--------------------------------------------------------------------------------
PURCHASE AGREEMENT
by and among
GEORGIA-PACIFIC CORPORATION,
CERTAIN SUBSIDIARIES OF
GEORGIA-PACIFIC CORPORATION
and
DOMTAR INC.
dated as of
June 1, 2001
--------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I Purchase and Sale of Acquired Assets; Assumption of Assumed
Liabilities; Purchase and Sale of Shares.................................................2
1.1 Transfer of Assets..............................................................................2
1.2 Excluded Assets.................................................................................5
1.3 Assumed Liabilities.............................................................................7
1.4 Purchase and Sale of Shares....................................................................10
1.5 Purchase Price; Allocation of Purchase Price...................................................10
ARTICLE II The Closing; Purchase Price Adjustments......................................................10
2.1 Closing Date...................................................................................10
2.2 Transactions to be Effected at the Closing.....................................................10
2.3 Purchase Price Adjustment......................................................................12
2.4 Accounts Receivable Reimbursement..............................................................14
ARTICLE III Representations and Warranties of Sellers...................................................14
3.1 Organization, Standing and Power...............................................................14
3.2 Authority......................................................................................14
3.3 No Conflicts...................................................................................15
3.4 Compliance with Applicable Laws................................................................15
3.5 Litigation; Decrees............................................................................16
3.6 Capitalization; Subsidiaries; Title to Shares; Title to Assets.................................16
3.7 Sufficiency of Acquired Assets.................................................................17
3.8 Financial Information..........................................................................18
3.9 Absence of Certain Changes.....................................................................18
3.10 No Undisclosed Liabilities.....................................................................20
3.11 Real Property..................................................................................20
3.12 Intellectual Property..........................................................................22
3.13 Insurance......................................................................................23
3.14 Contracts......................................................................................24
3.15 Employee Benefits and Related Matters..........................................................26
3.16 Environmental Matters..........................................................................28
3.17 Taxes..........................................................................................29
3.18 Labor Matters..................................................................................31
3.19 Brokers........................................................................................31
3.20 Affiliate Transactions.........................................................................32
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE IV Representations and Warranties of Purchaser..................................................32
4.1 Organization, Standing and Power...............................................................32
4.2 Authority......................................................................................32
4.3 No Conflicts...................................................................................33
4.4 Financing Commitment...........................................................................33
4.5 Litigation 33
4.6 Investment Intent..............................................................................33
4.7 Accredited Investor; Investment Representations................................................34
4.8 Brokers........................................................................................34
ARTICLE V Covenants.....................................................................................34
5.1 Conduct of Carve Out Business..................................................................34
5.2 Access to Information..........................................................................36
5.3 Further Actions................................................................................36
5.4 Information Technology.........................................................................36
5.5 Pre-Closing Publicity and Related Matters......................................................42
5.6 Ancillary Documents............................................................................42
5.7 Proration of Certain Charges...................................................................43
5.8 Real Property..................................................................................43
5.9 Adverse Changes................................................................................44
5.10 Supplemental Disclosure........................................................................45
5.11 Tax Exempt Bond Financed Facilities............................................................45
5.12 Termination of Certain Arrangements............................................................46
5.13 Environmental Site Assessment..................................................................46
5.14 Audited and Interim Financial Statements.......................................................46
5.15 Monthly Financial Information..................................................................47
5.16 Transition Services............................................................................47
5.17 Information Regarding Financing................................................................47
5.18 FERC Assets....................................................................................47
5.19 Wisconsin Real Property Transfers..............................................................49
5.20 Return of Parent Information...................................................................49
5.21 Inventory......................................................................................50
5.22 Black Liquor...................................................................................50
5.23 Cluster Testing................................................................................50
5.24 Inventory Support..............................................................................50
ARTICLE VI Conditions Precedent.........................................................................50
6.1 Conditions to Each Party's Obligation..........................................................50
6.2 Conditions to Obligation of Purchaser..........................................................51
6.3 Conditions to Obligation of Sellers............................................................52
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE VII Termination, Amendment and Waiver...........................................................53
7.1 Termination....................................................................................53
7.2 Amendments and Waivers.........................................................................54
ARTICLE VIII Indemnification............................................................................55
8.1 Indemnification by Parent......................................................................55
8.2 Indemnification by Purchaser...................................................................56
8.3 Limitations on Indemnity Obligation............................................................57
8.4 Procedures Relating to Third Party Claims (other than Pre-Closing Environmental Liabilities)...60
8.5 Procedures Relating to Pre-Closing Environmental Liabilities...................................61
8.6 Acknowledgment; Exclusive Remedies.............................................................62
ARTICLE IX Additional Agreements........................................................................62
9.1 Survival of Representations and Warranties, etc................................................62
9.2 Confidentiality................................................................................63
9.3 Expenses.......................................................................................63
9.4 Certain Information............................................................................64
9.5 Tax Matters....................................................................................64
9.6 Name Changes...................................................................................72
9.7 Use of Certain Information.....................................................................72
9.8 Woodland Landfill..............................................................................73
ARTICLE X General Provisions............................................................................73
10.1 Notices........................................................................................73
10.2 Severability...................................................................................74
10.3 Counterparts...................................................................................74
10.4 Entire Agreement; No Third Party Beneficiaries.................................................74
10.5 Attachments....................................................................................75
10.6 Governing Law, etc.............................................................................75
10.7 Assignment.....................................................................................76
10.8 Headings.......................................................................................76
ARTICLE XI Definitions..................................................................................76
11.1 Definitions....................................................................................76
11.2 Construction and Interpretation of Certain Terms and Phrases...................................90
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
EXHIBIT A-1 ASSUMED ENVIRONMENTAL LIABILITIES
EXHIBIT A-2 EXCLUDED ENVIRONMENTAL LIABILITIES
EXHIBIT B WORKING CAPITAL PRINCIPLES
EXHIBIT C TERM SHEET FOR ACCOUNTS RECEIVABLE COLLECTION AND
REMITTANCE OF FUNDS
EXHIBIT D Form of IT SUPPORT SERVICES Agreement
EXHIBIT E Form OF HUMAN RESOURCES Agreement
EXHIBIT F FORMS OF TRADEMARK LICENSE AGREEMENTs
EXHIBIT G Form of SUPPLY AND DISTRIBUTION Agreement
EXHIBIT H Form of NON-COMPETITION Agreement
EXHIBIT I Form of PULP SUPPLY Agreement
EXHIBIT J FORMS OF FIBRE SUPPLY AGREEMENTS (ashdown and
woodland)
EXHIBIT K Form of Opinion of Counsel to Parent
EXHIBIT L FORM OF SHARED SERVICES AGREEMENT
EXHIBIT M Form of OPERATING Agreement
EXHIBIT N TERM SHEET FOR INTERIM SALES AGREEMENT
</TABLE>
iv
<PAGE>
PURCHASE AGREEMENT
This Purchase Agreement (this "Agreement") is made and entered into as of
---------
June 1, 2001, by and among Georgia-Pacific Corporation, a Georgia corporation
("Parent"), Nekoosa Papers Inc., a Wisconsin corporation ("NPI"),
------ ---
Georgia-Pacific Resins, Inc. ("G-P Resins"), a Delaware corporation, and Domtar
----------
Inc., a Canadian corporation ("Purchaser").
---------
PRELIMINARY STATEMENT
WHEREAS, Parent and G-P Resins own pulp and paper mill operations located
in and around Woodland, Maine and certain related assets that are used in the
conduct of the Carve Out Business (as such term and other capitalized terms used
herein without definition are defined in Article XI);
WHEREAS, NPI owns pulp and paper mill operations located in and around
Nekoosa, Wisconsin; Port Edwards, Wisconsin; and Ashdown, Arkansas and certain
related assets that are used in the conduct of the Carve Out Business;
WHEREAS, Parent owns all of the outstanding shares of St. Croix Water Power
Company, a Maine corporation, The Saint Croix Water Power Company, a New
Brunswick, Canada corporation, and The Sprague's Falls Manufacturing Company
(Limited), a New Brunswick, Canada corporation (collectively, the "Transferred
-----------
Subsidiaries"), which own certain real property and water rights relating to
------------
dams used in the Woodland, Maine operation;
WHEREAS, Parent and certain Subsidiaries of Parent make available to the
Mills certain services and assets that are used in the conduct of the Carve Out
Business;
WHEREAS, Purchaser wishes (i) to acquire certain assets associated with the
Mills (subject to the assumption of certain obligations and liabilities
specified herein) and to acquire the Shares and (ii) to receive certain
--
services, licenses and rights pursuant to certain ancillary agreements under
which Parent and certain Subsidiaries of Parent will make available certain
services and assets used in the Carve Out Business for specified periods
following the Closing, all on the terms and conditions set forth herein; and
WHEREAS, Sellers are agreeable to such a transaction, on the terms and
subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements herein contained, the parties, intending to be legally
bound, agree as follows:
1
<PAGE>
ARTICLE I
Purchase and Sale of Acquired Assets;
Assumption of Assumed Liabilities; Purchase and Sale of Shares
--------------------------------------------------------------
1.1 Transfer of Assets.
------------------
(a) Upon the terms and subject to the conditions of this Agreement, at the
Closing, for the consideration specified in Section 1.5, Parent, NPI and G-P
Resins, as applicable, will sell, assign, transfer, convey and deliver to
Purchaser, and Purchaser will purchase and acquire from Parent, all right, title
and interest of Parent, NPI and G-P Resins, as applicable, in and to the
properties, assets and rights of every nature, kind and description, tangible
and intangible (including goodwill), whether real, personal or mixed, whether
accrued, contingent or otherwise primarily relating to or used or held for use
in the operation of the Carve Out Business as of the date hereof and at any time
following the date hereof to the Closing Date, including all such property
acquired by Parent, NPI and G-P Resins, as applicable, between the date hereof
and the Closing Date, but excluding the Excluded Assets (collectively, the
"Acquired Assets"). It is agreed that the Acquired Assets shall include, without
---------------
limitation, the following assets, in each case as they shall exist on the
Closing Date:
(i) the Real Property, including all buildings, improvements,
fixtures and all other appurtenances thereto (including the Port Edwards
chipping facility presently under construction, the Wisconsin Sand Pit, the
Maine Non-FERC Assets, the FERC Assets, the Nepco Lake Dam, and the Weirgor
Woodyard) and all other rights and benefits in and relating to real
property (including the Wisconsin Landfill Extension Option) together with
all right, title and interest therein (the "Premises");
--------
(ii) except for public utilities, all water treatment facilities,
together with all pipes and canals that are used to bring water to and
discharge water from the Premises and rights to water from the Wisconsin
River and Nepco Lake;
(iii) all Inventory of Parent and NPI (other than Excluded Inventory)
located at any Mill and any Inventory of Parent and NPI (including the
Inventory of the Weirgor Woodyard) that is not located at any Mill but is
allocable to the Mills in a manner consistent with the practices utilized
in the preparation of the Audited Financial Statements;
(iv) all rights in products sold or leased by or on behalf of any
Mill to third parties (including, but not limited to, products hereafter
returned or repossessed and unpaid rights or rescission, replevin,
reclamation and rights to stoppage in transit), but in the case of returned
products only to the extent that any
2
<PAGE>
corresponding obligation to a third party in respect of such products
constitutes an Assumed Liability hereunder;
(v) all production orders that are allocated to the Mills in
accordance with past practice, including customer orders for at least 4,000
tons of Woodland export pulp Inventory;
(vi) all machinery, equipment, furniture, vehicles, tools, dies,
molds, rolling stock, intermill railroads and related equipment, office
supplies and all other items of tangible personal property owned or leased
by Parent or NPI that are located at any Mill (or are in transit to or on
order on behalf of any Mill) or are used primarily by Other Employees (as
defined in the Human Resources Agreement) (other than fixtures) who accept
an offer of post-Closing employment that he or she receives from Purchaser
prior to the Closing or during the 30-day period following the Closing or
by Employees who work at any Mill (including, but not limited to, any of
the foregoing items purchased subject to any conditional sales or title
retention agreement in favor of any other Person);
(vii) any and all Computer Hardware and Computer Software which is
physically located and operated at any Mill (or is in transit to or on
order on behalf of any Mill) (collectively, the "Mill Technology"), and any
---------------
and all Computer Hardware (and all Computer Software loaded thereon) that
(A) constitutes a personal computer (with peripherals) that is primarily
-
used by any Other Employee who accepts an offer of post-Closing employment
that he or she receives from Purchaser prior to or during the 30 day period
following the Closing or (B) is portable (e.g., laptop computers, PDA's)
-
and is used primarily by an Employee who works at any Mill;
(viii) the Purchaser IT Environment on the terms provided in Section
5.4;
(ix) to the extent their transfer is permitted under Applicable
Laws, all Governmental Approvals that are used primarily in the operation
of any Mill, including any pending applications therefor (the "Permits");
-------
(x) all Contracts relating primarily to the business activities of
any Mill (including all Contracts specifically identified on Section
3.14(a) of the Parent Disclosure Letter as being assigned to Purchaser
hereunder), including, without limitation, any right to receive payment for
products sold or services rendered pursuant to such Contracts (to the
extent they constitute receivables under clause (xi) below), any right to
receive goods and services pursuant to such Contracts, and any right to
assert claims and take other rightful actions in respect
3
<PAGE>
of post-closing breaches, defaults and other violations of such Contracts
(such Contracts, the "Mill Contracts");
--------------
(xi) $120 million of trade accounts receivable (the "Transferred
-----------
Accounts Receivable") for products shipped or services provided prior to
-------------------
the Closing Date, which receivables shall be specifically identified on a
schedule to be provided by Parent to Purchaser within 15 days after the
Closing Date;
(xii) all prepaid expenses and other current assets that are
attributable to any Mill and that will inure to the benefit of Purchaser
after the Closing;
(xiii) all books of account, financial and accounting records, files,
manuals, invoices, customer and supplier lists and other business records
related primarily to any Mill, including Transferring Employee records
(other than medical records) except to the extent required by Applicable
Law to be retained by Parent or its Affiliates (in which case copies (other
than of medical records) will be provided to Purchaser), including all
records and materials maintained at the headquarters of Parent or NPI,
catalogues, price lists, correspondence, mailing lists, distribution lists,
photographs, production data, sales and promotional materials and records,
purchasing materials and records, manufacturing and quality control records
and procedures, blueprints and research and development files;
(xiv) all patents, patent applications, trade secrets, confidential
know-how, formulae, processes, procedures, trademarks, service marks,
copyrights, trade names, service names, corporate signatures, logos and
other like proprietary rights specifically listed in Section 1.1(a)(xiv) of
the Parent Disclosure Letter, including rights to sue for and remedies
against past, present and future infringements thereof, and rights of
priority and protection of interests therein under the laws of any
jurisdiction worldwide and all tangible embodiments thereof (the "Acquired
--------
Intellectual Property");
---------------------
(xv) Plan assets to the extent provided in the Human Resources
Agreement; and
(xvi) all assets specifically listed in Section 1.1(a)(xvi) of the
Purchaser Disclosure Letter.
(b) At the Closing, the Acquired Assets shall be transferred or otherwise
conveyed to Purchaser free and clear of all liabilities, obligations and Liens
excepting only Assumed Liabilities and Permitted Liens or, in the case of the
Real Property, free and clear of all Title Defects, excepting only the Permitted
Real Property Exceptions.
4
<PAGE>
(c) Notwithstanding anything to the contrary contained herein, but subject
to the provisions of Section 5.3(c) and the Ancillary Documents, to the extent
any Mill Contract, order, document, instrument or other asset that is intended
to be sold, assigned, transferred, conveyed or licensed to Purchaser hereunder
or any Ancillary Document requires the consent, approval, authorization, waiver,
permit, grant, franchise, concession or license of any Person (other than any
Seller) (any of the foregoing, a "Consent") in order to consummate the
-------
transactions contemplated hereby and by the Ancillary Documents (any such Mill
Contract, order, document, instrument or other asset, a "Restricted Asset"),
----------------
this Agreement will not constitute an agreement to sell, assign, transfer,
convey or license such Restricted Asset if such action would constitute a breach
of the terms of, or limit the post-Closing use and enjoyment of such Restricted
Asset. In accordance with Section 5.3(c), Section 5.4 and the expense provisions
of Section 9.3, Parent shall take all commercially reasonable actions to obtain
such Consent from such Person. Subject to Section 6.2(e), if the Closing occurs
without obtaining any such Consent regarding a Restricted Asset, Parent and its
Affiliates will, in accordance with the expense provisions of Section 9.3, take
all commercially reasonable action requested by Purchaser to obtain such Consent
after the Closing or to otherwise transfer to Purchaser the benefit of such
Restricted Asset. Without limiting the obligations of Parent under Section 5.4,
in connection with seeking any Consent, Parent and its Affiliates (i) will not
-
agree to any modifications of rights in respect of the Restricted Asset that
would be adverse to Purchaser after the Closing, (ii) shall not be required to
--
agree to any restriction on the conduct of their respective businesses, and
(iii) shall not be required to make any payment that is unreasonable in relation
---
to the applicable Contract or asset. This Section 1.1(c) shall not limit or
otherwise affect Parent's obligation to seek Consents in respect of Mill
Technology and the Purchaser IT Environment, which will be governed by Section
5.4.
1.2 Excluded Assets. Notwithstanding anything in this Agreement to the
---------------
contrary, the following assets of Parent, NPI and G-P Resins (collectively, the
"Excluded Assets") shall be excluded from and shall not constitute any part of
---------------
the Acquired Assets:
(i) all cash and cash equivalents on hand or in banks and all bank
accounts, including trust funds with the Maine Environmental Protection
Division;
(ii) (A) all rights of Parent or its Affiliates under this Agreement
-
and the agreements, instruments and - certificates delivered in connection
with this Agreement and the certificate of incorporation and bylaws of
Sellers, qualifications to conduct business, taxpayer and other
identification numbers, corporate seals, minute books, stock transfer
records and any other document relating to the organization, maintenance
and existence of each of Parent, NPI and G-P Resins as a corporation, (B)
-
such business - records as may be located at the Mills and are listed on
Section 1.2(ii) of the Parent Disclosure Letter, (C) books,
-
5
<PAGE>
records and other information relating primarily to production orders not
allocated - to the Mills, (D) medical records of Employees and (E)
-
personnel records of Employees who are not - Transferring Employees;
(iii) all records prepared by Parent and its Affiliates in connection
with the sale of the Mills to Purchaser, except as otherwise specified
herein;
(iv) all rights, claims and causes of action and rights of
reimbursement (A) relating to any of the Excluded Liabilities or the
-
Excluded Assets, including rights, claims and causes of action under
insurance policies relating thereto and to the Acquired Assets, (B)
-
specifically listed in Section 1.2(iv) of the Parent Disclosure Letter or
(C) arising after the Closing relating to the pre-Closing operations of the
-
Mills;
(v) all deferred Tax assets and all rights to claims available to
or being pursued by Parent, NPI and G-P Resins and their respective
Affiliates for refunds of or credits against Taxes, investment Tax credits,
research credits and credits for prepayments of Taxes attributable to
Parent or any Affiliate of Parent (other than (A) any Tax refund accrued as
-
a current asset shown on the Closing Working Capital Statement as finally
determined in accordance with Section 2.3 and (B) any refund in respect of
-
any Transfer Tax to the extent such Transfer Tax is the responsibility of
Purchaser under Section 9.5(k) of this Agreement);
(vi) any consolidated, combined, unitary or separate company Tax
Return relating to Income Taxes that includes Parent or any Affiliate of
Parent and records and work papers used in preparation thereof;
(vii) except for the Acquired Intellectual Property, all patents,
patent applications, trade secrets, confidential know-how, formulae,
processes, procedures, trademarks, service marks, copyrights, trade names,
service names, corporate signatures, logos and other like proprietary
rights owned by Parent or any Affiliate of Parent, including, without
limitation, the Georgia-Pacific logo and corporate signature, the trade
names and trademarks "Georgia-Pacific", "G-P" and "Great Northern", the
"gapac.com" and "gp.com" domain names and any variation, alteration,
modification or derivative thereof;
(viii) except as otherwise set forth in the Human Resources Agreement,
any asset of any Plan, including, but not limited to, the right to receive
assets of any such Plan upon termination thereof;
(ix) all properties, assets and rights of Parent relating primarily
to (A) the sawmill operations located in the Town of Baileyville, Maine,
-
the oriented strand board operations located in the Town of Baileyville,
Maine, the
6
<PAGE>
procurement yard adjacent thereto and certain expansion lands adjacent
thereto, the exact location of each of which shall be established prior to
the Closing Date by a survey to be prepared by Plisga & Day and shall be
subject to the reasonable approval of Purchaser and Sellers (together, the
"Excluded Woodland Facilities"), and (B) the procurement operations located
---------------------------- -
at or adjacent to the Woodland Mill or the Ashdown Mill that are identified
in Section 1.2(ix) of the Parent Disclosure Letter;
(x) all rights of Parent or any of its Affiliates to any
reimbursements from any Governmental Entity for payments made in respect of
environmental remediation or condemnation prior to the Closing (except to
the extent reflected as a current asset on the Closing Working Capital
Statement);
(xi) any and all properties or assets not located at the Mills that
are utilized by Parent or its Affiliates in providing the services that are
the subject of the Ancillary Documents or the services listed in Section
3.20(a) of the Parent Disclosure Letter, other than the Purchaser IT
Environment on the terms provided in Section 5.4(b);
(xii) the real property located at or near the Woodland Mill known as
the South Princeton Landfill, and the accompanying contiguous buffer zone,
situated in the Town of Princeton, Maine, the exact location of which shall
be established prior to the Closing Date by a survey to be prepared by
Plisga & Day and shall be subject to the reasonable approval of Purchaser
and Sellers;
(xiii) the Excluded Inventory;
(xiv) the Computer Hardware or Computer Software (and any associated
Contract) that is specifically listed in Section 1.2(xiv) of the Parent
Disclosure Letter; and
(xv) (A) all Contracts relating to benefit plans and arrangements
-
except to the extent provided in the Human Resources Agreement and (B) all
-
Contracts specifically identified on Section 3.14(a) of the Parent
Disclosure Letter as not being assigned to Purchaser hereunder.
1.3 Assumed Liabilities.
-------------------
(a) Subject to the terms and conditions set forth herein, at the Closing
Purchaser shall assume and undertake to pay, satisfy or discharge the following
liabilities, obligations and commitments (collectively, the "Assumed
Liabilities"):
(i) all liabilities, obligations and commitments that constitute
trade accounts payable allocated to the Mills in a manner consistent with
the practices
7
<PAGE>
utilized in the preparation of the Audited Financial Statements, and other
accrued liabilities recorded in the books and records of the Mills;
(ii) all liabilities, obligations and commitments that arise after
the Closing under the Mill Contracts assigned to Purchaser at the Closing,
excluding liabilities for pre-Closing breaches except as otherwise provided
pursuant to Section 1.3(a)(iii) below;
(iii) all liabilities, obligations and commitments that it expressly
agrees to assume under the Human Resources Agreement, including accrued
vacation and related benefits to the extent assumed by Purchaser under the
Human Resources Agreement (the "Assumed Employee Liabilities");
----------------------------
(iv) the litigation, proceedings and claims identified as items
IV(a)(ii), (iii), (iv), (v) and (vii) under the heading for "Woodland" in
Section 3.5 of the Parent Disclosure Letter (the "Assumed Litigation");
------------------
(v) all Pre-Closing Environmental Liabilities relating to or
arising out of the matters for which Purchaser is identified as the
"Responsible Party" on Exhibit A-1 hereto (the "Assumed Purchaser
-----------------
Environmental Liabilities");
-------------------------
(vi) all Pre-Closing Environmental Liabilities relating to or
arising out of the matters for which Parent is identified as the
"Responsible Party" on Exhibit A-1 hereto and all other Pre-Closing
Environmental Liabilities relating to or arising out of matters that are
not identified on Exhibit A-1 hereto (excluding Excluded Environmental
Liabilities and the Impaired Asset Liabilities) (the "Assumed Parent
--------------
Environmental Liabilities");
-------------------------
(vii) all liabilities, obligations or commitments (whether known or
unknown, contingent or otherwise) relating to or arising out of the
Impaired Assets (the "Impaired Asset Liabilities"); and
--------------------------
(viii) any liabilities, obligations or commitments, excluding the
Excluded Liabilities, whether known or unknown, contingent or otherwise, to
the extent relating to or arising out of the operation of the Carve Out
Business or the ownership of the Acquired Assets prior to the Closing
(including any Transferred Subsidiary Pre-Closing Liability other than in
respect of Taxes) (other than those liabilities, obligations and
commitments included in clauses (i) - (vii) above)(collectively, the
"Assumed Pre-Closing Liabilities").
-------------------------------
(b) Except as expressly set forth in Section 1.3(a), Purchaser expressly
does not, and shall not, assume or be deemed to assume, under this Agreement or
otherwise by reason of the transactions contemplated hereby, any liabilities,
obligations or
8
<PAGE>
commitments of Parent or any of its Affiliates of any nature whatsoever, whether
known or unknown, contingent or otherwise (collectively, the "Excluded
--------
Liabilities"). Without limiting the generality of the foregoing, and
-----------
notwithstanding Section 1.3(a)(viii), the following shall constitute Excluded
Liabilities:
(i) any obligation or liability (including, without limitation, any
Pre-Closing Environmental Liability) in respect of the Excluded Assets;
(ii) any continuing liabilities of Parent or its Affiliates under
this Agreement or the Ancillary Documents or other instruments to be
delivered by Parent or its Affiliates at the Closing;
(iii) any legal, accounting, transactional, consultant, brokerage or
other expense relating to the negotiation and consummation of the
transactions contemplated hereby by or on behalf of Parent;
(iv) any deferred Tax Liability and any liability for (A) Taxes
-
imposed on, with respect to or relating to the Acquired Assets for any
Pre-Closing Tax Period or (B) Taxes of Parent or any of its Affiliates
-
(other than any liability in respect of any Transfer Tax to the extent such
Transfer Tax is the responsibility of Purchaser under Section 9.5(k) of
this Agreement);
(v) except as expressly provided otherwise in this Agreement or in
any Ancillary Document, any obligation or liability to Parent or any of its
Affiliates, including any post-Closing Date obligation or liability arising
from an Affiliated Party Transaction, other than trade accounts payable
arising in the ordinary course of business that are included in the Assumed
Liabilities;
(vi) any litigation, proceeding or claim (excluding the Assumed
Litigation and other claims and proceedings expressly assumed by Purchaser
under the Human Resources Agreement) that is pending or has been made or
asserted and of which Parent has received notice as of the Closing Date,
including without limitation any such litigation, proceeding or claim that
is set forth on Section 3.5, 3.11, 3.12, 3.15 or 3.18 of the Parent
Disclosure Letter (all such litigation, proceedings and claims described in
this clause (vi), the "Pending Litigation");
------------------
(vii) all Pre-Closing Environmental Liabilities relating to or
arising out of the matters for which Parent is identified as the
"Responsible Party" on Exhibit A-2 hereto (the "Excluded Environmental
----------------------
Liabilities");
-----------
9
<PAGE>
(viii) all liabilities relating to or arising out of any breach prior
to the Closing of any Mill Contract other than as provided in the Human
Resources Agreement; and
(ix) all Pre-Closing Employee Liabilities other than Assumed
Employee Liabilities.
1.4 Purchase and Sale of Shares. Upon the terms and subject to the
---------------------------
conditions of this Agreement, at the Closing, for the consideration specified in
Section 1.5, Parent will sell, transfer and deliver to Purchaser free and clear
of all Liens, and Purchaser will purchase, acquire and accept from Parent, the
Shares.
1.5 Purchase Price; Allocation of Purchase Price.
--------------------------------------------
(a) The aggregate purchase price for the Acquired Assets and the Shares
shall be $1,650,000,000 (the "Purchase Price"), payable in the manner described
--------------
in Section 2.2(b)(i) and subject to adjustment as set forth in Section 2.3.
(b) Purchaser and Parent agree to allocate the Purchase Price between the
Shares and the Acquired Assets in accordance with Section 9.5(d)(i) of this
Agreement. Any adjustment to the Purchase Price pursuant to Section 2.3 or
otherwise shall be allocated to the Shares on the one hand or the Acquired
Assets on the other hand as determined in good faith by Purchaser.
ARTICLE II
The Closing; Purchase Price Adjustments
---------------------------------------
2.1 Closing Date. The closing of the transactions contemplated by this
------------
Agreement (the "Closing") shall take place at the New York offices of Debevoise
-------
& Plimpton, at 10:00 a.m., local time, on (i) the second Business Day following
-
the last to be fulfilled or waived of the conditions set forth in Article VI
(other than those conditions which are only capable of being fulfilled as of
such date), or (ii) such other time, date or place as the parties hereto may
--
agree in writing. The date on which the Closing shall occur is herein referred
to as the "Closing Date".
------------
2.2 Transactions to be Effected at the Closing.
------------------------------------------
(a) Sellers shall deliver or cause to be delivered to Purchaser the
following:
(i) such appropriately executed special or limited warranty deeds
in local customary form, bills of sale, assignments, affidavits of title
and other instruments of transfer as shall be necessary or appropriate for
the sale, assignment, transfer, conveyance and delivery as contemplated by
this Agreement
10
<PAGE>
of the Acquired Assets (it being understood that any such document shall
not provide for any representations or warranties that are not otherwise
expressly provided for in this Agreement), provided that the transfer
--------
documents for the FERC Assets and the Nepco Lake Dam, respectively, shall
be held in escrow pursuant to an escrow arrangement reasonably satisfactory
to Purchaser and Parent pending FERC's approval of the transfer of the FERC
Licenses and any necessary compliance with Chapter 31 of the Wisconsin
Statutes as contemplated by Section 5.18;
(ii) the stock certificate or certificates representing all of the
Shares, duly endorsed in blank or accompanied by stock powers duly executed
in blank;
(iii) a duly executed copy of each of the Ancillary Documents to
which Parent or an affiliate of Parent is a party; and
(iv) such other instruments or documents, the delivery of which is a
condition to Closing or which may be reasonably requested by Purchaser
prior to the Closing Date or as may be necessary to effect the Closing in
accordance with this Agreement (it being understood that any such other
instrument or document shall not provide for any representations or
warranties or any obligations or liabilities that are not otherwise
expressly provided for in this Agreement).
(b) Purchaser shall deliver or cause to be delivered to Sellers, as the
case may be, the following:
(i) by wire transfer to the accounts designated in writing by
Parent at least five days prior to the Closing, immediately available U.S.
funds in an aggregate amount equal to the Purchase Price;
(ii) such appropriately executed assumption agreements and other
instruments of assumption providing for Purchaser's assumption of the
Assumed Liabilities as contemplated by this Agreement (it being understood
that any such document shall not provide for any representations or
warranties that are not otherwise expressly provided for in this
Agreement);
(iii) a duly executed copy of each of the Ancillary Documents to
which Purchaser is a party; and
(iv) such other instruments or documents, the delivery of which is a
condition to Closing or which may be reasonably requested prior to the
Closing Date by Parent or as may be necessary to effect the Closing in
accordance with this Agreement (it being understood that any such other
instrument or document shall not provide for any representations or
warranties or any obligations or liabilities that are not otherwise
expressly provided for in this Agreement).
11
<PAGE>
2.3 Purchase Price Adjustment.
-------------------------
(a) Within 60 days following the Closing Date, Parent will prepare and
deliver or cause to be prepared and delivered to Purchaser, a working capital
statement for the Acquired Assets and the Assumed Liabilities as of the close of
business on the Closing Date (the "Closing Working Capital Statement"), audited
---------------------------------
by Arthur Andersen, independent accountants for Parent, setting forth an
itemized calculation of the current assets included in the Acquired Assets or
owned by the Transferred Subsidiaries as of the Closing Date and the current
liabilities included in the Assumed Liabilities (including for this purpose
liabilities of the Transferred Subsidiaries for Taxes (other than Combined
Income Taxes)). The excess of such current assets over such current liabilities,
as reflected on the Working Capital Statement, will be referred to herein as the
"Closing Working Capital". The Closing Working Capital Statement shall be
-----------------------
prepared in accordance with U.S. GAAP and on a basis consistent with the U.S.
GAAP principles, procedures and elections used in the Financial Statements, as
modified by the principles, procedures and elections set forth in Exhibit B
hereto (the "Working Capital Principles"). Notwithstanding the foregoing, (i)
--------------------------
the amount of the trade accounts receivable for the purposes of determining the
Closing Working Capital shall be $120,000,000 and (ii) the Closing Working
Capital Statement will not reflect any accrual for additional matching
contributions within the meaning of the applicable Parent 401(k) Plan.
(b) Following the receipt by Purchaser of the Closing Working Capital
Statement, Purchaser and its advisors and accountants shall have 45 days to
review the Closing Working Capital Statement. Purchaser shall have full access
to all information used by Parent in preparing the Closing Working Capital
Statement, including the books and records and the work papers of Parent's
accountants (subject to the reviewing party executing any customary access
letters required by Parent's accountants). The Closing Working Capital Statement
will become final and binding upon the parties on the 45th day following
delivery thereof, unless Purchaser delivers a written notice (the "Dispute
-------
Notice") to Parent prior to such date which specifies in reasonable detail the
------
amount by which and the reasons why Purchaser thinks the current assets or
current liabilities reflected on the Closing Working Capital Statement either
contain mathematical errors or were not prepared in accordance with Section
2.3(a).
(c) If Purchaser delivers a Dispute Notice in accordance with Section
2.3(b), then the parties shall, during the 30-day period beginning on the
receipt by Parent of the Dispute Notice (the "Review Period"), seek in good
-------------
faith to resolve in writing any differences which they may have with respect to
the matters specified in the Dispute Notice. If Purchaser and Parent are unable
to resolve all of the objections of Purchaser within such 30-day period, then
Purchaser and Parent shall submit such unresolved objections to the Washington,
D.C. office of Deloitte & Touche LLP (the "Third Party Accountants"). Purchaser
-----------------------
and Parent shall use reasonable efforts to cause the Third Party Accountants to
render a final, binding decision resolving the matters in dispute within 60
12
<PAGE>
days following the submission of such matter to the Third Party Accountants. The
determination of the Third Party Accountants will be final and binding on Parent
and Purchaser and judgment may be entered upon the determination of the Third
Party Accountants in any court having jurisdiction over the party against which
such determination is to be enforced. The fees, costs and expenses of the Third
Party Accountants (i) shall be borne by Purchaser in the proportion that the
-
aggregate dollar amount of all such disputed items so submitted that are
unsuccessfully disputed by Purchaser (as finally determined by the Third Party
Accountants) bears to the aggregate dollar amount of such items so submitted and
(ii) shall be borne by Parent in the proportion that the aggregate dollar amount
--
of such disputed items so submitted that are successfully disputed by Purchaser
(as finally determined by the Third Party Accountants) bears to the aggregate
dollar amount of all such items so submitted.
(d) Within 10 days after the first to occur of (i) the Closing Working
-
Capital Statement becoming final pursuant to Section 2.3(b) or (ii) the parties
--
reaching agreement pursuant to Section 2.3(c) or (iii) the Third Party
---
Accountants rendering their decision pursuant to Section 2.3(c), a final
adjustment to the Purchase Price will be made as follows:
(A) if it is determined that the Closing Working Capital is equal
to $200,000,000, then no adjustment will be made to the Purchase
Price;
(B) if it is determined that the Closing Working Capital is less
than $200,000,000, then the Purchase Price will be reduced by an
amount equal to the difference between $200,000,000 and the Closing
Working Capital, and Parent will pay to Purchaser, by wire transfer of
immediately available funds, an amount equal to such difference, plus
interest at LIBOR plus 150 basis points on such amount from the
Closing Date through the date of payment; or
(C) if it is determined that the Closing Working Capital is more
than $200,000,000, then the Purchase Price will be increased by an
amount equal to the excess of the Closing Working Capital over
$200,000,000, and Purchaser will pay to Parent, by wire transfer of
immediately available funds, an amount equal to such excess, plus
interest at LIBOR plus 150 basis points on such amount from the
Closing Date through the date of payment.
(e) Purchaser Indemnitees' rights to indemnification pursuant to Article
VIII (and any limitations on such rights) shall not be deemed to limit,
supersede or otherwise affect Purchaser's right to a full adjustment of the
Purchase Price pursuant to this Section 2.3, provided that Purchaser shall not
--------
be entitled to be indemnified under Article VIII for
13
<PAGE>
a Loss if, and to the extent that, such Loss has been reflected in the final
calculation of Closing Working Capital.
2.4 Accounts Receivable Reimbursement. The collection and reimbursement of
---------------------------------
the Transferred Accounts Receivable shall be performed in accordance with the
terms set forth in Exhibit C.
---------
ARTICLE III
Representations and Warranties of Sellers
-----------------------------------------
As of the date hereof and as of the Closing Date, Sellers, jointly and
severally, represent and warrant to Purchaser as follows:
3.1 Organization, Standing and Power.
--------------------------------
(a) Each Seller and each Transferred Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has the requisite corporate power and authority to own, lease
and operate its properties and assets, to carry on its operations (including the
Carve Out Business) as now being conducted, to execute and deliver this
Agreement and each of the Ancillary Documents to which it is or will be a party,
to perform fully its obligations under this Agreement and the Ancillary
Documents, and to consummate the transactions contemplated hereby and thereby.
(b) Each Seller and each Transferred Subsidiary is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the operation of its portion of the Carve Out Business or the character of the
properties owned, leased or operated by it in connection with its portion of the
Carve Out Business makes such qualification or licensing necessary, except for
any such failure to be qualified or licensed that, individually and in the
aggregate, has not had and would not reasonably be expected to have a Material
Adverse Effect.
(c) Each Seller and each Transferred Subsidiary has made available to
Purchaser complete and correct copies of its certificate of incorporation and
by-laws or other organizational documents, in each case, as amended and in
effect on the date hereof. No Seller or Transferred Subsidiary is in violation
of any of the provisions of its certificate of incorporation or by-laws or other
organizational documents.
3.2 Authority. The execution and delivery of this Agreement and the
---------
Ancillary Documents and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on the
part of each Seller. This Agreement and the Human Resources Agreement have each
been duly executed and delivered by each Seller which is a party thereto and
each constitutes its legal, valid and binding obligation, enforceable against
each of them in accordance with their terms.
14
<PAGE>
Each Ancillary Document to be entered into by a Seller at the Closing will be
duly executed and delivered by such Seller, and when so executed and delivered
will constitute, the legal, valid and binding obligation of such Person
enforceable against such Person in accordance with its terms.
3.3 No Conflicts.
------------
(a) The execution, delivery and performance of this Agreement and the
Ancillary Documents by each Seller and the consummation by each Seller of the
transactions contemplated hereby and thereby do not and will not, conflict with,
or result in any violation of or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or result in
the creation of any Lien (other than a Permitted Lien) upon any asset
constituting a part of the Carve Out Business under (i) the certificate of
-
incorporation or bylaws (or comparable organizational documents) of such Seller,
(ii) subject to the filings and other matters referred to in the following
--
paragraph (b), any law, judgment, order, decree, statute, ordinance, rule or
regulation applicable to Parent or any of its Affiliates, or (iii) other than as
---
set forth in Section 3.3(a) of Parent Disclosure Letter, any Contract to which
Parent or any of its Affiliates is a party or by which any of the assets
constituting a part of the Carve Out Business are bound or affected, except in
the case of clause (ii) and clause (iii), for any such conflict, violation,
default, or other consequence that, individually or in the aggregate, has not
and would not reasonably be expected to have a Material Adverse Effect.
(b) No Governmental Approval is required to be obtained or made by Parent
or any of its Affiliates in connection with the execution and delivery of this
Agreement and the Ancillary Documents or the consummation of the transactions
contemplated hereby and thereby by Seller, except for (i) compliance with and
-
filings under the HSR Act and any other applicable pre-merger notification law,
whether U.S. or foreign, (ii) the Governmental Approvals set forth in Section
--
3.3(b) of the Parent Disclosure Letter, and (iii) those the failure of which to
---
obtain or make, individually or in the aggregate, would not materially impair
the ability of a Seller to perform its obligations under this Agreement or
materially impair Purchaser's use of the Acquired Assets or operation of the
Transferred Subsidiaries immediately following the Closing.
3.4 Compliance with Applicable Laws.
-------------------------------
(a) Except as set forth in Section 3.4(a) of the Parent Disclosure Letter,
Parent and its Affiliates have complied with all Applicable Laws with respect to
the Carve Out Business and the Acquired Assets, except where such failure to so
comply, individually or in the aggregate, has not had and would not reasonably
be expected to have a Material Adverse Effect. Except as set forth in Section
3.4(a) of the Parent Disclosure Letter, since January 1, 1996, neither Parent
nor any of its Affiliates has received any written
15
<PAGE>
notice from a Governmental Entity alleging any material non-compliance relating
to the Carve Out Business or the Acquired Assets under any such Applicable Law,
except for any alleged non-compliance that, if substantiated, individually and
in the aggregate, has not had and would not reasonably be expected to have a
Material Adverse Effect. This Section 3.4(a) does not apply to employee benefits
matters for which Section 3.15 is applicable, Environmental Laws for which
Section 3.16 is applicable, Tax matters for which Section 3.17 is applicable or
labor matters for which Section 3.18 is applicable.
(b) Section 3.4(b) of the Parent Disclosure Letter sets forth all consents,
approvals, authorizations, waivers, permits, grants, franchises, concessions,
agreements, licenses, exemptions or orders of, registrations, certificates,
declarations or filings with, or reports or notices to, any Governmental Entity
(collectively, "Governmental Approvals") necessary for, or otherwise material
----------------------
to, the use and operation of the Acquired Assets and the assets of the
Transferred Subsidiaries. Except as set forth in Section 3.4(b) of the Parent
Disclosure Letter, all such Governmental Approvals have been duly obtained and
are in full force and effect, and each of Parent and its Affiliates, as the case
may be, are in compliance with each of such Governmental Approvals held by it
with respect to the Acquired Assets and the assets of the Transferred
Subsidiaries, except for any failure to obtain or comply with a Governmental
Approval that, individually or in the aggregate, has not had and would not
reasonably be expected to have a Material Adverse Effect.
3.5 Litigation; Decrees. Except as set forth in Section 3.5 of the Parent
-------------------
Disclosure Letter (and except for any lawsuit, action or proceeding brought
after the date of this Agreement by any Person seeking to delay or prevent, or
otherwise challenging, the transactions contemplated hereby), there is no
lawsuit, action or proceeding pending, or, to the Knowledge of Parent,
threatened, against any of Parent or any of its Affiliates by any Person or
asserted by any of them against any Person that relates to the Carve Out
Business or the Acquired Assets, except for any such matter that, if resolved in
a manner adverse to Parent and its Affiliates, would not, individually or in the
aggregate reasonably be expected to have a Material Adverse Effect. None of
Parent or any of its Affiliates is in default under any material judgment,
order, injunction or decree of any Governmental Entity or arbitrator entered
against any such party that relates to the Carve Out Business or the Acquired
Assets. This Section 3.5 does not apply to Intellectual Property matters for
which Section 3.12 is applicable or labor matters for which Section 3.18 is
applicable.
3.6 Capitalization; Subsidiaries; Title to Shares; Title to Assets.
--------------------------------------------------------------
(a) The authorized capital stock and the outstanding shares of capital
stock (collectively, the "Shares") of each of the Transferred Subsidiaries is
------
set forth in Section 3.6(a) of the Parent Disclosure Letter, and there are no
other classes of stock authorized or issued. All of the Shares are duly and
validly authorized, issued and outstanding and are fully paid and
non-assessable, and owned beneficially and of record by Parent, as set
16
<PAGE>
forth in Section 3.6(a) of the Parent Disclosure Letter. There are no shares of
capital stock of any Transferred Subsidiary held as treasury shares. There are
no preemptive rights existing with respect to the capital stock of any
Transferred Subsidiary and none of the Shares were issued in violation of any
preemptive rights. There are no outstanding warrants, options, rights, calls or
other commitments of any nature relating to the capital stock of any Transferred
Subsidiary, and there are no outstanding securities or debt obligations of any
Transferred Subsidiary convertible into or exchangeable for shares of capital
stock of any Transferred Subsidiary. There are no agreements, commitments,
restrictions or arrangements relating to ownership (including, without
limitation, repurchase or redemption), voting or receipt of dividends or
distributions in respect of any shares of any Transferred Subsidiary's capital
stock.
(b) No Transferred Subsidiary has any Subsidiaries, or owns any shares of
capital stock or other securities of, or interest in, any other Person, or is
obligated to make any capital contribution to or other investment in any other
Person. From the time that Parent acquired the Transferred Subsidiaries, they
have not employed any employees and have not engaged in any material business
activities other than the ownership of the dams used in the operation of the
Woodland Mill, the production of electric power for supply to the Woodland Mill
and other operations of Parent and activities related thereto.
(c) Except as set forth in Section 3.6(c) of the Parent Disclosure Letter,
each of Parent, NPI and G-P Resins, as the case may be, has good and valid title
to, or has legally sufficient rights to use, the Acquired Assets, in each case
free and clear of all Liens, except for Permitted Liens. This Section 3.6(c)
does not apply to Real Property, for which Section 3.11 is applicable.
3.7 Sufficiency of Acquired Assets.
------------------------------
(a) Other than the Excluded Assets, the assets owned by the Transferred
Subsidiaries and the Acquired Assets, together with the services, licenses and
rights to be provided pursuant to the Ancillary Documents and the services
referenced on Section 3.7(a) of the Parent Disclosure Letter, comprise all
assets and services used in and necessary for the conduct of the Carve Out
Business since January 1, 2000 and as of the Closing Date.
(b) The Acquired Assets and the assets of the Transferred Subsidiaries are
in all material respects adequate for the purposes for which such assets are
currently used or are held for use, and are in reasonably good repair and
operating condition (subject to normal wear and tear). To the Knowledge of
Parent, there are no facts or conditions affecting any material tangible
Acquired Assets which would, individually or in the aggregate, reasonably be
expected to materially interfere with the use, occupancy or operation thereof as
currently used, occupied or operated, or their adequacy for such use.
17
<PAGE>
3.8 Financial Information. True and complete copies of (i) the unaudited
--------------------- -
balance sheets of the Carve Out Business as of January 1, 2000 and December 30,
2000, and the related unaudited statements of income, Parent's investment and
cash flow for each of the three years in the three-year period ended December
30, 2000, together with all related notes thereto (the "Year-End Financial
------------------
Statements"), and (ii) the unaudited balance sheet of the Carve Out Business as
---------- --
of March 31, 2001, and the related unaudited statements of income, Parent's
investment and cash flow for the three months ended March 31, 2001, together
with all related notes thereto (the "Interim Financial Statements" and together
----------------------------
with the Year-End Financial Statements, the "Financial Statements"), have been
--------------------
delivered by Parent to Purchaser. The Year-End Financial Statements, the Interim
Financial Statements, and, when delivered in accordance with Section 5.14, the
Audited Financial Statements (x) were (and, in the case of the Audited Financial
-
Statements, shall have been) prepared in accordance with the books of account
and other financial records of Parent and its Affiliates, (y) present fairly, in
-
all material respects, the consolidated financial condition and results of
operations of the Carve Out Business, as of the dates thereof or for the periods
covered thereby, as the case may be, and (z) have been (and, in the case of the
-
Audited Financial Statements, shall have been prepared) in accordance with U.S.
GAAP applied on a consistent basis from period to period, except as otherwise
stated in the Financial Statements (including the notes thereto) or in the
letter dated the date hereof delivered by Parent to Purchaser (the "Side
----
Letter"). Upon Purchaser's receipt of the Audited Financial Statements delivered
------
in accordance with Section 5.14(a), all references in this Article III to the
"Financial Statements" shall be deemed to refer to the Audited Financial
Statements and the Interim Financial Statements instead of the Year-End
Financial Statements and the Interim Financial Statements delivered prior to the
date hereof. Notwithstanding the foregoing provisions of this Section 3.8, the
Weirgor Woodyard and related Inventory and assets are not reflected in the
Year-End Financial Statements but such properties and assets will be reflected
in the Audited Financial Statements.
3.9 Absence of Certain Changes. Except as set forth on Section 3.9 of the
--------------------------
Parent Disclosure Letter, since December 30, 2000, (i) the Carve Out Business
-
has been conducted in the ordinary course and (ii) neither Parent nor any of its
--
Affiliates (solely in connection with the Carve Out Business) has:
(a) suffered any Material Adverse Effect;
(b) made any change in method of accounting or accounting practice, other
than such changes required by U.S. GAAP;
(c) sold, transferred, leased, subleased, licensed or otherwise disposed
of any properties or assets, real, personal or mixed (including, without
limitation, leasehold interests and intangible property), other than the sale of
Inventory and other sales of non-material assets in each case in the ordinary
course consistent with past practice;
18
<PAGE>
(d) solely with respect to any Transferred Subsidiary, issued or sold any
capital stock, notes, bonds or other securities, or any option, warrant or other
right to acquire the same;
(e) solely with respect to any Transferred Subsidiary redeemed any of the
capital stock or declared, made or paid any dividends or distributions to the
holders of capital stock or otherwise;
(f) solely with respect to any Transferred Subsidiary amended or restated
its certificate of incorporation or bylaws;
(g) amended, terminated, cancelled or compromised any material claims of
or waived any other rights of substantial value to the Carve Out Business;
(h) made any express or deemed election or settled or compromised any
material liability with respect to Taxes other than in the ordinary course of
business consistent with past practice;
(i) failed to pay any creditor of the Carve Out Business any material
amount owed to such creditor when due (other than in connection with any good
faith commercial disputes relating to monies owed, services rendered or product
warranties or guarantees);
(j) mortgaged, pledged or subjected to Lien (other than Permitted Liens),
any Acquired Asset or asset of any Transferred Subsidiary;
(k) received any notice of termination of any Contract or suffered any
damage, destruction or loss (whether or not covered by insurance) which, in
either case, individually or in the aggregate, has had, or would reasonably be
expected to have or result in, a Material Adverse Effect;
(l) made any change in the rate of compensation, commission, bonus or
other direct or indirect remuneration payable, or paid or agreed or orally
promised to pay, conditionally or otherwise, any bonus, incentive, retention or
other compensation, retirement, welfare, fringe or severance benefit or vacation
pay, to or in respect of any, officer, Employee, salesman, distributor, broker
or agent of Parent or any of its Affiliates relating to the Carve Out Business,
or entered into or amended any employment, severance or similar Contract with
any such Person, except (A) in the ordinary course and consistent with past
-
practice, (B) as may be required to satisfy contractual obligations existing as
-
of the date hereof (a full and complete description of which is provided in
Section 3.9(l) of the Parent Disclosure Letter), (C) as set forth in the Human
-
Resources Agreement, or (D) to satisfy the requirements of Applicable Law,
-
unless any such action has the effect of reducing the aggregate liabilities of
Parent and its Affiliates with respect
19
<PAGE>
to any such payments, benefits, agreements or arrangements, in each case to the
extent such Person is participating in the conduct of the Carve Out Business;
(m) had any actual or, to the Knowledge of Parent, threatened employee
strikes, work stoppages, slowdowns or lockouts, or had any materially adverse
change in its relations with its employees, agents, customers or suppliers
(taking each group as a whole);
(n) suffered any material or recurring power shortages at any of the
Mills;
(o) instituted, settled or agreed to settle any litigation, action or
proceeding before any Governmental Entity relating to the Carve Out Business or
the Acquired Assets, other than in the ordinary course of business but in no
event for an amount in excess of $250,000;
(p) failed to maintain Inventory levels in the ordinary course of business
consistent with past practice or made any purchase commitment other than in the
ordinary course of business consistent with past practice;
(q) changed its methods and guidelines for allocating pulp or paper
production orders among any of its mills; or
(r) agreed, whether in writing or otherwise, to take any of the actions
specified in this Section 3.9, except as expressly contemplated by this
Agreement and the Ancillary Documents.
3.10 No Undisclosed Liabilities. There are no liabilities arising out of or
--------------------------
relating to the Carve Out Business or the Acquired Assets, whether known or
unknown, absolute, accrued, contingent or otherwise and whether due or to become
due, except (i) as set forth in Section 3.10 of the Parent Disclosure Letter,
-
(ii) as and to the extent disclosed or reserved against in the audited balance
--
sheet as of December 30, 2000 included in the Financial Statements (including
the notes thereto) and (iii) for liabilities and obligations that (A) were
--- -
incurred after the date of such balance sheet in the ordinary course of business
consistent with past practice and (B) individually and in the aggregate have not
-
had or resulted in, and would not reasonably be expected to have or result in, a
Material Adverse Effect.
3.11 Real Property.
-------------
(a) Fee Properties. One of the Sellers or the Transferred Subsidiaries is
--------------
or prior to the Closing will be the owner of good, marketable and insurable fee
title to the land described in Section 3.11(a) of the Parent Disclosure Letter
and to all buildings, structures and other improvements (which term, as used in
this Agreement, shall include fixtures constituting real property) located
thereon (collectively, "Owned Real Property")
-------------------
20
<PAGE>
free and clear of all Title Defects except for the Permitted Real Property
Exceptions. The Owned Real Property constitutes all of the real property owned
by Parent or any of its Affiliates on the date hereof that primarily relates to
or is used in or held for use in connection with the Carve Out Business.
(b) [Intentionally Omitted].
-----------------------
(c) Leased Properties. Section 3.11(c) of the Parent Disclosure Letter is a
-----------------
true and complete (except with respect to easements) list of all Contracts under
which Parent or any of its Affiliates uses or occupies or has the right to use
or occupy, now or in the future, any real property that primarily relates to or
is used in or held for use in connection with the Carve Out Business (such
Contracts, the "Real Property Leases", the land, buildings, and other
--------------------
improvements covered by the Real Property Leases being herein called the "Leased
------
Real Property"). Except for the Permitted Real Property Exceptions, Parent or
-------------
one of its Affiliates, as the case may be, have good and valid title to the
leasehold estates under, and good and valid interest in, each Real Property
Lease free and clear of all Title Defects. Except for the Permitted Real
Property Exceptions, there is no underlying mortgage, deed of trust, lease,
grant of term or other estate or interest affecting any Leased Real Property
which is superior to the interest of Parent or of its Affiliates as tenant under
the applicable Real Property Lease and the Real Property Leases will not be
subordinate to any future mortgage, deed of trust, lease, grant of term or other
estate affecting the Leased Real Property.
(d) Entire Premises. All of the land, buildings, structures and other
---------------
improvements which primarily relate to or are used in or are held for use
primarily in connection with the Carve Out Business are included in the Owned
Real Property and the Leased Real Property. The Owned Real Property and the
Leased Real Property are hereinafter collectively referred to as the "Real
----
Property".
--------
(e) No Options. Except as set forth in Section 3.11(e) of the Parent
----------
Disclosure Letter (all of which exceptions are Permitted Real Property
Exceptions), neither Parent nor any of its Affiliates owns, holds or is
obligated under or a party to, any option, right of first refusal or other
contractual right to purchase, acquire, sell or dispose of the Real Property or
any portion thereof or interest therein.
(f) Real Property Permits. All material certificates of occupancy, permits,
---------------------
licenses, franchises, approvals and authorizations (collectively, the "Real
----
Property Permits") of all Governmental Entities having jurisdiction over the
----------------
Real Property (other than with respect to the environmental matters described in
Section 3.16 and other than any required State of Wisconsin or Federal permit
required for the pipeline running under the Wisconsin River from Nepco Lake to
the Port Edwards Mill) required to have been issued to Seller or Transferred
Subsidiaries to enable the Real Property to be lawfully occupied and used for
all of the purposes for which they are currently occupied and used
21
<PAGE>
have been lawfully issued and are, as of the date hereof, in full force and
effect. Neither Parent nor any of its Affiliates has received or been informed
by a third party of the receipt by it of any notice from any Governmental Entity
having jurisdiction over the Real Property threatening a suspension, revocation,
modification or cancellation of any Real Property Permit and, to Parent's
Knowledge, there is no basis for the issuance of any such notice or the taking
of any such action.
(g) Condemnation. Except as set forth in Section 3.11(g) of the Parent
------------
Disclosure Letter, none of the Sellers or Transferred Subsidiaries has received
notice or has Knowledge of any pending, threatened or contemplated condemnation
proceeding affecting the Real Property or any part thereof or of any sale or
other disposition of the Real Property or any portion thereof in lieu of
condemnation.
(h) Real Property Taxes. Except for Permitted Real Property Exceptions,
-------------------
each of the parcels included in the Real Property is assessed for real estate
tax purposes as a wholly independent tax lot, separate from any adjoining land
or improvements not constituting a part of such parcel.
(i) Survey. Except for Permitted Real Property Exceptions, there are
------
neither any encroachments upon any of the parcels comprising each of the
Woodland Mill and each NPI Mill nor any other facts or conditions affecting any
such parcel that an accurate survey or careful physical inspection thereof would
reveal. Except for Permitted Real Property Exceptions, no portion of any
improvement located on the Real Property encroaches upon any property not
included within the Real Property or upon the area of any easement affecting the
Real Property.
3.12 Intellectual Property.
---------------------
(a) Owned Intellectual Property. All Intellectual Property owned by Parent
---------------------------
or any of its Affiliates and used or held for use in the conduct of the Carve
Out Business, including the Acquired Intellectual Property (collectively, the
"Owned Intellectual Property") is listed in Section 3.12(a) of the Parent
---------------------------
Disclosure Letter if it is (i) material to the conduct of the Carve Out Business
-
and (ii) constitutes an issued patent or pending patent application, a trademark
--
registration, pending trademark application or common-law trademark, a
registered copyright or a registered domain name. With respect to any registered
or issued patents, copyrights or trademarks, or any pending applications
therefor that are listed on Section 3.12(a) of the Parent Disclosure Letter,
such list indicates the jurisdiction in which they were issued or registered or
await issuance or registration, registration or application, as the case may be,
and any registration or identification number assigned thereto. All due and owed
maintenance fees and renewal filings with respect to each such registration,
issuance and application have been paid or filed, as the case may be, except
where the failure to make the payment of such fees or such filings would not,
individually or in the aggregate, reasonably be expected to have a
22
<PAGE>
Material Adverse Effect. Except as disclosed in Section 3.12(a) of the Parent
Disclosure Letter or as set forth in a Listed Contract, neither Parent nor any
of its Affiliates has granted any license or assigned any rights to a third
party with respect to any Acquired Intellectual Property and has not granted any
license or assigned any rights with respect to any Owned Intellectual Property
that will be inconsistent with the rights granted under the License Agreement.
Except as listed in Section 3.12(a) of the Parent Disclosure Letter, there are
no present or future royalty or other payment obligations arising from the use
of the Acquired Intellectual Property.
(b) Licensed Intellectual Property. Section 3.12(b) of the Parent
------------------------------
Disclosure Letter sets forth a complete and correct list of all Contracts (other
than shrink-wrap licenses for off-the-shelf commercially available Computer
Software) pursuant to which a Person permits Parent or any of its Affiliates to
use any Intellectual Property that is material to the conduct of the Carve Out
Business (collectively, the "Intellectual Property Licenses"). To the Knowledge
-------------------------------
of Parent, none of the Intellectual Property Licenses is subject to any
outstanding order, ruling, decree, judgment or stipulation by or with any
Governmental Authority.
(c) Infringement. Except as disclosed in Section 3.12(c) of the Parent
------------
Disclosure Letter, the conduct of the Carve Out Business does not infringe or
otherwise conflict with any rights of any Person in respect of any Intellectual
Property, except for any infringement or conflict that, together with any other
such conflict or infringement, has not had and would not reasonably be expected
to have, a Material Adverse Effect. Except as disclosed in Section 3.12(c) of
the Parent Disclosure Letter, no claim or demand of any Person has been made nor
is there any proceeding that is pending, or to Parent's Knowledge, threatened,
nor, to Parent's Knowledge, is there a reasonable basis therefor, which (i)
-
challenges the rights of Parent or any of its Affiliates in respect of any Owned
Intellectual Property or Intellectual Property License or (ii) asserts that
--
Parent or any of its Affiliates is infringing any Person's Intellectual Property
rights in the conduct of the Carve Out Business or is required to pay any
royalty, license fee, charge or other amount with regard to its use of any
Intellectual Property in the conduct of the Carve Out Business. There is no
material contractual restriction or limitation pursuant to any orders, decisions
or decrees of any Governmental Authority on the right of Parent and its
Affiliates to use the names and marks that constitute Acquired Intellectual
Property in the conduct of the Carve Out Business. To the Knowledge of Parent,
no Acquired Intellectual Property is being infringed by any other Person, other
than any infringement that, together with any other such infringement, has not
had and would not reasonably be expected to have, a Material Adverse Effect.
3.13 Insurance. Section 3.13 of the Parent Disclosure Letter contains a
---------
complete and correct list and summary description of all insurance policies
maintained by or with respect to the Carve Out Business or the Acquired Assets.
Such policies are in full force and effect, and all premiums due thereon have
been paid. Parent, NPI, G-P Resins and
23
<PAGE>
the Transferred Subsidiaries have complied in all material respects with the
terms and provisions of such policies. Neither Parent nor any of its Affiliates
has received or been informed by a third party of the receipt by it of any
notice from any insurance company or fire rating and other similar board or
organization having jurisdiction over the Real Property threatening a
suspension, revocation, modification or cancellation of any insurance policies
maintained by or with respect to the Real Property and, to Parent's Knowledge,
there is no basis for the issuance of any such notice or the taking of any such
action in each case that would reasonably be expected to have a Material Adverse
Effect.
3.14 Contracts.
---------
(a) Except for any Contract listed in Sections 3.11(c), 3.12(b), 3.14(a)
or 3.15 of the Parent Disclosure Letter or in a schedule to the Human Resources
Agreement (collectively, "Listed Contracts"), no Acquired Asset or asset of the
----------------
Transferred Subsidiaries is bound or affected by, and none of any Transferred
Subsidiary, Parent or any of its other Affiliates (solely in connection with the
Carve Out Business) is a party to or bound by, any Contract that is:
(i) a Contract for the employment of any Person with an annual base
salary in excess of $100,000 or any consulting agreement with any Person
involving annual payments in excess of $100,000;
(ii) a collective bargaining agreement or any other material
Contract with any labor union;
(iii) a written agreement for the supply of power to any of the
Mills;
(iv) other than letters of credit obtained in the ordinary course of
business, an indenture, note, loan or credit agreement or other Contract
relating to the borrowing of money or to the direct or indirect guarantee
or assumption of the obligations of any other Person for borrowed money in
excess of $100,000, including any arrangement which has the economic effect
although not the legal form of such a guarantee;
(v) a mortgage, pledge, security agreement, deed of trust or other
document granting any Liens (including Liens upon properties acquired under
conditional sales, capital lease or other title retention or security
devices) on any of the Acquired Assets or any assets of a Transferred
Subsidiary, other than Permitted Liens;
(vi) a power of attorney (other than powers of attorney given in the
ordinary course of business);
24
<PAGE>
(vii) a covenant not to compete or similar agreement prohibiting or
materially restricting the ability of any Transferred Subsidiary or any
Person operating the Carve Out Business from conducting or engaging in any
business or operating in any geographical area, other than (A) any
-
distribution (including independent sales representative) agreement listed
on Section 3.14(a) of the Parent Disclosure Letter or (B) any supplier or
-
customer agreement relating to non-disclosure of confidential information
of the supplier or customer party thereto;
(viii) a Computer Hardware or Computer Software maintenance or
outsourcing agreement relating to information technology systems used in
the Carve Out Business;
(ix) a lease or similar agreement under which (A) Parent or any of
-
its Affiliates is lessee of, or holds or uses, any machinery, equipment,
vehicle or other tangible personal property owned by any third Person for
an annual payment in excess of $200,000 or (B) Parent or any of its
-
Affiliates is a lessor of, or makes available for use by any third Person,
any tangible personal property owned (including ownership for Tax purposes)
by Parent or such Affiliate having a fair market value in excess of
$200,000;
(x) other than any of the following entered into in the ordinary
course of business between the date of this Agreement and the Closing Date,
a Contract (including purchase orders) involving an obligation to purchase
products or services for payment by Parent or one of its Affiliates of more
than $500,000 annually (unless terminable by Parent or such Affiliate, as
the case may be, without payment or penalty of not more than $100,000 upon
no more than 90 days' notice);
(xi) a joint venture, partnership or similar Contract involving a
sharing of profits or expenses (including but not limited to a joint
research and development or joint marketing Contract);
(xii) a stock purchase agreement, asset purchase agreement or other
acquisition or divestiture agreement, including, but not limited to, any
agreement relating to the acquisition, sale, lease or disposal of any
material asset constituting part of the Carve Out Business or Acquired
Assets or assets of any Transferred Subsidiary (other than sales of
inventory in the ordinary course of business) or involving continuing
indemnity or other obligations; or
(xiii) a Contract not otherwise identified above that is material to
the Carve Out Business, taken as a whole.
25
<PAGE>
All Listed Contracts that constitute Mill Contracts are indicated as such
in the Parent Disclosure Letter.
(b) Except as disclosed in Section 3.14(b) of the Parent Disclosure
Letter or in a schedule to the Human Resources Agreement, (i) each material
-
Listed Contract is in full force and effect and enforceable against each party
thereto in accordance with its terms (except as enforceability may be limited by
bankruptcy, insolvency or other laws affecting the enforcement of creditors'
rights generally, and except that the availability of the remedy of specific
performances or other equitable relief is subject to the discretion of the court
before which any proceeding therefor may be brought), (ii) neither Parent nor
--
any of its Affiliates is (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect under any material
Listed Contract, (iii) to the Knowledge of Parent, as of the date of this
---
Agreement, none of the other parties to any such material Listed Contract is
(with or without the lapse of time or the giving of notice, or both) in breach
or default in any material respect thereunder, and (iv) neither Parent nor any
--
to terminate any material Listed Contract.Complete and correct copies of all
Listed Contracts, including all amendmentsand supplements thereto (and a
complete and correct description of all oralListed Contracts), have been made
available by Parent to Purchaser at the Millsor at the data room maintained by
Parent at its Atlanta headquarters.
3.15 Employee Benefits and Related Matters.
-------------------------------------
(a) Employee Benefit Plans.
----------------------
(i) Section 3.15(a)(i) of the Parent Disclosure Letter sets forth a
true and complete list of each Plan. Section 3.15(a)(i) of the Parent
Disclosure Letter separately identifies each Plan that is sponsored or
maintained by NPI (a "NPI Stand-Alone Plan").
--------------------
(ii) With respect to each such Plan, Parent has provided or made
available to Purchaser complete and correct copies of: all Plans; all trust
agreements, insurance contracts or other funding arrangements, if any; the
most recent actuarial and trust reports, if applicable; the most recent
Forms 5500 and all schedules thereto, if applicable; the most recent IRS
determination letter, if applicable; current summary plan descriptions; all
material communications received from or sent to the IRS, the Pension
Benefit Guaranty Corporation or the Department of Labor (including a
written description of any material oral communication to the extent
relevant to the administration of Purchaser's employee benefit plans to be
established as set forth in the Human Resources Agreement, such information
to be provided from time to time prior to Closing); an actuarial study of
any post-employment life or medical benefits provided under any such Plan,
if any; statements or other communications regarding withdrawal
26
<PAGE>
or other multiemployer plan liabilities, if any; and all amendments and
modifications to any such document.
(iii) Except as set forth in Section 3.15(a)(iii) of the Parent
Disclosure Letter or as expressly provided for in the Human Resources
Agreement, neither Parent nor any Affiliate of Parent has communicated to
any Employee any intention or commitment to modify any Plan or to establish
or implement any other employee or retiree benefit or compensation
arrangement.
(b) Qualification. Each Plan intended to be qualified under section 401(a)
-------------
of the Code, and the trust (if any) forming a part thereof, has received a
favorable determination letter from the IRS as to its qualification under the
Code and to the effect that each such trust is exempt from taxation under
section 501(a) of the Code, and to the Knowledge of the Parent nothing has
occurred since the date of such determination letter that could adversely affect
such qualification or tax-exempt status.
(c) Compliance; Liability.
---------------------
(i) Except as set forth in Section 3.15(c)(i) of the Parent
Disclosure Letter, no Plan is subject to section 412 of the Code or section
302 or 302 or Title IV of ERISA.
(ii) Except as set forth in Section 3.15(c)(ii) of the Parent
Disclosure Letter, no material liability has been or is expected to be
incurred by Parent or any Affiliate of Parent or the Carve Out Business
(either directly or indirectly, including as a result of an indemnification
obligation) under or pursuant to Title I or IV of ERISA or the penalty,
excise tax or joint and several liability provisions of the Code relating
to employee benefit plans that could, following the Closing, become or
remain a liability of the Carve Out Business or become a liability of
Purchaser or any of its Affiliates or of any employee benefit plan
established or contributed to by Purchaser and, to the Knowledge of Parent,
no event, transaction or condition has occurred or exists that could result
in any such liability to the Carve Out Business or, following the Closing,
Purchaser.
(iii) Except as set forth in Section 3.15(c)(iii) of the Parent
Disclosure Letter, each of the Plans has been operated and administered in
all material respects in compliance with all Applicable Laws, except for
any failure so to comply that, individually or together with all other such
failures, (A) has not and - will not result in a material liability or
-
obligation on the part of the Carve Out Business, or, following the
Closing, Purchaser or any of its Affiliates, and (B) has not had or
-
resulted in, and will - not have or result in, a Material Adverse Effect.
Except as set forth in Section 3.15(c)(iii) of the Parent Disclosure
Letter, there are no material pending or, to the Knowledge of Parent,
threatened claims by or on
27
<PAGE>
behalf of any of the Plans, by any Employee or otherwise involving any such
Plan or the assets of any Plan (other than routine claims for benefits).
(iv) Except as set forth in Section 3.15(c)(iv) of the Parent
disclosure Letter, no condition exists and no event has occurred with
respect to any Plan that is a "multiemployer plan" within the meaning of
section 4001(a)(3) of ERISA (a "Multiemployer Plan") that presents a
------------------
material risk of a complete or partial withdrawal under subtitle E of Title
IV of ERISA. To the Knowledge of Parent, no Multiemployer Plan is in
"reorganization" or "insolvent."
(v) All contributions required to have been made by Parent or any
Affiliate of Parent to any Plan under the terms of any such Plan or
pursuant to any applicable collective bargaining agreement or applicable
law have been made within the time prescribed by any such Plan, agreement
or Applicable Law.
(vi) No Employee is or may become entitled to post-employment
benefits of any kind by reason of employment in the Carve Out Business,
including, without limitation, death or medical benefits (whether or not
insured), other than (A) coverage provided pursuant to the terms of any
-
Plan specifically identified as providing such coverage in Section
3.15(c)(vi) of the Parent Disclosure Letter or mandated by section 4980B of
the Code, or (B) retirement benefits payable under any Plan qualified under
-
section 401(a) of the Code.
(vii) Except as otherwise expressly set forth in the Human Resources
Agreement, the consummation of the transactions contemplated by this
Agreement or the Ancillary Documents will not result in an increase in the
amount of compensation or benefits or the acceleration of the vesting or
timing of payment of any compensation or benefits payable to or in respect
of any Employee.
3.16 Environmental Matters. Except as disclosed in Section 3.16 of the
---------------------
Parent Disclosure Letter:
(a) Parent and its Affiliates are in material compliance with all
applicable Environmental Laws pertaining to the Real Property and the Carve Out
Business. No material violation by Parent or any of its Affiliates is being
alleged or, to the Knowledge of Parent, threatened, of any applicable
Environmental Law relating to the Real Property or the Carve Out Business or
with respect to any off-site disposal location.
(b) Parent and its Affiliates are in possession of, and in material
compliance with, all Governmental Authorizations relating to the Real Property
and the Carve Out Business that are required pursuant to applicable
Environmental Laws ("Environmental
-------------
28
<PAGE>
Permits"). A list of each Environmental Permit relating to the Carve Out
-------
Business or to the Real Property is contained on Section 3.16(b) of the Parent
Disclosure Letter.
(c) With respect to the Carve Out Business, except as has not had and would
not reasonably be expected to have a Material Adverse Effect, neither Parent nor
any of its Affiliates, nor to Parent's Knowledge, any other Person has caused or
taken any action that will result in any liability or obligation on the part of
Parent or any of its Affiliates relating to (i) the environmental conditions on,
-
under, or about the Real Property or any off-site disposal location, including
without limitation, the air, soil and groundwater conditions, or (ii) the past
--
or present use, management, handling, transport, treatment, generation, storage,
disposal, discharge, emission, Release or threatened Release of any Materials of
Environmental Concern at the Real Property or any off-site disposal location.
(d) There are no material Environmental Claims pending, or to the Knowledge
of Parent, threatened, relating to the Real Property or the Carve Out Business,
and to the Knowledge of Parent, there are no facts, circumstances, conditions or
occurrences that could reasonably form the basis of any material Environmental
Claim, including with respect to any off-site disposal location used by the
Carve Out Business.
(e) No material work, repair, construction or capital expenditure is
required or planned within the next two years in respect of the Real Property or
the Carve Out Business pursuant to, or to comply with, any Environmental Law,
nor has Parent or any of its Affiliates received notice of any such requirement.
(f) The Parent and its Affiliates have made available to Purchaser all
material environmental site assessments, compliance audits, investigation or
remediation studies, notices of violation and allegations of noncompliance or
liability in its possession, custody or control relating to the Real Property or
the Carve Out Business or any off-site disposal location.
3.17 Taxes. Except as set forth in Section 3.17 of the Parent Disclosure
-----
Letter:
(a) (i) None of the assets of the Transferred Subsidiaries or the Acquired
-
Assets is "tax exempt use property" within the meaning of Section 168(h) of the
Code, (ii) no liens for material Taxes have been filed with respect to the
--
assets of any of the Transferred Subsidiaries or the Acquired Assets, and (iii)
---
no material claims for Taxes payable by any of the Transferred Subsidiaries have
been asserted or raised and, to the Knowledge of Parent, no circumstances exist
to form the basis for asserting or raising such claims.
(b) There have been properly completed and filed on a timely basis and in
correct form all material Tax Returns required to be filed by (or on behalf of)
the
29
<PAGE>
Transferred Subsidiaries or with respect to the Acquired Assets required to be
filed on or prior to the Closing Date, and the foregoing Tax Returns are true,
complete and correct in all material respects.
(c) All material Taxes required to be paid by (or on behalf of) the
Transferred Subsidiaries or imposed with respect to the Acquired Assets which
were due and payable on or prior to the Closing Date have been duly and timely
paid or reserved for in accordance with GAAP, and all applicable material Tax
laws have been complied with on or prior to the Closing Date.
(d) There is no audit, examination, investigation, appeal, litigation or
other proceeding currently pending with respect to Taxes payable by any of the
Transferred Subsidiaries or relating to the Acquired Assets which could
reasonably be expected to result in a material Tax liability.
(e) All material Taxes required by law to be withheld or collected by (or
on behalf of) the Transferred Subsidiaries or with respect to the Acquired
Assets have been duly withheld or collected and have been timely paid over to
the proper Taxing authorities.
(f) (i) None of the Transferred Subsidiaries is a party to or bound by or
-
has an obligation under any Tax sharing, allocation, indemnification or similar
agreement and (ii) none of the Transferred Subsidiaries is or has been a member
--
of any consolidated, combined or unitary group for purposes of filing Tax
Returns or paying Taxes and would be held liable for Taxes of any Person (other
than Parent and its Affiliates) under Treasury Regulation Section 1.1502-6 or
any similar provision of state, local or foreign law or as a transferee or
successor, by contract, or otherwise.
(g) Neither Parent nor any of the Transferred Subsidiaries is a party to
any joint venture, partnership, or other arrangement which relates to the Carve
Out Business.
(h) No written document or comparable consent extending or waiving, or
having the effect of extending or waiving, the application of the statute of
limitations with respect to any Taxes payable by any of the Transferred
Subsidiaries or relating to the Acquired Assets is currently outstanding,
pending or otherwise in effect with the IRS or any other taxing authority, and
no written power of attorney with respect to any such Taxes has been filed or
entered into with any taxing authority.
(i) Section 3.17(i) of the Parent Disclosure Letter contains a list of
states, territories and jurisdictions in which material income, franchise,
sales, use, employment or payroll Tax Returns with respect to the Transferred
Subsidiaries or the Acquired Assets were filed for the past three years and
true, complete and correct copies of all such Tax Returns filed within the past
three years have been made available to Purchaser.
30
<PAGE>
(j) There are no outstanding adjustments for Tax purposes applicable to any
of the Transferred Subsidiaries as a result of changes in methods of accounting.
(k) Purchaser will not have a carryover basis in the Acquired Assets under
Section 1.338-8 of the Treasury Regulations.
(l) Neither any of the Transferred Subsidiaries nor any Person on behalf of
any of the Transferred Subsidiaries has entered into or will enter into any
agreement or consent pursuant to Section 341(f) of the Code.
(m) Each of the Transferred Canadian Subsidiaries (i) is classified as a
-
corporation for U.S. federal income - tax purposes and (ii) is not a corporation
--
for which an election described in Section 1504(d) of the Code has -- been made.
3.18 Labor Matters. Except as set forth in Section 3.18 of the Parent
-------------
Disclosure Letter:
(a) Section 3.18(a) of the Parent Disclosure Letter sets forth a list of
each Other Employee (as defined in the Human Resources Agreement).
(b) As of the date hereof, there are no strikes or lockouts or material
work stoppages or slowdowns pending or, to the Knowledge of Parent, threatened
against or involving employees of the Mills or the Acquired Assets.
(c) As of the date hereof, there are no formal or informal complaints,
charges, claims or grievances against Parent or one of its Affiliates pending
or, to the Knowledge of Parent, threatened to be brought or filed with any
Governmental Entity, arbitrator or court based on or arising out of the
employment by Parent or one of its Affiliates of any employee of the Mills,
except for those which, individually or in the aggregate, has not had and would
not reasonably be expected to have a Material Adverse Effect.
(d) Parent and each of its Affiliates is in compliance with all laws,
regulations, rules and orders of all Governmental Entities relating to the
employment of labor at the Mills or relating to the Transferring Employees,
including all such laws, regulations, rules and orders relating to wages, hours,
collective bargaining, discrimination, civil rights, safety and health, worker
notification requirements, immigration, workers' compensation, layoffs, and the
collection and payment of withholding Taxes and similar Taxes, except where the
failure to be in compliance, individually or in the aggregate, has not had and
would not reasonably be expected to have a Material Adverse Effect.
3.19 Brokers. Except as disclosed in Section 3.19 of the Parent Disclosure
-------
Letter, no finder, broker, agent or other intermediary is entitled to any fee or
commission or other payment from Parent or its Affiliates in connection with
this Agreement or the transactions contemplated hereby.
31
<PAGE>
3.20 Affiliate Transactions.
----------------------
(a) Section 3.20(a) of the Parent Disclosure Letter lists all material
services, and technology provided by or through Parent or any of its Affiliates
in the conduct of the Carve Out Business to NPI, G-P Resins or any Transferred
Subsidiary or to the operations conducted at the Mills.
(b) Section 3.20(b) of the Parent Disclosure Letter sets forth a complete
and correct list of (i) any transfers of personnel between Parent or any of its
-
Affiliates, on the one hand, and any of the Mills, on the other hand from and
after January 1, 2000 and (ii) to the extent not described in Section 3.20(a),
--
all Contracts between Parent or any of its Affiliates, on the one hand, and any
of the Mills, on the other hand, in effect from and after January 1, 2000 (all
of the foregoing transactions described in Sections 3.20(a) and 3.20(b),
collectively, "Affiliated Party Transactions").
-----------------------------
ARTICLE IV
Representations and Warranties of Purchaser
-------------------------------------------
As of the date hereof and as of the Closing Date, Purchaser hereby
represents and warrants to Parent as follows:
4.1 Organization, Standing and Power.
--------------------------------
(a) Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has the
requisite corporate power and authority to carry on its business as now being
conducted, to execute and deliver this Agreement and each of the Ancillary
Documents to which it is or will be a party, to perform fully its obligations
under this Agreement and the Ancillary Documents, and to consummate the
transactions contemplated hereby and thereby.
(b) Purchaser is not in violation of any of the provisions of its
certificate of incorporation or by-laws.
4.2 Authority. The execution and delivery of this Agreement and the
---------
Ancillary Documents and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on the
part of Purchaser. This Agreement and the Human Resources Agreement have been
duly executed and delivered by Purchaser and each constitutes its legal, valid
and binding obligation, enforceable against it in accordance with its terms.
Each Ancillary Document to be entered into by Purchaser will be duly executed
and delivered at the Closing and when so executed and delivered will constitute,
its legal, valid and binding obligation, enforceable against it in accordance
with its terms.
32
<PAGE>
4.3 No Conflicts.
------------
(a) The execution, delivery and performance of this Agreement and the
Ancillary Documents by Purchaser, and the consummation by Purchaser of the
transactions contemplated hereby and thereby do not and will not conflict with,
or result in any violation of or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or result in
the creation of any Lien (other than a Permitted Lien) upon any of Purchaser's
assets under, any provision of (i) the certificate of incorporation or bylaws of
-
Purchaser, (ii) subject to the filings and other matters referred to in the
--
following paragraph (b), any law, judgment, order, decree, statute, ordinance,
rule or regulation applicable to Purchaser, or (iii) other than as set forth in
---
Section 4.3(a) of the Purchaser Disclosure Letter, any Contract to which
Purchaser is a party or by which any of Purchaser's assets are bound or
affected, except in the case of clause (ii) and clause (iii), for any such
conflict, violation, default or other consequence that would not, individually
or in the aggregate, reasonably be expected to materially impair the ability of
Purchaser to perform its obligations under this Agreement.
(b) No Governmental Approval is required to be obtained or made by
Purchaser in connection with the execution and delivery of this Agreement and
the Ancillary Documents or the consummation of the transactions contemplated
hereby and thereby, except for (i) compliance with and filings under the HSR Act
-
and any other applicable pre-merger notification law, whether U.S. or foreign,
and (ii) those the failure of which to obtain or make, individually or in the
--
aggregate, would not materially impair the ability of Purchaser to perform its
obligations under this Agreement.
4.4 Financing Commitment. Purchaser has delivered to Parent a true and
--------------------
correct copy of the commitment letter, dated June 1, 2001, obtained by Purchaser
in respect of the debt financing of the transactions contemplated by this
Agreement (the "Financing Commitment"). Assuming that the financing contemplated
--------------------
by the Financing Commitment is consummated in accordance with the terms thereof,
the funds to be obtained thereunder by Purchaser, together with other funds of
Purchaser, will provide sufficient funds to pay the Purchase Price. As of the
date hereof, the Financing Commitment is in full force and effect to the extent
of the terms thereof.
4.5 Litigation. As of the date hereof, there is no claim, action, suit
----------
proceeding or governmental investigation pending or, to the Knowledge of
Purchaser, threatened against Purchaser, by or before any Governmental Entity
which would materially impair the ability of Purchaser to perform, or prohibit
Purchaser from performing, its obligations under this Agreement.
4.6 Investment Intent. Purchaser is acquiring the Shares solely for
-----------------
investment for its own account and not with the view to, or for resale in
connection with, any
33
<PAGE>
distribution thereof. Purchaser understands that the Shares have not been
registered under the Securities Act or any state or foreign securities laws by
reason of specified exemptions therefrom that depend upon, among other things,
the bona fide nature of its investment intent as expressed herein and as
--------
explicitly acknowledged hereby and that under such laws and applicable
regulations such securities may not be resold without registration under the
Securities Act or under applicable state or foreign law unless an applicable
exemption from registration is available.
4.7 Accredited Investor; Investment Representations. Purchaser is an
-----------------------------------------------
"accredited investor" within the meaning of Rule 501 of Regulation D under the
Securities Act. Purchaser, by reason of its business and financial experience in
business, has such knowledge, sophistication and experience in business and
financial matters as to be capable of evaluating the merits and risks of the
purchase of the Shares, is able to bear the economic risk of such investment in
the Transferred Subsidiaries, and is able to afford a complete loss of such
investment.
4.8 Brokers. Except as disclosed in Section 4.8 of the Purchaser Disclosure
-------
Letter, no finder, broker, agent or other intermediary is entitled to any fee or
commission or other payment from Purchaser or its Affiliates in connection with
this Agreement or the transactions contemplated hereby.
ARTICLE V
Covenants
---------
5.1 Conduct of Carve Out Business. During the period from the date of this
-----------------------------
Agreement to and including the Closing Date, except as otherwise required by
this Agreement or any Ancillary Document or as set forth on Section 5.1 of the
Parent Disclosure Letter:
(a) Each of Sellers will, and will cause its Affiliates to (except with the
prior written consent of Purchaser, such consent not to be unreasonably withheld
or delayed):
(i) inform Purchaser promptly of the occurrence of any event of which
Parent obtains Knowledge which occurs prior to the Closing and which has
had or would, based on the Knowledge of Parent at the time, reasonably be
expected to have a Material Adverse Effect;
(ii) maintain, preserve and insure the Acquired Assets in the ordinary
course of business and consistent with past practice;
(iii) pay accounts payable and other obligations of the Carve Out
Business in the ordinary course of business consistent with prior practice
and maintain current practices with respect to the collection of accounts
receivable of the Carve Out Business;
34
<PAGE>
(iv) perform in the ordinary cause of business and in all material
respects all of its obligations under all Contracts and other orders,
documents and instruments relating to or affecting the Carve Out Business,
and comply in all material respects with all Applicable Laws with respect
to the Carve Out Business or the Acquired Assets;
(v) conduct all Tax affairs relating to the Transferred Subsidiaries
and the Acquired Assets in good faith, in the ordinary course of business
and in substantially the same manner as such affairs would have been
conducted if this Agreement had not been entered into; and
(vi) otherwise carry on the Carve Out Business in the ordinary course
of business, in substantially the same manner as heretofore conducted,
including preserving intact the present business organization, keeping
available the services of the significant employees and sales agents, and
preserving their respective relationships with material customers,
suppliers, distributors and others having business dealings with Parent,
NPI, G-P Resins or any of their Affiliates relating to the Carve Out
Business.
(b) Each of Sellers will not and will cause its Affiliates not to (without
the prior written consent of Purchaser, such consent not to be unreasonably
withheld or delayed):
(i) make any capital expenditure on or lease any item of capital
equipment for use in the Carve Out Business in excess of $500,000, in the
case of any such capital expenditure or lease, or $5,000,000 in the case of
all such capital expenditures and leases, in each case other than pursuant
to the capital expenditure budget for the Mills for 2001 that has been
provided to Purchaser;
(ii) modify any Listed Contract or enter into or assume any Contract
that would constitute a Listed Contract if it existed on the date hereof or
that involves an expenditure of more than $1,000,000 per annum (or a series
of related Contracts involving aggregate expenditures of more than $