EX-2.3
INDEMNITY AGREEMENT
INDEMNITY AGREEMENT (the "Agreement"), dated as of
October 4, 1999, between WISCONSIN TISSUE XXXXX INC., a
Delaware corporation and wholly owned subsidiary of
Chesapeake Corporation ("WISCO" or the "Indemnitor"), and
GEORGIA-PACIFIC CORPORATION, a Georgia corporation ("G-P").
Capitalized terms used but not otherwise defined herein shall
have the respective meanings given to such terms in the Joint
Venture Agreement or the Operating Agreement, each referred
to below.
W I T N E S S E T H:
WHEREAS, Chesapeake Corporation, WISCO, G-P and Georgia
Pacific Tissue, LLC, a Delaware limited liability company
(the "Company"), are parties to a Joint Venture Agreement,
dated as of October 4, 1999 (the "Joint Venture Agreement");
WHEREAS, WISCO and G-P are parties to the Operating
Agreement of the Company, dated as of October 4, 1999 (the
"Operating Agreement");
WHEREAS, the Company is a party to a Credit Agreement,
dated as of September 13, 1999, among the Company and Bank of
America, N.A. (the "Lender") (as amended, supplemented or
otherwise modified from time to time in accordance with the
Operating Agreement, the "Credit Agreement"), pursuant to
which the Lender has agreed to make a loan to the Company in
the amount of up to $800 million (the "Company Debt");
WHEREAS, the Company has executed a promissory note,
dated as of October 4, 1999, evidencing the Company Debt;
WHEREAS, G-P has provided to the Lender a full and
unconditional guaranty of payment of the Company Debt
pursuant to a Guaranty Agreement, dated as of October 4, 1999
(the "G-P Guaranty");
WHEREAS, the Indemnitor has agreed to indemnify G-P
against amounts that may be actually paid by G-P to the
Lender under the G-P Guaranty for the original principal
amount of the Company Debt, subject to the terms and
limitations set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Indemnity. Subject to Sections 3 and 4
hereof, the Indemnitor unconditionally agrees to indemnify G-
P as follows for payments of the original principal amount of
the Company Debt that G-P may make under the G-P Guaranty:
If (i) G-P shall have made a payment of principal (excluding
any accrued and unpaid interest that may be added to
1
principal) of the Company Debt to the Lender under the G-P
Guaranty, (ii) G-P shall have exhausted all of its rights
(whether by subrogation or otherwise) to reimbursement or
recovery from the Company or the Company's assets, and (iii)
G-P shall have demanded reimbursement from the Indemnitor
within 120 days after G-P exhausts such rights, the
Indemnitor shall reimburse G-P upon demand for the amount of
such payment in excess of the amount so recovered from or
reimbursed by the Company or its assets.
SECTION 2. Subrogation/Acquisition of Interest.
(a) Upon such reimbursement by the Indemnitor pursuant
to Section 1 hereof, the Indemnitor shall (i) be subrogated
to the remaining rights of G-P against the Company to the
extent of such reimbursement and (ii) at the Indemnitor's
option, obtain an Interest or (if the Indemnitor is then a
Member) an increased Interest in the Company in satisfaction
of such rights. To exercise the option to obtain an Interest
or increased Interest, the Indemnitor shall give G-P notice
of exercise within 30 days after the payment of such
reimbursement. Such Interest or increase in Interest shall
consist of (i) a Capital Account, or increase in Capital
Account, equal to the amount of such reimbursement and (ii) a
Percentage Interest, or increase in Percentage Interest,
equal to the ratio of (A) the amount of such reimbursement to
(B) the sum of the total of all Capital Accounts immediately
before the payment of the reimbursement plus the amount of
such reimbursement. For this purpose, the amount of Capital
Accounts immediately before the payment of the reimbursement
shall take into account the revaluation of Capital Accounts,
pursuant to the Regulations under Section 704(b) of the Code,
occasioned by the Indemnitor's acquisition of the Interest or
increased Interest pursuant to this paragraph. G-P shall,
either directly or through any of its Affiliates that is then
a Member, cause the Company to issue to the Indemnitor the
appropriate number of Units to represent such Interest or
increase in Interest.
(b) Notwithstanding any other provision of this
Agreement or of applicable Law to the contrary, the
Indemnitor hereby waives any and all claims and other rights
(whether legal or equitable) that it may now have or
hereafter acquire against G-P, any other Member, or any other
person (other than the Company) by reason of making a payment
pursuant to Section 1 hereof, including, without limitation,
any right of indemnification, subrogation, reimbursement,
exoneration, or contribution or any right to participate in
any claim or remedy of the Lender or G-P against any person
(other than the Company).
SECTION 3. Limitation on Amount of Indemnity.
Notwithstanding any provision of this Agreement to the
contrary, the aggregate obligation of the Indemnitor
hereunder shall in no event exceed the amount of the Special
Distribution (that is, $755.2 million).
2
SECTION 4. Termination. Except as otherwise provided
in this Section 4, this Agreement shall survive and be in
full force and effect so long as any of the original
principal amount of the Company Debt is outstanding and has
not been paid in full. On the third anniversary and on each
subsequent anniversary of the date hereof, the Indemnitor may
terminate this Agreement by giving written notice of such
termination (the "Termination Notice") to G-P at least 15
days and not more than 30 days before the anniversary date on
which such termination is to take effect (the "Termination
Date"), provided that (i) no Default (as defined in the
Credit Agreement) relating to the nonpayment of principal or
interest or Event of Default (as defined in the Credit
Agreement) is pending under the Credit Agreement on the date
of the Termination Notice, and (ii) either (A) neither WISCO
nor any Affiliate of WISCO owns any Interest on the
Termination Date, or (B) notice of exercise of an Option
Right with respect to all Units owned by WISCO and any
Affiliate of WISCO is given under the Operating Agreement on
or before the Termination Date. In addition, this Agreement
shall terminate on the first date (the "Cessation Date") that
both of the following circumstances exist: (x) neither WISCO
nor any Affiliate of WISCO owns any Interest, if WISCO (or
such Affiliate) ceases to own its Interest as a result of the
exercise of the G-P Call or G-P's option under Section 8.5(b)
of the Operating Agreement; and (y) no Default (as defined in
the Credit Agreement) relating to the nonpayment of principal
or interest or Event of Default (as defined in the Credit
Agreement) is pending under the Credit Agreement . As of the
Termination Date or the Cessation Date, as applicable, the
Indemnitor shall be released from any and all liabilities
hereunder; provided, however, that the Indemnitor shall not
be released from any unpaid liability of the Indemnitor for
which G-P has made or is then entitled to make a demand
pursuant to Section 1 hereof, or for which G-P then would be
so entitled to make a demand upon exhaustion of its rights to
reimbursement or recovery from the Company or the Company's
assets.
SECTION 5. No Third Party Reliance. Nothing in this
Agreement, expressed or implied, is intended to confer upon
any person other than the parties hereto and their respective
permitted successors and assigns any rights or remedies under
or by reason of this Agreement. Without limiting the
foregoing, it is expressly understood that the Lender shall
have no rights against the Indemnitor hereunder.
SECTION 6. Governing Law. This agreement shall be
governed by, and construed in accordance with, the laws of
the State of Virginia.
SECTION 7. No Waiver; Amendment.
(a) No failure on the part of the Indemnitor or G-P to
exercise, and no delay in exercising, any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or
remedy by the Indemnitor or G-P preclude any other or further
exercise thereof or the exercise of any other right, power or
remedy. All remedies hereunder are cumulative and are not
3
exclusive of any other remedies provided by law. Neither the
Indemnitor nor G-P shall be deemed to have waived any rights
hereunder unless such waiver shall be in writing and signed
by such parties.
(b) Neither this Agreement nor any provision hereof may
be waived, amended or modified except pursuant to a written
agreement entered into between all of the parties hereto.
SECTION 8. Notices. All communications and notices
hereunder between and among the parties hereto shall be in
writing and given as provided in the Operating Agreement and
addressed as specified therein.
SECTION 9. Binding Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the permitted successors
and assigns of such party; and all covenants, promises and
agreements by or on behalf of the parties that are contained
in this Agreement shall bind and inure to the benefit of
their respective permitted successors and assigns. No party
hereto may assign or transfer any of its rights or
obligations hereunder (and any such attempted assignment or
transfer shall be void) without the prior written consent of
the other party hereto.
SECTION 10. Severability. In case any one or more of
the provisions contained in this Agreement should be held
invalid, illegal or unenforceable in any respect, no party
hereto shall be required to comply with such provision for so
long as such provision is held to be invalid, illegal or
unenforceable, but the validity, legality and enforceability
of the remaining provisions contained herein shall not in any
way be affected or impaired thereby. The parties shall
endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
SECTION 11. Counterparts; Effectiveness; Execution.
This Agreement may be executed in counterparts (and by
different parties hereto on different counterparts), each of
which shall constitute an original, but all of which when
taken together shall constitute a single contract. Delivery
of an executed signature page to this Agreement by facsimile
transmission shall be as effective as delivery of a manually
signed counterpart of this Agreement.
SECTION 12. Rules of Interpretation. The rules of
interpretation specified in Section 1.2 of the Operating
Agreement shall be applicable to this Agreement.
4
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their duly
authorized officers as of the date first appearing above.
WISCONSIN TISSUE XXXXX INC.
By:_________________________
Xxxxxxx X. Xxxxxx
Vice President
GEORGIA-PACIFIC CORPORATION
By:________________________
Xxxxxxx X. Xxxxxx
Vice President, Deputy
General Counsel and Secretary
5
