EXHIBIT 10.5
TIMBERLANDS PARTNERSHIP INTEREST SALE AGREEMENT
AGREEMENT dated as of October 15, 1997 by and among Dow Xxxxx
Virginia Company, Inc., a Delaware corporation ("DJ"), Newsprint,
Inc., a Virginia corporation ("Newsprint") (each of DJ and Newsprint
sometimes being referred to herein as a "Selling Partner" and
sometimes being collectively referred to as the "Selling Partners"),
and Xxxxx-Xxxxx Industries, Inc., a Delaware corporation
("Xxxxx-Xxxxx").
WHEREAS, the Selling Partners are the sole limited partners in
Bear Island Timberlands Company, L.P., a Virginia limited partnership
(the "Partnership"), and parties to the Limited Partnership Agreement
(the "Limited Partnership Agreement") dated as of August 14, 1985, as
amended, among the Selling Partners and Xxxxx-Xxxxx; and
WHEREAS, each of the Selling Partners desires to sell its entire
partnership interest (the "Partnership Interest") in the Partnership
to Xxxxx-Xxxxx, and Xxxxx-Xxxxx desires to purchase such Partnership
Interests on the terms provided for herein.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, intending to be legally bound hereby, the parties
agree as follows:
I. SALE OF PARTNERSHIP INTERESTS
1.1 Partnership Interests. Subject to the terms and
conditions of this Agreement, at the Closing provided for herein each
of the Selling Partners agrees to sell, transfer and convey its entire
Partnership Interest to Xxxxx-Xxxxx, and Xxxxx-Xxxxx agrees to
purchase from each of the Selling Partners such Partnership Interest.
1.2 Consideration. (a) Subject to the terms and conditions
of this Agreement, and in reliance upon the representations,
warranties and agreements of the parties contained herein, and in
consideration of the sale of the Partnership Interest by each of the
Selling Partners to Xxxxx-Xxxxx, Xxxxx-Xxxxx shall pay at Closing to
each Selling Partner the amount that each Selling Partner would
receive if the Enterprise Value of the Partnership, as defined below,
were distributed as follows: (i) of the first $18,860,496 of
Enterprise Value, each of the Selling Partners would receive
$6,264,102, and (ii) of the remaining portion of Enterprise Value,
each of the Selling Partners would receive 35% of such remaining
portion.
(b) As used herein, the term "Enterprise Value" of the
Partnership shall mean the amount equal to (A) $520 per acre for the
approximately 129,000 acres of timberlands of the Partnership, the
definitive amount of such acreage to be determined on or before the
Closing Date by an independent third party to be mutually agreed upon
by the parties, plus the book value of the notes receivable which are
long-term assets of the Partnership as of the Closing Date plus the
book value of the other fixed assets of the Partnership as of the
Closing Date plus the Working Capital (as defined below) of the
Partnership as of the Closing Date less (B) the amount of the
long-term portion of the term debt of the Partnership (determined in
accordance with generally accepted accounting principles, as applied
consistent with the past practices of the Partnership) outstanding on
the Closing Date (as defined below) (the "Long-Term Debt") plus the
lesser of (i) the amount of any prepayment penalties paid by the
Partnership pursuant to the requirements of Section 2.3 of the
Timberlands Loan and Maintenance Agreement between the Partnership and
Xxxx Xxxxxxx Mutual Life Insurance Company dated July 12, 1988 as a
result of the prepayment of the Long-Term Debt on the Closing Date, or
(ii) the amount of any refinancing fee paid by the Partnership as a
result of refinancing the Long-Term Debt on the Closing Date. For
purposes of this Agreement, the term "Working Capital" shall mean
current assets less current liabilities, including the current portion
of the Long-Term Debt and accrued interest thereon; provided, however,
that if, prior to the Closing, an entity related to Xxxxx-Xxxxx
acquires from the Partnership a one percent (1%) interest in the
Partnership, the amount contributed to the Partnership by such entity
shall be excluded from the computation of current assets. In
addition, for purposes of determining the amounts to be paid on the
Closing Date, the book value of the notes receivable which are
long-term assets, the net book value of the other assets and the
amounts of Working Capital, Long-Term Debt, prepayment penalties and
refinancing fees shall be estimated in good faith by the Chief
Financial Officer of the Partnership.
(c) The aggregate of the amounts referred to in
Section 1.2(a) shall be paid to the Selling Partners at the Closing in
immediately available funds.
1.3 Closing Statement. (a) Not later than thirty (30)
days following the Closing Date, Xxxxx-Xxxxx shall deliver to each of
the Selling Partners a statement computing the Enterprise Value (the
"Closing Statement"), which Closing Statement shall include (i) the
notes receivable which are long-term assets of the Partnership as of
the Closing Date (ii) the book value of all fixed assets of the
Partnership, other than the timberlands, as of the Closing Date, (iii)
the Working Capital of the Partnership as of the Closing Date, and
(iv) a statement of the long-term portion of the Long-Term Debt
outstanding on the Closing Date, the amount of any prepayment penalty
paid by the Partnership as a result of the prepayment of the Long-Term
Debt and the amount of any refinancing fee paid by the Partnership as
a result of refinancing the Long-Term Debt. The Closing Statement
shall be certified by the Chief Financial Officer of the Partnership
and shall be accompanied by such work papers and other relevant
documents relating to its preparation as the Selling Partners may
reasonably request.
(b) If the Selling Partners are both in agreement with
the amounts shown in the Closing Statement, any difference between the
amounts paid on the Closing Date and the amounts which would have been
paid on the Closing Date had the amounts shown in the Closing
Statement been used to compute the amounts paid on the Closing Date
shall be paid in immediately available funds by the party or parties
from whom such payment is owing to the other party or parties within
two (2) business days of the delivery of the Closing Statement.
However, in the event that one or both of the Selling Partners does
not agree with the amounts shown in the Closing Statement, such
Selling Partner and Xxxxx-Xxxxx shall jointly appoint an independent
accounting firm to arbitrate the dispute. Xxxxx-Xxxxx, on the one
hand, and the disputing Selling Partner or Selling Partners, on the
other hand, shall bear equally the cost of retaining such accounting
firm. The parties shall use their best commercially reasonable
efforts to resolve any such dispute within thirty (30) days following
the delivery of the Closing Statement. The determination of the
accounting firm shall be final and binding on all parties. Any
adjustment required as a consequence of the arbitration shall be paid
in immediately available funds within one (1) business day of the
termination of the arbitration.
1.4 Fair Value. The Selling Partners agree that the
consideration referred to in Section 1.2 above represents the fair
value of the Partnership Interests. Each of the Selling Partners
hereby expressly agrees and acknowledges that it shall not receive and
is not entitled to receive any further payments of any kind from the
Partnership or its partners.
II. CLOSING
2.1 Closing. Subject to the terms and conditions of this
Agreement, the closing of the transactions contemplated hereby (the
"Closing") shall occur at the offices of Skadden, Arps, Slate, Xxxxxxx
& Xxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, xx the day that is
two (2) business days following the satisfaction of the conditions to
Closing set forth in Article VI of this Agreement, or at such other
time and place as the parties may agree (the "Closing Date"), but in
no event shall the Closing occur after 5:00 p.m. (Eastern Standard
Time) on January 31, 1998.
2.2 Restructuring. Prior to the purchase of the Partnership
Interests pursuant to this Agreement, Xxxxx-Xxxxx may elect to (i)
transfer a portion of its partnership interest to an affiliated entity
in order to create a new limited partner with a 1% limited partnership
interest, (ii) transfer its interest in the Partnership to a limited
liability company wholly-owned by Xxxxx-Xxxxx, and/or (iii) convert
the Partnership from a limited partnership to a limited liability
company (collectively, the "Restructuring"). The Selling Partners
will reasonably cooperate with Xxxxx-Xxxxx and take any actions that
Xxxxx-Xxxxx may reasonably request in order to implement the
Restructuring, provided, that the Selling Partners will not be
required to take any actions that might adversely affect them or their
Partnership Interests, provided further that if any actions required
to be taken by the Selling Partners might be adverse, but not
materially adverse, the Selling Partners will take such actions if,
prior to taking such actions, they are fully indemnified by
Xxxxx-Xxxxx to the Selling Partners' satisfaction for any adverse
consequences of such actions. If Xxxxx-Xxxxx elects to proceed with
the Restructuring, the Restructuring will occur and become effective
concurrently with, or immediately prior to, the Closing.
2.3 Tax Certificate. Each of the Selling Partners shall
deliver to Xxxxx-Xxxxx at the Closing a certificate of such Selling
Partner's non-foreign status which complies with the requirements of
Section 1445 of the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder.
III. REPRESENTATIONS OF THE SELLING PARTNERS
Each of the Selling Partners, severally, but not jointly,
hereby represents and warrants to Xxxxx-Xxxxx as follows:
3.1 Ownership of the Partnership Interest. Such Selling
Partner has the complete and unrestricted power, and the unqualified
right to sell, assign, transfer and deliver to Xxxxx-Xxxxx, good and
valid title to its Partnership Interest, free and clear of all liens,
claims, options, charges and encumbrances whatsoever (individually, an
"Encumbrance"), except any Encumbrance that may have resulted from any
liability of the Partnership. Evidence of the authority of each
Selling Partner to enter into this Agreement has been, or will be,
separately delivered to Xxxxx-Xxxxx, such evidence being certified
resolutions properly adopted by the Board of Directors and
shareholders, respectively, of such Selling Partner.
3.2 Valid and Binding Agreement. This Agreement constitutes
the valid and binding agreement of such Selling Partner, enforceable
in accordance with its terms. The officer signing on behalf of such
Selling Partner has the necessary corporate authority to do so. No
consent or approval of any court, governmental agency (foreign,
federal or state), or any other person or entity is required in
connection with the execution or consummation of the transactions
contemplated herein to permit such Selling Partner to carry out its
obligations hereunder.
3.3 No Violation. The execution, delivery and performance
of this Agreement by such Selling Partner will not (i) result in a
breach of any of the terms or provisions of, or constitute a default
under, the certificate of incorporation or by-laws of such Selling
Partner or any indenture or other agreement or instrument to which
such Selling Partner is a party, (ii) constitute a default under any
mortgage, deed of trust, or other encumbrance to which such Selling
Partner or its property is subject, or (iii) conflict with, or result
in a breach of, any law, order, judgment, decree or regulation binding
on such Selling Partner.
3.4 Selling Partner's Knowledge. As of the date hereof,
such Selling Partner has no actual knowledge of any material breach of
any representation or warranty of Xxxxx-Xxxxx set forth in this
Agreement.
IV. REPRESENTATIONS OF XXXXX-XXXXX
Xxxxx-Xxxxx hereby represents and warrants to each of the
Selling Partners as follows:
4.1 Valid and Binding Agreement. This Agreement constitutes
the valid and binding agreement of Xxxxx-Xxxxx, enforceable in
accordance with its terms. The officer signing on behalf of
Xxxxx-Xxxxx has the necessary corporate authority to do so. No
consent or approval of any court, governmental agency (foreign,
federal or state), or any other person or entity is required in
connection with the execution or consummation of the transactions
contemplated herein to permit Xxxxx-Xxxxx to carry out its obligations
hereunder.
4.2 No Violation. The execution, delivery and performance
of this Agreement by Xxxxx-Xxxxx will not (i) result in a breach of
any of the terms or provisions of, or constitute a default under, the
certificate of incorporation or by-laws of Xxxxx-Xxxxx or any
indenture or other agreement or instrument to which Xxxxx-Xxxxx is a
party, (ii) constitute a default under any mortgage, deed of trust, or
other encumbrance to which Xxxxx-Xxxxx or its property is subject, or
(iii) conflict with, or result in a breach of, any law, order,
judgement, decree or regulation binding on Xxxxx-Xxxxx.
4.3 Financial Statements. To the knowledge of Xxxxx-Xxxxx,
the unaudited balance sheet of the Partnership as of May 31, 1997, the
related statements of income, changes in partners' equity and cash
flow and internal management accounts or reports for the period
(collectively, the "Interim Financial Statements"), and the audited
balance sheets of the Partnership as of December 31, 1996 and 1995,
and the related statements of income, changes in partners' equity and
cash flows for the years then ended, including any footnotes thereto
(collectively, the "Financial Statements"), fairly present in all
material respects the financial position of the Partnership as of the
dates indicated and the results of its operations and cash flows for
the periods indicated, and, in the case of the Interim Financial
Statements, subject to normal year-end adjustments which, to the
knowledge of Xxxxx-Xxxxx, are not expected to be material. To the
knowledge of Xxxxx-Xxxxx, the Interim Financial Statements and the
Financial Statements have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the
periods covered thereby and in accordance with the books and records
of the Partnership maintained in accordance with historical practice
(except that the Interim Financial Statements do not contain footnote
disclosure that otherwise would be required by generally accepted
accounting principles).
4.4 Disclosure. To Xxxxx-Xxxxx'x knowledge, none of the
documents or materials set forth on Schedule 4.4 to this Agreement,
which have been furnished to the Selling Partners in connection with
the consummation of the transactions contemplated by this Agreement
contains any untrue statement of a material fact by the Partnership or
omits to state a material fact necessary in order to make statements
contained herein or therein, in light of the circumstances in which
they were made, not misleading. As of the date of this Agreement,
there is no fact which Xxxxx-Xxxxx has not disclosed to either of the
Selling Partners and of which Xxxxx-Xxxxx has knowledge which
materially positively affects, or could reasonably be expected to
materially positively affect, the business or assets of the
Partnership or the operations, financial condition or prospects of the
Partnership; it being understood that for purposes of such
representation, Xxxxx-Xxxxx shall be deemed to have disclosed, and the
Selling Partners shall be deemed to have possession and otherwise be
aware of, all information relating to the paper and the newsprint
industries generally, and to general economic conditions, which would
reasonably be expected to be known by participants in such industries
or is otherwise generally publicly available. Xxxxx-Xxxxx has
furnished to the Selling Partners all material information relating to
offers made by third parties to acquire the Partnership Interests or
all or a material portion of the assets of the Partnership.
4.5 Conduct of Business. Since May 31, 1997, the
Partnership has not taken, and Xxxxx-Xxxxx has not caused the
Partnership to take, any action outside the ordinary course of
business or inconsistent with past practices, except as contemplated
by this Agreement, including but not limited to the following:
(a) the creation, incurring or assumption of any debt,
liability or obligation, direct, indirect, whether accrued, absolute,
contingent or otherwise, relating to the business of the Partnership,
and which is material to the business of the Partnership;
(b) with respect to any executive officer of the
Partnership, other than in the ordinary course of business (i) any
increase in the rate or terms of compensation payable or to become
payable, (ii) the payment or agreement to pay any pension, retirement
or other employee benefit not required by any existing plan, agreement
or arrangement, or (iii) the commitment to any additional pension,
bonus, incentive, deferred compensation or other employee benefit
plan, agreement or arrangement, or the increase in the rate or terms
of any such plan, agreement or arrangement which currently exists;
(c) the waiver or release of any right of material value
relating to the business of the Partnership;
(d) the alteration of, or increase in services provided
under, any maintenance or service agreement of the Partnership, other
than in the ordinary course of business, consistent with the past
practices of the Partnership;
(e) the acceleration of any expense of the Partnership;
(f) any expenditure of capital relating to the business of
the Partnership, other than in the ordinary course of business,
consistent with the past practices of the Partnership;
(g) any material alteration in the manner of keeping the
books, accounts or records of the Partnership, or in the accounting
practices therein reflected, except as required by law or generally
accepted accounting principles; or
(h) any agreement to take any of the foregoing actions.
V. RELATED MATTERS, COVENANTS
5.1 Funding. Xxxxx-Xxxxx shall use its best commercially
reasonable efforts to obtain the funds necessary to consummate the
transactions contemplated by this Agreement. Xxxxx-Xxxxx shall
provide the Selling Partners with written or oral weekly progress
reports as to the status of the potential financing and shall
appropriately respond to any questions that the Selling Partners may
have with respect to such financing. In addition, Xxxxx-Xxxxx shall
cooperate and use reasonable efforts in making available to the
Selling Partners representatives of the Toronto Dominion Bank, TD
Securities (U.S.A.), Inc., Salomon Brothers, Inc and Xxxx Xxxxxxx Life
Insurance Company (the "Prospective Lenders"), subject to the
availability of such representatives, to discuss the status of the
financings and to appropriately respond to any questions that the
Selling Partners may have with respect to such financings at such
times as either of the Selling Partners may reasonably request.
Xxxxx-Xxxxx also shall promptly provide to the Selling Partners with
copies of any documents relating to the financing, or current drafts
thereof, provided to or by any of the Prospective Lenders as the
Selling Partners may reasonably request.
5.2 Transfer Taxes. Xxxxx-Xxxxx shall be responsible for
the payment, if any, of 50 percent (50%) of all sales, use, transfer,
recording, ad valorem and other similar taxes and fees attributable to
the sale of the Selling Partners' Partnership Interests hereunder, and
the remaining 50 percent (50%) of any such taxes or fees shall be paid
by the Selling Partners.
5.3 Conduct of Business. The parties agree that the
business of the Partnership shall be conducted in the ordinary course
and consistent with past practices in all material respects between
the date hereof and the Closing Date and that during such period
Xxxxx-Xxxxx shall not cause or permit the Partnership to take any of
the actions set forth in Section 4.5. The Selling Partners shall not
take any action that may have the effect of causing a dissolution of
the Partnership.
5.4 Distributions. Xxxxx-Xxxxx shall not permit the
Partnership to make any distributions, in cash or kind, to either
Selling Partner or to Xxxxx-Xxxxx, or to any of their respective
affiliates, between the date hereof and the Closing Date.
5.5 No Dispositions. The Selling Partners shall not, nor
shall they enter into any agreement (other than this Agreement) to,
directly or indirectly, sell, convey, pledge, encumber, assign or
otherwise transfer in any manner all or any portion of the Partnership
interests prior to the Closing or termination of this Agreement.
5.6 Section 754 Election. Each of the Selling Partners
acknowledges that the Partnership or its successor intends to make an
election pursuant to Section 754 of the Internal Revenue Code of 1986,
as amended (the "Election"), to step up the basis of Partnership
assets as a result of the sale of the Selling Partners' Partnership
Interests and agrees to cooperate with the Partnership in making such
election by, among other things, providing to the Partnership such
information as is necessary to enable the Partnership to determine the
basis of its assets following the Election.
5.7 Fees and Expenses. The parties hereto shall bear their
own respective fees and expenses incurred in connection with the
preparation for and consummation of the transactions contemplated by
this Agreement. None of the fees or expenses that may be incurred by
the parties hereto in connection with this Agreement or obtaining the
financing for the purchase of the Selling Partners' Partnership
Interests (such as any third party costs of environmental due
diligence and costs of accountants and counsel, including those of the
Partnership) shall be borne by the Partnership.
5.8 Long-Term Debt Repayment. Xxxxx-Xxxxx shall take all
action necessary to prepay the Long-Term Debt contemporaneously with
the Closing.
5.9 Xxxx-Xxxxx-Xxxxxx. Each of the parties will file any
Notification and Report Forms and related material that it may be
required to file with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and will use all commercially reasonable efforts to obtain
an early termination of the applicable waiting period, and will make
any further filings pursuant thereto that may be necessary or
advisable in connection therewith.
VI. CONDITIONS TO CLOSING
6.1 Conditions to Obligations of the Selling Partners. The
obligations of the Selling Partners to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction on
or prior to the Closing Date of the following conditions:
(a) the representations and warranties of Xxxxx-Xxxxx
contained herein shall be true and accurate in all material respects
on the date of this Agreement and on the Closing Date;
(b) Xxxxx-Xxxxx shall have performed in all material
respects all the covenants and agreements required to be performed by
it prior to the Closing Date;
(c) no order or injunction of any court or governmental
authority shall be in effect which shall restrain, enjoin or otherwise
prevent the consummation of any of the transactions contemplated
hereby, and, if applicable, all applicable waiting periods (and any
extensions thereof) under the HSR Act shall have expired or otherwise
been terminated;
(d) the transactions contemplated by the Partnership
Interest Sale Agreement of even date herewith by and among the Selling
Partners and Xxxxx-Xxxxx shall be closed contemporaneously;
(e) each of the Selling Partners shall have received
evidence in a form and substance reasonably satisfactory to it that it
has been released of any and all guaranties made by it in connection
with the Partnership; and
(f) Xxxxx-Xxxxx shall have caused the Long-Term Debt to have
been contemporaneously repaid.
6.2 Conditions to Obligations of Xxxxx-Xxxxx. The
obligation of Xxxxx-Xxxxx to consummate the transactions contemplated
by this Agreement shall be subject to the satisfaction on or prior to
the Closing Date of the following conditions:
(a) the representations and warranties of the Selling
Partners contained herein shall be true and accurate in all material
respects on the date of this Agreement and on the Closing Date;
(b) the Selling Partners shall have performed in all
material respects all the covenants and agreements required to be
performed by them prior to the Closing Date;
(c) no order or injunction of any court or governmental
authority shall be in effect which shall restrain, enjoin or otherwise
prevent the consummation of any of the transactions contemplated
hereby, and, if applicable, all applicable waiting periods (and any
extensions thereof) under the HSR Act shall have expired or otherwise
been terminated; and
(d) Xxxxx-Xxxxx shall have closed on the funds necessary to
consummate the transactions contemplated by this Agreement; provided,
however, that Xxxxx-Xxxxx'x failure to satisfy this condition 6.2(d)
will not eliminate the assessment of the Dilution Percentage (as
hereinafter defined) if any of the conditions required to assess the
Dilution Percentage are met under the provisions of Article VIII of
this Agreement.
VII. MISCELLANEOUS
7.1 Survival. All representations, warranties and
agreements made in this Agreement or pursuant hereto (including
Sections 7.7 and 8.2) shall survive indefinitely following the
Closing, except that the representations and warranties made by
Xxxxx-Xxxxx in Sections 4.3, 4.4 and 4.5 shall expire and have no
further force or effect after the first anniversary of the Closing
Date and, accordingly, the Selling Partners shall not be indemnified
for breaches of such representations and warranties discovered after
such first anniversary. None of the representations, warranties and
agreements made in this Agreement or pursuant hereto shall survive the
termination of this Agreement, except this Section 7.1 shall not limit
any covenant or agreement which by its terms contemplates performance
after the termination of this Agreement.
7.2 Further Assurance and Cooperation. From time to time at
the request of any party to this Agreement and without further
consideration, each party will execute and deliver such documents and
take such action as may reasonably be requested in order to consummate
more effectively the transactions contemplated by this Agreement.
7.3 Assignment; Parties in Interest; Execution in
Counterpart. This Agreement and the rights, interests and obligations
hereunder may not be assigned by any party hereto without the prior
written consent of the other parties hereto, except that Xxxxx-Xxxxx
may assign the right to purchase the Selling Partners' Partnership
Interests to a wholly-owned subsidiary (including, without limitation,
a limited liability company formed in connection with the
Restructuring), provided that Xxxxx-Xxxxx shall remain responsible for
all obligations hereunder. This Agreement will be binding upon, inure
to the benefit of and be enforceable by the parties and their
respective successors and assigns. This Agreement may be executed in
one or more counterparts, but all such counterparts shall constitute
one and the same instrument.
7.4 Entire Agreement. This Agreement and the documents
referred to herein or delivered pursuant hereto which form a part
hereof, contain the entire understanding of the parties with respect
to its subject matter. There are no restrictions, agreements,
promises, warranties, covenants or undertaking other than those
expressly set forth herein or therein. This Agreement supersedes all
prior agreements and understandings between the parties with respect
to its subject matter.
7.5 Law Governing. This Agreement will be governed by and
construed in accordance with the laws of the Commonwealth of Virginia.
7.6 Specific Performance. Each of the parties hereto
acknowledges and agrees that the other parties hereto would be
irreparably damaged in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms
or were otherwise breached. Accordingly, each of the parties hereto
agrees that it shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state
thereof having subject matter jurisdiction, in addition to any other
remedy to which a party may be entitled, at law or in equity.
7.7 Indemnification.
(a) Xxxxx-Xxxxx (the "Buyer Indemnifying Party") shall
indemnify and hold each of the Selling Partners (each a "Seller
Indemnified Party") harmless from and against all claims, demands,
losses, obligations, liabilities, damages and reasonable costs and
expenses, including attorneys' fees and expenses (individually, a
"Loss," and collectively, "Losses"), that either of the Seller
Indemnified Parties shall incur or suffer which result from or relate
to (i) any breach of any representation or warranty of the Buyer
Indemnifying Party contained in this Agreement; (ii) any breach of, or
failure to perform, any covenant or agreement of the Buyer
Indemnifying Party contained in this Agreement; (iii) the business or
assets of the Partnership; or (iv) any alleged liability under Section
50-73.43 of the Virginia Revised Uniform Limited Partnership Act or
any successor provision as a result of the sale to Xxxxx-Xxxxx of the
Selling Partners' Partnership Interests pursuant to this Agreement.
(b) Each Selling Partner (each a "Seller Indemnifying
Party") shall indemnify and hold Xxxxx-Xxxxx (the "Buyer Indemnified
Party") harmless from and against all Losses that the Buyer
Indemnified Party shall incur or suffer which result from or relate to
(i) any breach of any representation or warranty of such Selling
Partner contained in this Agreement; and (ii) any breach of, or
failure to perform, any covenant or agreement of such Selling Partner
contained in this Agreement.
(c) The Seller Indemnifying Party and the Buyer Indemnifying
Party are each referred to herein as an "Indemnifying Party," and the
Buyer Indemnified Party and the Seller Indemnified Party are each
referred to herein as an "Indemnified Party." The Indemnified Party
shall promptly notify the Indemnifying Party of any Loss for which
indemnification is sought under this Agreement. If such Loss is
initiated by a third party, the Indemnifying Party shall have the
right, but not the obligation, at its own expense, to assume the
defense thereof with counsel reasonably acceptable to the Indemnified
Party. In connection with any such third party Loss which the
Indemnifying Party has elected to defend, (i) the Indemnified Party
shall have the right to participate, at its own expense, and (ii) the
parties hereto shall cooperate with each other and provide each other
with access to relevant books and records in their possession. No
third party Loss shall be settled without the prior written consent of
the Indemnified Party.
(d) Notwithstanding the foregoing, no Indemnifying Party
shall have any liability to any Indemnified Party pursuant to this
Section 7.7 unless and until the total amount of Losses suffered by
the Indemnified Party shall exceed $100,000, in which case the amount
of Losses for which indemnity may be sought shall be limited to the
amount in excess of $100,000.
7.8 Knowledge of Xxxxx-Xxxxx. Whenever a representation and
warranty contained in this Agreement is made to the "knowledge of
Xxxxx-Xxxxx," it shall mean all facts and conditions which are
actually known by Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxx Xxxxxxxx or Xxx
Xxxxxxxxx (individually, an "Insider") or which should have been known
by a prudent manager holding the position of an Insider with access to
the books and records of the Partnership or Xxxxx-Xxxxx.
7.9 Knowledge of a Selling Partner. The "actual knowledge"
of Newsprint for purposes of Section 3.4 shall mean all facts and
conditions which are actually known by Boisfeuillet Xxxxx, Xx., Xxxxxx
Xxxxxxx and Xxxxxx Xxxxx, and the "actual knowledge" of DJ for
purposes of Section 3.4 shall mean all facts and conditions which are
actually known by Xxxxx X. Xxxxx and Xxxxxxx X. Xxxxxxx.
7.10 Notice. All notices, requests and other communications
hereunder shall be sufficient if given in writing and either
personally delivered, sent by a nationally recognized overnight
courier or sent by telecopy, addressed as follows, and shall be
effective only when actually received:
if to Newsprint: with a copy to:
Newsprint, Inc. Shaw, Pittman, Xxxxx & Xxxxxxxxxx
c/o The Washington Post 0000 X Xxxxxx, X.X.
0000 00xx Xxxxxx, X.X. Xxxxxxxxxx, X.X. 00000
Washington,D.C. 20071 Tel: (000) 000-0000
Tel: (000) 000-0000 Fax: (000) 000-0000
Fax: (000) 000-0000 Attn: Xxxxxx X. XxXxxxxxx, Esq.
Attn: Xxxx Xxxxxxxxxxx, Esq.
if to DJ: with a copy to:
Dow Xxxxx Virginia Company, Inc. Shaw, Pittman, Xxxxx & Xxxxxxxxxx
c/o Dow Xxxxx & Company, Inc. 0000 X Xxxxxx, X.X.
World Xxxxxxxxx Xxxxxx Xxxxxxxxxx, X.X. 00000
000 Xxxxxxx Xxxxxx, 00xx Xxxxx Tel: (000) 000-0000
Xxx Xxxx, XX 00000 Fax: (000) 000-0000
Tel: (000) 000-0000 Attn: Xxxxxx X. XxXxxxxxx, Esq.
Fax: (000) 000-0000
Attn: Xx. Xxxxx X. Xxxxx
if to Xxxxx-Xxxxx: with a copy to:
Xxxxx-Xxxxx Industries, Inc. Skadden, Arps, Slate, Xxxxxxx &
00 Xxxxx Xxxxx Xxxx Xxxx XXX
Xxxxxxxxx, XX 00000 000 Xxxxx Xxxxxx
Tel: (000) 000-0000 New York,NY 10022
Fax: (000) 000-0000 Tel: (000) 000-0000
Attn: Mr. Xxxxx Xxxxx Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
VIII. TERMINATION
8.1 Termination Rights. This Agreement may be terminated in
any of the following circumstances:
(a) Upon the mutual agreement of the parties.
(b) By a nonbreaching party concurrently with the
termination of the Partnership Interest Sale Agreement, dated as of
October 15, 1997, among the parties with respect to the Bear Island
Paper Company, L.P. in accordance with the terms thereof.
(c) By a Selling Partner at any time after a Selling Partner
has been advised by Xxxxx-Xxxxx that commercial banking, investment
banking or lending services of entities other than one or more of the
Prospective Lenders will be required to obtain funds sufficient to
consummate the transactions contemplated by this Agreement; provided
that it is agreed and understood that the Prospective Lenders may at
their election include other banks, underwriters, agents and
syndicates as part of their customary selling efforts.
(d) By a Selling Partner at any time after a Selling Partner
has notified Xxxxx-Xxxxx in writing that Xxxxx-Xxxxx is in material
breach of any provision of this Agreement, unless Xxxxx-Xxxxx has
cured such breach within three (3) business days of receiving such
notice.
(e) By Xxxxx-Xxxxx at any time after Xxxxx-Xxxxx has
notified a Selling Partner in writing that the Selling Partner is in
material breach of any provision of this Agreement, unless the Selling
Partner has cured such breach within three (3) business days of
receiving such notice.
(f) By a Selling Partner on or after November 30, 1997,
unless prior to November 30, 1997 a Selling Partner has received a
certificate, which shall be reasonably based, from Xxxxx-Xxxxx, dated
after November 20, 1997, certifying that, as of the date of such
certificate, Xxxxx-Xxxxx has no current knowledge of any issue that
would reasonably be expected to prevent the financing necessary for
the transactions contemplated by this Agreement from being received on
or prior to December 31, 1997; provided, however, that the certificate
may list an issue which could be expected to not be resolved until
after December 31, 1997 if (i) the issue involves an action of the
type described in clause (iv) of paragraph (g) below, and (ii)
Xxxxx-Xxxxx certifies that it will use all commercially reasonable
efforts to resolve such issue prior to December 31, 1997.
(g) By a Selling Partner on or after December 31, 1997,
unless prior to December 31, 1997 a Selling Partner has received a
certificate, which shall be reasonably based, from Xxxxx-Xxxxx
certifying that (i) all necessary loan agreements relating to the
financing have been executed by all parties; (ii) the underwriting or
purchase agreements relating to the issuance of any securities
relating to the financing has been fully negotiated and is, except for
execution, completed; (iii) prospective investors have "circled" or
otherwise indicated their commitment to purchase the requisite dollar
amount of securities to be issued in connection with the financing;
and (iv) the only outstanding actions necessary to be taken before the
Closing can occur, which shall be listed and described in the
certificate, shall be actions which do not involve the exercise of any
material discretion on the part of any person and are capable of
being, and reasonably expected to be, completed on or before January
31, 1998. At the time Xxxxx-Xxxxx provides the Selling Partner such
certificate, Xxxxx-Xxxxx shall also provide the Selling Partner a copy
of the loan agreement and/or underwriting or purchase agreement
referred to in such certificate.
(h) By any party after January 31, 1998.
8.2 Effect of Termination. (a) Subject to paragraph (b)
below, upon a rightful termination of this Agreement by a Selling
Partner pursuant to Section 8.1(b), (c), (d), (f) or (g) or by any
party pursuant to Section 8.1(h), including as a result of the waiting
period under the HSR Act, if applicable, not having expired by January
31, 1998, Xxxxx-Xxxxx shall be assessed a dilution of 2.5% of its
interest in the Partnership (the "Dilution Percentage") to be
distributed equally to the Selling Partners. In the event that the
dilution is assessed in accordance with this Section 8.2, the parties
hereto agree that they will take the necessary actions to amend the
Limited Partnership Agreement to reduce Xxxxx-Xxxxx'x interest in the
Partnership (i.e., Xxxxx-Xxxxx'x share of the Partnership's profits,
losses and distributions as set forth in Section 3.2 of the Limited
Partnership Agreement) by the Dilution Percentage and to increase the
partnership interest of each of the Selling Partners by one half (1/2)
of the Dilution Percentage or 1.25% (the "Amendment"). Xxxxx-Xxxxx
hereby grants to each of the Selling Partners and their successors and
assigns a limited power of attorney (which the parties acknowledge
shall be deemed to be coupled with an interest) for the purpose of
executing any and all documents, instruments and certificates that are
necessary to effect the Amendment; provided, however, that Xxxxx-Xxxxx
shall be notified at least five (5) business days prior to a Selling
Partner's use of this proposed power of attorney.
(b) Xxxxx-Xxxxx shall not be assessed the Dilution
Percentage if the termination of this Agreement results from one or
more Prospective Lenders being unable or unwilling to provide funds
necessary to consummate the transactions contemplated by this
Agreement primarily due to one or more of the following reasons that
arose after the date of this Agreement: (i) a fire or earthquake,
hurricane or comparable physical event beyond the control of
Xxxxx-Xxxxx causing material damage to the Partnership's properties;
provided that Xxxxx-Xxxxx'x negligence or misconduct did not
materially contribute to the extent of the damage caused by such
event; or (ii) a proceeding is begun under a governmental authority's
power of eminent domain with respect to a material portion of the
Partnership's properties.
(c) The parties acknowledge and agree that time is of the
essence with respect to the expected dates for Closing as set forth in
this Article VIII and that the assessment of the Dilution Percentage
as set forth in Section 8.2 hereof are reasonable and justifiable
liquidated damages for the failure of the Closing to occur in a timely
manner.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written.
DOW XXXXX VIRGINIA COMPANY, INC.
By: /s/ Xxxxx X. Xxxxx
__________________________
Name: ____________________
Title: ___________________
NEWSPRINT, INC.
By: /s/ Xxxxxx Xxxxx
__________________________
Name: Xxxxxx Xxxxx
Title: President
XXXXX-XXXXX INDUSTRIES, INC.
By: /s/ Xxxxxx Xxxxx
__________________________
Name: Xxxxxx Xxxxx
Title: Executive Vice President
Timberlands Partnership Interest Sale Agreement
Schedule 4.4
Financial Statements (as defined in the Timberlands Partnership
Interest Sale Agreement)
Interim Financial Statements (as defined in the Timberlands
Partnership Interest Sale Agreement)
Bowater's Letter of Intent, dated July 25, 1997, to purchase the
business and assets of Bear Island Paper Company, L.P. and Bear Island
Timberlands Company, L.P. (the "Partnerships")
Bowater's Proposed Asset Purchase Agreement, dated August 12, 1997,
for the Partnerships
T.D. Securities Engagement Letter, dated August 29, 1997
T.D. Securities Commitment Letters, dated August 29, 1997, relating to
$120 million in bank debt and sale of $100 million in high yield bonds
Salomon Brothers Letter, relating to sale of $195 million in high
yield bonds
