EX-2.2
OPERATING AGREEMENT
OF
GEORGIA-PACIFIC TISSUE, LLC
Dated As Of:
October 4, 1999
TABLE OF CONTENTS
Page No.
ARTICLE I DEFINITIONS AND TERMS 1
Section 1.1 Certain Definitions. 1
Section 1.2 Rules of Construction. 11
ARTICLE II GENERAL MATTERS 12
Section 2.1 Formation. 12
Section 2.2 Purposes and Business. 12
Section 2.3 Offices. 12
Section 2.4 Name. 12
Section 2.5 Term. 13
Section 2.6 Members. 13
ARTICLE III FINANCIAL AND TAX MATTERS 13
Section 3.1 Capital Contributions. 13
Section 3.2 Loans from Members. 14
Section 3.3 Restrictions Relating to Capital; Company
Property. 14
Section 3.4 Tax Treatment. 15
Section 3.5 Allocation of Profits. 15
Section 3.6 Allocation of Losses. 15
Section 3.7 Special Allocations. 16
Section 3.8 Offsetting Special Allocations. 17
Section 3.9 Other Allocation Rules. 18
Section 3.10 Tax Elections. 18
Section 3.11 Tax Allocations; Code Section 704(c). 19
Section 3.12 Tax Matters Member. 19
Section 3.13 Regular Distribution Policy. 20
Section 3.14 Special Distribution. 20
Section 3.15 Accelerated Gains Tax Liability of WISCO. 20
Section 3.16 Sharing of Company Tax Benefits. 23
Section 3.17 Permanent Company Debt. 25
ARTICLE IV MANAGEMENT 27
Section 4.1 General. 27
Section 4.2 Board Composition. 27
Section 4.3 Term; Removal; Vacancies. 27
Section 4.4 Notice; Quorum. 27
Section 4.5 Voting. 28
Section 4.6 Telephonic Meeting; Written Consents. 29
Section 4.7 Committees of the Board; Officers. 29
Section 4.8 Execution of Documents. 29
Section 4.9 Reliance on Documents and Reports. 30
Section 4.10 Standard of Care; Indemnification. 30
Section 4.11 Member Action. 31
Section 4.12 Certain Transactions. 31
ARTICLE V ACCOUNTING, BOOKS AND RECORDS 32
Section 5.1 Fiscal Year. 32
Section 5.2 Books and Records. 32
Section 5.3 Auditors. 32
Section 5.4 Reporting. 32
Section 5.5 Banking. 33
Section 5.6 Tax Return Information. 33
Section 5.7 Delegation of Responsibility for Accounting
and Reports. 33
ARTICLE VI CONFIDENTIALITY 33
Section 6.1 Confidentiality Obligation. 33
Section 6.2 Exceptions from Confidentiality Obligation. 34
Section 6.3 Employees, Agents and Advisers. 35
Section 6.4 Return of Confidential Information. 35
Section 6.5 Survival After Termination. 36
ARTICLE VII TRANSFER OF UNITS; PUT AND CALL RIGHTS 36
Section 7.1 General. 36
Section 7.2 Put and Call Rights. 37
Section 7.3 Member Transfers. 38
Section 7.4 Retirement. 38
ARTICLE VIII DISSOLUTION AND WINDING UP; BUY OUT RIGHTS 38
Section 8.1 Dissolution. 38
Section 8.2 Winding Up. 39
Section 8.3 In-Kind Distributions. 39
Section 8.4 Cancellation of Certificate of Formation. 40
Section 8.5 Buy Out Rights. 40
ARTICLE IX CERTIFICATES EVIDENCING UNITS 40
Section 9.1 Certificates. 40
Section 9.2 Register. 40
Section 9.3 New Certificates. 41
Section 9.4 Interest as a Security. 41
Section 9.5 Legends. 41
ARTICLE X MISCELLANEOUS 42
Section 10.1 Notices. 42
Section 10.2 Amendment; Waiver. 42
Section 10.3 Assignment. 42
Section 10.4 Entire Agreement. 42
Section 10.5 Public Disclosure. 42
Section 10.6 Parties in Interest. 43
Section 10.7 Governing Law; Submission to Jurisdiction;
Selection of Forum. 43
Section 10.8 Counterparts. 43
Section 10.9 Severability. 43
Section 10.10 Equitable Relief. 44
Section 10.11 No Agency. 44
Section 10.12 Limitation of Liability. 44
Section 10.13 Non-Exclusive Business. 44
Section 10.14 Dispute Resolution. 45
EXHIBIT A Form of Unit Certificate
SCHEDULE 1 Identification of Members
OPERATING AGREEMENT
OF
GEORGIA-PACIFIC TISSUE, LLC
THIS OPERATING AGREEMENT of GEORGIA-PACIFIC TISSUE,
LLC, a Delaware limited liability company (the "Company"), is
made and entered into as of October 4, 1999, among WISCONSIN
TISSUE XXXXX INC., a Delaware corporation and a wholly owned
subsidiary of Chesapeake Corporation ("WISCO"), GEORGIA-PACIFIC
CORPORATION, a Georgia corporation ("G-P"), and such other
Persons that become Members as herein provided.
RECITALS
WHEREAS, the Company, G-P, WISCO and certain WISCO
Affiliates are parties to that certain Joint Venture Agreement,
dated as of October 4, 1999 (the "Joint Venture Agreement");
WHEREAS, pursuant to and subject to the terms and
conditions of the Joint Venture Agreement, each of WISCO and G-P
will contribute, or cause to be contributed, to the Company
certain assets and liabilities in exchange for equity interests
in the Company;
WHEREAS, the Members desire to enter into this
Agreement, which shall constitute the limited liability company
agreement of the Members under the Delaware Act, for the purpose
of setting forth the agreements of the Members as to the affairs
of the Company and the conduct of its business;
NOW, THEREFORE, in consideration of the foregoing and
of the mutual covenants and undertakings contained herein, the
parties agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1 Certain Definitions.
As used herein, the following terms shall have the
meanings set forth or as referenced below:
"Adjusted Capital Account Deficit" means, with respect
to any Member, the deficit balance, if any, in such Member's
Capital Account as of the end of the relevant Fiscal Year, after
giving effect to the following adjustments:
(i) Add to such Capital Account any amounts which
such Member is treated as obligated to restore pursuant to
Regulations Section 1.704-1(b)(2)(ii)(c) by virtue of such
Member's guarantee or indemnity agreement with respect to the
Company Debt or is deemed to be obligated to restore pursuant to
the penultimate sentences of Regulations Sections 1.704-2(g)(1)
and 1.704-2(i)(5); and
1
(ii) Subtract from such Capital Account the items
described in Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the
Regulations.
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Section
1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted
consistently therewith.
"Adjusted Property" means any property the Carrying
Value of which has been adjusted pursuant to Section 3.5(e);
"Affiliate" means, with respect to any Person, any
other Person directly or indirectly controlling, controlled by or
under direct or indirect common control with such first Person as
of the date on which, or at any time during the period for which,
the determination of affiliation is being made. For the purpose
of this definition, "control" means (i) the direct or indirect
ownership or control of more than 50% of the voting stock or
general partnership interest or other voting interest in any
Person, or (ii) the ability to direct or cause the direction of
the management or affairs of a Person, whether through the direct
or indirect ownership of voting interests, by contract or
otherwise.
"Affiliate Member" shall have the meaning set forth in
Section 7.3(a).
"Agreed Value" means the Fair Market Value of
Contributed Assets; provided that the initial Agreed Value of
Contributed Assets that a Member is obligated to transfer, or
cause to be transferred, to the Company pursuant to the Joint
Venture Agreement shall be the amount set forth in, or determined
pursuant to, Section 3.1 of this Agreement.
"Agreement" shall mean this Operating Agreement,
including the schedules and exhibits hereto, as the same may be
amended or supplemented from time to time in accordance with the
terms hereof.
"Ancillary Agreements" shall have the meaning set forth
in the Joint Venture Agreement.
"Board" means the governance board of the Company
consisting of all Managers or, as may be applicable, any duly
appointed committee of the Board.
"Built In Gain" means, with respect to any Contributed
Asset, the excess of the Fair Market Value of such Contributed
Asset on the Closing Date as determined under Section 3.1(a) over
the Company's adjusted basis for federal income tax purposes in
such Contributed Asset immediately following its contribution to
the Company.
"Business Day" means a day, other than a Saturday or
Sunday, on which banks generally are open in New York City for a
full range of business.
"Call Price" shall have the meaning set forth in
Section 7.2(b).
2
"Capital Account" means, with respect to any Member,
the Capital Account maintained for such Member in accordance with
the following provisions:
(i) To each Member's Capital Account there shall
be added the amount of money and the initial Gross Asset Value of
any property (other than money) contributed to the Company by
such Member (or its predecessors in interest) with respect to the
Interest in the Company held by such Member, such Member's
distributive share of Profits and any items in the nature of
income or gain which are specially allocated pursuant to Section
3.7 or Section 3.8, and the amount of any Company liabilities
assumed by such Member or which are secured by any Company
property distributed to such Member.
(ii) From each Member's Capital Account there
shall be subtracted the amount of money and the Gross Asset Value
of any property distributed to such Member pursuant to any
provision of this Agreement, such Member's distributive share of
Losses and any items in the nature of expense or loss which are
specially allocated pursuant to Section 3.7 or Section 3.8, and
the amount of any liabilities of such Member assumed by the
Company or which are secured by any property contributed by such
Member to the Company.
(iii) In the event all or a portion of an
Interest in the Company is transferred in accordance with the
terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it relates to the
transferred Interest.
(iv) In determining the amount of any liability
for purposes of subparagraphs (i) and (ii) above, there shall be
taken into account Code Section 752(c) and any other applicable
provisions of the Code and Regulations.
The foregoing provisions and the other provisions of
this Agreement relating to the maintenance of Capital Accounts
are intended to comply with Regulations Section 1.704-1(b), and
shall be interpreted and applied in a manner consistent with such
Regulations. In the event the Board shall determine that it is
necessary to modify the manner in which the Capital Accounts, or
any debits or credits thereto (including, without limitation,
debits or credits relating to liabilities which are secured by
contributions or distributed property or which are assumed by the
Company or any Member) are computed in order to comply with such
Regulations, the Board may make such modification, provided that
such modification is not likely to have a material adverse effect
on the amounts distributed to any Member upon the dissolution of
the Company. The Board also shall (i) make any adjustments that
are necessary or appropriate to maintain equality between the
Capital Accounts of the Members and the amount of Company capital
reflected on the Company's balance sheet, as computed for book
purposes in accordance with Regulations Section
1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications
in the event unanticipated events might otherwise cause this
Agreement not to comply with Regulations Section 1.704-1(b),
provided that, to the extent that any such adjustment is
inconsistent with other provisions of this Agreement and would
have a material adverse effect on any Member, such adjustment
shall require the consent of such Member.
3
"Capital Contribution" means, with respect to any
Member, the amount of cash and the Agreed Value of Contributed
Assets contributed by such Member to the Company in accordance
with Section 3.1.
"Cash Balances" means all cash accounts on a balance
sheet representing paper currency and coins, negotiable money
orders, checks and bank balances as well as cash equivalents in
the form of highly liquid securities with a known market value
and a maturity, when acquired, of less than three months.
"Certificate" means a certificate evidencing Units
substantially in the form of Exhibit A to this Agreement.
"Certificate of Formation" shall have the meaning set
forth in Section 2.1.
"Closing" and "Closing Date" shall have the respective
meanings set forth in the Joint Venture Agreement.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor to such statute.
"Commercial Tissue Business" shall have the meaning set
forth in the Joint Venture Agreement.
"Company" shall have the meaning set forth in the
preamble hereto.
"Company Business" means the business intended to be
carried on by the Company Group, as described in Section 2.2
hereof.
"Company Debt" means the debt incurred by the Company
on or about the Closing Date solely to fund the Special
Distribution, as further described in Section 2.8(b) of the Joint
Venture Agreement, and refinancing or replacement therefor
(including up to $8 million of related expenses, including legal
fees, accounting fees, printing fees, filing fees, and
underwriting fees).
"Company Group" means the Company and any Subsidiaries
of the Company from time to time.
"Company Group Affiliate" means any Person that is an
Affiliate of the Company.
"Company Property" means any and all property of
whatsoever nature, tangible or intangible, real or personal, of
the Company Group from time to time.
"Confidential Information" shall have the meaning set
forth in Section 6.1.
"Contributed Assets" means the property or other
consideration (other than cash) contributed to the Company in
exchange for Units in the Company.
4
"CPA Firm" means the independent public auditor
determined pursuant to Section 5.3.
"CSK" means Chesapeake Corporation, a Virginia
corporation, of which WISCO is a wholly-owned subsidiary.
"CSK Group" means CSK, WISCO, and all other CSK
Subsidiaries from time to time.
"CSK Group Affiliate" means any Person that is an
Affiliate of CSK.
"Debt" means any liability of the Company (including,
without limitation, liabilities to Members) for borrowed money,
or any liability for the payment of money by the Company in
connection with any guarantees, surety agreements, letters of
credit, or other interest bearing liabilities evidenced by any
bond, debenture, note or other similar instrument, excluding any
trade liabilities or any non-interest bearing liabilities or
obligations; capital lease (but not operating lease) liabilities
and other liabilities which are in the nature of financing; and
any interest bearing off-balance sheet liabilities and the net
liability of off balance sheet derivative contracts.
"Delaware Act" means the Delaware Limited Liability
Company Act, 6 Del. C. 18-101 et seq., as amended from time to
time, and any successor to such statute.
"Depreciation" means, for each Fiscal Year, an amount
equal to the depreciation, amortization, or other cost recovery
deduction allowable for federal income tax purposes with respect
to an asset for such Fiscal Year, except that if the Gross Asset
Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such Fiscal Year,
Depreciation shall be determined by the Board in the manner
described in Regulations Section 1.704-1(b)(2)(iv)(g)(3).
"Distributable Cash" means the amount of cash that the
Board reasonably determines is available for distribution to
Members at any applicable time, taking into account available
cash and anticipated cash flow and current and anticipated
expenses of the Company and after setting aside reserves in an
amount reasonably deemed necessary to provide for the Company's
planned capital expenditures, debt service and working capital.
"EBITDA" means, at any time of determination as
specified in this Agreement, the earnings before interest, taxes,
depreciation and amortization of the Company Group, computed on a
consolidated basis in accordance with GAAP consistently applied,
for the four fiscal quarters next preceding such date of
determination, excluding any one time, unusual or extraordinary
items (and, if determined at a time prior to the expiration of
four fiscal quarters following the Closing Date, then such EBITDA
shall be deemed to be the EBITDA of the Company Group for post-
Closing completed fiscal quarters of the Company plus combined
EBITDA of the WISCO Business and the G-P Business for such number
of pre-Closing fiscal quarters as, together with the completed
fiscal quarters of the Company, shall equal four (4)).
"Exercise Notice" shall have the meaning set forth in
Section 7.2(c).
5
"Fair Market Value" means, with respect to property, as
of any date of determination, the price for such property that
could be negotiated in an arm's-length free market transaction,
for cash, between a willing seller and a willing buyer, neither
of whom is under pressure or compulsion to complete the
transaction, as of such date of determination, as determined in
good faith by the Board using a reasonable valuation method,
which determination must include the vote or consent of the WISCO
Member; provided that if the full Board is unable to reach such a
determination with the vote or consent of the WISCO Member, the
WISCO Member and the G-P Member shall each select an independent
and nationally recognized accounting firm as its representative,
and such accounting firms shall select one independent and
nationally recognized investment banking firm, accounting firm or
appraisal company as they deem appropriate and in the best
position to determine the Fair Market Value, whose determination
of the Fair Market Value shall be final and binding.
"Final Determination" means (i) a decision, judgment,
decree or other order by any court of competent jurisdiction,
which binds WISCO or CSK and has become final and not subject to
further appeal, (ii) a closing agreement which binds WISCO or CSK
entered into under Section 7121 of the Code or any other binding
settlement agreement with the Internal Revenue Service entered
into in connection with or in contemplation of an administrative
or judicial proceeding, or (iii) the completion of Internal
Revenue Service administrative proceedings which binds WISCO or
CSK and if a judicial contest is not or is no longer available
or, in the sole discretion of WISCO or CSK, is not to be
commenced or continued.
"Financing Agreements" means any agreement pursuant to
which the Company or any Company Affiliate incurs Debt.
"Fiscal Year" means the fiscal year of the Company as
specified in 5.1.
"Formula Price" means, at any date of determination,
the EBITDA of the Company less Net Debt as of such date
multiplied by 7.38.
"G-P Books" means any books and records of G-P Related
to calculation of volume, price or cost allocation methodology
for purposes of the Ancillary Agreements.
"G-P Call" shall have the meaning set forth in Section
7.2(b).
"G-P Group" means G-P and its Subsidiaries from time to
time.
"G-P Group Affiliate" means any Person that is an
Affiliate of G-P.
"G-P Guarantee" shall have the meaning set forth in
Section 3.17.
"G-P Member" means, collectively if more than one, the
G-P Group Affiliate(s) who from time to time is (are) Member(s)
of the Company.
"Gross Asset Value" means, with respect to any asset,
the asset's adjusted basis for federal income tax purposes,
except as follows:
6
(i) The initial Gross Asset Value of any asset
contributed by a Member to Company shall be the Agreed Value of
such asset except as otherwise provided in Section 3.1;
(ii) The Gross Asset Values of all Company assets
shall be adjusted to equal their respective gross Fair Market
Values as of the following times: (A) the acquisition of an
additional Interest in the Company by any new or existing Member
in exchange for more than a de minimis capital contribution; (B)
the distribution by the Company to a Member of more than a de
minimis amount of money or other property as consideration for an
Interest in the Company; and (C) the liquidation of the Company
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g);
provided, however, that adjustments pursuant to clauses (A) and
(B) above shall be made only if such adjustments are reasonably
necessary or appropriate to reflect the relative economic
interests of the Members in the Company;
(iii) The Gross Asset Value of any Company
asset distributed to any Member shall be adjusted to equal the
gross Fair Market Value of such asset on the date of
distribution; and
(iv) The Gross Asset Values of Company assets
shall be increased (or decreased) to reflect any adjustments to
the adjusted basis of such assets pursuant to Code Section 734(b)
or Code Section 743(b), but only to the extent that such
adjustments are taken into account in determining Capital
Accounts pursuant to Regulation Section 1.704-1(b)(2)(iv)(m) and
subparagraph (vi) of the definition of "Profits" and "Losses" or
Section 3.7(g); provided, however, that Gross Asset Values shall
not be adjusted pursuant to this subparagraph (iv) to the extent
the Board makes an adjustment pursuant to subparagraph (ii) that
would otherwise result in an adjustment pursuant to this
subparagraph (iv).
If the Gross Asset Value of an asset has been determined or
adjusted pursuant to subparagraphs (i), (ii), or (iv), such Gross
Asset Value shall thereafter be adjusted by the Depreciation
taken into account with respect to such asset for purposes of
computing Profits and Losses.
"Group" means the Company Group, the CSK Group or the G-
P Group, or both, as the context may require.
"Independent Third Party" means any Person who,
immediately prior to the contemplated transaction, is not the
owner of in excess of a 5% Percentage Interest in the Company and
who is not a Member of any such 5% Owner.
"Indemnitee" shall have the meaning set forth in
Section 4.10.
"Interest" means the ownership interest of a Member in
the Company (which shall be considered personal property for all
purposes), consisting of (i) such Member's interest in profits,
losses, allocations and distributions, (ii) such Member's right
to vote or grant or withhold consents with respect to Company
matters as provided herein or in the Delaware Act and (iii) such
Member's other rights and privileges as provided herein or under
the Delaware Act.
7
"Involuntary Dissolution Event" shall mean any event
described in Section 8.1(d) hereof if no Member filed a motion,
petition, or other request before a court or an administrative
agency seeking a dissolution of the Company.
"Joint Venture Agreement" shall have the meaning set
forth in the recitals hereto.
"Law" means any federal, state, foreign or local law,
constitutional provision, code, statute, ordinance, rule,
regulation, order, judgment or decree of any governmental
authority.
"Manager" means a person duly elected to the Board
pursuant to the provisions of Section 4.2 or Section 4.3 hereof.
Each Manager shall constitute a "manager" of the Company as such
term is defined in Section 18-101 of the Delaware Act.
"Members" mean WISCO and G-P and all other Persons
admitted as additional or substituted Members pursuant to this
Agreement, so long as they remain Members. Each Member shall
constitute a "Member" of the Company, as such term is defined in
Section 18-101 of the Delaware Act.
"Net Debt" means, at any date of determination, the
amount of all Debt of the Company Group on such date, less all
Cash Balances held by or on behalf of any Company Group Member
and less loans made to the Members as of such date.
"Nonrecourse Deductions" has the meaning set forth in
Section 1.704-2(b)(1) and 1.704-2(c) of the Regulations.
"Obligations" shall have the meaning set forth in
Section 3.17(b).
"Nonrecourse Liability" has the meaning set forth in
Section 1.704-2(b)(3) of the Regulations.
"Option Closing" shall have the meaning set forth in
Section 7.2(c).
"Option Right" shall have the meaning set forth in
Section 7.2(c).
"Partner Nonrecourse Debt" has the same meaning as the
term "partner nonrecourse debt" set forth in Section
1.704-2(b)(4) of the Regulations.
"Partner Nonrecourse Debt Minimum Gain" means an
amount, with respect to each Partner Nonrecourse Debt, equal to
the Partnership Minimum Gain that would result if such Partner
Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Section 1.704-2(i)(3) of the
Regulations.
"Partner Nonrecourse Deductions" has the same meaning
as the term "partner nonrecourse deductions" set forth in
Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.
8
"Partnership Minimum Gain" has the meaning set forth in
Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.
"Percentage Interests" means the respective proportions
in which the Members hold their Interests in the Company,
determined for any Member as of any date by dividing the number
of Units held by such Member on such date by the total number of
Units outstanding and held by all Members as of such date.
"Permanent Company Debt" shall mean the indebtedness
incurred by the Company to refinance the Company Debt, as further
described in Section 3.17 hereof, and shall include, where the
context requires, any replacement or refinancing thereof.
"Person" shall mean an individual, a corporation, a
partnership, an association, a trust, a limited liability
company, a governmental authority or any other entity or
organization.
"Products" shall have the meaning set forth in Section
10.13(a).
"Profits" and "Losses" means, for each Fiscal Year, an
amount equal to the Company's taxable income or loss for such
Fiscal Year, determined in accordance with Code Section 703(a)
(for this purpose, all items of income, gain, loss, or deduction
required to be stated separately pursuant to Code Section
703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(i) Any income of the Company that is exempt from
federal income tax and not otherwise taken into account in
computing Profits or Losses pursuant to this definition of
"Profits" and "Losses" shall be added to such taxable income or
loss;
(ii) Any expenditures of the Company described in
Code Section 705(a)(2)(B), or treated as Code Section
705(a)(2)(B) expenditures pursuant to Regulations Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Profits or Losses pursuant to this definition of
"Profits" and "Losses" shall be subtracted from such taxable
income or loss;
(iii) In the event the Gross Asset Value of
any Company asset is adjusted pursuant to subparagraphs (ii) or
(iii) of the definition of "Gross Asset Value," the amount of
such adjustment shall be taken into account as gain or loss from
the disposition of such asset for purposes of computing Profits
or Losses;
(iv) Gain or loss resulting from any disposition
of property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to the
Gross Asset Value of the property disposed of, notwithstanding
that the adjusted tax basis of such property differs from its
Gross Asset Value;
(v) In lieu of the depreciation, amortization,
and other cost recovery deductions taken into account in
9
computing such taxable income or loss, there shall be taken into
account Depreciation for such Allocation Year, computed in
accordance with the definition of "Depreciation";
(vi) To the extent an adjustment to the adjusted
tax basis of any Company asset pursuant to Code Section 734(b) or
Code Section 743(b) is required pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining
Capital Accounts as a result of a distribution other than in
complete liquidation of a Member's Interest, the amount of such
adjustment shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment
decreases the basis of the asset) from the disposition of the
asset and shall be taken into account for purposes of computing
Profits or Losses; and
(vii) Any items which are specially allocated
pursuant to Section 3.7 or Section 3.8 shall not be taken into
account in computing Profits or Losses.
The amounts of the items of Company income, gain, loss or
deduction available to be specially allocated pursuant to
Sections 3.7 and 3.8 shall be determined by applying rules
analogous to those set forth in subparagraphs (i) through (vi)
above.
"Put Price" shall have the meaning set forth in Section
7.2(a).
"Regulations" means the regulations promulgated by the
U.S. Treasury Department pursuant to the Code.
"Regulatory Allocations" shall have the meaning set
forth in Section 3.8.
"Special Distribution" shall have the meaning set forth
in Section 2.8(b) of the Joint Venture Agreement.
"Subsidiary" means, with respect to any Person, any
corporation, partnership, association, trust, limited liability
company or other legal entity or organization of which such
person, either directly or indirectly or through or together with
any other Subsidiary of such Person, owns more than 50% of the
equity interests.
"Tax Matters Member" shall have the meaning set forth
in Section 3.12.
"Tax Opinion" means an opinion of CSK's legal counsel
or public accounting firm to the effect that it is substantially
more likely than not that (1) the transfer of the WISCO Business
constituted a sale to the Company (in whole or in part) for
federal income tax purposes, or (2) the Special Distribution is
taxable to WISCO in whole or in part. Such opinion must be based
upon an addition, amendment, or other modification to the Code or
the Regulations, the issuance by the Internal Revenue Service (or
any other administrative agency or authority having jurisdiction
over the interpretation, administration, or enforcement of
federal income tax laws) of a ruling, notice, or other
administrative pronouncement, or the issuance or publication of a
decision by a court, in any such event occurring after the
Closing but before the eighth anniversary of the Closing Date.
10
"Transfer" shall have the meaning set forth in Section
7.1.
"Units" means the equal proportional units into which
Interests in the Company shall be divided, which term may include
fractions of Units as well as whole Units. Subject to the
Capital Contribution obligations of the Members hereunder, all
Units issued hereunder shall be fully paid and non-assessable.
"Voluntary Dissolution Event" shall mean any event
described in Section 8.1 hereof other than an Involuntary
Dissolution Event.
"Voluntary Dissolution Event Without WISCO's Consent"
shall mean any Voluntary Dissolution Event which is described in
Section 8.1 hereof if the event occurs without the consent of the
WISCO Member. For this purpose, the WISCO Member shall be deemed
to have consented to (i) any action approved by the Manager
designated by the WISCO Member, (ii) any reduction of the WISCO
Member's (or the CSK Group's) ownership of the outstanding Units
below 5% if such reduction occurs because of an exercise of the
WISCO Put, and (iii) the dissolution of the Company under Section
8.1(d) hereof at the request of the WISCO Member.
"WISCO" shall have the meaning set forth in the
preamble hereto.
"WISCO Business" shall have the meaning set forth in
the Joint Venture Agreement.
"WISCO Indemnity Period" shall have the meaning set
forth in Section 3.17.
"WISCO Manager" shall mean a Manager designated by the
WISCO Member.
"WISCO Member" means, collectively if more than one,
the CSK Group Affiliate(s) which from time to time is (are)
Member(s) of the Company.
"WISCO Put" shall have the meaning set forth in Section
7.2(a).
Section 1.2 Rules of Construction.
(a) Words used herein, regardless of the number and
gender used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine,
feminine or neuter, as the context requires, and, as used herein,
unless the context requires otherwise, the words "hereof",
"herein", and "hereunder" and words of similar import shall refer
to this Agreement as a whole and not to any particular provision
of this Agreement.
(b) A reference to any statute or statutory provision
shall be construed as a reference to the same as it may have
been, or may from time to time be, amended, modified or re-
enacted.
(c) The terms "dollars" and "$" shall mean United
States dollars.
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(d) The term "including" shall be deemed to mean
"including without limitation."
(e) Article and section headings used in this
Agreement are for convenience of reference only and shall not
affect the interpretation of this Agreement.
(f) This Agreement is among financially sophisticated
and knowledgeable parties and is entered into by the parties in
reliance upon the economic and legal bargains contained herein
and shall be interpreted and construed in a fair and impartial
manner without regard to such factors as the party who prepared,
or caused the preparation of, this Agreement or the relative
bargaining power of the parties.
ARTICLE II
GENERAL MATTERS
Section 2.1 Formation.
The Members have caused the formation of the Company as
a Delaware Limited Liability Company pursuant to the Delaware Act
by filing a Certificate of Formation of the Company (the
"Certificate of Formation") with the Delaware Secretary of State
in accordance with the Delaware Act and, in connection therewith,
each Member has contributed $10.00 to the capital of the Company
prior to the date hereof. The rights and liabilities of the
Members shall be as provided in the Delaware Act, except as
otherwise provided in this Agreement.
Section 2.2 Purposes and Business.
Except as may otherwise be approved by the Board (which
approval must include the affirmative vote or consent of the
WISCO Manager), the purpose of the Company and the Company Group
shall be to engage in any lawful business in any way related to
the business of producing, licensing for production and selling
commercial tissue products and related products for the "away
from home" market, on a worldwide basis. The Company shall have
all powers necessary or desirable to accomplish the aforesaid
purposes. In connection therewith, the Company may engage in and
enter into any and all activities, contracts and agreements
related or incident to the above-stated purposes as the Board may
determine to be appropriate from time to time. The Company shall
have the power to do all things necessary, appropriate,
advisable, convenient, or incidental in connection with the
fulfillment of its business purposes. The Company shall not, and
shall not permit any of its Subsidiaries to, engage in any other
activity or business except to the extent approved by the Board
(which approval must include the affirmative vote or consent of
the WISCO Manager).
Section 2.3 Offices.
(a) The principal executive offices of the Company
shall be located at 00 Xxxx Xxxxx, Xxxxxxx, Xxxxxxx at the
offices of G-P or such other location as determined by the Board
from time to time.
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(b) The registered office of the Company in the State
of Delaware is located at Corporation Trust Center, 0000 Xxxxxx
Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000. The registered agent of the
Company for service of process at such address is The Corporation
Trust Company. Such registered office or registered agent may be
changed by the Board from time to time.
Section 2.4 Name.
The name of the Company shall be Georgia-Pacific
Tissue, LLC or such other name as the Board may from time to time
select.
Section 2.5 Term.
The existence of the Company commenced on the date its
Certificate of Formation was filed with the Secretary of State of
the State of Delaware, and shall continue in perpetuity unless
dissolved in accordance with Section 8.1.
Section 2.6 Members.
The name and business or mailing address of each Member
of the Company are set forth on Schedule 1 to this Agreement.
The Board shall cause Schedule 1 to be amended from time to time
to reflect the addition or retirement of Members, or transfers of
Units, in accordance with the terms of this Agreement. Except in
connection with a permitted redemption or transfer of a Member's
entire Interest in accordance with the terms of this Agreement,
no Member shall have the right to retire from the Company prior
to the termination of the Company following dissolution and
winding up.
ARTICLE III
FINANCIAL AND TAX MATTERS
Section 3.1 Capital Contributions.
(a) Simultaneously with the execution of this
Agreement, WISCO is contributing to the Company the WISCO
Business, as defined and identified in the Joint Venture
Agreement, with an aggregate agreed value of $775,000,000 in
exchange for 5 Units, which number of Units reflects the Special
Distribution. Specifically, the various categories of assets
comprising the Contributed Assets of WISCO are as follows:
Shares of Wisconsin Tissue
de Mexico, S.A.
Shares of Wisconsin Tissue
Management LLC
Interest in Alsip Condominium Association
Working Capital
Land
Buildings
Equipment
Inventory
Goodwill
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For purposes of maintaining the Company's books in accordance
with Regulations Section 1.704-1(b)(2)(iv), the initial Gross
Asset Value of each asset within each of the above categories
shall be based on the relative Fair Market Values of the assets
within each category.
(b) Simultaneously with the execution of this
Agreement, G-P is contributing to the Company the G-P Contributed
Assets, as defined and identified in the Joint Venture Agreement,
with an aggregate agreed value of $376,400,000 in exchange for 95
Units, which number of Units reflects the Special Distribution.
Specifically, the various categories of assets comprising the
Contributed Assets of G-P are as follows:
Working Capital
Land
Buildings
Equipment
Inventory
Goodwill
For purposes of maintaining the Company's books in accordance
with Regulations Section 1.704-1(b)(2)(iv), the initial Gross
Asset Value of each asset within each of the above categories
shall be based on the relative Fair Market Values of the assets
within each category.
(c) Except as may otherwise be unanimously agreed to
in writing by the Members, the Members shall have no right or
obligation to make any additional Capital Contributions to the
Company.
(d) Unless otherwise unanimously agreed by the
Members, any additional Capital Contributions made by the Members
shall be made in accordance with the Members' respective
Percentage Interests, and additional Units shall be issued in
respect of any such additional Capital Contributions pro rata
based on the Members' respective Percentage Interests.
Section 3.2 Loans from Members.
Loans by a Member to the Company shall not be
considered Capital Contributions. Such loans shall bear interest
at arm's length market rates and may contain other customary
commercial terms as agreed by the Company and the Member;
provided, however, that any such loans shall be fully
subordinated to the Company Debt and the Permanent Company Debt
in accordance with terms that are reasonably acceptable to each
Member. If any Member shall advance funds to the Company in
excess of the amounts required hereunder to be contributed by
such Member to the capital of the Company, such advances shall
not increase the Capital Account of such Member. The amounts of
any such advances shall be a debt of the Company to such Member
and shall be payable or collectible only out of Company assets in
accordance with the terms and conditions upon which such advances
are made. The repayment of debt owed to a Member upon
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liquidation of the Company shall be subject to the order of
priority set forth in Section 8.2.
Section 3.3 Restrictions Relating to Capital; Company
Property.
(a) Except as otherwise provided herein or by the
Delaware Act, no Member shall have the right to withdraw, or
receive any return of, all or a portion of such Member's Capital
Contribution, nor shall any Member have the right to demand and
receive property other than cash in return for its Capital
Contribution, except as provided in Section 8.3(a).
(b) No interest shall be paid by the Company on
Capital Contributions or on balances in Members' Capital
Accounts.
(c) All Company Property, whether contributed by a
Member or otherwise acquired by the Company, shall be owned by
the Company as a separate legal entity and no Member shall have
any right of partition with respect to any Company Property. The
Board shall cause the Company to execute, file and record such
documents as may be necessary or appropriate to reflect the
Company's ownership of Company Property in appropriate public
offices.
(d) No Member shall be liable to the Company or to any
other Member to restore any deficit balance in its Capital
Account (except as may be required by the Delaware Act) or to
reimburse any other Member for any portion of such other Member's
investment in the Company. No Member shall have priority over
any other Member, either as to the return of its Capital
Contribution or as to income, losses, interest, returns, or
distributions, except for the priority of the WISCO Member with
respect to the Special Distributions and as set forth in Section
8.3(a).
(e) The Company shall not enter into any transaction,
other than the Ancillary Agreements, with any Member or any
Affiliate of any Member except on arms length terms.
Section 3.4 Tax Treatment.
It is the intention of the Members that the Company
shall be taxed as a "partnership" for United States federal,
state and local income tax purposes, and, except as otherwise
required by law, no Member shall take any action inconsistent
with the classification of the Company as a partnership for U.S.
tax purposes, including any action to cause the Company to be
treated as an association taxable as a corporation for U.S. tax
purposes.
Section 3.5 Allocation of Profits.
After giving effect to the special allocations set
forth in Sections 3.7 and 3.8, Profits for any Fiscal Year shall
be allocated among the Members in proportion to their respective
Percentage Interests.
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Section 3.6 Allocation of Losses.
After giving effect to the special allocations set
forth in Sections 3.7 and 3.8, Losses for any Fiscal Year shall
be allocated as set forth in Section 3.6(a), subject to the
limitation in Section 3.6(b).
(a) Losses for any Fiscal Year shall be allocated
among the Members in proportion to their respective Percentage
Interests.
(b) The Losses allocated pursuant to Section 3.6(a)
shall not exceed the maximum amount of Losses that can be so
allocated without causing any Member to have an Adjusted Capital
Account Deficit at the end of any Fiscal Year. In the event some
but not all of the Members would have Adjusted Capital Account
Deficits as a consequence of an allocation of Losses pursuant to
Section 3.6(a), the limitation set forth in this Section 3.6(b)
shall be applied on a Member by Member basis so as to allocate
the maximum permissible Losses to each Member under Section
1.704-1(b)(2)(ii)(d) of the Regulations.
Section 3.7 Special Allocations.
The following special allocations shall be made in the
following order:
(a) Minimum Gain Chargeback Except as otherwise
provided in Section 1.704-2(f) of the Regulations,
notwithstanding any other provision of this Article III, if there
is a net decrease in Partnership Minimum Gain during any Fiscal
Year, each Member shall be specially allocated items of Company
income and gain for such Fiscal Year (and, if necessary,
subsequent Fiscal Years) in an amount equal to such Member's
share of the net decrease in Partnership Minimum Gain, determined
in accordance with Regulations Section 1.704-2(g). Allocations
pursuant to the previous sentence shall be made in proportion to
the respective amounts required to be allocated to each Member
pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(f)(6) and
1.704-2(j)(2) of the Regulations. This Section 3.7(a) is
intended to comply with the minimum gain chargeback requirement
in Section 1.704-2(f) of the Regulations and shall be interpreted
consistently therewith.
(b) Partner Minimum Gain Chargeback. Except as
otherwise provided in Section 1.704-2(i)(4) of the Regulations,
notwithstanding any other provision of this Article III, if there
is a net decrease in Partner Nonrecourse Debt Minimum Gain
attributable to a Partner Nonrecourse Debt during any Fiscal
Year, each Member who has a share of the Partner Nonrecourse Debt
Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Section 1.704-2(i)(5) of the
Regulations, shall be specially allocated items of Company income
and gain for such Fiscal Year (and, if necessary, subsequent
Fiscal Years) in an amount equal to such Member's share of the
net decrease in Partner Nonrecourse Debt Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to
the respective amounts required to be allocated to each Member
pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(i)(4) and
16
1.704-2(j)(2) of the Regulations. This Section 3.7(b) is
intended to comply with the minimum gain chargeback requirement
in Section 1.704-2(i)(4) of the Regulations and shall be
interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Member
unexpectedly receives any adjustments, allocations, or
distributions described in Section 1.704-1(b)(2)(ii)(d)(4),
Section 1.704-1(b)(2)(ii)(d)(5) or Section
1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Company
income and gain shall be specially allocated to each such Member
in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, the Adjusted Capital Account Deficit
of such Member as quickly as possible, provided that an
allocation pursuant to this Section 3.7(c) shall be made only if
and to the extent that such Member would have an Adjusted Capital
Account Deficit after all other allocations provided for in this
Article III have been tentatively made as if this Section 3.7(c)
were not in the Agreement.
(d) Gross Income Allocation. In the event any Member
has a deficit Capital Account at the end of any Fiscal Year which
is in excess of the sum of (i) the amount such Member is treated
as obligated to restore pursuant to Regulations Section
1.704-1(b)(2)(ii)(c) by virtue of such Partner's guarantee or
indemnity with respect to the Company Debt, and (ii) the amount
such Member is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5), each such Member shall be specially allocated
items of Company income and gain in the amount of such excess as
quickly as possible, provided that an allocation pursuant to this
Section 3.7(d) shall be made only if and to the extent that such
Member would have a deficit Capital Account in excess of such sum
after all other allocations provided for in this Article III have
been made as if Section 3.7(c) and this Section 3.7(d) were not
in the Agreement.
(e) Partner Nonrecourse Deductions. Any Partner
Nonrecourse Deductions for any Fiscal Year shall be allocated to
the Member who bears the economic risk of loss with respect to
the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Regulations
Section 1.704-2(i)(1).
(f) Nonrecourse Deductions. Nonrecourse Deductions
for any Fiscal Year shall be allocated to the Members in
proportion to their respective Percentage Interests.
(g) Section 754 Adjustments. To the extent an
adjustment to the adjusted tax basis of any Company asset
pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2)
or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into
account in determining Capital Accounts as the result of a
distribution to a Member in complete liquidation of its interest
in the Company, the amount of such adjustment to Capital Accounts
shall be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases such
basis) and such gain or loss shall be specially allocated to the
Members in accordance with their Interests in the Company in the
event that Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies,
or to the Member to whom such distribution was made in the event
that Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
17
(h) In the event that the Company makes a distribution
to WISCO pursuant to Section 3.15 hereof, then WISCO shall be
specially allocated items of Company income and gain from each
Fiscal Year in which such distribution is made (and, if
necessary, subsequent Fiscal Years in the case of distributions
under Section 3.15(a) or (b)) in an amount equal to the total of
such distributions made to WISCO.
Section 3.8 Offsetting Special Allocations.
The allocations set forth in Sections 3.6(b), and
3.7(a), (b), (c), (d), (e), (f), and (g) (the "Regulatory
Allocations") are intended to comply with certain requirements of
the Regulations. It is the intent of the Members that, to the
extent possible, all Regulatory Allocations shall be offset
either with other Regulatory Allocations or with special
allocations of other items of Company income, gain, loss or
deduction pursuant to this Section 3.8. Therefore,
notwithstanding any other provision of this Article III (other
than the Regulatory Allocations), the Board shall make such
offsetting special allocations of Company income, gain, loss or
deduction in whatever manner it determines appropriate so that,
after such offsetting allocations are made, each Member's Capital
Account balance is, to the extent possible, equal to the Capital
Account balance such Member would have had if the Regulatory
Allocations were not part of the Agreement and all Company items
were allocated pursuant to Sections 3.5, 3.6(a) and 3.7(h). In
exercising its discretion under this Section 3.8, the Board shall
take into account future Regulatory Allocations under Sections
3.7(a) and 3.7(b) that, although not yet made, are likely to
offset other Regulatory Allocations previously made under
Sections 3.7(e) and 3.7(f).
Section 3.9 Other Allocation Rules.
(a) Profits, Losses, and any other items of income,
gain, loss or deduction shall be allocated to the Members
pursuant to this Article III as of the last day of each Fiscal
Year; provided that Profits, Losses and such other items shall
also be allocated at such times as the Gross Asset Values of
Company Property are adjusted pursuant to subparagraph (ii) of
the definition of Gross Asset Value.
(b) For purposes of determining the Profits, Losses,
or any other items allocable to any period, Profits, Losses, and
any such other items shall be determined on a daily, monthly, or
other basis, as determined by the Board using any permissible
method under Code Section 706 and the Regulations thereunder.
(c) All allocations to the Members pursuant to this
Article III shall, except as otherwise provided, be divided among
them in proportion to their respective Percentage Interests.
(d) The Members are aware of the income tax
consequences of the allocations made by this Article III and
hereby agree to be bound by the provisions of this Article III in
reporting their shares of Company income and loss for income tax
purposes, except to the extent otherwise required by law.
(e) Solely for purposes of determining a Member's
proportionate share of the "excess nonrecourse liabilities" of
the Company within the meaning of Regulations
18
Section 1.752-3(a)(3), the Members' interests in Company profits
are in proportion to their Percentage Interests.
(f) To the extent permitted by Section 1.704-2(h)(3)
of the Regulations, the Board shall endeavor to treat
distributions as having been made from the proceeds of a
Nonrecourse Liability or a Partner Nonrecourse Debt only to the
extent that such distributions would cause or increase an
Adjusted Capital Account Deficit for any Member.
Section 3.10 Tax Elections.
The Company shall make the following elections on the
appropriate tax returns:
(a) to adopt the accrual method of accounting, if
permitted by the Code, and to keep the Company's books and
records in a manner consistent therewith;
(b) to elect to amortize the organizational expenses
and the start-up expenditures of the Company ratably over a
period of sixty (60) months as permitted by Sections 709(b) and
195(b) of the Code;
(c) if so requested by any Member, an election under
Section 754 of the Code to adjust the basis of the Company's
property in the circumstances described therein; and
(d) any other election not inconsistent with this
Agreement or the Joint Venture Agreement that the Tax Matters
Member may deem appropriate and in the best interests of the
Members.
Neither the Company nor any Member may make an election for the
Company to be excluded from the application of the provisions of
subchapter K of chapter 1 of subtitle A of the Code or any
similar provisions of applicable state law.
Section 3.11 Tax Allocations; Code Section 704(c).
In accordance with Code Section 704(c) and the Regulations
thereunder, income, gain, loss, and deduction with respect to any
Contributed Asset shall, solely for tax purposes, be allocated
among the Members so as to take account of any variation between
the adjusted basis of such Contributed Asset to the Company for
federal income tax purposes and its initial Gross Asset Value
(computed in accordance with subparagraph (i) of the definition
of "Gross Asset Value").
In addition, in the event the Gross Asset Value of any
Company asset is adjusted pursuant to subparagraph (ii) of the
definition of the "Gross Asset Value," subsequent allocations of
income, gain, loss, and deduction with respect to such asset
shall take account of any variation between the adjusted basis of
such asset for federal income tax purposes and its Gross Asset
Value in the same manner as under Code Section 704(c) and the
Regulations thereunder.
The Company shall adopt and use only the "traditional
method" permitted by the Regulations under Code Section 704(c),
and therefore shall not make any curative allocations and/or
19
remedial allocations. Allocations pursuant to this Section 3.11
are solely for purposes of federal, state, and local taxes and
shall not affect, or in any way be taken into account in
computing, any Member's Capital Account or share of Profits,
Losses, other items, or distributions pursuant to any provision
of this Agreement.
Except as otherwise provided in this Agreement, all items of
Company income, gain, loss, deduction, and any other allocations
not otherwise provided for shall be divided among the Members in
the same proportions as the Percentage Interest for the Fiscal
Year.
Section 3.12 Tax Matters Member.
The Member having the highest Percentage Interest shall
be the tax matters partner (the "Tax Matters Member") of the
Company pursuant to Section 6231(a)(7) of the Code. Such Member
shall take such action as may be necessary to cause each other
Member to become a notice partner within the meaning of Section
6223 of the Code. Such Member shall inform each other Member of
all significant matters that may come to its attention in its
capacity as Tax Matters Member by giving prompt notice thereof.
The Company agrees to defend, indemnify and hold harmless the Tax
Matters Member from and against all claims and damages relating
to actions taken in good faith in discharging its
responsibilities as Tax Matters Member.
Section 3.13 Regular Distribution Policy.
(a) The Board shall determine from time to time, in
its complete discretion whether and to what extent the Company
shall distribute any portion of available Distributable Cash to
Members; provided, however, that aside from the Special
Distribution, distributions declared or made on or before January
1, 2002 shall not exceed the Company's "net cash flow from
operations" as determined under Section 1.707-4(b), unless
unanimously approved by the Members. All funds distributed to
the Members pursuant to this Section 3.12 shall be distributed to
them in accordance with their respective Percentage Interests.
(b) Subject to Section 8.3 hereof, to the extent that
the Board approves any distribution that consists of property of
a type or in a form other than cash, the types and forms of such
property shall be allocated in an equitable manner among the
Members entitled thereto, such that each Member shall, except for
immaterial variances, receive the same type or form of property.
(c) Any distributions to be made by the Company shall
be made only to the extent permitted by the Company Debt and any
other Financing Agreements to which any Company Group Affiliate
is a party and only if and to the extent permitted by applicable
Law (including, without limitation, Sections 18-607 and 18-804 of
the Delaware Act).
Section 3.14 Special Distribution.
Simultaneous with the Closing, the Company shall use
the net proceeds of the Company Debt (after deducting borrowing
expenses) to make the Special Distribution to the WISCO Member in
an amount that will result in the WISCO Member's Percentage
20
Interest equaling 5%. The amount of the Special Distribution
shall be determined in accordance with Section 2.1(b) of the
Joint Venture Agreement.
Section 3.15 Accelerated Gains Tax Liability of WISCO.
(a) If (on one or more occasions) prior to the tenth
anniversary of the Closing Date, the Company sells or otherwise
disposes of all or any part of the WISCO Contributed Assets, and
if WISCO therefore incurs and pays (either directly or as an
offset against a tax refund or overpayment of tax) federal and/or
state income tax liabilities (on a cumulative basis, taking into
account all such sales or other dispositions) exceeding $22
million as a result of the allocation to it of income or gain(s)
recognized by the Company from such sales or dispositions (up to
the total Built In Gain with respect to the WISCO Contributed
Assets sold or disposed of, determined by assuming, absent a
Final Determination or receipt by CSK of a Tax Opinion, that no
income or gain is recognized by WISCO on the transfer of such
assets to the Company), then the Company shall distribute to
WISCO (after each such occasion and within 10 days after WISCO
has demonstrated to the Company's reasonable satisfaction the
appropriate amount to be distributed) an amount of money equal to
the actual amount, if any, of WISCO's total federal and state
income tax liability in excess of $22 million resulting from the
allocation to it of income or gain so recognized by the Company.
No distribution to WISCO under this Section 3.15(a), however,
shall be made with respect to the Company's sale of inventory,
the collection or disposition of accounts receivable, or the
retirement of other assets in the ordinary course of operating
the WISCO Business (it being understood that the disposition or
partial liquidation of a manufacturing facility or of any stock
or other equity interest in any WISCO Contributed Subsidiary
shall not be considered to be a transaction in the ordinary
course of business) regardless of whether the $22 million limit
otherwise has been exceeded.
(b) (i) Subject to the compliance of WISCO with its
obligations under clause (ii) of this Section 3.15(b), if (on one
or more occasions) the Company or G-P (other than satisfying its
obligations under the G-P Guarantee) pays all or any part of the
principal amount of the Permanent Company Debt prior to the
thirtieth (30th) anniversary of the Closing Date, or if the
Company takes any action prior to such thirtieth (30th)
anniversary that would result in a reduction, after the funding
of the Permanent Company Debt, of the portion of such debt for
which WISCO "bears the economic risk of loss" within the meaning
of Section 1.752-2 of the Regulations, then the Company shall
distribute to WISCO (after each such occasion and within 10 days
after WISCO has demonstrated to the Company's reasonable
satisfaction the appropriate amount to be distributed) an amount
of money equal to the actual increase, if any, in WISCO's total
federal and state income tax liability incurred and paid by WISCO
(either directly or as an offset against a tax refund or
overpayment of tax) as a result of such payment or other action
by the Company. Similar principles shall apply if the Company
repays the principal amount of the Company Debt other than by
replacing such debt with the Permanent Company Debt as provided
in Section 3.17 hereof. WISCO has determined that it "bears the
economic risk of loss" within such meaning for the Company Debt
up to the amount of the Special Distribution as of the Closing
Date and acknowledges that it will need to make a similar
determination with respect to the Permanent Company Debt, and the
Members acknowledge that no distribution will be made pursuant to
this Section 3.15(b) to compensate WISCO for any tax liability
attributable to the incorrectness of WISCO's determinations.
21
(ii) The Members acknowledge that the Company
shall replace the Company Debt and may replace the Permanent
Company Debt from time to time with other indebtedness so long as
(x) such replacement does not result in a reduction in the total
amount of Company indebtedness for which WISCO "bears the
economic risk of loss," (y) such indebtedness is on terms that
are no less favorable to the Company (taking into account the
Company's credit rating) than prevailing terms in the credit
markets in all material respects at the time such indebtedness is
incurred, and (z) the Company shall have provided notice to WISCO
of the terms of such indebtedness as soon after agreeing to such
terms as is reasonably practicable. WISCO hereby agrees to
cooperate to the extent reasonably required to facilitate such
one or more refinancings, including but not limited to, executing
agreements (in form and substance reasonably satisfactory to
WISCO) necessary for it to "bear the economic risk of loss" for
such replacement indebtedness in an amount not less than the
Special Distribution. In such event, any such replacement
indebtedness (and any and all subsequent replacement
indebtedness) shall be treated as Permanent Company Debt for
purposes of this Section 3.15(b).
(c) For the avoidance of doubt, the Members
acknowledge that no distribution will be made pursuant to this
Section 3.15 as a result of the exercise of the WISCO Put, nor
shall any distribution be made pursuant to this Section 3.15 to
compensate WISCO for any tax liability resulting from any
treatment of the contribution of the WISCO Contributed Assets to
the Company as a sale in whole or in part for federal and/or
state income tax purposes (such treatment being evidenced by a
Final Determination or by a Tax Opinion). In making any
determination of the appropriate amount to be distributed
pursuant to this Section 3.15, any effect on WISCO's taxable
income and/or gain resulting from any distribution made to WISCO
pursuant to this Section 3.15, or from any corresponding special
allocation of income under Section 3.7(h), shall be disregarded.
(d) If G-P purchases WISCO's Interest in the Company
pursuant to Section 7.2(b) hereof, or if a Voluntary Dissolution
Event Without WISCO's Consent occurs, then the Company shall
distribute to WISCO an amount of money equal to the lesser of the
following two amounts: (i) the amount of federal and state income
tax liability that WISCO actually incurred and paid (either
directly or as an offset against a tax refund or overpayment of
tax) as a result of the income and/or gain it recognized on the
sale of its Interest to G-P (or an Affiliate of G-P) pursuant to
Section 7.2(b) or Section 8.5(b) hereof, or upon the receipt of
distributions in liquidation of its Interest pursuant to Section
8.2 hereof, or (ii) the amount of federal and state income tax
liability that WISCO would have incurred on the sale of its
Interest to G-P (or an Affiliate of G-P), or upon the receipt of
distributions in liquidation of its Interest, if the income or
gain recognized from such sale or liquidation were an amount
equal to the excess of (x) the aggregate Built In Gain in all of
the WISCO Contributed Assets over (y) any such Built In Gain
previously recognized by WISCO. For purposes of clause (y) of
the preceding sentence, the following items shall be treated as
recognized Built In Gain: (1) any gain actually recognized by
WISCO from action taken by the Company with respect to the
Company Debt if such action would give rise to a distribution
obligation under Section 3.15(b) and (2) any Built In Gain in
WISCO Contributed Assets consisting of inventory or accounts
receivable (whether or not recognized). For purposes of this
Section 3.15(d), in computing the amount of income and/or gain
22
recognized by WISCO on the sale its Interest pursuant to Section
7.2(b) or Section 8.5(b) hereof, or upon the receipt of
distributions in liquidation of its Interest pursuant to Section
8.2 hereof, there shall be included in the amount realized by
WISCO the entire amount of Company Debt (including for this
purpose the Permanent Company Debt) for which WISCO "bears the
economic risk of loss" within the meaning of Section 1.752-2 of
the Regulations immediately before such sale or liquidation,
regardless of whether the indemnity agreement or other
arrangement causing WISCO to "bear the economic risk of loss"
remains in effect after such sale or liquidation. The Company
shall distribute to WISCO the amount determined in this Section
3.15(d) within 10 days after WISCO has demonstrated to the
Company's reasonable satisfaction the amount to be distributed.
If, following a Voluntary Dissolution Event Without WISCO's
Consent, the Company does not have sufficient funds to make the
distribution to WISCO required under this Section 3.15(d), G-P
shall pay WISCO the amount of any shortfall.
(e) If any distribution to WISCO pursuant to this
Section 3.15 is smaller than it otherwise would have been because
the event triggering the Company's obligation to make the
distribution reduced, eliminated, or prevented the creation of or
addition to a net operating loss carryover, capital loss
carryover, tax credit carryover, or other tax attribute of WISCO
(collectively, a "WISCO Tax Attribute"), then the Company shall
distribute to WISCO (within 10 days after WISCO has demonstrated
to the Company's reasonable satisfaction the amount to be
distributed) an amount equal to any actual increase in WISCO's
federal and state income tax liability in one or more prior or
subsequent taxable years of WISCO, but only to the extent that
such increased liability is attributable to the decrease in such
WISCO Tax Attribute.
(f) Upon the occurrence of an event requiring a
distribution to WISCO under Section 3.15(b) or (d), the amount of
such distribution shall be increased pursuant to this Section
3.15(f) if WISCO has theretofore incurred and paid (either
directly or as an offset against a tax refund or overpayment of
tax), and has not been indemnified by the Company pursuant to
Section 3.15(a) (due to the $22 million limit), federal and/or
state income tax liabilities resulting from the allocation to
WISCO of Built In Gain in the WISCO Contributed Assets upon the
Company's sale or other disposition of all or any part of such
assets. The amount of the increased distribution, if any, under
this Section 3.15(f) shall be determined by multiplying (i) the
federal and/or state income tax liabilities actually incurred and
paid by WISCO (either directly or as an offset against a tax
refund or overpayment of tax) from asset sales or other
dispositions by the Company to the extent that such liabilities
were not indemnified by the Company under Section 3.15(a) by
reason of the $22 million limit times (ii) the "Built In Gain
Percentage." For purposes of this Section 3.15(f), the "Built In
Gain Percentage" in the case of a distribution to WISCO pursuant
to Section 3.15(b) is the percentage obtained by dividing (i) the
income or gain actually recognized by WISCO from action taken by
the Company with respect to the Company Debt or the Permanent
Company Debt if such action would give rise to a distribution
obligation under Section 3.15(b) by (ii) the aggregate Built In
Gain in all of the WISCO Contributed Assets. In the case of a
distribution to WISCO pursuant to Section 3.15(d), the "Built In
Gain Percentage" is 100%.
(h) Notwithstanding anything to the contrary in this
Section 3.15, no distribution shall be made to WISCO pursuant to
this Section 3.15 prior to the day after the second anniversary
23
of the Closing Date. If a distribution otherwise would have been
due to WISCO under this Section 3.15 before the second
anniversary of the Closing Date, the amount of the distribution
shall be increased by an amount computed like interest at the
prime rate published in the "Money Rates" table (or any successor
thereto) of The Wall Street Journal from time to time from the
date such distribution otherwise would have been due.
(i) For purposes of applying this Section 3.15, the
Company's adjusted basis for federal and state income tax
purposes in the stock of Wisconsin Tissue de Mexico, S.A. de C.V.
immediately after the contribution of such stock to the Company
shall be increased by the amount of any intercompany loss with
respect to such stock recognized by the CSK Group as a result of
the contribution. WISCO shall inform the Company of the amount
of any such recognized loss on or before September 15, 2000, and
shall inform the Company of any adjustments to the amount of such
recognized loss promptly after any such adjustment is made
(whether by the CSK Group or by the Internal Revenue Service).
Section 3.16 Sharing of Company Tax Benefits.
(a) (i) The Members believe that the contribution of
the WISCO Business constitutes a nonrecognition transaction
pursuant to Section 721(a) of the Code, and the Members and the
Company shall report and otherwise treat the transfer of the
WISCO Contributed Assets to the Company as solely a
nonrecognition transaction pursuant to Section 721(a) of the Code
on all relevant tax returns and reports unless there is a Final
Determination to the contrary or CSK receives a Tax Opinion to
the contrary. In addition, unless there is a Final Determination
to the contrary or CSK receives a Tax Opinion to the contrary,
the Members and the Company agree to treat any excess of the
Special Distribution over WISCO's "allocable share" of the
Company Debt (within the meaning of Regulations Section 1.707-
5(b)), and any excess of the Special Distribution over WISCO's
"allocable share" of the Permanent Company Debt (within the
meaning of Regulations Section 1.707-5(b)), as reimbursements of
capital expenditures incurred by WISCO with respect to the WISCO
Contributed Assets during the two-year period prior to the
Closing Date to the extent permitted by Regulations Section 1.707-
4(d). If CSK receives a Tax Opinion or, prior to the eighth
anniversary of the Closing Date, there is a Final Determination
that the transfer of the WISCO Business to the Company
constituted a sale to the Company (in whole or in part) for
federal income tax purposes, then WISCO and G-P shall jointly
determine the change in the Company's adjusted basis for federal
income tax purposes in the WISCO Contributed Assets (such change
being referred to herein as the "Sale Step-Up").
(ii) If the Company is dissolved because of an
Involuntary Dissolution Event and WISCO recognizes taxable income
and/or gain resulting from the receipt of liquidating
distributions pursuant to Section 8.2 hereof or upon the sale of
its Interest pursuant to Section 8.5 hereof, then WISCO and G-P
shall jointly determine the change, if any, in the Company's (or
G-P's) adjusted basis for federal income tax purposes in the
WISCO Contributed Assets (such change being referred to herein as
the "Involuntary Dissolution Step-Up," and together with the Sale
Step-Up, the "Step-Up").
24
(b) Within 10 days after G-P or an Affiliate of G-P
files any federal or state income tax return (including for this
purpose any amended return or claim for refund) with the Internal
Revenue Service or the applicable state income tax authority, G-P
shall pay to WISCO an amount equal to one-half of the net income
tax benefit to G-P or the Affiliate reflected on such return to
the extent that such benefit is attributable to the Step-Up. In
the case of any tax return described in the preceding sentence in
which a net operating loss or a net capital loss is reported, the
net income tax benefit attributable to the Step-Up shall be
determined as if each deduction or recognized loss of G-P (or its
Affiliate) claimed on such return were used in proportion to (i)
the total amount of deductions or losses claimed on such return
before creating any net operating loss or net capital loss,
divided by (ii) the total amount of deductions or losses claimed
on such return (taking into account the amount of deductions and
losses resulting in a net operating loss or net capital loss for
the year). Any deduction resulting from a net operating loss
carryover, and any net capital loss carryover used to offset a
recognized capital gain, shall be treated as a deduction or loss
attributable to the Step-Up in proportion to a fraction, the
numerator of which is any portion of a deduction or loss
attributable to the Step-Up that is deemed not to have been used
previously and the denominator of which is the total amount of
the deduction resulting from the net operating loss carryover or,
as the case may be, the total amount of the capital loss
carryover that is used to offset a recognized capital gain. To
the extent that G-P or its Affiliate receives (either directly or
as an offset against a liability) a payment of interest or
realizes a reduction in interest expense as a result of filing a
tax return described in the first sentence of this Section
3.16(b), G-P shall pay to WISCO an amount computed in the same
manner as such interest on the amount described in such sentence.
(c) If CSK receives a Tax Opinion or, prior to the
eighth anniversary of the Closing Date, there is a Final
Determination that the transfer of the WISCO Business to the
Company constituted a sale to the Company (in whole or in part)
for federal income tax purposes, and the WISCO Put is exercised
in full following receipt of such Tax Opinion or such Final
Determination, G-P shall continue to make payments to WISCO
pursuant to Section 3.16(b) hereof until the net income tax
benefit attributable to the Step-Up is exhausted. If, however,
WISCO exercises the WISCO Put (in whole or in part) prior to
CSK's receipt of a Tax Opinion or prior to a Final Determination
that the transfer of the WISCO Business to the Company
constituted a sale to the Company (in whole or in part) for
federal income tax purposes, G-P's payment obligation under
Section 3.16(b) shall not apply to any income tax deductions or
losses attributable to the Step-Up which are claimed in any
taxable year (or portion thereof, determined by pro rating the
number of days in such taxable year) of G-P (or its Affiliate)
that occurs after the first such exercise of the WISCO Put.
(d) If G-P makes a payment to WISCO under this Section
3.16 and if WISCO and G-P jointly determine that there should
have been no change in the basis of assets or that the change was
more or less than the amount they originally determined, then (i)
the amount of G-P's income tax savings previously determined
shall be redetermined to reflect the correct change (or no
change) in the basis of assets, and (ii) WISCO shall refund to G-
P or G-P shall pay to WISCO, as appropriate, the difference
between the total amount previously paid by G-P to WISCO under
this Section 3.16 and the total amount that should have been paid
based on the redetermined tax savings. To facilitate the
application of this Section 3.16(d), each party shall promptly
25
notify the other of any event (of which the party becomes aware)
that the party believes likely would give rise to a
redetermination under this Section 3.16(d).
Section 3.17 Permanent Company Debt.
The Company shall refinance the Company Debt (in
accordance with Section 3.15(b)(ii)) with new non-amortizing
indebtedness that remains outstanding for an aggregate term
(taking into account the initial refinancing and any subsequent
refinancings) of 30 years from the maturity date of the Company
Debt (the "Permanent Company Debt"). The principal amount of the
Permanent Company Debt shall be equal to the Company Debt plus an
amount of expenses incurred in obtaining the Permanent Company
Debt (including any refinancings thereof) that does not exceed
the difference between (i) $8,000,000 in the aggregate and (ii)
the amount of any borrowing expenses that were incurred to obtain
the Company Debt and added to the principal amount thereof.
After deducting such expenses, the net proceeds of the Permanent
Company Debt shall be used solely to repay in full the principal
amount of the Company Debt (or, in the case of refinancings of
Permanent Company Debt, such refinanced Debt). In accordance
with Section 3.15(b)(ii), WISCO hereby agrees to cooperate to the
extent reasonably required to facilitate the obtaining of the
Permanent Company Debt, including but not limited to, executing
agreements (in form and substance reasonably satisfactory to
WISCO) necessary for it to "bear the economic risk of loss" for
such debt in an amount not less than the Special Distribution.
The Company agrees that the Permanent Company Debt shall be
issued pursuant to an indenture or credit agreement that contains
covenants that are substantially similar to those contained in
the G-P Member's public bond indenture dated March 1, 1983, from
G-P to Chase Manhattan Bank National Association, as trustee, a
copy of which has been provided to the WISCO Member. Further,
the G-P Member shall fully and unconditionally guarantee all
refinancings of the Company Debt or Permanent Company Debt (such
guarantee to be in substance sufficient for G-P to bear the
"economic risk of loss" for such Debt, but for the WISCO Debt
Indemnity (the "G-P Guarantee")), subject to an indemnity from
WISCO on substantially the same terms as the WISCO Debt
Indemnity.
In addition, at all times that WISCO is subject to any
continuing liability under a WISCO debt indemnity (the "WISCO
Indemnity Period"), the Company agrees (and each of the G-P
Member and WISCO Member agrees to cause the Company) to abide by
the following covenants:
(a) Notwithstanding Section 3.13 hereof, in the event
the Company or any of its Subsidiaries sells any assets (other
than sales of inventory in the ordinary course of its business)
or incurs any indebtedness in addition to the Permanent Company
Debt, the proceeds of such sales or borrowings may not be
distributed to Members, or loaned or contributed to any Person
(including, without limitation, Subsidiaries of the Company);
provided, however, that the Company or any of its Subsidiaries
shall be permitted to lend such proceeds to G-P or a Subsidiary
of the Company (such loan to be evidenced by a G-P note or
Company Subsidiary note, as the case may be, that is not
subordinated to G-P's or such Company Subsidiary's, as the case
may be, other senior unsecured debt).
26
(b) Neither the Company nor any of its Subsidiaries
shall guarantee the debt or other obligations (the "Obligations")
of any other Person (including, without limitation, Subsidiaries
of the Company) other than in the ordinary course, consistent
with the past practices of either Business, except that (i) the
Company or such Subsidiary shall be permitted to guarantee the
Obligations of G-P (including, without limitation, Obligations
pursuant to G-P's senior bank credit agreement), and (ii) the
Company or such Subsidiary shall be permitted to guarantee the
Obligations of other Persons, provided that, with respect to
clause (ii) hereof, G-P has also guaranteed such Obligations on
terms that provide that the beneficiaries of such guarantees will
exhaust their rights and remedies against G-P before exercising
any rights or remedies against the Company or such Subsidiary, as
the case may be, pursuant to its guarantee.
(c) In addition to the negative pledge provisions to
be included in the indenture or credit agreement for the
Permanent Company Debt, neither the Company nor any Subsidiary of
the Company shall grant any liens or encumbrances on any of its
assets to secure Obligations of any other Person (including,
without limitation, Subsidiaries of the Company), except (i) the
Company or such Subsidiary of the Company shall be permitted to
grant liens to secure Obligations of G-P, and (ii) the Company or
such Subsidiary of the Company shall be permitted to grant liens
on its assets to secure Obligations of other Persons, provided
that with respect to clause (ii), G-P has guaranteed such
Obligations on terms that provide that the beneficiaries of such
Obligations will exhaust their rights and remedies against G-P
before exercising any rights or remedies with respect to the
pledged assets of the Company or such Subsidiary of the Company,
as the case may be.
(d) In connection with the G-P guarantees referred to
in the provisos of clauses (b) and (c) of this section, G-P
agrees to provide the WISCO Member with the proposed form of such
guarantee (which shall be the same in all material respects as
the actual guarantee entered into by G-P in connection with the
subject transaction) as soon as practicable, but in any event
within five (5) Business Days prior to G-P's execution of such
guarantee.
(e) If the WISCO Debt Indemnity has terminated in
accordance with its terms, this Section 3.17 shall have no
further effect.
27
ARTICLE IV
MANAGEMENT
Section 4.1 General.
Subject to the delegation of rights and powers provided
herein, the Board shall have the sole right to manage the
business of the Company and shall have all powers and rights
necessary, appropriate or advisable to effectuate and carry out
the purposes and business of the Company. No Member, by reason
of its status as such, shall have any authority to act for or
bind the Company or otherwise take part in the management of the
Company, but shall have only the right to vote on or approve the
matters specifically provided herein or in the Delaware Act (or
hereafter specified by the Board) to be voted on or approved or
determined by the Members.
Section 4.2 Board Composition.
The Board shall consist of 5 Managers or such other
number as the Board shall determine. Each Member shall have the
right to designate such number of Managers (rounded up or down to
the nearest whole number) as is in proportion to its respective
Percentage Interest; provided that the WISCO Member shall, so
long as it holds any Units in the Company, be entitled to appoint
at least one Manager to the Board. Each of CSK and G-P shall
provide notice of its initial designations of Managers in writing
to the other on or prior to the Closing Date. Each Manager shall
hold office until such Manager's resignation, removal, death or
incapacity; provided, however, that if the number of Managers
that a Member is entitled to designate is reduced by reason of a
change in Unit ownership, the one or more affected Managers
appointed by such Member shall automatically cease to be Managers
(if more than one, in the reverse order of the date of their
respective appointments).
Section 4.3 Term; Removal; Vacancies.
Managers shall hold office at the pleasure of the
Member that designated them. Any Member may at any time, by
written notice to the other Members and the Company, remove (with
or without cause) any Manager designated by such Member. Subject
to applicable Law and to the provisions of Section 4.2, a Manager
may not be removed except by written request of the Member that
designated the Manager. In the event a vacancy occurs on the
Board for any reason, the vacancy will be filled by the written
designation of the Member that designated the Manager creating
the vacancy.
Section 4.4 Notice; Quorum.
Meetings of the Board may be called by any Manager on
two Business Days' prior written notice to all Managers stating
in general the purpose or purposes thereof; provided, however,
that any Manager may waive such notice prior to, at or after the
meeting. The presence in person of a majority of the Managers
shall constitute a quorum for the transaction of business at any
meeting of the Board. Each Member shall use its reasonable
efforts to ensure that a quorum is present at any duly convened
meeting of the Board and each Member may designate by written
28
notice to the others an alternate to act in the absence of any of
its previously designated Managers at any such meeting. If at
any meeting of the Board a quorum is not present, a majority of
the Managers present may, without further notice, adjourn the
meeting from time to time until a quorum is obtained.
Section 4.5 Voting.
(a) Each Manager shall be entitled to cast one vote on
each matter considered by the Board. Except as otherwise
expressly provided by this Agreement, the act of a majority of
the Managers present at any meeting at which a quorum is present
shall constitute an act of the Board.
(b) The following matters shall require, in addition
to any other vote required by applicable Law or as otherwise
provided for herein, the affirmative vote of a majority of the
Board in attendance, which majority must include a Manager
designated by the WISCO Member:
(i) except as provided in Article VIII hereof,
and subject to applicable Law, any dissolution or liquidation of
the Company;
(ii) any merger, consolidation, conversion or
other reorganization involving the Company, or the sale or other
disposition of all or substantially all of the assets of the
Company in one transaction or a series of related transactions;
(iii) the admission of an additional Member
except as provided in Section 7.1; and
(iv) any amendment to or waiver or termination of,
any Ancillary Agreement, which amendment or waiver or termination
would have the effect of adversely altering the methodology for
establishing the price of goods or the cost allocation of
services provided to the Company in the Ancillary Agreements
(other than the Parent Roll Supply Agreement) or adversely amend
or waive Section 4.1 of the Parent Roll Supply Agreement or
terminate the Parent Roll Supply Agreement.
(c) Any Manager, when making any determination in such
capacity, including voting or acting by consent with respect to
any matter, shall be entitled to act in his or her discretion,
considering only such interests and factors as such Manager
desires, and such Manager shall have no duty or obligation to
give any consideration to any interest of, or other factors
affecting, the Company or any Member. Further, a Manager may
consider and act in accordance with the interests of the Member
appointing him or her, without regard to the other interests or
factors, including any fiduciary duties, when acting on any
matter presented to the Board for determination, and to the
extent permitted by the Delaware Limited Liability Company Act,
the Members hereby eliminate and waive any and all fiduciary
duties and liabilities of the Manager and their Affiliates to the
Company and any other Members.
29
Section 4.6 Telephonic Meeting; Written Consents.
(a) Any meeting of the Board may be held by conference
telephone or similar communication equipment so long as all
Managers participating in the meeting can hear one another. All
Managers participating by telephone or similar communication
equipment shall be deemed to be present in person at the meeting.
(b) Any action to be taken by the Managers at a
meeting of the Board may be taken without such meeting by the
written consent of a majority of the Managers then in office (or
such higher number of Managers as is required take such action
under the terms of this Agreement or applicable Law). Any such
written consent may be executed and given by telecopy or similar
electronic means and shall be filed with the minutes of the
proceedings of the Board. If any action is so taken by the Board
by the written consent of less than all of the Managers, prior
notice of the taking of such action shall be furnished to each
Manager, which notice shall include a copy of the proposed
consent, as well as any other information provided by the Company
to any Manager with such consent (provided that the effectiveness
of such action shall not be impaired by any delay or failure to
furnish such notice).
Section 4.7 Committees of the Board; Officers.
(a) The Managers may, by resolution (which resolution
shall have been approved by the WISCO Manager), delegate any of
the Board's powers to one or more committees of the Board, each
consisting of one or more Managers (other than the power to take
the actions specified in Section 4.5(b)). The Board, by
resolution, may adopt further procedures relating to the conduct
of business by any of the committees established by it.
(b) The Company shall have such officers as shall be
appointed by the Board, each having such powers and duties as
shall be provided by resolution of the Board. In addition, the
Board may appoint, employ or otherwise cause the Company to
contract with such other Persons for the transaction of the
business of the Company or the performance of services for or on
behalf of the Company as it shall determine in its discretion
from time to time. The Board may delegate to any officer of the
Company or to any such other Person such authority to act on
behalf of the Company as the Board may from time to time
determine appropriate in its discretion. The salaries or other
compensation, if any, of the officers and agents of the Company
shall be fixed from time to time by the Board. The Managers
shall not be responsible for any misconduct or negligence on the
part of any officer, agent or other Person to whom authority is
delegated, provided that such Person was appointed by the
Managers with reasonable care.
Section 4.8 Execution of Documents.
No Manager (acting solely in his capacity as such)
shall have any authority to bind the Company to any third party
with respect to any action except pursuant to a resolution
authorizing such action. Any Manager or officer of the Company,
or any other persons specifically authorized by the Board, may
execute any contract or other agreement or document on behalf of
the Company and may execute on behalf of the Company and file
with the Secretary of State of the State of Delaware any
certificates or filings provided for in the Delaware Act. The
30
filing of the Certificate of Formation with the Secretary of
State of the State of Delaware by the authorized person therein
specified is hereby ratified and confirmed.
Section 4.9 Reliance on Documents and Reports.
A Manager shall be fully protected in relying in good
faith upon the records of the Company and upon such information,
opinions, reports or statements presented to the Company by any
of its other Managers, Members, officers, employees or
committees, or by any other Person, as to matters the Manager
reasonably believes are within such other Person's professional
or expert competence and who has been selected with reasonable
care by or on behalf of the Company (including, without
limitation, information, opinions, reports or statements as to
the value and amount of the assets, liabilities, profits, or
losses of the Company or any other facts pertinent to the
existence and amount of assets from which distributions to
Members might properly be paid). In addition, the Managers may
consult with legal counsel, accountants, appraisers, management
consultants, investment bankers and other consultants and
advisors selected by them, and reliance upon any opinion of any
such Person as to matters which the Managers reasonably believe
to be within such Person's professional or expert competence
shall be full and complete protection in respect of any action
taken or suffered or omitted by the Managers hereunder in good
faith and in accordance with such opinion.
Section 4.10 Standard of Care; Indemnification.
Subject to Section 4.5(c), in carrying out his duties,
a Manager or officer of the Company shall not be liable to the
Company or to any Member for any actions taken in good faith and
reasonably believed by the Manager or officer to be in, or not
opposed to, the best interests of the Company Group, or for
errors of judgment, neglect or omission, including any losses
sustained, liabilities incurred, or benefits not derived by
Members in connection with any action or inaction of the Manager,
provided, however, that a Manager or officer shall be liable for
his willful misconduct or gross negligence.
(a) Each Manager shall, and each officer at the
discretion of the Board may (as so indemnified, an "Indemnitee")
be indemnified and held harmless by the Company from and against
any and all losses, claims, damages, liabilities, expenses
(including legal fees and disbursements), judgments, fines,
settlements and all other amounts arising from any and all
claims, demands, actions, suits or proceedings, civil, criminal,
administrative or investigative, in which the Indemnitee may be
involved, or threatened to be involved, as a party or otherwise
by reason of his status as a Manager or officer, or his
management of the affairs of the Company, or which relate to the
Company, its property, business or affairs, whether or not the
Indemnitee continues to be a Manager or officer at the time any
such liability or expense is paid or incurred, if the Indemnitee
(i) acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Company Group
and, (ii) with respect to any criminal proceeding, had no
reasonable cause to believe his conduct to be unlawful; provided
however, that no Indemnitee shall be entitled to indemnification
if it shall be finally determined that such Indemnitee's act or
omission constituted willful misconduct or gross negligence.
31
(b) Expenses (including legal fees and disbursements)
incurred in defending any proceeding shall be paid by the Company
in advance of the final disposition of such proceeding upon
receipt of an undertaking by or on behalf of the Indemnitee to
repay such amount if it is ultimately determined by a court of
competent jurisdiction that the Indemnitee is not entitled to be
indemnified by the Company as authorized hereunder.
Section 4.11 Member Action.
In the event that any matter is required to be
submitted to the Members for their approval under the terms of
this Agreement or the Delaware Act, the following provisions
shall apply:
(a) The Members may vote on any such matter at a
meeting to be held at such time and place as shall be designated
by the Board. Any meeting of the Members may be held by
conference telephone or similar communication equipment so long
as all Members participating in the meeting can hear one another.
All Members participating by telephone or similar communication
equipment shall be deemed to be present in person at the meeting.
Members shall be given at least three Business Days' prior notice
of any meeting; provided that any Member may waive such notice
prior to, at or after the meeting. The notice shall specify the
place, date and hour of the meeting and the general nature of the
business to be transacted. Every Member entitled to vote or act
on any matter at a meeting of Members shall have the right to do
so either in person or by proxy.
(b) Each Member shall be entitled to one vote for each
Unit owned by it. At any meeting of Members, the presence in
person or by proxy of Members having the right to vote more than
50% of the Units entitled to vote at such meeting shall
constitute a quorum for the transaction of business. Except as
otherwise required by this Agreement or applicable Law, the
affirmative vote of Members having the right to cast more than
50% of the votes present at a meeting of Members at which a
quorum is present is required to approve any action requiring the
Members' approval at such meeting.
(c) Any action that may be taken at any meeting of
Members may be taken without a meeting and without prior notice
if a consent in writing setting forth the action so taken is
signed by all Members. Any such written consent may be executed
and given by telecopy or similar electronic means and such
consents shall be filed with the minutes of the proceedings of
the Members.
Section 4.12 Certain Transactions.
(a) Without requirement of further consent or action
of the Members or Managers of the Company, the Company is
authorized to enter into the Joint Venture Agreement and each of
the Ancillary Agreements and all other documents and agreements
to be delivered by the Company at the Closing pursuant to the
Joint Venture Agreement, to perform the Company's obligations
thereunder, and to consummate the transactions contemplated
thereby, all of which actions are approved, ratified and
confirmed by the Members. Without limiting the foregoing, it is
understood and agreed that, pursuant to the Management Agreement
32
(as defined in the Joint Venture Agreement) G-P shall, subject to
the authority of the Board, be responsible for the management and
operations of the Company.
(b) Notwithstanding anything herein to the contrary,
prior to agreeing to terminate any Ancillary Agreement (other
than the Parent Roll Supply Agreement, which may not be
terminated at any time that WISCO is a Member of the Company
without the WISCO Manager's consent thereto), the Board must make
a good faith determination that it no longer requires the
services provided by G-P in such Ancillary Agreement.
ARTICLE V
ACCOUNTING, BOOKS AND RECORDS
Section 5.1 Fiscal Year.
The fiscal year and fiscal periods of the Company shall
be the same as the fiscal year and fiscal periods of G-P, as the
same may be changed or modified from time to time. The G-P
Member shall give the WISCO Member prompt notice of any material
change in the fiscal year or fiscal periods of G-P.
Section 5.2 Books and Records.
The Company shall keep at its principal executive
offices books and records typically maintained by Persons engaged
in similar businesses and which shall set forth a true, and
complete account of the Company Business and affairs of the
Company Group in all material respects. Such books and records
shall be kept in accordance with GAAP in a manner reasonably
designed to provide such information as well as permit
preparation by Members of their Federal and State tax returns and
to calculate EBITDA of the Company. Each of the Members and
their respective authorized representatives (and with respect to
the G-P Books the WISCO Member) shall have the right, at all
reasonable times and upon reasonable advance written notice to
the Company, at such Member's expense, to inspect, audit and copy
the books and records of the Company Group (and with respect to
the G-P Books the WISCO Member) for any purpose reasonably
related to the Member's interests as a Member of the Company. A
Member requesting any such access to books and records shall
reimburse the Company or G-P, as the case may be, for any costs
reasonably incurred by it in connection therewith.
Section 5.3 Auditors.
The CPA Firm of the Company shall be the same firm used
by G-P, as such CPA Firm may be changed from time to time so long
as it is an auditing firm of national standing.
Section 5.4 Reporting.
The Company shall use reasonable commercial efforts to
deliver to each Member (i) prior to each fiscal quarter, a
quarterly forecast of the results of operations of the Company
33
Group for such quarter, and, as soon as practicable, any material
changes to such forecast; (ii) within 15 days after the close of
each fiscal quarter, estimated financial statements for the
Company Group; (iii) within 30 days after the close of each
fiscal quarter, an Unaudited Balance Sheet, Statement of Income
and Statement of Cash Flows for the Company Group, together with
the notes related thereto; and (iv) within 60 days after the
close of each Fiscal Year, an Audited Balance Sheet, Statement of
Income and Statement of Cash Flows for the Company Group for such
Fiscal Year, together with the notes related thereto. The
Members acknowledge and agree that the Members shall have no
recourse against the Company or each other in the event the
forecast is incorrect and that no Member shall be entitled to
rely on such forecast for any purpose.
Section 5.5 Banking.
All funds of the Company received from any and all
sources shall be deposited in the Company's name in such separate
checking or other such accounts as shall be determined by the
Board. In connection with the maintenance of such bank accounts,
the Board shall designate those individuals who will have
authority to write checks or otherwise disburse funds from such
bank accounts on behalf of the Company in connection with its
activities. Nothing contained herein shall be construed to limit
the ability of the Company to obtain and utilize cash management
services pursuant to the Management Agreement, as defined in the
Joint Venture Agreement.
Section 5.6 Tax Return Information.
The Company shall prepare all federal, foreign, state
and local income tax returns that the Company is required to
file. Within 120 days following the close of each Fiscal Year,
the Company shall send or deliver to each Person that was a
Member at any time during such year such tax information as shall
reasonably be required for the preparation by such Person of its
federal, foreign, state and local income and other income tax
returns.
Section 5.7 Delegation of Responsibility for Accounting
and Reports.
Subject to the provisions of Section 5.3, the Board may
cause the Company to contract with any other Person for the
provision of any of the accounting, cash management and tax
services required under Article III or this Article V and may pay
reasonable compensation for such services.
ARTICLE VI
CONFIDENTIALITY
Section 6.1 Confidentiality Obligation.
The WISCO Member (and, in the case of Section 6.1(c)
below, the Company) shall use (and shall ensure that each of its
Affiliates shall use) all reasonable efforts to keep confidential
(and to ensure that its officers, employees, agents and
professional and other advisers keep confidential) the following
("Confidential Information"):
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(a) all technical information, formulae, designs,
specifications, drawings, data, manuals, instructions and other
know-how relating to the products and technical processes of the
Company Group, the Company Business or the business of any other
Member;
(b) any information which the WISCO Member may have or
acquire before or after the date of this Agreement with respect
to the customers, business, assets or affairs of any G-P Group
Affiliate, or any Company Group Affiliate, resulting from:
(i) negotiating this Agreement, the Joint Venture
Agreement or any other agreement referred to in or entered into
pursuant to this Agreement or the Joint Venture Agreement;
(ii) being a Member in the Company;
(iii) appointing Managers to the Board and
their exercise of their duties; or
(iv) exercising its rights or performing its
obligations under this Agreement;
(c) any information which the Company may have or
acquire before or after the date of this Agreement in relation to
the customers, business, assets or affairs of any G-P Group
Affiliate or any CSK Group Affiliate resulting from the exercise
of its rights or performance of its obligations under this
Agreement, the Joint Venture Agreement or any other agreement
referred to in or entered into pursuant to this Agreement or the
Joint Venture Agreement; or
(d) any information which such Member may have or
acquire before or after the date of this Agreement with respect
to the customers, business, assets or affairs of the Company
Business.
The WISCO Member (and, in the case of Section 6.1(c), the
Company) shall not (and shall cause its Affiliates not to)
disclose to any third party any Confidential Information without
the consent of the G-P Member. In performing its obligations
under this Article VI, the WISCO Member and the Company shall
(and shall cause its Affiliates to) apply no lesser
confidentiality standards and procedures than it applies
generally in relation to its own confidential information.
Notwithstanding anything herein to the contrary, for purposes of
this Agreement, the term Confidential Information shall not
include information of the type described in Sections 6.2(b) and
6.2(g).
Section 6.2 Exceptions from Confidentiality Obligation.
The obligation not to disclose Confidential Information
to any third party under this Article VI does not apply to:
(a) the disclosure (subject to Section 6.3) on a `need
to know' basis to a company which is another CSK Group Member
where the disclosure is for a purpose reasonably incidental to
35
this Agreement; including, without limitation, as necessary for
the performance of its obligations under any Ancillary Agreement,
in which case such company shall be subject to the
confidentiality obligations of Article VI in this Agreement;
(b) information which is independently developed by
the WISCO Member or acquired from a third party to the extent
that it is acquired with the right to disclose the same after the
date hereof;
(c) the disclosure of information to the extent
required to be disclosed by law, any stock exchange regulation or
any binding judgment, order or requirement of any court or other
competent authority (subject to the obligation to consult with
the G-P Member in advance and to take account of its reasonable
requirements);
(d) disclosure of information to lenders and rating
agencies;
(e) the disclosure of information to any tax authority
to the extent reasonably required for the purposes of the tax
affairs of the WISCO Member concerned or any Member of its Group;
(f) the disclosure (subject to Section 6.3) in
confidence to the WISCO Member's professional advisers of
information reasonably required to be disclosed for a purpose
reasonably incidental to this Agreement; or
(g) information which becomes within the public domain
(otherwise than as a result of a breach of Article VI).
Section 6.3 Employees, Agents and Advisers.
The WISCO Member shall inform (and shall ensure that
each of its Subsidiaries or Affiliates shall inform) any officer,
employee or agent or any professional or other adviser advising
it in relation to the matters referred to in this Agreement, or
any other Person to whom it provides Confidential Information,
that such information is confidential and shall instruct them (i)
to keep it confidential and (ii) not to disclose it to any third
party (other than those persons to whom it has already been
disclosed in accordance with the terms of this Agreement). The
disclosing Member is responsible for any breach of this Article
VI by the person to whom the Confidential Information is
disclosed.
Section 6.4 Return of Confidential Information.
If the Company dissolves and terminates, either the
WISCO Member or the G-P Member may by notice to any other Member
require the other Member to destroy or return the first Member's
(but not the Company's) Confidential Information. In addition,
if at any time either the WISCO Member or the G-P Member shall
cease directly or indirectly to be a Member, the other Member
may, by notice to the first Member, require the first Member to
destroy or return the other Member's Confidential Information.
If so, the first Member shall (and shall ensure that its
Affiliates and its officers and employees shall):
36
(a) destroy or return all documents containing
Confidential Information which have been provided by or on behalf
of the Member demanding the return of Confidential Information;
and
(b) destroy or return any copies of such documents and
any document or other record (including in electronic form)
reproducing, containing or made from or with reference to the
Confidential Information
(except, in each case, for a record of any submission to or
filings with governmental, tax or regulatory authorities or
papers required for a Member's board or other corporate records
or documents required in connection with litigation). The first
Member shall return or destroy the Confidential Information as
soon as practicable after receiving notice and, in the case of
destruction, shall provide a certificate of an officer of that
Member confirming that destruction.
(c) The provisions of Section 6.4(a) shall not apply
in the event of a dissolution and termination in which the Board
has expressed its rights under Section 8.3(a) hereof.
Section 6.5 Survival After Termination.
The provisions of this Section 6.5 shall survive the
dissolution and termination of the Company and any Transfer of a
Member's Units. If either the WISCO Member or the G-P Member
shall cease to be a Member following a Transfer of Units pursuant
to this Agreement, then:
(a) the term Confidential Information for the purposes
of this Article VI shall extend to and include all Confidential
Information held by CSK Group Members or G-P Group Members (as
the case may be) about the other (excluding the Company) and the
confidentiality obligations set out in Section 6.1 shall (subject
to Section 6.2) thereafter apply to each CSK Group Member ceasing
to be a Member (as the case may be) as if it were a Member; and
(b) the provisions of Section 6.4 relating to return
or destruction of Confidential Information shall similarly apply
to such extended application of the term Confidential
Information, pursuant to Section 6.5(a), as if it were
Confidential Information of the remaining Member.
ARTICLE VII
TRANSFER OF UNITS; PUT AND CALL RIGHTS
Section 7.1 General.
Except as permitted by Section 7.2, or with the prior
written consent of all other Members, no Member will directly or
indirectly (i) sell, assign, pledge, encumber, hypothecate,
dispose of or otherwise transfer (collectively, "Transfer") any
37
Units, or any interest in any Units, (ii) agree to any such
Transfer or (iii) permit or suffer any such interest to be
subject to Transfer, directly or indirectly, by merger or other
operation of law, agreement or otherwise. Any purported Transfer
in any manner not permitted by this Article VII shall be null and
void and shall not be recognized or given effect by the Company
or any Member; provided, however, that a change of control of CSK
or G-P shall not be deemed to be a Transfer.
Section 7.2 Put and Call Rights.
(a) At any time on or after the third anniversary of
the Closing Date, the WISCO Member shall have a right to sell to
G-P, or to obligate the Company to redeem, in WISCO's sole
discretion, all or any portion of the WISCO Member's Units (the
"WISCO Put") at a purchase or redemption price, as the case may
be, equal to the Formula Price multiplied by a fraction, the
numerator of which shall be the number of Units being sold or
redeemed and the denominator of which shall be the total number
of Units of the Company then outstanding (the "Put Price");
provided, however, that WISCO shall not have the right to
exercise the WISCO Put on more than (3) three occasions.
(b) At any time commencing after the tenth anniversary
of the Closing, G-P shall have the right to purchase, and the
WISCO Member shall be obligated to sell, all but not less than
all of the Units owned by the WISCO Member (the "G-P Call") at a
purchase price equal to the Formula Price multiplied by a
fraction, the numerator of which shall be the number of Units
then owned by the WISCO Member and the denominator of which shall
be the total number of Units of the Company then outstanding (the
"Call Price").
(c) In the event the WISCO Put or the G-P Call (either
being referred to as "Option Right") is exercised, the following
procedure shall be applicable:
(i) The Member exercising its Option Right shall
deliver a written notice to the other Member and the Company (the
"Exercise Notice").
(ii) The Exercise Notice shall: (a) specify the
identity of each Member electing to exercise an Option Right;
(b) specify the number of Units to be sold, purchased or
redeemed pursuant to such Exercise Notice; and (c) be executed
by a duly authorized officer of such Member.
(iii) In the event of exercise of a WISCO Put,
the G-P Member or the Company, as specified in any Exercise
Notice regarding such WISCO Put, shall purchase and the WISCO
Member shall sell the Units specified in the Exercise Notice. In
the event of exercise of the G-P Call, the WISCO Member shall
sell and the G-P Member shall purchase all Units owned by the
WISCO Member.
38
(iv) The closing of a Transfer pursuant to
exercise of an Option Right (an "Option Closing") shall take
place at a time and place to be designated by mutual agreement
between the Members; provided, however, that the date designated
for the Option Closing shall not be more than ten (10) Business
Days from the date of receipt by the Company of the Exercise
Notice. At the Option Closing, the WISCO Member shall deliver to
the Company certificates representing the Units subject to the
Exercise Notice (free and clear of all liens, charges and
encumbrances) and the Company or the G-P Member, as applicable,
shall pay to the WISCO Member the Put Price or the Call Price, as
applicable, by cashier's or certified check payable to any such
WISCO Member, or by wire transfer of immediately available funds
to an account designated by such WISCO Member.
(v) At the Option Closing, the WISCO Member shall
execute and deliver such documents as reasonably requested by the
G-P Member to fully transfer title to the Units subject to such
Exercise Notice, including documents representing and warranting
good and marketable title to such Units and that such Units are
owned free and clear of all liens, charges and encumbrances.
Section 7.3 Member Transfers.
(a) Upon not less than fifteen (15) days advance
written notice to the Company and effective as of the first day
of the next calendar month, any Member may Transfer any of the
Units held by it to any of its Affiliates and such transferee
shall become a Member hereunder (an "Affiliate Member"), provided
that (i) such transferee shall execute a counterpart of this
Agreement, agreeing thereby to be bound by all of the provisions
hereof and (ii) in the event that such transferee would at any
time thereafter cease to be an Affiliate of the CSK Group or the
G-P Group, as the case may be, then the Units so transferred to
such former Affiliate shall be Transferred back to CSK or G-P, or
an Affiliate of their respective Groups, as applicable, prior to
such CSK Group Affiliate or G-P Group Affiliate ceasing to be
such (and if such transfer back does not occur prior to the
Affiliate ceasing to be such, the transaction which results in
the transferee ceasing to be an Affiliate shall be deemed a
Transfer which is subject to the restrictions of this Section
7.3).
(b) Notwithstanding anything herein to the contrary, G-
P or an Affiliate Member of G-P may transfer its Units or
interests in its Units to any third party at any time after the
tenth anniversary of the date hereof, provided that such
transferee shall execute a counterpart of this Agreement,
agreeing thereby to be bound by all of the provisions hereof.
Section 7.4 Retirement.
Any Member that Transfers all of its Units pursuant to
the terms hereof shall be deemed to have retired and to have
ceased to be a Member as of the effective date of such Transfer.
39
ARTICLE VIII
DISSOLUTION AND WINDING UP; BUY OUT RIGHTS
Section 8.1 Dissolution.
Subject to Section 8.5 hereof, the Company may, at the
sole discretion of the Board, be dissolved and its affairs wound
up and terminated upon the first to occur of the following:
(a) the unanimous consent of all Members to dissolve
the Company, it being expressly understood that Section 18-
801(a)(3) of the Delaware Act shall not apply to the Company;
(b) the sale or other disposition of all or
substantially all of the assets of the Company in one transaction
or a series of related transactions;
(c) the date the WISCO Member or the CSK Group holds
less than 5% of the outstanding Units; and
(d) the occurrence of an event causing a dissolution
of the Company under Section 18-801 of the Delaware Act, unless
the Company is continued as permitted under the Delaware Act.
Section 8.2 Winding Up.
If the Company is dissolved pursuant to Section 8.1,
this Agreement shall remain in full force and effect and shall
continue to govern the rights and obligations of the Members and
Managers and the conduct of the Company during the period of
winding up the Company's affairs. The Board shall apply and
distribute the assets of the Company in the following order of
priority (subject to Section 8.3), unless otherwise required by
mandatory provisions of applicable law:
(a) to satisfy the Company Debt or the Permanent
Company Debt;
(b) to other creditors, including Members who are
creditors, to the extent otherwise permitted by law, in
satisfaction of the liabilities of the Company (whether by
payment, by the establishment of reserves of cash or other assets
of the Company for contingent liabilities in amounts, if any,
determined by the Board to be appropriate for such purposes or by
other reasonable provision for payment), other than liabilities
for distributions to Members and former Members under Sections 18-
601 or 18-604 of the Delaware Act;
(c) to Members and former Members in satisfaction of
liabilities for distributions under 18-601 or 18-604 of the
Delaware Act; and
(d) thereafter to the Members in proportion to the
positive balances of their respective Capital Accounts
(determined after allocating all income, gain, deduction, loss
40
and other like items arising in connection with the liquidation
of Company assets and otherwise making all Capital Account
adjustments required under the definition of Capital Account);
Section 8.3 In-Kind Distributions.
In the event of a dissolution or winding up of the
Company, the Board shall, to the extent permitted by law, (a)
distribute to the G-P Member the amount required by Section 8.2
in kind, from the Company's assets, and to the WISCO Member the
amount required by Section 8.2 in cash, or (b) if the Board
determines (which determination must include the affirmative vote
or consent of the WISCO Manager) that a prompt sale of part or
all of the Company's assets would be impractical or would cause
undue loss to the value of Company assets, the Board may defer
for a reasonable time (up to three (3) years) the liquidation of
any assets, except those necessary to timely satisfy liabilities
of the Company (other than those to Members), and/or may
distribute to the Members, in lieu of cash, as tenants in common,
undivided interests in such Company assets as the Board deems not
suitable for liquidation. Any such in-kind distributions shall
be made in accordance with the priorities set forth in Section
8.2 as if cash equal to the Fair Market Value of the distributed
assets were being distributed. Any such distributions in kind
shall be subject to such conditions relating to the disposition
and management of such properties as are reasonable and equitable
and to any joint operating agreements or other agreements
governing the operation of such properties at such time. The
liquidating distributions to be made pursuant to this section
shall be made within the time set forth in Regulations Section
1.704-1(b)(2)(ii)(b)(2).
Section 8.4 Cancellation of Certificate of Formation.
Upon the completion of the distribution of Company
Property as provided in Sections 8.2 and 8.3, the Company shall
be terminated, and the Board shall cause the cancellation of the
Certificate of Formation and all qualifications of the Company as
a foreign limited liability company and shall take such other
actions as may be necessary to terminate the Company.
Section 8.5 Buy Out Rights.
In the event of the occurrence of any of the events
described in Section 8.1, G-P shall have the option to either (a)
cause the dissolution and wind up the Company pursuant to this
Article VIII; or (b) cause a Subsidiary of G-P to purchase the
Units held by the WISCO Member at a purchase price calculated by
multiplying the Formula Price times the WISCO Member's Percentage
Interest, in which case the Company shall not be dissolved; or
(c) to the extent legally permissible, take no action and
continue the existence of the Company. Such option shall be
exercised, and notice of such exercise provided to the WISCO
Member, within 120 days after the occurrence of any of such
events described in Section 8.1.
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ARTICLE IX
CERTIFICATES EVIDENCING UNITS
Section 9.1 Certificates.
The Units owned by each Member shall be evidenced by
one or more Certificates. Each Certificate shall be executed by
such Managers or such officers of the Company as the Board shall
designate.
Section 9.2 Register.
The Company shall keep or cause to be kept a register
in which, subject to such regulations as the Board may adopt, the
Company will provide for the registration of Units and the
registration of Transfers of Units. Upon surrender for
registration of Transfer of any Certificate, and subject to the
further provisions of this Section 9.2 and Section 9.3 and the
limitations on Transfer contained elsewhere in this Agreement,
the Company will cause the execution, in the name of the
registered holder or the designated transferee, of one or more
new Certificates, evidencing the same aggregate number of Units
as did the Certificate surrendered or such other number as is
appropriate in the event such Transfer is pursuant to exercise of
an Option Right. Every Certificate surrendered for registration
of Transfer shall be duly endorsed, or be accompanied by a
written instrument of Transfer in form satisfactory to the Board,
duly executed by the registered holder thereof or such holder's
authorized attorney.
Section 9.3 New Certificates.
The Company shall issue a new Certificate in place of
any Certificate previously issued if the record holder of the
Certificate (i) makes proof by affidavit, in form and substance
satisfactory to the Board, that a previously issued Certificate
has been lost, destroyed or stolen, (ii) requests the issuance of
a new Certificate before the Company has received notice that the
Certificate has been acquired by a purchaser for value in good
faith and without notice of an adverse claim, (iii) if requested
by the Board, delivers to the Company a bond, in form and
substance satisfactory to the Board, with such surety or sureties
and with fixed or open liability as the Board may direct, to
indemnify the Company, as registrar, against any claim that may
be made on account of the alleged loss, destruction or theft of
the Certificate, and (iv) satisfies any other reasonable
requirements imposed by the Board.
Section 9.4 Interest as a Security.
A Unit in the Company evidenced by a Certificate shall
constitute a security for all purposes of Article 8 of the
Uniform Commercial Code promulgated by the National Conference of
Commissioners on Uniform State Laws, as in effect in Delaware or
any other applicable jurisdiction. Delaware law shall constitute
the local law of the Company's jurisdiction in its capacity as
the issuer of Units.
42
Section 9.5 Legends.
A copy of this Agreement shall be kept with the records
of the Company. Each of the Members hereby agrees that each
outstanding Certificate shall bear a conspicuous legend reading
substantially as follows:
The Units represented by this Certificate
have not been registered under the Securities
Act of 1933 or applicable state and other
securities laws and may not be sold, pledged,
hypothecated, encumbered, disposed of or
otherwise transferred without compliance with
the Securities Act of 1933 or any exemption
thereunder and applicable state and other
securities laws. The Units represented by
this Certificate are subject to the
restrictions on transfer and other provisions
of an Operating Agreement dated as of October
4, 1999 (as amended from time to time, the
"Agreement") by and among Company and its
Members, and may not be sold, pledged,
hypothecated, encumbered, disposed of or
otherwise transferred except in accordance
therewith. A copy of the Agreement is on file
at the principal executive offices of the
Company.
ARTICLE X
MISCELLANEOUS
Section 10.1 Notices.
All notices and other communications required or
permitted by this Agreement shall be in writing and shall be
delivered by personal delivery, by nationally recognized
overnight courier service, by facsimile, by first class mail or
by certified or registered mail, return receipt requested,
addressed, to any Member at its address as set forth on Schedule
1 (as the same may be updated from time to time at the direction
of such Member) or to the Company at 00 Xxxx Xxxxx, Xxxxxxx,
Xxxxxxx 00000 (or to such other address as the Company shall
have designated to each of the Members by written notice given in
the manner hereinabove set forth). Notices shall be deemed given
one day after sent, if sent by overnight courier; when delivered
and receipted for, if hand delivered; when received, if sent by
facsimile or other electronic means or by first class mail; or
when receipted for (or upon the date of attempted delivery where
delivery is refused or unclaimed), if sent by certified or
registered mail, return receipt requested.
Section 10.2 Amendment; Waiver.
Any provision of this Agreement may, (i) in the case of
an amendment, be amended if, and only if, such amendment is in
writing and signed by each Member, or (ii) in the case of a
waiver, be waived if such waiver is contained in a writing, and
signed by the party against whom the waiver is to be effective.
No failure or delay by any party in exercising any right, power
43
or privilege hereunder shall operate as a waiver thereof nor
shall any single exercise thereof preclude any other or further
exercise thereof or of any other right, power or privilege.
Except as otherwise provided rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 10.3 Assignment.
Except as otherwise expressly provided herein, no party
to this Agreement may assign any of its rights or obligations
under this Agreement without the prior written consent of the
other parties hereto.
Section 10.4 Entire Agreement.
This Agreement, the Joint Venture Agreement and the
Ancillary Agreements (including the schedules and exhibits hereto
and thereto) contain the entire agreement among the parties
hereto with respect to the subject matter hereof and supersede
all prior agreements and understandings, oral or written, with
respect to such matters.
Section 10.5 Public Disclosure.
Each Member hereby agrees that, except as may be
required to comply with the requirements of any applicable Laws
or the rules and regulations of any exchange upon which its
securities (or the securities of one of its Affiliates) are
traded, it shall not make or permit to be made any press release
or similar public announcement or communication concerning the
execution or performance of this Agreement unless specifically
approved in advance by all parties hereto, which approval shall
not be unreasonably withheld, conditioned or delayed. In the
event that, in the absence of such approval, legal counsel for
any party is of the opinion that a press release or similar
public announcement or communication is required by Law or by the
rules and regulations of any exchange on which such party's
securities (or the securities of one of its Affiliates) are
traded, then such party may issue a public announcement limited
solely to that which legal counsel for such party advises is
required under such Law or such rules and regulations (and the
party making any such announcement shall provide a copy thereof
to the other parties for review before issuing such
announcement).
Section 10.6 Parties in Interest.
This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors
and permitted assigns. Nothing in this Agreement, express or
implied, is intended to confer upon any Person other than the
Company, WISCO, G-P or their respective successors or permitted
assigns, any rights or remedies under or by reason of this
Agreement. The Company is executing this Agreement as a party,
and this Agreement shall constitute a contract among the Members
and between the Company and each of the Members.
Section 10.7 Governing Law; Submission to Jurisdiction;
Selection of Forum.
This Agreement shall be governed by, and construed and
enforced in accordance with the laws of the State of Delaware
without giving effect to any choice of law provision or rule
44
(whether of the State of Delaware or any other jurisdiction) that
would cause the application of the Laws of any jurisdiction other
than the internal Laws of the State of Delaware. Each of the
Parties agrees that any legal action between the parties, or any
of them, relating to this Agreement, the interpretation of the
terms hereof or the performance hereof or the consummation of the
transactions contemplated hereby, whether in tort or contract or
at law or in equity, shall exclusively be brought in a Federal or
State Court located in New Castle County, Delaware, having
jurisdiction of the subject matter thereof, and each party
irrevocably (i) consents to personal jurisdiction in any such
Federal or State Court, (ii) waives any objection to laying venue
in any such action or proceeding in any such Court, (iii) waives
any immunity from suit and any objection that any such Court is
an inconvenient forum or does not have jurisdiction over any
party hereto and (iv) agrees that service of complaint or other
process may be made by certified or registered mail addressed to
such party at its address determined in accordance with Section
10.1 of this Agreement.
Section 10.8 Counterparts.
This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all
of which shall constitute one and the same Agreement.
Section 10.9 Severability.
The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision
shall not affect the validity or enforceability of the other
provisions hereof. If any provision of this Agreement, or the
application thereof to any Person or any circumstance, is invalid
or unenforceable (i) a suitable and equitable provision shall be
substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or
unenforceable provision and (ii) the remainder of this Agreement
and the application of such provision to other Persons or
circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
Section 10.10 Equitable Relief.
Each party acknowledges that money damages would be
inadequate to protect against any actual or threatened breach of
this Agreement by any party and that each party shall be entitled
to equitable relief, including specific performance and/or
injunction, without posting bond or other security, in order to
enforce or prevent any violations of the provisions of this
Agreement.
Section 10.11 No Agency.
This Agreement shall not constitute an appointment of
any party as the agent of any other party, nor shall any party
have any right or authority to assume, create or incur in any
manner any obligation or other liability of any kind, express or
implied, against, in the name or on behalf of, any other party.
Nothing herein or in the transactions contemplated by this
Agreement shall be construed as, or deemed to be, the formation
45
of a partnership by or among the parties hereto (provided that
nothing in this Section 10.11 shall affect the tax treatment of
the Company under Article III hereof).
Section 10.12 Limitation of Liability.
The debts, obligations and liabilities of the Company,
whether arising in contract, tort or otherwise, shall be solely
the debts, obligations and liabilities of the Company, and no
Member, Manager or officer of the Company shall be obligated
personally for any such debt, obligation or liability of the
Company solely by reason of being a Member, Manager and/or
officer.
Section 10.13 Non-Exclusive Business.
(a) Notwithstanding anything herein to the contrary,
the parties hereto agree that the Company shall not be the
exclusive vehicle for G-P to engage in the manufacture or sale of
commercial tissue products or "away from home" tissue products
(the "Products"), or to engage in the Commercial Tissue Business
and that G-P shall have the right to engage in the manufacture or
sale of Products and otherwise engage in the Commercial Tissue
Business, whether directly or through other Affiliates, without
regard to the Company or any requirement that G-P make such
opportunity or Commercial Tissue Business available to the
Company in any way.
(b) Notwithstanding anything herein to the contrary,
the parties hereto agree that the Company may provide to any
member of the G-P Group the right to use intangible Company
Property, and such member of the G-P Group will have no
obligation to reimburse the Company for such use.
(c) In the event G-P or a G-P Affiliate uses
production equipment and machines owned by the Company to produce
products for G-P or a G-P Affiliate, all costs, revenues and
profits relating to such products shall be allocated to the
Company.
(d) In the event G-P or a G-P Affiliate uses
production equipment or machines it owns that are located in
facilities owned or operated by the Company to produce products
for G-P or a G-P Affiliate, G-P shall reimburse to the Company an
amount equal to the allocated overhead (including facility costs)
determined pursuant to the cost allocation methodology set forth
in Exhibit B to the Operating Support Services Agreement.
Section 10.14 Dispute Resolution.
Except as otherwise provided in this Agreement, any
dispute among the Members hereto, including disputes related to
the Ancillary Agreements and the review of G-P Books related
thereto, shall be resolved by the Members through good faith
negotiations. If such dispute cannot be resolved by such
negotiation it shall be submitted to non-binding commercial
arbitration pursuant to the commercial arbitration rules then in
effect of the American Arbitration Association, before a panel of
not less than three arbitrators. All costs and expenses incurred
in connection with such proceeding shall be shared equally by the
Members, however each Member shall bear the cost of its legal
fees. Only upon the conclusion of arbitration proceedings in
46
which a decision was rendered may the Members bring an action in
connection with such dispute in the United States District Court
or the state court sitting in New Castle County, Delaware. Each
Member agrees to irrevocably submit to the exclusive jurisdiction
of such court and agrees to waive any objection to laying venue
in such court or that such court is an inconvenient forum or does
not have jurisdiction over the Member.
47
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement as of the date first written above.
GEORGIA-PACIFIC CORPORATION
By:
Name: Xxxxxxx X. Xxxxxxx
Title: Senior Vice President -
Packaged Products
WISCONSIN TISSUE XXXXX INC.
By:
Name: Xxxxxxx X. Xxxxxx
Title: Senior Vice President -
Finance and Chief Financial Officer
Consented/Agreed To
By the Company as Referenced
In Section 10.6
GEORGIA-PACIFIC TISSUE, LLC
By:
Name: Xxxxxxx X. Xxxxxxx
Title: Manager
