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SECURITIES PURCHASE AGREEMENT
among
GEORGIA-PACIFIC CORPORATION,
GEORGIA-PACIFIC FINANCE, LLC
SCA TISSUE, INC.
and
SVENSKA CELLULOSA AKTIEBOLAGET SCA (publ)
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TABLE OF CONTENTS
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ARTICLE I
Purchase and Sale of Securities
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SECTION 1.1. Purchase Price of the Securities......................... 1
ARTICLE II
The Closing; Purchase Price Adjustments
SECTION 2.1. Closing Date............................................. 2
SECTION 2.2. Transactions to be Effected at the Closing............... 2
SECTION 2.3. Equity Adjustment........................................ 3
SECTION 2.4. EBITDA Adjustment........................................ 4
SECTION 2.5. Accounting Principles.................................... 5
ARTICLE III
Representations and Warranties of Seller
SECTION 3.1. Organization, Standing and Qualifications................ 6
SECTION 3.2. Authority................................................ 7
SECTION 3.3. Compliance with Applicable Laws.......................... 7
SECTION 3.4. Litigation; Decrees...................................... 8
SECTION 3.5. Title to Assets.......................................... 8
SECTION 3.6. Real Property............................................ 8
SECTION 3.7. Intellectual Property.................................... 10
SECTION 3.8. Insurance................................................ 11
SECTION 3.9. Contracts................................................ 12
SECTION 3.10. Sufficiency of Assets................................... 15
SECTION 3.11. Employee Benefits....................................... 15
SECTION 3.12. Environmental Matters................................... 17
SECTION 3.13. Taxes................................................... 18
SECTION 3.14. Labor Matters........................................... 19
SECTION 3.15. Absence of Certain Changes.............................. 20
SECTION 3.16. Customers and Suppliers................................. 20
SECTION 3.17. Disclosure.............................................. 21
SECTION 3.18. Financial Statements.................................... 21
SECTION 3.19. No Undisclosed Liabilities or Distributions............. 23
SECTION 3.20. Transactions with Seller and Affiliates................. 23
SECTION 3.21. Title to Securities..................................... 24
SECTION 3.22. Capitalization.......................................... 24
SECTION 3.23. Subsidiaries and Equity Interests....................... 24
SECTION 3.24. GPF Authority, etc...................................... 24
SECTION 3.25. Notes................................................... 24
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ARTICLE IV
Representations and Warranties of Purchaser and SCA
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SECTION 4.1. Organization, Standing and Power......................... 25
SECTION 4.2. Authority................................................ 25
SECTION 4.3. Available Funds.......................................... 25
SECTION 4.4. Investment Intent........................................ 26
SECTION 4.5. Accredited Investor; Investment Representations.......... 26
SECTION 4.6. Litigation; Decrees...................................... 26
ARTICLE V
Covenants
SECTION 5.1. Conduct of Business...................................... 26
SECTION 5.2. Access to Information.................................... 29
SECTION 5.3. Governmental Approval, Etc............................... 29
SECTION 5.4. Environmental Matters.................................... 30
SECTION 5.5. Expenses................................................. 30
SECTION 5.6. Brokers or Finders....................................... 30
SECTION 5.7. Restructuring............................................ 31
SECTION 5.8. No Oral Representations.................................. 31
SECTION 5.9. Purchaser Notices........................................ 31
SECTION 5.10. Accounts Receivable..................................... 31
SECTION 5.11. Allocation; Tax Matters................................. 31
SECTION 5.12. Ancillary Agreements.................................... 34
SECTION 5.13. [Intentionally Omitted]................................. 34
SECTION 5.14. Gary, Indiana Access.................................... 34
SECTION 5.15. Litigation Cooperation.................................. 34
SECTION 5.16. Intellectual Property................................... 34
SECTION 5.17. Supplemental Disclosure................................. 35
SECTION 5.18. Negotiations with Others................................ 35
SECTION 5.19. Non-Solicitation........................................ 35
SECTION 5.20. Unisource............................................... 36
SECTION 5.21. Maintenance of Insurance................................ 36
SECTION 5.22. Resignations............................................ 36
SECTION 5.23. Certifications.......................................... 36
SECTION 5.24. Licensed Computer and Leased Computer Hardware.......... 36
SECTION 5.25. Post Closing Deliveries................................. 37
SECTION 5.26. PWC Report.............................................. 37
SECTION 5.27. Undertaking to Keep Proprietary Information Confidential 38
SECTION 5.28. Prohibited Transactions................................. 38
SECTION 5.29. Obligation of SCA....................................... 38
SECTION 5.30. Delivery of Certain Inventories......................... 38
SECTION 5.31. Warren and Washington Industry Development Agency....... 38
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ARTICLE VI
Conditions Precedent
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SECTION 6.1. Conditions to Each Party's Obligation.................... 39
SECTION 6.2. Conditions to Obligation of Purchaser.................... 39
SECTION 6.3. Conditions to Obligation of Seller....................... 41
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.1. Termination.............................................. 41
SECTION 7.2. Amendments and Waivers................................... 42
ARTICLE VIII
Indemnification
SECTION 8.1. Indemnification by Seller................................ 43
SECTION 8.2. Indemnification by Purchaser and SCA..................... 44
SECTION 8.3. Environmental Liability.................................. 45
SECTION 8.4. Losses Net of Insurance.................................. 47
SECTION 8.5. Limitation on Indemnification by Seller.................. 47
SECTION 8.6. Procedures Relating to Third Party Claims (other than Tax
Liabilities 48
SECTION 8.7. Procedures Relating to Non-Third Party Claims............ 49
SECTION 8.8. [Intentionally Omitted].................................. 49
SECTION 8.9. Acknowledgment........................................... 49
SECTION 8.10. Tax and Accounting...................................... 49
SECTION 8.11. Reasonableness of Parties; Obligation to Mitigate....... 49
ARTICLE IX
General Provisions
SECTION 9.1. Notices ................................................. 50
SECTION 9.2. Survival of Representations.............................. 51
SECTION 9.3. Severability............................................. 51
SECTION 9.4. Counterparts............................................. 51
SECTION 9.5. Entire Agreement; No Third Party Beneficiaries........... 51
SECTION 9.6. Governing Law............................................ 51
SECTION 9.7. Consent to Jurisdiction.................................. 52
SECTION 9.8. Publicity................................................ 52
SECTION 9.9. Assignment............................................... 52
ARTICLE X
Definitions
SECTION 10.1. Definitions............................................. 52
SECTION 10.2. Construction and Interpretation of Certain Terms and
Phrases................................................. 63
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Exhibit A [Intentionally left blank]
Exhibit B Form of Human Resources Agreement
Exhibit C Form of Opinion of Deputy General Counsel of Seller
Exhibit D Form of Opinion of Special Counsel of Purchaser
Exhibit E Form of Opinion of General Counsel of Purchaser
Exhibit F Form of Paper Sludge Disposal Agreement
Exhibit G Form of Parent Roll Supply Agreement
Exhibit H Form of Coronet License Agreement
Exhibit I Form of Finished Goods Agreement
Exhibit J Form of Assumption Agreement
Exhibit K Form of Transition Agreement
Exhibit L Form of the WISCO Release
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SCHEDULES
Schedule 2.4(a) Agreed Procedures
Schedule 3.1(c) Organization, Standing and Qualifications
Schedule 3.2(b) Conflicts, Breaches, Violations, Defaults, Liens
Schedule 3.2(c) Required Permits
Schedule 3.3(a)(i) Permits Held by Company
Schedule 3.3(a)(ii) Compliance Exceptions
Schedule 3.3(a)(iii) Governmental Investigations
Schedule 3.4 Company's Litigation; Decrees
Schedule 3.5 Permitted Liens and Material Property, Asset and Equipment
Schedule 3.6(a) Owned Property
Schedule 3.6(b) Leased Property
Schedule 3.6(c) Easements & Access
Schedule 3.6(d) Leases, Subleases, Licenses and Occupancy Agreements
Schedule 3.7(a) Company's Intellectual Property
Schedule 3.7(b) Company's Intellectual Property Licenses, Sublicenses and
Agreements
Schedule 3.7(d) Infringements
Schedule 3.7(g) Computer Software Licenses
Schedule 3.7(g)(i) Other Licenses
Schedule 3.8(a) Insurance Policies
Schedule 3.8(b) Inactive Insurance Policies
Schedule 3.9(a) Material Contracts
Schedule 3.9(b) Material Contracts (Extraordinary)
Schedule 3.9(c) Change of Control
Schedule 3.9(d) Contracts Assigned
Schedule 3.10 Sufficiency of Assets
Schedule 3.11 Seller's Benefit Plans
Schedule 3.11(a) Assumed Benefit Plan
Schedule 3.11(e) Reportable Events
Schedule 3.11(f) Actions, Suits or Claims
Schedule 3.11(g) Post-Retirement Welfare Benefits
Schedule 3.12 Environmental Matters
Schedule 3.13 Tax Matters
Schedule 3.14 Labor and Employment Matters
Schedule 3.14(a) Collective Bargaining Agreements
Schedule 3.14(b) Claims/Grievances
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Schedule 3.14(e) Employee List
Schedule 3.14(f) Severance Arrangements
Schedule 3.14(i) Headquarter Services
Schedule 3.15 Absence of Certain Changes
Schedule 3.16(a) Customers
Schedule 3.16(b) Suppliers
Schedule 3.17(c) Information and Materials
Schedule 3.18(a) Company Balance Sheet
Schedule 3.18(h) Projected Statement of Income
Schedule 3.19 Liabilities
Schedule 3.20 Transactions with Affiliates
Schedule 3.22 Capitalization
Schedule 3.23 Subsidiaries and Equity Interests
Schedule 5.4 Remediation and Compliance Plans
Schedule 5.7 Restructuring
Schedule 5.12(b) Products and Quantities
Schedule 8.1(a) Liabilities
Schedule 8.5 Environmental Liabilities
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SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is made and entered
into as of January 21, 2001, among Georgia-Pacific Corporation, a Georgia
corporation ("GPC" or "Seller"), Georgia-Pacific Finance, LLC, a Delaware
limited liability company ("GPF"), Svenska Cellulosa Aktiebolaget SCA (publ), a
Swedish corporation ("SCA") and SCA Tissue, Inc., a Delaware corporation and a
wholly-owned subsidiary of SCA ("Purchaser").
PRELIMINARY STATEMENT
WHEREAS, GPC owns 95% of the Membership Units of, and on or before the
Closing (as hereinafter defined) it will own 100% of the Membership Units of,
Georgia-Pacific Tissue, LLC, a Delaware limited liability company (the
"Company");
WHEREAS, GPF holds the Notes in respect of the Company Indebtedness; and
WHEREAS, Purchaser desires to purchase from GPC, and GPC desires to sell to
Purchaser, all of the Membership Units of the Company (the "Securities") and
Purchaser desires to purchase from GPF and GPF desires to sell to Purchaser the
Notes, all of the foregoing, upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements herein contained, the parties, intending to be legally
bound, agree as follows:
ARTICLE I
Purchase and Sale of Securities
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SECTION 1.1. Purchase Price of the Securities. Subject to all of the
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terms and conditions of this Agreement, GPC in reliance on the covenants,
representations and warranties of Purchaser and SCA contained herein, shall sell
the Securities to Purchaser at the Closing (as defined in Section 2.1 below) and
Purchaser, in reliance on the covenants, representations and warranties of
Seller and GPF contained herein, shall purchase the Securities from GPC at the
Closing for a purchase price equal to $78,074,000 (the "Purchase Price"). The
Purchase Price shall be paid by Purchaser to GPC at the Closing, in immediately
available funds. GPC shall deliver to Purchaser at the Closing certificates for
the Securities duly endorsed or with duly executed stock powers attached.
Subject to all of the terms and conditions of this Agreement, GPF
shall sell the Notes to Purchaser at the Closing and Purchaser shall acquire the
Notes from GPF at the Closing for a price equal to the aggregate principal
amount outstanding under the Notes at the Closing plus an amount equal to all
accrued and unpaid interest thereon.
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ARTICLE II
The Closing; Purchase Price Adjustments
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SECTION 2.1. Closing Date. The closing of the sale and transfer of the
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Securities (the "Closing") shall take place at the offices of Troutman Sanders
LLP, Bank of America Plaza, 600 Peachtree Street N.E., Atlanta, Georgia 30308,
at 10:00 a.m., local time, on March 2, 2001, or, if the conditions to the
Closing set forth in Article VI shall not have been satisfied by such date, as
soon as practicable after such conditions shall have been satisfied. The date
on which the Closing shall occur is herein referred to as the "Closing Date."
SECTION 2.2. Transactions to be Effected at the Closing.
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(a) GPC shall deliver or cause to be delivered to Purchaser the following:
(i) Certificates representing the Securities, duly endorsed (or
accompanied by duly executed stock powers), in proper form for transfer to
Purchaser;
(ii) a duly executed copy of each of the Ancillary Agreements to
which GPC is a party; and
(iii) [Intentionally left blank];
(iv) such other instruments or documents, in form and substance
reasonably acceptable to Purchaser, the delivery of which is a condition to
Closing.
(b) GPF shall deliver the Notes, duly endorsed, to Purchaser.
(c) Purchaser shall deliver to GPC the following:
(i) by wire transfer to an account designated in writing by GPC,
not less than seven days prior to the Closing, immediately available United
States dollars in an amount equal to the Purchase Price;
(ii) a duly executed copy of each of the Ancillary Agreements to
which the Company is a party; and
(iii) such other instruments or documents, in form and substance
reasonably acceptable to Seller, the delivery of which is a condition to
Closing.
With the exception of Section 2.2(c)(ii), which will take place immediately
after the Closing, all actions set forth in this Section 2.2 will take place at
or prior to the Closing.
(d) Purchaser shall deliver to GPF by wire transfer to an account
designated in writing by GPF not less than seven days prior to the Closing, in
immediately available United States dollars, an amount equal to the outstanding
aggregate principal of the Company Indebtedness plus accrued and unpaid interest
(the "Notes Acquisition Price").
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SECTION 2.3. Equity Adjustment.
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(a) Within 90 days following the Closing Date, Purchaser and Company with
the cooperation of GPC shall prepare, or cause to be prepared, and deliver to
GPC a balance sheet of the Company as of the Closing Date after giving effect to
the Restructuring, which balance sheet shall be audited by PWC (the "Closing
Balance Sheet").
(b) GPC and its accountants shall have 30 days after the delivery to GPC of
the Closing Balance Sheet to review the Closing Balance Sheet. In the event
that GPC determines that the Closing Balance Sheet has not been prepared on the
basis set forth in Section 2.5, GPC shall inform Purchaser in writing (an
"Objection"), setting forth a specific description of the basis of the Objection
and the adjustments to the Closing Balance Sheet which GPC believes should be
made, which Objection must be delivered to Purchaser on or before the last day
of such 30-day period. Purchaser shall then have 30 days to review and respond
to the Objection. The parties shall attempt in good faith to reach an agreement
with respect to any matters in dispute. If the parties are unable to resolve
all of their disagreements with respect to the determination of the foregoing
items within 45 days following the delivery to GPC of Purchaser's response to
the Objection by GPC, they shall refer their remaining differences to Ernst &
Young LLP or such other firm mutually agreed to by the parties (the "CPA Firm"),
who shall determine in accordance with this Agreement, and only with respect to
the remaining differences so submitted, whether and to what extent, if any, the
Closing Balance Sheet requires adjustment. The parties shall direct the CPA
Firm to use its best efforts to render its determination within 30 days after
such submission. In arriving at its decision, the CPA Firm shall rely on its
expertise as certified public accountants and shall not be bound by the
submissions of the parties but shall be bound to apply the provisions of this
Agreement. The CPA Firm's determination shall be conclusive and binding upon
Purchaser, Company, SCA, GPC and GPF. The fees and disbursements of the CPA
Firm shall be paid one-half by Purchaser and one-half by GPC. Purchaser and GPC
shall make readily available to the CPA Firm all relevant books and records and
any work papers (including those of the parties' respective accountants)
relating to the Closing Balance Sheet and all other items reasonably requested
by the CPA Firm. The "Final Closing Balance Sheet" shall be deemed to be (i)
the Closing Balance Sheet in the event that no Objection is delivered by GPC
during the 30-day period specified above, or (ii) if an Objection is delivered
by GPC, the Closing Balance Sheet, as adjusted by either (A) the agreement of
the parties or (B) the decision of the CPA Firm.
(c) GPC shall have the opportunity to participate in the preparation of the
Closing Balance Sheet by (i) observing the physical inventory taken in
connection therewith (which may begin prior to the Closing Date), (ii) attending
any audit planning meetings in connection therewith, (iii) meeting with and
discussing procedures with Purchaser, Company and their accountants, and (iv)
otherwise having full access to all information used by Purchaser in preparing
the Closing Balance Sheet, including the books and records and the work papers
of its accountants (subject to the reviewing party executing any necessary
waivers or indemnifications required by Purchaser's or Company's accountants).
The Company shall provide reasonable advance notice to GPC of any such physical
inventory or audit planning meeting.
(d) In reviewing any Objection, Purchaser and its accountants shall have
full access to all information used by GPC in preparing such Objection,
including the work papers of GPC
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and GPC's accountants (subject to the reviewing party executing any necessary
waivers or indemnifications required by GPC's accountants).
(e) If the total assets minus total liabilities as reflected on the Final
Closing Balance Sheet (the "Final Stockholder's Equity") is less than the total
assets minus total liabilities as reflected on the Pro Forma Business Balance
Sheet (the "Management Stockholder's Equity"), then, within ten Business Days
following the issuance of the Final Closing Balance Sheet, GPC agrees to make a
payment to Purchaser in an amount, in immediately available funds, equal to the
difference between the Management Stockholder's Equity and the Final
Stockholder's Equity, plus interest on such amount at the prime rate (as set
forth in the "Money Rates" section of The Wall Street Journal) from the Closing
-----------------------
Date through the date of payment. If the Final Stockholder's Equity is greater
than the Management Stockholder's Equity, then within ten Business Days
following issuance of the Final Closing Balance Sheet, Purchaser shall make a
payment to GPC, in immediately available funds, equal to the difference between
the Final Stockholder's Equity and the Management Stockholder's Equity, plus
interest on such amount at the prime rate (as set forth in the "Money Rates"
section of The Wall Street Journal) from the Closing Date through the date of
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payment.
SECTION 2.4. EBITDA Adjustment.
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(a) PWC shall audit the Company Financial Statements and perform the agreed
processes and procedures set out in Schedule 2.4(a) (the "Agreed Procedures") on
the Pro Forma Business Financial Statements and shall, before Closing, submit a
report thereon with respect to the EBITDA for the Business for the fiscal year
2000 (the "PWC Report").
(b) GPC and its accountants shall have 30 days after the delivery of the
PWC Report to review the PWC Report. In the event that GPC determines that the
PWC Report has not been prepared on the basis set forth in Section 2.4(a), GPC
shall inform Purchaser in writing (a "Section 2.4 Objection"), setting forth a
specific description of the basis of the Section 2.4 Objection and the
adjustments to the PWC Report which GPC believes should be made, which Section
2.4 Objection must be delivered to Purchaser on or before the last day of such
30-day period. Purchaser shall then have 30 days to review and respond to the
Section 2.4 Objection. The parties shall attempt in good faith to reach an
agreement with respect to any matters in dispute. If the parties are unable to
resolve all of their disagreements with respect to the determination of the
foregoing items within 45 days following the delivery of Purchaser's response to
the Section 2.4 Objection by GPC, they shall refer their remaining differences
to the CPA Firm, who shall determine in accordance with this Agreement, and only
with respect to the remaining differences so submitted, whether and to what
extent, if any, the PWC Report requires adjustment. The parties shall direct
the CPA Firm to use its best efforts to render its determination within 30 days
after such submission. In arriving at their decision the CPA Firm shall rely on
their expertise as certified public accountants and shall not be bound by the
submissions of the parties but shall be bound to apply the provisions of this
Agreement. The CPA Firm's determination shall be conclusive and binding upon
Purchaser, Company, SCA, GPC and GPF. The fees and disbursements of the CPA
Firm shall be paid one-half by Purchaser and one-half by GPC. Purchaser and GPC
shall make readily available to the CPA Firm all relevant books and records and
any work papers (including those of the parties' respective accountants)
relating to the PWC Report and all other items reasonably requested by the CPA
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Firm. The "Final PWC Report" shall be deemed to be (i) the PWC Report in the
event that no Section 2.4 Objection is delivered by GPC during the 30-day period
specified above, or (ii) if a Section 2.4 Objection is delivered by GPC, the PWC
Report, as adjusted by either (A) the agreement of the parties or (B) the
decision of the CPA Firm.
(c) GPC shall have the opportunity to participate in the preparation of the
PWC Report by (i) observing any physical inventory taken in connection therewith
(which may begin prior to the Closing Date), (ii) attending any audit planning
meetings in connection therewith, (iii) meeting with and discussing procedures
with Purchaser, Company and their accountants, and (iv) otherwise having full
access to all information used by Purchaser in preparing the PWC Report,
including the books and records and the work papers of its accountants (subject
to the reviewing party executing any necessary waivers or indemnifications
required by Purchaser's or Company's accountants). The Company shall provide
reasonable advance notice to GPC of any such physical inventory or audit
planning meeting.
(d) In reviewing any Section 2.4 Objection, Purchaser and its accountants
shall have full access to all information used by GPC in preparing such Section
2.4 Objection, including the work papers of GPC and GPC's accountants (subject
to the reviewing party executing any necessary waivers or indemnifications
required by GPC's accountants).
(e) If the earnings before interest, tax, depreciation and amortization
("EBITDA"), as shown in the Final PWC Report are less than sixty-eight million
dollars ($68,000,000), Seller agrees to make a payment to Purchaser in an
amount, in immediately available funds, equal to 7.4 times the difference
between $68,000,000 and the EBITDA shown in the Final PWC Report plus interest
on such amount at the prime rate (as set forth in the "Money Rates" section of
The Wall Street Journal) from the Closing Date through the date of payment.
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SECTION 2.5. Accounting Principles. The Closing Balance Sheet will be
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prepared from the books and records of the Company using U.S. GAAP consistent
with those used in the preparation of GPC's audited consolidated balance sheet
as of December 30, 2000 and the related audited consolidated statement of income
for the fiscal year then ended, as filed by GPC with the Securities and Exchange
Commission.
Notwithstanding anything herein to the contrary, the Closing Balance Sheet
shall be prepared based on the following accounting principles or methods:
(1) Inventories will be stated at the lower of FIFO cost or market;
(2) Inventories related to the SKU's that will be supplied to the Company
pursuant to the Finished Goods Agreement shall be excluded;
(3) Intangible assets, other those set forth on the Pro Forma Business
Balance Sheet, shall be excluded;
(4) Whereas GPC, SCA and Purchaser have agreed to settle the issue
regarding certain employee benefit matters and, as a result the
Purchase Price has already been reduced by $7 million, the entry for
(x) the underfunding of the Wisconsin Tissue Mills Retirement Plans
for Hourly Employees and the Wisconsin Tissue
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Mills, Inc. Chicago Operations Retirement Plan for Hourly Employees
and (y) the accumulated post retirement medical benefit obligation for
active union employees shall be $7,000,000;
(5) The book value of any asset acquired by or transferred to the Company
after December 30, 2000 shall be disregarded to the extent that it is
in excess of the cash consideration paid for the asset and no effect
shall be given to any write-up of assets; and
(6) If the Net Working Capital of the Company at the Closing exceeds
$130,000,000, the excess shall be disregarded.
ARTICLE III
Representations and Warranties of Seller
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Seller hereby represents and warrants to Purchaser as follows:
SECTION 3.1. Organization, Standing and Qualifications.
-----------------------------------------
(a) GPC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia.
(b) The Company is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
full power and authority to carry on its business as presently conducted by it
and to own, lease and operate its properties and assets in the places where it
maintains offices and where its properties and assets are owned, leased or
operated. Copies of the operating agreement (and any other similar governing or
organizational documents), minute books, membership unit certificate books and
membership unit transfer books of the Company have heretofore been delivered to
Purchaser and are true, correct and complete.
(c) Schedule 3.1(c) sets forth (a) each jurisdiction in which the Company
is duly qualified to do business and in good standing, and (b) each jurisdiction
in which the Company is duly licensed, authorized or registered to conduct such
business or businesses as are conducted by it and the type of business or
businesses for which it is so licensed, authorized or registered. Each such
qualification, license, authorization and registration (collectively,
"Qualification") is in full force and effect and neither the character of the
properties owned or held under lease or license by the Company nor the nature of
the business conducted by the Company requires any additional Qualification in
any such jurisdiction or any Qualification in any other jurisdiction, except any
such jurisdiction wherein the failure to be so qualified, licensed, authorized
or registered would not have, individually or in the aggregate, a Material
Adverse Effect on the Company. No approval, consent or notification in
connection with any Qualification is necessary in connection with the
transactions contemplated by this Agreement or the Ancillary Agreements to
prevent the termination or withdrawal of any such Qualification as a result of
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such transactions, except those the failure of which to obtain or make,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company.
SECTION 3.2. Authority.
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(a) Seller has all requisite power and authority to execute, deliver and
perform this Agreement and the Ancillary Agreements and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of Seller and, in the case of the Ancillary Agreements and the consummation
of the transactions contemplated thereby, will be authorized by all necessary
action on the part of Seller (to the extent it is a party thereto) prior to the
Closing. This Agreement has been duly executed and delivered by Seller and
constitutes, and each Ancillary Agreement to be entered into by Seller 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.
(b) Except as set forth on Schedule 3.2(b), the execution, delivery and
performance of this Agreement and the Ancillary Agreements by Seller does not,
and the consummation by Seller of the transactions contemplated hereby and
thereby and the compliance by Seller with the terms hereof and thereof will not
conflict with, or result in any breach or violation of or default (with or
without the giving of notice or lapse of time, or both) under, or give rise to a
right of amendment, termination, cancellation or acceleration of any obligation
or loss of a benefit under, or result in the creation of any Lien upon any of
the properties or assets of the Company under, any provision of (i) the articles
of incorporation or by-laws (or comparable organizational documents) of Seller
or the Company, (ii) subject to the filings and other matters referred to in the
following paragraph (c), any Law, applicable to Seller, the Company or the
properties, assets or business of the Company, (iii) any Permit that is held by
the Company, or (iv) any of the terms, conditions or provisions of any Contract
to which the Company is a party or by which its properties or assets is bound,
except in the case of clauses (ii) through (iv), any such conflicts, breaches,
violations, defaults, rights or Liens, that, individually or in the aggregate,
would not have a Material Adverse Effect on any of the Company and Seller.
(c) No Permit is necessary or required to be obtained or made by or with
respect to the Company or Seller in connection with the execution, delivery and
performance of this Agreement or the Ancillary Agreements or the consummation of
the transactions contemplated hereby or thereby, except for (i) notice to and
consent by the United States pursuant to Section V of the Consent Decree, (ii)
those listed on Schedule 3.2(c) hereto, which have been duly obtained and are in
full force and effect or which will have been duly obtained and will be in full
force and effect on and at the Closing Date and (iii) those the failure of which
to obtain or make, individually or in the aggregate, would not have a Material
Adverse Effect on either the Company or Seller.
SECTION 3.3. Compliance with Applicable Laws.
-------------------------------
(a) Schedule 3.3(a)(i) contains a complete and accurate list of all
material Permits that are held by the Company including Permits required
pursuant to Environmental Laws. The
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Permits listed in Schedule 3.3(a)(i) constitute all of the material Permits,
including Permits required pursuant to Environmental Laws, necessary to permit
the Company to conduct and operate the Business in a lawful manner. The Company
has complied in all material respects with all of the terms and requirements of
each Permit identified or required to be identified in Schedule 3.3(a)(i).
Except as set forth in Schedule 3.3(a)(ii) and except for Environmental Laws
which are addressed in Section 3.12, the Company is in compliance with, and has
complied in all respects with, all Laws applicable to it or to the conduct or
operation of its business or the ownership or use of any of its properties or
assets except where the failure to be in compliance would not have, individually
or in the aggregate, a Material Adverse Effect on the Company. Except as set
forth on Schedule 3.3(a)(iii) or Schedule 3.12, no investigation or review by
any Governmental Entity which is related to the Business or the properties or
assets of the Company is pending or, to the knowledge of Seller or the Company,
threatened, nor has any Governmental Entity indicated an intention to conduct
any such investigation or review. This Section 3.3 does not apply to employee
benefits matters for which Section 3.11 is applicable, Tax matters for which
Section 3.13 is applicable or labor and employment matters for which Section
3.14 is applicable.
(b) The Company has delivered to Purchaser true and correct copies of all
material Permits. None of Seller, the Company or any of their Affiliates has
received any written notification from any Governmental Entity to the effect
that there is lacking any certificate of occupancy or other Permit needed in
connection with the operation or use of any Owned Property or Leased Property.
SECTION 3.4. Litigation; Decrees. Except as set forth in Schedules 3.4 or
-------------------
3.14, (i) there is no Order in effect to which the Company is a party or that
otherwise is related to the Business or any of the properties or assets of the
Company or that is related to or affects the transactions contemplated hereby or
in the Ancillary Agreements and (ii) the Company is not a party to, or engaged
in, or to the knowledge of Seller, has been threatened with, any Action, and, to
the knowledge of Seller, no event has occurred or condition exists which would
form the basis of an Action described in this Section 3.4. Except as set forth
in Schedules 3.4 or 3.14, none of the Actions disclosed or required to be
disclosed in Schedule 3.4, if adversely determined, will have a Material Adverse
Effect on the Company.
SECTION 3.5. Title to Assets. Except for the Excluded Assets as to which
---------------
no representation is made, the Company has good and valid title to all its
properties and assets in each case free and clear of all Liens, except for
Permitted Liens. This Section 3.5 does not apply to Intellectual Property
(which is exclusively the subject of Section 3.7) or real property, interests in
real property or leasehold interests (which are exclusively the subject of
Section 3.6). Attached as Schedule 3.5 is a complete list of all the Company's
material properties, assets and equipment (other than the Excluded Assets) which
sets forth for each such property, asset or equipment, its location, the
approximate date in service and cost thereof and, as applicable, its use in the
Business and capacity.
SECTION 3.6. Real Property.
-------------
(a) Schedule 3.6(a) sets forth a list of all real property and interests in
real property owned by the Company, except for any of the Excluded Assets
(collectively, the "Owned
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Property"). The Company has good and marketable title to all Owned Property free
and clear of all Liens other than (i) Permitted Liens and (ii) Permitted Real
Property Encumbrances.
(b) Schedule 3.6(b) sets forth a list of all real property and interests in
real property leased to the Company other than the Excluded Assets (the "Leased
Property") together with the commencement date of each lease (each, a "Real
Property Lease") and the expiration date of each Real Property Lease. The
Company is the lessee of each Leased Property and is in possession of each
Leased Property. True and correct copies of each Real Property Lease have been
delivered to Purchaser prior to the date hereof. Each Real Property Lease is in
full force and effect and will be in full force and effect on the Closing Date.
The Company is not in default under any Real Property Lease and no lessor is in
default under any Real Property Lease, except for any such defaults that would
not have, individually or in the aggregate, a Material Adverse Effect on the
Company. The consummation of the transactions contemplated hereby and in the
Ancillary Agreements will not cause the termination of any Real Property Lease
or any default thereunder.
(c) All easements, licenses and other real property rights materially
necessary for the use and operation (as currently operated) of and access to the
Owned Property and Leased Property and the Facilities and the supply of
utilities thereto have been obtained by the Company. True and correct copies of
all such documents have been delivered to Purchaser. Except as set forth on
Schedule 3.6(c), the buildings and improvements necessary for the operation of
the Business are located on the Owned Property or Leased Property. Each Owned
Property and Leased Property has legal access to a public road. There are no
easements burdening any Owned Property or Leased Property that would have a
Material Adverse Effect on the Company.
(d) There are no leases, subleases, licenses or occupancy agreements
affecting the Owned Property or Leased Property, other than those set forth in
Schedule 3.6(d).
(e) Seller has not received any notice of a violation of setback laws with
respect to the Owned Property located in Neenah, Wisconsin.
(f) Except for the PILOT, no Owned Property receives the benefit of any
real estate tax exemption.
(g) The current zoning classification of each Owned Property permits its
current operation. The zoning classification for each Leased Property permits
its current operation. None of Seller, the Company or any of their Affiliates
has received any notice that any of the improvements on any Owned Property or
Leased Property do not comply with legal requirements for the current use and
occupancy thereof.
(h) None of Seller, the Company or any of their Affiliates has any
knowledge of and the Company has not received any notice of, any condemnation
affecting any Owned Property or Leased Property.
(i) All buildings, plants and structures which are part of the Owned
Property or Leased Property lie wholly within the boundaries of said property
and do not encroach upon the property of, or otherwise conflict with the
property rights of, any other Person except for such
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encroachments and conflicts which do not, individually or in the aggregate, have
a Material Adverse Effect on the Company.
SECTION 3.7. Intellectual Property.
---------------------
(a) "Intellectual Property" means all trademarks, service marks, trade
names, copyrights (except copyrights to computer software), patents,
domain/URLs, inventions, trade secrets, know-how, technical or operational
processes, formulae, research and development data, proprietary business
methods, including without limitation any registrations, applications, renewals,
extensions, continuations, divisions, continuations-in-part, reissues or foreign
counterparts for any of the foregoing. "Company Intellectual Property" means
Intellectual Property owned, licensed or currently used or held for use by the
Company but does not include any Intellectual Property that is part of the
Excluded Assets. Schedule 3.7(a) contains a true and complete list of all
unexpired letters patent and trademark registrations constituting Company
Intellectual Property specifying as to each, as applicable, the nature of such
Intellectual Property, the owner of such Intellectual Property, the
jurisdictions by or in which such Intellectual Property is recognized (without
regard to registration) or has been issued or registered or in which an
application for such issuance or registration has been filed, the registration
or application numbers, the termination or expiration dates and, if the
Intellectual Property is licensed to others, any applicable royalty.
(b) Schedule 3.7(b) sets forth a list of all licenses, sublicenses and
other agreements as to which Seller or the Company is a party and pursuant to
which any Person is authorized to use any of the Company's Intellectual
Property, including the identity of all parties thereto, a description of the
nature and subject matter thereof, the applicable royalty and the term thereof.
(c) Neither Seller nor the Company is aware of any unauthorized use,
disclosure, infringement or misappropriation of any of the Company's
Intellectual Property by a third party, including any employee or former
employee of the Company.
(d) Except as expressly set forth in either Schedule 3.4 or 3.7(d):
(i) the Company currently is not a defendant in any action, suit,
investigation or proceeding relating to, and has not otherwise been
notified of, any alleged claim of infringement or misappropriation by it of
any Intellectual Property of any other Person, and neither Seller nor the
Company has any knowledge of any other such infringement by the Company;
(ii) no trademark registration or letters patent comprising the
Company's Intellectual Property is the subject of any pending opposition,
interference, cancellation proceeding, claim challenging the validity,
ownership or enforceability of the same, nor, to the knowledge of Seller or
the Company, has any such action been threatened by any Person;
(iii) none of the Company's Intellectual Property is subject to any
outstanding judgment, injunction, order, decree or agreement restricting
the use thereof by Seller or the Company, or restricting the licensing
thereof by the Company to any Person;
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(iv) except in the normal course of purchasing or selling products,
the Company has not entered into any agreement to indemnify any other
person against any charge of infringement of Intellectual Property; and
(v) to the best knowledge of Seller and the Company, the Company
does not infringe any valid claim of any of the patents claimed to be
infringed in the action described on Schedule 3.7(d).
(e) None of the registrations or letters patent included in the
Company's Intellectual Property identified in Schedule 3.7(a) has been abandoned
or canceled, and, to the best knowledge of Seller, all of the Company's
Intellectual Property is valid, enforceable and subsisting, and neither Seller
nor the Company knows of any reason why any such rights should be found invalid
or unenforceable.
(f) After the Restructuring the Company will own, free and clear of any
Liens, all of the Company's Intellectual Property necessary for the conduct of
the Business as currently conducted.
(g) Schedule 3.7(g)(i) contains a list of all computer software
licenses, except locally purchased licenses, currently used in or for the
Business. Except as disclosed on Schedule 3.7(g)(i) and in the Transition
Agreement, those licenses appearing on the list and not owned by the Company can
and will be assigned to the Company as part of the Restructuring.
SECTION 3.8. Insurance.
---------
(a) Schedule 3.8(a) contains a true and complete list of all casualty
and other property insurance policies related to the business, assets or
properties of the Company and to which Seller or the Company is a party (the
"Insurance Policies") as of the date of this Agreement, indicating in each case
the type of coverage, name of the insured, the insurer, the expiration date of
each policy and the amount of coverage.
(b) Except as set forth in Schedule 3.8(b), the Insurance Policies: (i)
are in full force and effect and will not lapse or terminate until the Closing
Date by reason of the execution, delivery or performance of this Agreement or
consummation of the transactions contemplated hereby; (ii) insure the Company's
assets constituting tangible property in amounts the Company believes are
reasonably sufficient against all risks usually insured against by Persons
operating similar businesses or properties in the localities where such
businesses or properties are located; and (iii) are sufficient for compliance
with all requirements of Laws, Permits and Material Contracts (as defined
below). Each of Seller and the Company is current in all premiums or other
payments due thereunder and has otherwise performed all of its obligations under
each Insurance Policy. Each of Seller and the Company has given timely notice to
the insurer of all claims that may be insured thereby. No Insurance Policy
provides for any retrospective premium adjustment or other experience-based
liability.
(c) Neither Seller nor the Company has received (i) any refusal of
coverage or any notice that a defense will be afforded with reservation of
rights or (ii) any notice of cancellation or any other indication that any
Insurance Policy is no longer in full force or effect or will not be
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renewed or that the issuer of any policy is not willing or able to perform its
obligations thereunder.
SECTION 3.9. Contracts.
---------
(a) Except for Contracts listed in Schedules 3.6(b), 3.7(b), 3.9(a), 3.11
or 3.14, the Ancillary Agreements or those disclosed in or attached to the Human
Resources Agreement, the Company is not a party to, and none of the Company's
properties or assets is bound by, any Contract that is:
(i) (A) a Contract for the employment of any Person that has a
future liability in excess of $100,000 or any consulting agreement with any
Person involving payments by GPC or the Company in excess of $100,000 or
(B) providing for severance or other termination payment to any employee;
(ii) a collective bargaining agreement with any labor union;
(iii) a Contract with any current or former director, officer,
subsidiary or Affiliate of the Company or Seller;
(iv) an indenture, note, loan or credit agreement or other Contract
relating to the borrowing of money by the Company or to the direct or
indirect guarantee or assumption by the Company of the obligations of any
other Person for borrowed money, including any arrangement which has the
economic effect although not the legal form of such a guarantee;
(v) a power of attorney;
(vi) a covenant not to compete (other than those of which the
Company is the beneficiary of the covenant in employee-related agreements);
(vii) a lease or similar agreement under which (A) the Company is
lessee of, or holds or uses, any machinery, equipment, vehicle or other
tangible personal property owned by any third Person for an annual rent in
excess of $100,000 or (B) the Company is a lessor of, or makes available
for use by any third Person, any tangible personal property owned
(including ownership for Tax purposes) by the Company having a fair market
value in excess of $100,000;
(viii) a mortgage, pledge, security agreement, deed of trust or other
document granting a material Lien (including Liens upon properties acquired
under conditional sales, capital lease or other title retention or security
devices);
(ix) evidencing Plans;
(x) relating to the ownership, Lease, management or operation of
any real property, including Leases relating to Leased Property;
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(xi) for the purchase or sale of inventory, materials, supplies,
products, spare parts or real, personal or mixed property, or for the
furnishing or receipt of services to or by the Company pursuant to which
the Company is likely to pay or otherwise give or to receive consideration
of more than $100,000 in the aggregate during the 12-month period ending at
the first anniversary of the Closing or more than $100,000 in the aggregate
over the remaining term of such Contract or pursuant to which the Company
is obligated to "take or pay" for such purchases or sales or is otherwise
required to purchase the output of any Person or to purchase all or a major
part of its requirements of a particular good from any Person and which
cannot be canceled by the Company without penalty or further payment and by
notice of not more than 30 days;
(xii) relating in whole or in part to Intellectual Property,
including any option, license or other Contracts under which the Company is
licensee or licensor of any such Intellectual Property, Contracts
restricting the goods for which, the form in which or the manner in which
any Intellectual Property may be used and Contracts with current or former
employees, consultants or contractors regarding the appropriation or
nondisclosure of any Intellectual Property;
(xiii) under which (A) any Person has directly or indirectly
guaranteed indebtedness or other Liabilities of the Company, (B) the
Company has directly or indirectly guaranteed indebtedness or other
Liabilities of any Person (in each case other than endorsements for the
purpose of collection in the ordinary course of business) or (C) the
Company has any obligations relating to the financial condition of any
other Person (including so-called "keepwell" arrangements), and in each
case which cannot be canceled by the Company without penalty or further
payment and by notice of not more than 90 days;
(xiv) under which the Company has, directly or indirectly, made
any advance, loan, extension of credit or capital contribution in excess of
$100,000 to, or other investment in, any Person or which involves a sharing
of profits, losses, costs or Liabilities by the Company with any other
Person;
(xv) providing for or containing any mortgage, pledge, security
agreement, deed of trust or other instrument granting a Lien upon any of
the properties or assets of the Company;
(xvi) providing for indemnification of any Person with respect to
Liabilities relating to any current or former business of the Company or
any predecessor Person;
(xvii) with any broker distributor, dealer sales representative,
supplier, manufacturer or other Person (other than customers who are the
end-users of such products or services) relating to the marketing,
distribution, sale, rental, supply or manufacture of products or materials
or the marketing, sale or supply of services and in each case which cannot
be canceled by the Company without penalty or further payment and by notice
of not more than 90 days;
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(xviii) for the purchase or sale (through the acquisition of
shares, assets or by merger, reorganization, or otherwise) of any business,
corporation, partnership, joint venture, association or other business
organization or any division, material assets, operating unit or product
line thereof;
(xix) for the management, operation or control by or of any
Person or any division, material assets, operating unit or product line
thereof, including stockholder, joint venture, strategic alliance, joint
marketing, research and development, and any other similar Contract;
(xx) which limits or purports to limit the ability of the Company
to compete in any line of business or with any Person or in any geographic
area or otherwise restricts the Company in any substantial way in the
conduct of its business;
(xxi) with any Governmental Entity and in each case which cannot
be canceled by the Company without penalty or further payment and by notice
of not more than 90 days; or
(xxii) otherwise material and is not described in any of the
categories specified in this Section.
Each item set forth or required to be set forth in Schedule 3.9(a) is
referred to herein as a "Material Contract."
(b) Except as set forth in Schedule 3.9(b) and the Ancillary
Agreements, (i) all Material Contracts were entered into in the ordinary course
of business of the Company; (ii) each such Material Contract is in full force
and effect and is legal, valid, and, except for term sheets or open bids,
binding and enforceable in accordance with its terms; (iii) the Company has
performed the obligations required to be performed by it to date and is not
(with or without the lapse of time or the giving of notice, or both) in breach
or default or alleged to be in breach or default under any such Material
Contract and, to the knowledge of the Company, the other parties thereto have
complied in all respects thereunder, except for any such nonperformance, breach
or default which would not, individually or in the aggregate, have a Material
Adverse Effect on the Company; and (iv) no event has occurred or circumstance
exists that (with or without lapse of time or the giving of notice) may
contravene, conflict with or result in a violation or breach of or give the
Company or other Person the right to declare a default or exercise any remedy
under or to accelerate the maturity of or to cancel, terminate or modify, any
such Material Contract. Except as set forth in Schedule 3.9(b), there are no
renegotiations of, attempts or requests to renegotiate or outstanding rights to
renegotiate any such Material Contract with any Person. Seller has previously
delivered to Purchaser true and complete copies of all Material Contracts.
Except as set forth in Schedule 3.9(b), the consummation of the transaction
contemplated hereby and in the Ancillary Agreements will not result in or cause
any increase in any payment or change in any term under any Material Contract,
and no such Material Contract requires the Consent of, with or to any other
party thereto or any increase in any payment or change in any term provided for
thereunder in connection with or as a result of the execution, delivery and
performance of this Agreement and the Ancillary Agreements and the consummation
of the transactions contemplated hereby and thereby.
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(c) Except as set forth in Schedule 3.9(c), (i) there are no change of
control or similar provisions or any obligations arising under any Material
Contract which are created, accelerated or triggered by the execution, delivery
or performance of this Agreement or the Ancillary Agreements or the consummation
of the transactions contemplated hereby and thereby and (ii) the transactions
contemplated hereby and thereby will not constitute a "change of control,"
require the Consent from or the giving of notice to any Person, permit any
Person to terminate a Material Contract or accelerate vesting, grant any
repayment or repurchase rights to any Person, or create any other detriment,
under the terms, conditions or provisions of any Material Contract.
(d) The contracts listed on Schedule 3.9(d) have been legally and validly
assigned to the Company and any consents required in connection with such
assignments have been obtained.
SECTION 3.10. Sufficiency of Assets.
---------------------
(a) The buildings, plants, structures and equipment including utility
systems and mechanical systems (collectively, the "Physical Plant") of the
Company (excluding the Excluded Assets and, specifically including the
Transferred Equipment) are in normal operating condition and repair, taking into
account reasonable wear and tear, and are suitable for the uses for which they
are being used and are performing the functions for which they were intended and
have not suffered any damages, destruction or other casualty that has not been
repaired or otherwise remedied and are not the subject of any pending or, to the
knowledge of Seller, threatened, eminent domain proceeding. The paper machines
and converting equipment (including the Transferred Assets, as applicable) are
capable of functioning at the average capacities and utilization rates set forth
in Schedule 3.10 if managed or operated in accordance with current operating
practices of the Company.
(b) The Physical Plant of the Company (taking into account the services to
be provided pursuant to, and the actions contemplated by, the Ancillary
Agreements and that portion of the Physical Plant located in the common area of
the Alsip, Illinois Condominium Association) is sufficient for the continued
conduct of the Business after the Closing in substantially the same manner as
conducted prior to the Closing (after giving effect to the Restructuring).
SECTION 3.11. Employee Benefits.
-----------------
(a) Schedule 3.11 contains an accurate and complete list of each Plan, in
each case currently maintained or contributed to by the Company or Seller or its
ERISA Affiliates on behalf of Employees or former Employees of the Company
located at, or employed for the exclusive benefit of, the Converting Facilities,
the Paper Mills and the Service Center (all the foregoing being herein called
"Seller's Benefit Plans"). Schedule 3.11(a) contains a list of (i) each Plan
for which Purchaser will assume any liability pursuant to this Agreement, the
Human Resources Agreement or by operation of law, other than a Multiemployer
Plan, ("Assumed Benefit Plan") and (ii) each Multiemployer Plan for which
Purchaser will assume any liability pursuant to this Agreement, the Human
Resources Agreement or by operation of law ("Assumed Multiemployer Plan").
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(b) Seller has delivered, or will deliver prior to the Closing Date, to
Purchaser current, accurate and complete copies of (i) each Seller Benefit Plan
that has been reduced to writing and all amendments thereto, other than any
Multiemployer Plan, (ii) all trust agreements, insurance contracts and, with
respect to any 401(k) plan, investment management agreements, investment
advisory agreements, administrative services agreements or similar agreements
maintained in connection with any Assumed Benefit Plan, (iii) for each Assumed
Benefit Plan that is intended to be qualified under Section 401(a) of the Code
("Assumed Qualified Plan"), the most recent determination letter issued by the
IRS, (iv) for each Assumed Benefit Plan with respect to which a Form 5500 series
annual report/return is required to be filed, the two most recent such annual
report/returns, together with all schedules and exhibits, (v) the summary plan
description for each Assumed Benefit Plan subject to Title I of ERISA and each
Multiemployer Plan, and in the case of each other Assumed Benefit Plan, any
similar employee summary (including but not limited to any employee handbook
description), (vi) to the knowledge of Seller, copies of any correspondence from
the IRS, Department of Labor ("DOL") or other U.S. government agency or
department relating to any audit or any current asserted or assessed penalty
with respect to an Assumed Benefit Plan or relating to requested relief from any
liability or penalty (including, but not limited to, any correspondence relating
to the IRS's EPCRS, VCR or CAP programs and the DOL's amnesty programs for later
filers and non-filers), (vii) for each Assumed Benefit Plan that is a defined
benefit pension plan, copies of the two most recent actuarial valuation reports
and the most recent Form PBGC 1s, and (viii) for each Assumed Qualified Plan,
copies of all applicable compliance testing results (including without
limitation applicable nondiscrimination tests under Code Sections 401(a)(4),
401(k) and 401(m) and tests under Code Sections 402(g), 410(b), 415 and 416) for
the two most recent plan years.
(c) The Company would not incur any "withdrawal liability" as defined in
ERISA under any Multiemployer Plan that is an Assumed Multiemployer Plan if it
were to withdraw from such plan on November 30, 2000. To the knowledge of the
Company and Seller after due inquiry, no such Assumed Multiemployer Plan is
insolvent or in reorganization. None of the Company, Seller nor any ERISA
Affiliate has partially or completely withdrawn from a Multiemployer Plan within
the six year period immediately preceding the Closing Date or entered into a
agreement covered by Section 4204 of ERISA which has or would result in a
material liability to the Company.
(d) To the knowledge of Seller, each Assumed Qualified Plan is so
qualified and the trust under each Assumed Qualified Plan is exempt from
taxation under Section 501(a) of the Code. The IRS has issued a favorable
determination with respect to the qualified status of each Assumed Qualified
Plan, which takes into account amendments for which the remedial amendment
period has expired, and to the knowledge of the Company and Seller nothing has
been done or not done that could result adversely affect the qualified status of
such Assumed Qualified Plan and the IRS has taken no action to revoke any such
determination letter.
(e) Except as set forth on Schedule 3.11(e), no "reportable event" as
defined at Section 4043 of ERISA for which the 30 day notice provision has not
been waived or given has occurred with respect to any Assumed Benefit Plan
subject to Title IV of ERISA. With respect to each Assumed Benefit Plan subject
to Section 412 of the Code, there is no accumulated funding deficiency which has
not been waived under such Assumed Benefit Plan.
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(f) To the knowledge of Seller, no "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Code has occurred with
respect to any Assumed Benefit Plan, which is not otherwise exempt by statute,
regulation or administrative ruling or opinion which has resulted in or is
reasonably likely to result in a material liability to the Company. Except as
set forth in Schedule 3.11(f), there are no actions, suits or claims pending
(other than routine claims for benefits) nor are there any actions, suits or
claims (other than routine claims for benefits) that could reasonably be
expected to be asserted against any Assumed Benefit Plan or the assets or
fiduciaries of any Assumed Benefit Plan. To the knowledge of Seller, no Assumed
Benefit Plan nor any fiduciary of an Assumed Benefit Plan has been the direct or
indirect subject of an audit, investigation or examination by any governmental
or quasi-governmental agency.
(g) Except for continuation of health coverage to the extent required
under Section 4980B of the Code or Section 601 et seq. of ERISA, or as set forth
on Schedule 3.11(g), there are no obligations under any Assumed Benefit Plan
providing welfare benefits after termination of employment.
(h) All contributions on behalf of Employees and former Employees to each
Assumed Benefit Plan have been made on a timely basis, except where such failure
to make timely payments is not reasonably likely to result in a Material Adverse
Effect.
(i) Except for individual employment agreements, each Assumed Benefit Plan
can be amended, modified or terminated without advanced notice to or consent by
any Employee, former employee or beneficiary, except as required by law or by
any collective bargaining agreement.
SECTION 3.12. Environmental Matters. Except as disclosed in Schedule
---------------------
3.12:
(a) (i) The Company, with respect to the Business, is, and at all relevant
times since the formation of the Company has been, in material compliance with
all applicable Environmental Laws in effect during such period; and (ii) at all
relevant times during the seven year period ending on the day after the
formation of the Company, to the knowledge of GPC, the Facilities have been, and
the operations conducted thereat have been operated, in material compliance with
all applicable Environmental Laws in effect during such period; and
(b) The Company holds, and the Company and the Business are and have at
all relevant times been in compliance with, all material Permits required with
respect to the Business under Environmental Laws; and
(c) (i) To the knowledge of Seller and the Company, there are no events,
conditions, actions or omissions relating to the operation of the Business that
have given or will give rise to any Environmental Liability; (ii) neither Seller
nor the Company has received any notice of the institution or pendency, or
threatened institution, of any lawsuit, action, proceeding, investigation or
claim by any Person alleging any Environmental Liability arising from or
relating to the Business; and (iii) no conditions are present at and no Releases
of Hazardous Substances have occurred at any of the Owned Properties or the
Leased Properties or any other location where Hazardous Substances from the
Business have been sent, Released or disposed except in
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compliance with, and for which no remediation could reasonably be required
under, applicable Environmental Laws.
SECTION 3.13. Taxes. Except as set forth in Schedule 3.13:
-----
(a) All Tax Returns required to be filed by or on behalf of the Company
have been properly completed and filed on a timely basis and in correct form.
As of the date of filing, the foregoing Tax Returns correctly reflected the
facts regarding the income, business, assets, operations, activities, status or
other matters of the Company or any other information required to be shown
thereon.
(b) All Taxes with respect to taxable periods or portions thereof covered
by such Tax Returns and all other material Taxes (without regard to whether a
Tax Return was or is required) for which the Company is otherwise liable that
are due have been paid in full and to the extent the Liabilities for such Taxes
are not due, adequate reserves have been established on the Pro Forma Business
Balance Sheet in accordance with U.S. GAAP.
(c) The Company has fully complied with all applicable Tax laws prior to
the date hereof.
(d) There is no audit, examination, deficiency or refund Action pending
with respect to any Taxes for which the Company is or might otherwise be liable
and no taxing authority has given written notice of the commencement of any
audit, examination or deficiency Action with respect to any such Taxes.
(e) No Liens for Taxes exist with respect to any of the assets or
properties of the Company except Permitted Liens and no claims for Taxes have
been asserted in writing with respect to such assets or properties.
(f) The Company has timely withheld proper and accurate amounts from its
employees, customers, shareholders and others from whom it is or was required to
withhold Taxes in compliance with all applicable laws and has timely paid all
such withheld amounts to the appropriate taxing authorities.
(g) There are no outstanding commitments or waivers extending the
statutory period of limitations applicable to any claim for, or the period for
the collection or assessment of, Taxes of the Company due for any taxable
period.
(h) None of the assets of the Company (i) is "tax exempt use property"
within the meaning of Section 168(h) of the Code; (ii) directly or indirectly
secures any debt the interest on which is exempt under Section 103 of the Code;
or (iii) is property that is required to be treated as being owned by any Person
(other than the Company) pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended, and in effect immediately before the
enactment of the Tax Reform Act of 1986.
(i) Any amount or other entitlement that could be received (whether in
cash or property or the vesting of property) as a result of any of the
transactions contemplated by this Agreement by any employee, officer or director
of the Company who is a "disqualified
18
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individual" (as such term is defined in proposed Treasury Regulation Section
1.280G-1) under any employment, severance or termination agreement would not be
characterized as an "excess parachute payment" (as such term is defined in
Section 280G(b)(1) of the Code).
(j) The Company is not a partner or a member of any partnership or joint
venture, or any other entity classified as a partnership for federal income tax
purposes.
SECTION 3.14. Labor Matters. Except as set forth in Schedule 3.14 or as
-------------
set forth in the Human Resources Agreement:
(a) Since March 31, 2000 , there have been no strikes, lockouts, work
stoppages, slowdowns pending or, to the knowledge of Seller or the Company,
threatened against or involving any employees of the Company. Except as set
forth in Schedule 3.14(a), to the knowledge of Seller and the Company, there are
no organizational campaigns, petitions or other activity concerning union
representation of any Employees. Schedule 3.14(a) contains a true and correct
list of each collective bargaining agreement which covers any Employee of the
Company. Seller has delivered to SCA copies of each such collective bargaining
agreement and, prior to Closing, Seller will deliver each material side
agreement.
(b) As of the date hereof, there are no complaints, charges, claims or
grievances against the Company pending or, to the knowledge of Seller or the
Company, threatened to be brought or filed with any Governmental Entity,
arbitrator or court based on or arising out of the employment by the Company of
any employee, except for those which, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect on the Company.
(c) The Company is in compliance with all laws, regulations, rules and
orders of all Governmental Entities relating to the employment of labor,
including all such laws, regulations, rules and orders relating to wages, hours,
collective bargaining, discrimination, civil rights, safety and health,
immigration, workers' compensation and layoffs, except where the failure to be
in compliance would not reasonably be expected to have a Material Adverse Effect
on the Company.
(d) Since March 31, 2000, except for customary bonuses and options granted
in the ordinary course of business under the Company's existing Plans, the
Company has not made any general uniform increase (other than statutory or
routine salary or wage increases) in the compensation of its employees
(including, without limitation, any increase pursuant to any bonus, insurance,
pension, profit sharing, stock option or other plan or commitment) or any
increase in any such compensation payable to any officer, employee, consultant
or agent of the Company or entered into any employment severance or termination
agreement with any officer or employee, or made any loan to, or engaged in any
transaction with, any officers or directors of the Company (other than relating
to their employee status).
(e) Schedule 3.14(e) contains a complete and accurate list, as of January
18, 2001, of all employees of the Company, whether salaried or hourly, and
whether or not on layoff, or medical, family or other authorized leave of
absence (the "Employees"), along with each such Employee's position, date of
hire, and base salary or wage.
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<PAGE>
(f) Except as set forth in Schedule 3.14(f), the Company is not a party to
any employment, termination, or severance contract or arrangement with any
employee that is not terminable at will without costs or penalty.
(g) Except as indicated in Schedule 3.14(g), neither the Company nor
Purchaser will by reason of the Closing be liable to any Employee for severance
pay or any other payments (other than accrued salary, vacation or other
compensation in accordance with normal policies or benefits under Seller's
Benefits Plans).
(h) The Employees, when considered together with the services to be
provided by GPC pursuant to the Transition Agreement, the Human Resources
Agreement and all of the services set forth in Schedule 3.14(h), would be
sufficient to enable the Company to operate the Business substantially in the
same manner as it was operated prior to the Closing.
(i) Other than Persons who have been terminated or quit or been
transferred in the ordinary course of business since April 1, 2000 and except as
contemplated by the Human Resources Agreement, no Person who was an employee of
the Company or GPC or its Affiliates provided services primarily to or for the
benefit of the Company (after giving effect to the distribution of the Excluded
Assets) on April 1, 2000, other than the Employees and other Persons who
provided or performed services that are to be provided by G-P pursuant to the
Transition Agreement and the Human Resources Agreement after the Closing.
SECTION 3.15. Absence of Certain Changes. Except as set forth in
--------------------------
Schedule 3.15 or as expressly permitted by this Agreement, since March 31, 2000,
the Company has operated its business in the ordinary course consistent with
past practice and has not suffered any Material Adverse Effect, determined
without reference to the requirement that a Loss must exceed $50,000 (including
any damage to or destruction of its properties), and no condition or event,
change or development has occurred which, individually or in the aggregate, may
result in a Material Adverse Effect on the Company, determined without reference
to the requirement that a Loss must exceed $50,000.
SECTION 3.16. Customers and Suppliers.
-----------------------
(a) Except with respect to the Excluded Assets, Schedule 3.16(a) sets
forth a list of the 20 most significant customers of the Company in terms of
revenues for the period April 1, 2000 through October 31, 2000, showing the
approximate total revenues from each such customer during such period. Except to
the extent set forth in Schedule 3.16(a) or with respect to the Excluded Assets,
the Company has not received any notice or has any reason to believe that any
significant customer has ceased, or will cease, to use the products, equipment,
goods or services of the Company, or has substantially reduced or will
substantially reduce, the use of such products, equipment, goods or services at
any time.
(b) Except with respect to the Excluded Assets, Schedule 3.16(b) sets
forth a list of the 20 most significant suppliers of raw materials, supplies,
merchandise or other goods to the Company in terms of purchases for the period
April 1, 2000 through October 31, 2000, showing the amount which the Company
paid to each such significant supplier during such period. Except as disclosed
in Schedule 3.16(b) or with respect to the Excluded Assets, the Company has
20
<PAGE>
no reason to believe that any such supplier will not sell raw materials,
supplies, merchandise and other goods to the Company following the Closing on
the same terms and conditions as those with respect to its current sales to the
Company, subject only to general and customary price increases.
SECTION 3.17. Disclosure.
----------
(a) No representation or warranty of Seller in this Agreement and no
statement contained in any Ancillary Agreement contains any untrue statement or
omits to state a material fact necessary to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading.
(b) No notice given pursuant to this Agreement, including Section 5.1(b),
will contain any untrue statement or omit to state a material fact necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
(c) The written information and materials provided to Purchaser and the
representatives of Purchaser described in Schedule 3.17(c), taken as a whole, do
not contain any untrue statement or omit to state a material fact necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
SECTION 3.18. Financial Statements
--------------------
(a) Attached as Schedule 3.18 is a true and correct copy of the unaudited
consolidated balance sheet of the Company as of December 30, 2000 (the "Company
Balance Sheet") and the related unaudited consolidated statement of income for
the twelve-month period ended December 30, 2000 (the "Company Income
Statement"), in each case prepared by the management of GPC including, in each
case, a true and complete description of all accounting policies and procedures
used in the preparation thereof (collectively, the "Company Financial
Statements").
(b) Attached as Schedule 3.18 is a true and correct analysis of the
financial position of the Business, the left hand column of which is the Company
Balance Sheet and the right hand column of which represents the balance sheet of
the Company as of December 30, 2000, assuming that the Restructuring had taken
place immediately before the closing of the accounts for the balance sheet (the
"Pro Forma Business Balance Sheet"). Attached as Schedule 3.18 is a true and
correct detailed analysis of the Company Income Statement, the right hand column
of which represents the unaudited pro forma income statement for the Business
for the same twelve-month period (the "Pro Forma Business Income Statement").
The Pro Forma Business Balance Sheet and the Pro Forma Business Income Statement
(collectively, the "Pro Forma Business Financial Statements") were each prepared
by the management of GPC in connection with the transactions contemplated
hereby. In each case, a true and complete description of all accounting
policies and procedures used in the preparation thereof are attached thereto.
The Inventories in the Pro Forma Business Balance Sheet have been valued at the
lower of FIFO cost or market.
(c) The Company Financial Statements were prepared from the books and
records of the Company and are true and correct and fairly present the financial
condition and results of
21
<PAGE>
operation of the Company as of the dates and for the periods indicated. Except
as described in Schedule 3.18 the Company Financial Statements have been
prepared using U.S. GAAP consistent with those used in the preparation of GPC's
audited consolidated balance sheet as of December 30, 2000 and the related
audited consolidated statement of income for the 12-month period then ended, as
filed by GPC with the Securities and Exchange Commission.
(d) The Pro Forma Business Financial Statements were prepared from the
books and records of the Company and management of GPC believes they fairly
present on a pro forma basis the financial condition and results of operation of
the Business after giving effect to the Restructuring as of the dates and for
the periods indicated. The Pro Forma Business Financial Statements contain a
detailed, true and complete and verifiable description of all adjustments and
the rationale and allocation method used for each adjustment and all other
assumptions used in the preparation of the Pro Forma Business Financial
Statements, and management of GPC believes that all of such adjustments and
assumptions correctly reflect the impact of the Restructuring. All group,
corporate and other overhead costs and other allocated costs set forth in the
Pro Forma Business Income Statement have been allocated on the basis of the
factors set forth in the Pro Forma Business Financial Statements and are not
less than the proportional share of the actual costs for such items incurred by
GPC.
In addition, the Pro Forma Business Balance Sheet entry for (x) the
underfunding of the Wisconsin Tissue Mills Retirement Plans for Hourly Employees
and the Wisconsin Tissue Mills, Inc. Chicago Operations Retirement Plan for
Hourly Employees and (y) the accumulated post retirement medical benefit
obligations for active union employees is $7,000,000.
(e) The accounts receivable set forth in the Pro Forma Business Balance
Sheet and Company Balance Sheet and to be set forth in the Final Closing Balance
Sheet arose, in the case of the Pro Forma Business Balance Sheet and Company
Balance Sheet, and except as disclosed on Schedule 3.18 will have arisen, in the
case of the Final Closing Balance Sheet, from bona fide sales and deliveries of
goods in the ordinary course of business and have been, in the case of the Pro
Forma Business Balance Sheet and Company Balance Sheet, and will have been, in
the case of the Final Closing Balance Sheet, adequately reserved against therein
in accordance with U.S. GAAP.
(f) All Inventory of the Company consists of good and saleable items of a
quality or quantity usable or salable at prevailing prices in the ordinary
course of the Company's business and consistent with past practice (after giving
effect to the Restructuring), is not stale, obsolete or slow moving and does not
relate to discontinued product lines. The quantities of each item of such
Inventory (whether raw materials, work-in-progress, or finished goods) were
procured or produced for sale in the ordinary course of the Company's business
and consistent with past practice (after giving effect to the Restructuring),
and the volume of production or purchases thereof and of orders therefor have
been consistent with ordinary and necessary production, purchasing and orders.
All Inventory included in the Company Balance Sheet and Pro Forma Business
Balance Sheet or to be included in the Final Closing Balance Sheet is or will
be, as the case may be, reflected at the lower of cost or market value in
accordance with U.S. GAAP.
(g) The fixed assets reflected in the Pro Forma Business Balance Sheet
include all fixed assets necessary to support the Business except for fixed
assets that are associated with
22
<PAGE>
goods and services provided pursuant to the Ancillary Agreements and not located
at the Facilities.
(h) Attached hereto as Schedule 3.18(h) is the projected statement of
income of the Business for fiscal year 2001 together with appropriate supporting
details and a statement of the underlying assumptions (the "Projections"). The
Projections have been prepared by GPC in light of the past operations of the
Company. As of November 28, 2000 the Projections, including the underlying
assumptions, were believed by GPC to be reasonable and to represent the good
faith estimate of GPC and its senior management concerning the Business in 2001
and since such date nothing has come to the attention of GPC or its senior
management to change such belief in a material way provided that no
representation is made as to the impact of the expected change in ownership of
the Company on the prospects of the Business. Without limiting the foregoing,
as of November 28, 2000 GPC was of the opinion that the assumptions regarding
the levels of overhead and other costs included in the Projections were
reasonable based on the historical results of the Company's operations and the
likely effect of the Restructuring, and in particular the adjustment to the
level of costs for the Business after giving effect to the distribution of the
Excluded Assets and since such date nothing has come to the attention of GPC or
its management which has caused it to change such opinion in a material way
provided that no representation is made as to the impact of the expected change
in ownership of the Company on the prospects of the Business. GPC does not
represent or warrant that the results set forth in the Projections are
achievable by the Business.
SECTION 3.19. No Undisclosed Liabilities or Distributions.
-------------------------------------------
(a) Except as set forth in Schedule 3.19 or, to the extent it is
reasonably apparent from the review of any other Schedule hereto, as set forth
on such other Schedule attached hereto, the Company has no Liabilities (whether
absolute, accrued, contingent, or otherwise) except for Liabilities or
obligations reflected or reserved against in the Company Balance Sheet and
current Liabilities, which have been incurred since the date thereof in the
ordinary course of business and consistent with past practice and which will be
reflected on the Final Closing Balance Sheet.
(b) Since December 30, 2000, the Company has not made any distribution of
or otherwise transferred any of its assets or properties (including any cash) to
or for the benefit of any of its membership unit holders or any of their
respective Affiliates, other than any such distribution or transfer contemplated
by the Restructuring or the payment of interest on Company Indebtedness in
accordance with the terms and conditions of such indebtedness in existence on
the date hereof.
SECTION 3.20. Transactions with Seller and Affiliate. Schedule 3.20 sets
--------------------------------------
forth each transaction or series of related transactions (including, without
limitation, the sale, purchase exchange or lease of assets, property or
services) to which the Company is or was a party and which are or were for the
benefit of Seller or any Affiliate of Seller and all or a part of which were
entered into or performed within the last five years. All of such transactions
or series of related transactions set forth on or required to be set forth on
Schedule 3.20 were entered into in good faith and are on terms that are no less
favorable to the Company than those that would be available in a comparable
transaction in arm's-length dealings with an unrelated third party.
23
<PAGE>
Sales to Seller or Seller's Affiliates have been made only to fill each
purchaser's immediate needs for resale. During the period from January 1, 2000
until the date hereof, the share of sales made to Seller and Seller's Affiliates
out of the total sales in the Business has remained constant in amount except
for variances that are not material.
SECTION 3.21. Title to Securities. GPC is the beneficial and record
-------------------
owner, free and clear of any Liens, of 95% of the outstanding Membership Units
and as of the Closing Date will be the beneficial and record owner, free and
clear of any Liens, of 100% of the outstanding Membership Units. GPC will sell,
transfer, assign and deliver good and valid title to the Securities as provided
in this Agreement. GPC has the absolute and unconditional right to purchase all
the Membership Units of the Company not owned by it. At the Closing, Purchaser
will acquire good and valid title to the Securities, free and clear of any
Liens.
SECTION 3.22. Capitalization. On the date of this Agreement, the
--------------
Company's authorized capitalization consists solely of 100 common membership
units (the "Membership Units"), of which 100 Membership Units are issued and
outstanding to the Persons and in the amounts set forth on Schedule 3.22.
Seller has entered into an agreement pursuant to which it is entitled to
purchase the 5% membership interest it currently does not own on the terms and
conditions set forth therein. The Securities represent all the outstanding
equity securities of the Company. Such issued and outstanding Membership Units
are validly issued, fully paid and nonassessable. Except (a) as set forth in
Schedule 3.22 hereto, and (b) for rights granted to Purchaser under this
Agreement, there are no outstanding options, warrants or other rights to
purchase, obtain or acquire, or any outstanding securities or obligations
convertible into or exchangeable for, or any voting agreements with respect to,
any Membership Units of the Company or any other securities of the Company and
the Company is not obligated, now or in the future, contingently or otherwise,
to issue or purchase any Membership Units of the Company or any other securities
of the Company to or from any Person. There are no treasury Membership Units of
the Company.
SECTION 3.23. Subsidiaries and Equity Interests. Except as set forth in
---------------------------------
Schedule 3.23, the Company owns no capital stock, membership units or other
securities of any Person.
SECTION 3.24. GPF Authority, etc. GPF is a limited liability corporation
------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware. GPF has all requisite power and authority to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of GPF. This Agreement has been
duly executed and delivered by GPF and constitutes its legal, valid and binding
obligation enforceable against it in accordance with its terms.
SECTION 3.25. Notes. GPF is the beneficial and record owner of the Notes,
-----
free and clear of any Liens. GPF will sell, transfer, assign and deliver good
and valid title to the Notes. At the Closing, Purchaser will acquire good and
valid title to the Notes free and clear of any Liens. The outstanding aggregate
principal amount of the Notes is $755,200,000.
24
<PAGE>
ARTICLE IV
Representations and Warranties of Purchaser and SCA
---------------------------------------------------
Each of Purchaser and SCA, with respect to itself only, hereby represents
and warrants to Sellers as follows:
SECTION 4.1. Organization, Standing and Power. It is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate power
and authority to carry on its business as currently conducted.
SECTION 4.2. Authority.
---------
(a) The execution and delivery by it of this Agreement and each Ancillary
Agreement to which it is a party and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on its part prior to the Closing. This Agreement and each
Ancillary Agreement to which it is a party, when duly executed and delivered by
it, will constitute its legal, valid and binding obligation enforceable against
it in accordance with its respective terms.
(b) Each of Purchaser and SCA has all requisite power and authority to
execute, deliver and perform this Agreement and the Ancillary Agreements to
which it is a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement by each of Purchaser and
SCA does not, and the consummation by each of Purchaser and SCA of the
transactions contemplated hereby and the compliance by each of Purchaser and SCA
with the terms hereof will not conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, any provision
of (i) its certificate of incorporation or by-laws (or comparable organizational
documents), (ii) subject to the filings and other matters referred to in Section
4.2(c), any law, judgment, order, decree, statute, ordinance, rule or regulation
applicable to it, or (iii) any of the terms, conditions or provisions of any
Contract to which it is a party or by which its properties or assets is bound
other than, in the case of clauses (ii) and (iii), any such conflicts,
violations or defaults, that, individually or in the aggregate, would not
materially impair its ability to perform its obligations under this Agreement.
Purchaser is a direct or indirect wholly owned subsidiary of SCA.
(c) No Permit is required to be obtained or made by or with respect to
each of Purchaser and SCA in connection with the execution and delivery of this
Agreement by it or the consummation by it of the transactions contemplated
hereby, except for (i) notice to and consent by the United States pursuant to
Section V of the Consent Decree, and (ii) those the failure of which to obtain
or make, individually or in the aggregate, would not materially impair its
ability to perform its obligations under this Agreement.
SECTION 4.3. Available Funds. SCA has, and on the Closing Date will make
---------------
available to Purchaser, sufficient funds to enable Purchaser to consummate the
transactions contemplated hereby.
25
<PAGE>
SECTION 4.4. Investment Intent. Purchaser is acquiring the Securities for
-----------------
its own account for investment purposes only and not with a view to, or for sale
or resale in connection with, any public distribution thereof or with any
present intention of selling, distributing or otherwise disposing of the
Securities in violation of the Securities Act of 1933, as amended (the
"Securities Act"). Purchaser understands that the Securities have not been
registered under the Securities Act or any state securities or "blue-sky" laws
by reasons 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 unless an applicable
exemption from registration is available.
SECTION 4.5. 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 Securities, is able to bear the economic risk of
such investment in the Company, and is able to afford a complete loss of such
investment.
SECTION 4.6. Litigation; Decrees. (i) There is no Order in effect to
-------------------
which either Purchaser or SCA is a party that is related to or affects the
transactions contemplated hereby or in the Ancillary Agreements and (ii) neither
Purchaser nor SCA is a party to, or engaged in, or to the knowledge of Purchaser
or SCA, has been threatened with, any Action that is related to or affects the
transaction contemplated hereby or in the Ancillary Agreements, and, to the
knowledge of Purchaser and SCA, no event has occurred or condition exists which
would form the basis of any such Action.
ARTICLE V
Covenants
---------
SECTION 5.1. Conduct of Business. During the period from the date of this
-------------------
Agreement and continuing until the Closing (except as expressly provided in this
Agreement or the Schedules or to the extent that the parties shall otherwise
consent in writing), Seller agrees and, as applicable, each of Purchaser and SCA
agrees, that:
(a) Ordinary Course. Except for the Restructuring and with respect to
---------------
matters contemplated in the Ancillary Agreements or to the extent Purchaser
shall otherwise consent in writing, Seller agrees to cause the Company to
operate and maintain its properties and assets and otherwise conduct its
business only in the usual and ordinary course in substantially the same manner
as presently conducted, maintained and operated, and to cause the Company to use
all commercially reasonable efforts to preserve intact its properties and assets
in their present condition, including the integrity of the Company's trademarks
and brands. Except as otherwise provided in this Agreement and the Human
Resources Agreement, Seller agrees to cause the Company to use commercially
reasonable efforts to (i) preserve intact its current business organization;
(ii) keep available the services of its current officers and employees; (iii)
preserve its relationship with customers, suppliers, licensers, licensees,
advertisers, distributors and others having business dealings with the Company;
(iv) retain for the benefit of the Company all material current customer
contracts on terms and conditions which are no less favorable to the
26
<PAGE>
Company than the terms and conditions that are currently in existence; (v)
preserve goodwill; (vi) maintain all existing business permits, licenses,
qualifications and authorizations; and (vi) comply in all material respects with
applicable Laws, including Environmental Laws. Seller will cause the Company to
enter into transactions with Seller or Seller's Affiliates only on terms that
are no less favorable to the Company than those that would be available in a
comparable transaction in arm's-length dealings with an unrelated third party.
Sales to Seller or Seller's Affiliates shall be made only to fill each
purchaser's immediate needs for resale. Seller will, and agrees to cause the
Company to, discuss with Purchaser, SCA and their representatives, as and when
requested but upon reasonable prior notice, the status of the Company's
operations and finances. Seller agrees to cause the Company to not increase the
salary of any employee and not hire or terminate the employment of any employee
except in each case in the ordinary course of business and consistent with past
practices or in accordance with the terms of the Human Resources Agreement.
(b) Notice of Changes. Seller shall promptly advise Purchaser in writing
-----------------
of the occurrence of any material adverse change in the business, assets,
condition (financial or otherwise), results of operations or prospects of the
Company. In addition, from the date of this Agreement until the Closing Date,
Seller will promptly notify Purchaser in writing of (i) any notice or other
communication from any Person alleging that the Consent of such Person is or may
be required in connection with the execution, delivery or performance of this
Agreement or any Ancillary Agreement or the consummation of the transactions
contemplated hereby or thereby; (ii) any notice or other communication from any
Governmental Entity in connection with the transactions contemplated hereby;
(iii) any actions or investigations commenced or, to the knowledge of Seller,
threatened, and related to the Company or its properties, assets or business
which could reasonable be expected to have a Material Adverse Effect; (iv) any
Order or notification relating to any material violation or claimed violation of
Law by the Company; (v) the existence or nonexistence or occurrence or
nonoccurrence of any event, condition or circumstance the existence or
nonexistence or occurrence or nonoccurrence of which does or would cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Closing Date; and (vi) any
failure of Seller to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; provided, however, that no
-------- -------
notice of the facts, conditions or circumstances referred to therein delivered
pursuant to this Section 5.1(b) may be considered in determining the fulfillment
of the conditions set forth in Article VI of this Agreement or be effective to
cure or correct any breach of a representation, warranty or covenant which would
have existed by reason of Seller's not giving such notice and will not limit or
otherwise affect the remedies available to Purchaser.
(c) Forbearance by Seller. Except for the Restructuring or as contemplated
---------------------
by the Ancillary Agreements or disclosed in Schedule 3.9(b), Seller will not
permit the Company to:
(i) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets except in the ordinary course of
business and consistent with past practices;
(ii) amend or otherwise modify, or terminate, any Material Contract,
or enter into any other Material Contract, other than with the consent of
Purchaser;
27
<PAGE>
(iii) increase or enhance in any manner the compensation or benefits
of any of its Employees or pay any pension or retirement benefit not
required by any existing Plan or Contract to any such Employee, or become a
party to, amend or commit itself to any pension, retirement, profit-sharing
or welfare benefit plan or agreement or employment agreement with or for
the benefit of any such Employee, other than increases in the compensation
of such Employees who are not officers or directors of the Company made
pursuant to collective bargaining agreements or in the ordinary course of
business and consistent with past practice, or, except to the extent
required by Law, Plan or any Contract delivered to Purchaser prior to the
date hereof, voluntarily accelerate the vesting of any compensation or
benefit to any Employee of the Company; provided, however, that the
-------- -------
foregoing shall not in any way prohibit Seller from increasing or enhancing
the compensation or benefits of any Person who is jointly employed or is a
joint officer of the Company and Seller; and provided, further, that such
-------- -------
Person will not be an Employee of the Company after the Closing;
(iv) waive, amend or allow to lapse any term or condition of any
confidentiality, "standstill," consulting, advisory or employment Contract;
(v) enter into any transaction with any Affiliate other than in the
ordinary course of business and consistent with past practice;
(vi) amend its operating agreement or other governing documents;
(vii) issue or sell any membership units or any other securities or
issue any securities convertible into or exchangeable for, or options,
warrants to purchase, script, rights to subscribe for, calls or commitments
of any character whatsoever relating to, or enter into any contract,
understanding or arrangement with respect to the issuance of, any
membership units or any of its other securities, or enter into any
arrangement or contract with respect to the purchase or voting of
membership units, or adjusting, splitting, reacquiring, redeeming,
combining or reclassifying any of its securities, or making any other
changes in its capital structure;
(viii) incur (contingently or otherwise) any indebtedness for borrowed
money;
(ix) incur (contingently or otherwise) any other debt or other
obligation to pay money except for normal operating purposes in the
ordinary course of business;
(x) declare, set aside or pay any dividends (in cash or in kind)
on, or make any distributions in respect of, the Membership Units (or any
other security) of the Company;
(xi) guarantee or enter into any obligation to guarantee the
obligation of any Person;
(xii) mortgage, pledge or subject to any Lien, charge or other
encumbrance, any of the assets or properties of the Company or Business;
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(xiii) cancel any debt or claim or waive any right, or purchase or
otherwise acquire or lease any properties or assets, in each case except in
the ordinary course of business and consistent with past practices;
(xiv) permit to lapse any right with respect to any Intellectual
Property or other intangible asset used in the conduct of the Business;
(xv) accelerate the collection of accounts receivable, delay the
payment of accounts payable or defer maintenance and other expenses, reduce
inventories, or otherwise increase cash on hand, in a manner, in each case,
inconsistent with past practice or not in the ordinary course of business;
(xvi) repay any indebtedness for borrowed money, except as required
by existing debt instruments;
(xvii) make any material tax election, settle or compromise any
liability for Taxes, prepare and file tax returns other than on a basis
consistent with the Company's past practices or, other than in the ordinary
course of business, engage in any transaction or operate the business in a
manner that would directly or indirectly result in any liability for Taxes
of the Company;
(xviii) make any change in its accounting methods or practices; or
(xix) take or agree to take any of the foregoing actions.
SECTION 5.2. Access to Information. Seller shall and shall cause the
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Company to afford to Purchaser, SCA and their representatives reasonable access
during normal business hours and upon reasonable prior notice during the period
prior to the Closing to all the Company's properties, books, Contracts,
commitments and records and during such period shall furnish promptly to
Purchaser any information concerning the Business as Purchaser may reasonably
request; provided, however, that they shall be under no obligation to disclose
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to Purchaser (i) any information the disclosure of which is restricted by
contract or applicable law except in strict compliance with the applicable
contract or law; and (ii) any information as to which the attorney-client or
work product privilege may be available, until a mutually satisfactory
confidentiality agreement has been executed by Purchaser and Seller (which the
parties agree to negotiate in good faith). Purchaser acknowledges that any
information being provided to it or its representatives by Seller or Company
pursuant to or in connection with this Agreement is subject to the terms of the
Confidentiality Agreement, which terms are incorporated herein by reference.
SECTION 5.3. Governmental Approval, Etc.
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(a) Seller shall as promptly as practicable, but in no event later than
two business days following the execution and delivery of this Agreement, notify
the United States Department of Justice of this Agreement and all Ancillary
Agreements as required by the Consent Decree. Each party agrees that it shall
promptly provide to the United States Department of Justice any supplemental
information requested by it. The parties shall consult with each other before
responding in writing to any comment or request for information made by
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the Department of Justice or by the court and shall, if appropriate, allow the
other party to attend any hearings, meetings and interviews in which it
participates provided that no party shall be obligated to share any competitive
or other confidential information. Seller shall take all commercially reasonable
efforts with respect to the United States Department of Justice to ensure that
Purchaser, and after the Closing, the Company, receive the benefits of this
Agreement and the Ancillary Agreements. Notwithstanding the terms of the Parent
Roll Supply Agreement, the parties agree to use their best efforts (which shall
not require the expenditure of funds or the retention of any consultant or
outside expert) to obtain the approval of the United States Department of
Justice to a term of eight years for the Parent Roll Supply Agreement (an
original term of three years plus five one-year extensions) and upon obtaining
any such consent, to modify the form of the Parent Roll Supply Agreement prior
to the execution thereof to reflect such change in the term of such agreement.
(b) Each of Purchaser and Seller shall as promptly as practicable comply
with any other laws of any country which are applicable to any of the
transactions contemplated hereby and pursuant to which any consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Entity or any other Person in connection with such transactions is
necessary. Each of Purchaser and Seller shall furnish to the other such
necessary information and reasonable assistance as the other may request in
connection with its preparation of any filing, registration or declaration which
is necessary under any such laws. Each of Purchaser and Seller shall keep the
other apprised of the status of any communications with, and any inquiries or
requests for additional information from, any Governmental Entity, and shall
comply promptly with any such inquiry or request.
SECTION 5.4. Environmental Matters. Seller shall commence prior to the
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Closing Date and thereafter diligently pursue to completion the remediation,
compliance plans, and other actions listed on Schedule 5.4. This obligation
shall survive until such remediation is complete.
SECTION 5.5. Expenses. Whether or not the Closing takes place, and except
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as otherwise specifically provided in this Agreement (including with respect to
Transfer Taxes as defined in Section 5.11(c)), all costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs or expenses.
SECTION 5.6. Brokers or Finders. Each of Purchaser and Seller represents,
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as to itself and its affiliates, that no agent, broker, investment banker or
other Person is or will be entitled to any broker's or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement, except, as to Seller and its Affiliates, Merrill
Lynch & Co., Inc., whose fees and expenses will be paid by Seller and, as to
Purchaser and its Affiliates, Credit Suisse First Boston Corporation, whose fees
and expenses will be paid by Purchaser. Each of Purchaser and SCA on the one
hand and Seller on the other hand respectively agrees to indemnify and hold the
other harmless from and against any and all claims, liabilities or obligations
with respect to the fees of Merrill Lynch & Co., Inc. in the case of Seller, and
Credit Suisse First Boston Corporation in the case of Purchaser and SCA, and any
other fees, commissions or expenses asserted by any Person on the basis of any
act or statement alleged to have been made by such party or its Affiliates. The
obligations set forth in the
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preceding sentence shall survive the Closing for a period equal to the
applicable statute of limitations, as extended or tolled, plus 90 days.
SECTION 5.7. Restructuring. Seller shall consummate and shall cause the
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Company to consummate the Restructuring in the manner and on the terms and
conditions set forth on Schedule 5.7 hereto.
SECTION 5.8. No Oral Representations. Purchaser acknowledges and agrees
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that none of Seller, its representatives or any other person has made any oral
representation or warranty, expressed or implied, with respect to the Company,
its assets, properties or business or the accuracy or completeness of any
information regarding the Company or its properties, assets or business
furnished or made available to Purchaser and its representatives.
SECTION 5.9. Purchaser Notices. From the date of this Agreement until
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the Closing Date, Purchaser and SCA will promptly notify Seller in writing of
(i) any notice or other communication from any Person alleging that the Consent
of such Person is or may be required in connection with the execution, delivery
or performance of this Agreement or any Ancillary Agreement or the consummation
of the transactions contemplated hereby or thereby; (ii) any notice or other
communication from any Governmental Entity in connection with the transactions
contemplated hereby; (iii)