Exhibit 2(a)
AGREEMENT FOR SALE AND PURCHASE
OF
ASSETS OF
LSPI FIBER CO.
AND
STOCK OF
SUPERIOR RECYCLED FIBER CORPORATION
TABLE OF CONTENTS
Page
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1. Definitions 1
2. Purchase and Sale Transaction 6
(a) Purchase of Assets 6
(b) Assumed Liabilities and Obligations 6
(c) Purchase of Stock 6
3. Purchase Price 6
4. Payment 7
5. Assumption of Liabilities 8
6. Closing 9
7. Parents' Representations, Warranties and Covenants 9
(a) Organization and Authority of Seller 9
(b) Valid and Enforceable Agreement 9
(c) Organization of Subsidiaries 10
(d) Financial Statements 11
(e) No Material Change 11
(f) Leases 12
(g) Title to Personal Property 12
(h) Real Estate 12
(i) Plant and Equipment 14
(j) Intellectual Property 14
(k) Employee Matters 14
(l) Litigation 14
(m) Compliance with Laws 14
(n) Material Contracts 15
(o) Licenses and Permits 15
(p) Insurance 15
(q) Liabilities to PBGC or Multiemployer or
Multiple Employer Plans 15
(r) Transactions with Related Parties 15
(s) Bank Accounts 16
(t) Tax Matters 16
(u) Accounts Receivable 18
(v) Inventory 18
(w) Motor Vehicles 19
(x) Product Warranty 19
8. Buyer's Representations and Warranties 19
(a) Organization 19
(b) Authority 19
(c) Valid and Enforceable Agreement 19
(d) No Insolvency 20
(e) Financial Statements 20
(f) Investment Intent 20
9. Actions Pending Closing 20
(a) Operations 20
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(b) Access to Records 21
(c) Access to Facilities 21
(d) Hart-Scott-Rodino Filings 21
(e) Notice of Developments 21
(f) SRFI Restrictions 22
(g) Best Efforts 22
10. Conditions Precedent to Obligations of Buyer 22
(a) No Errors; Performance of Obligations 22
(b) Officer's Certificates 22
(c) Certified Copy of Resolutions 22
(d) Opinion of Sellers' and Parent's Counsel 22
(e) Injunctions 23
(f) Clayton Act Matters 23
(g) Environmental Matters 23
(h) SRFI Restrictions 23
(i) Consents 24
(j) Financing 24
(k) FIRPTA Certificate 24
(l) Assignments of Contracts 24
(m) Purchase of LSPI and Niagara Paper 24
(n) Real Estate Consents 24
(o) Title Insurance and Surveys 24
(p) Note Purchase Agreement 26
(q) Other Matters 26
11. Conditions Precedent to Obligations of Sellers 26
(a) No Errors; Performance of Obligations 26
(b) Officer's Certificate 26
(c) Certified Copy of Resolutions 27
(d) Opinion of Buyer's Counsel 27
(e) Injunctions 27
(f) Clayton Act Matters 27
(g) Financing 27
(h) Purchase of LSPI and Niagara Paper 27
(i) Note Purchase Agreement 27
(j) Other Matters 27
12. Broker 28
13. [Intentionally Left Blank] 28
14. Confidential Information 28
15. Indemnification 29
16. [Intentionally left blank] 31
17. Expenses 31
18. Environmental Matters 31
(a) Warranty 31
(b) Indemnity 33
(c) Special Provisions 33
(d) Exclusive Remedy 34
(e) Inspection of Books and Records 34
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19. Termination of Agreement 35
20. Announcements 35
21. Records 35
22. Assistance after Closing 36
23. Tax Matters; Payment of Taxes 36
(a) Tax Returns 36
(b) Apportionment of Income 36
(c) Allocation of Taxes 36
(d) Indemnity 37
(e) Post-Closing Elections 38
(f) Control of Contest 38
(g) General 38
(h) Sales and Transfer Taxes 38
(i) Tax Effective Time 38
(j) Survival 39
(k) Tax Agreements 39
24. Section 338(h)(10) Election 39
25. Limitations on Liability 40
26. Amendment and Waiver 41
27. Notices 41
28. Parties in Interest 43
29. Further Assurances 43
30. No Waivers 43
31. Governing Law 43
32. Severability 43
33. Miscellaneous 43
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THIS AGREEMENT is made and entered into as of the 8th day of May, 1995 by and
among Pentair, Inc., a Minnesota corporation ("Pentair"), Minnesota Power &
Light Company, a Minnesota corporation ("Minnesota Power"), Synertec, Inc., a
Minnesota Corporation ("Synertec"), LSPI Fiber Co., a joint venture organized
under the general partnership laws of the state of Minnesota ("LSPI Fiber"),
and Consolidated Papers, Inc., a Wisconsin corporation ("Buyer").
WHEREAS, Pentair is the owner of all of the issued and outstanding capital
stock of Duluth Holdings (Paper) Corp., a Minnesota corporation ("Duluth
Holdings") which owns all of the issued and outstanding stock of Pentair Duluth
Pulp Corp., a Minnesota corporation ("Pentair Duluth Pulp"); and
WHEREAS, Minnesota Power is the owner of all of the issued and outstanding
capital stock of Minnesota Pulp Incorporated, a Minnesota corporation
("Minnesota Pulp"), which owns all of the issued and outstanding stock of
Minnesota Pulp Incorporated II, a Minnesota corporation ("Minnesota Pulp II");
and
WHEREAS, Pentair Duluth Pulp and Minnesota Pulp II each own a 50% equity
interest in LSPI Fiber; and
WHEREAS, Minnesota Power is the owner of all of the issued and outstanding
stock of Synertec which owns all of the issued and outstanding capital stock of
Superior Recycled Fiber Corporation, a Minnesota corporation ("SRFC"); and
WHEREAS, LSPI Fiber owns a 24% equity interest, and SRFC owns a 76% equity
interest, in Superior Recycled Fiber Industries, a joint venture organized
under the general partnership laws of the state of Minnesota ("SRFI"); and
WHEREAS, Synertec and LSPI Fiber (collectively, "Sellers") desire to sell
and Buyer desires to purchase from Sellers all of the issued and outstanding
capital stock of SRFC and all of the assets of LSPI Fiber in accordance with
the terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and conditions herein contained, the parties agree as follows:
1. Definitions. The terms below shall have the following
meanings under this Agreement unless the context clearly requires otherwise:
(a) "Affiliates" means Duluth Holdings and Pentair Duluth Pulp, in the
case of Pentair; and Minnesota Pulp, Minnesota Pulp II, Synertec and SRFC, in
the case of Minnesota Power; and all of the foregoing, in the case of Pentair
and Minnesota Power.
(b) "Allocations" shall have the meaning set forth in Section 24(b).
(c) "Assumed Liabilities and Obligations" means the liabilities set
forth in Section 2(b).
(d) "CERCLA" shall have the meaning set forth in Section 18(a)(iii).
(e) "Clayton Act" means 15 U.S.C. Section 12, et seq., as amended, and
the rules and regulations promulgated thereunder from time to time.
(f) "Closing" means the actual transfer of the Purchased Interests, the
delivery of documents providing for the assumption of the Assumed Liabilities
and Obligations, and the exchange and delivery by the parties of the other
documents and instruments contemplated by this Agreement.
(g) "Closing Date" means June 30, 1995, or such later month end date as
mutually agreed upon by the parties.
(h) "Code" means the Internal Revenue Code of 1986, as amended.
(i) "Commitments" shall have the meaning set forth in Section 10(o)(i).
(j) "Confidential Information" means all information designated as
"Evaluation Material" in the confidentiality letter agreement dated August 26,
1994 between Buyer and CS First Boston Corp., acting as agent for Pentair and
in the confidentiality letter agreement dated January 9, 1995 between Buyer and
PaineWebber Incorporated, acting as agent for Minnesota Power, copies of which
are attached as Schedule 1(j).
(k) "Election" shall have the meaning set forth in Section 24.
(l) "Election Form" shall have the meaning set forth in Section 24(c).
(m) "Environmental Cleanup" shall have the meaning set forth in Section
18(c)(iii).
(n) "Environmental Laws" means federal, state, regional, county and
local laws, statutes, rules, regulations and ordinances and common law
requirements as of the Closing Date relating to the environment, including,
without limitation, those relating to the public health or safety aspects
thereof, or to nuisance, trespasses, releases, discharges, emissions or
disposals to air, water, land or groundwater, to the withdrawal or use of
groundwater, to the use, handling or disposal of polychlorinated biphenyls
(PCB's), asbestos or urea formaldehyde, to the treatment, storage, disposal or
management of Hazardous Material (including, without limitation, petroleum, its
derivatives, by-products or other hydrocarbons), to exposure to toxic,
hazardous or other controlled, prohibited or regulated substances, to the
transportation, storage, disposal, management or release of gaseous or liquid
substances, and any regulation, order, injunction, judgment, declaration,
notice or demand issued thereunder.
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(o) "GAAP" means generally accepted accounting principles consistently
applied and maintained throughout the period indicated and consistent with
prior financial practice of LSPI Fiber, SRFC, SRFI, Pentair or Minnesota Power
(and their respective Affiliates), as the case may be.
(p) [Intentionally left blank]
(q) "Hazardous Material" means and includes (a) petroleum or petroleum
products, including crude oil, (b) any asbestos insulation or other material
composed of or containing asbestos, and (c) any hazardous, toxic or dangerous
waste, substance or material defined as such in (or for purposes of) the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, any so-called state or local "Superfund" or "Superlien" law, Section
115B.02 of the Minnesota Statutes, or any other Environmental Laws.
(r) "Indemnitee" shall have the meaning set forth in Section 15(e).
(s) "Indemnitor" shall have the meaning set forth in Section 15(e).
(t) "Intellectual Property" means all patents, utility patents and
design patents and registrations therefor, trademarks, trade names, trademark
rights and trademark registrations, copyrights and licenses listed on Schedule
1(t) attached, as well as all technical documentation reflecting engineering
and production data, design data, plans, specifications, drawings, technology,
know-how, trade secrets, software (whether owned or licensed), manufacturing
processes and all documentary evidence thereof relating to the SRFI Group and
its business.
(u) "Knowledge" of Sellers or the "best knowledge" of Sellers when
modifying any representation or warranty shall mean that: (i) no officer or
other manager, reporting directly to the President of any of Sellers or the
Parents (who are involved in or responsible for operations of the SRFI Group or
the LSPI Group); and (ii) no officer or other manager of any member of the SRFI
Group and the LSPI Group, including the chief financial officer and the manager
of environmental affairs, if any, of Sellers, the Parents or of any member of
the SRFI Group or the LSPI Group, has any knowledge that such representation
and warranty is not true and correct to the same extent as provided therein and
that:
(i) Sellers, the Parents and each member of the SRFI Group has
exercised due diligence and has made appropriate investigations and
inquiries of the officers and business records of each of Sellers, the
Parents, the SRFI Group and the LSPI Group; and
(ii) nothing has come to the attention of Sellers, the Parents or
of any member of the SRFI Group in the course of such investigation and
review or otherwise which would reasonably cause such party, in the
exercise of due diligence, to believe that such representation and
warranty is not true and correct.
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Such terms shall have a cognate meaning as applied to Buyer.
(v) "LSPI Group" means Pentair Duluth Corp., a Minnesota corporation,
Minnesota Paper Incorporated, a Minnesota corporation and Lake Superior Paper
Industries, a joint venture organized under the general partnership laws of the
state of Minnesota.
(w) "LSPI Supply Contract" means the Pulp Supply Agreement dated as of
August 9, 1993, between LSPI Fiber and Lake Superior Paper Industries, a joint
venture organized under the general partnership laws of the state of Minnesota.
(x) "MADSP" shall have the meaning set forth in Section 24(b).
(y) "Material Contracts" means those contracts and arrangements listed
on Schedule 7(n).
(z) "Net Book Value" means the sum of: (i) with respect to LSPI Fiber,
the difference between (x) the Purchased Assets less (y) all of the liabilities
of LSPI Fiber set forth on the balance sheet of LSPI Fiber as of December 31,
1994 or the Closing Date, as appropriate; and (ii) with respect to the Stock,
the difference between (x) the assets of SRFC (including therein, its
investments in the net assets of SRFI) less (y) all liabilities of SRFC
excluding current income tax accruals, deferred tax accruals, and subordinated
and other debt, whether current or long-term, owing to Sellers, Parents, or
Affiliates, all as reflected on the balance sheet of SRFC as of December 31,
1994 or the Closing Date, as appropriate.
(aa) "1933 Act" shall have the meaning set forth in Section 8(f).
(ab) "Note Purchase Agreement" means the Note Purchase Agreement between
SRFC, SRFI and New York Life Insurance Company dated as of December 30, 1993,
as amended and all of the Security Documents collateral thereto, as defined in
the Note Purchase Agreement.
(ac) "Owned Real Estate" shall have the meaning set forth in Section
7(h)(i).
(ad) "Parents" shall mean both of Pentair and Minnesota Power and
"Parent" shall mean any one of them.
(ae) "Permitted Exceptions" shall have the meaning set forth in
Section 10(o)(i).
(af) "Purchased Assets" shall have the meaning set forth in Section 2(a).
(ag) "Purchased Interests" means the Stock and the Purchased Assets.
(ah) "Real Estate" means all real property, whether owned, under contract
to purchase, or leased by the SRFI Group, including all land, buildings,
structures, easements, appurtenances and privileges relating thereto, and all
leaseholds, leasehold
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improvements, fixtures and other appurtenances and options, including options
to purchase and renew, or other rights thereunder, used or intended for use in
connection with the business of the SRFI Group.
(ai) "Report" shall have the meaning set forth in Section 24(b).
(aj) "Return(s)" means any return (including any consolidated or combined
return), report, claim for refund, information return or statement, relating to
any Tax, including any schedule or attachment thereto.
(ak) "SRFI Group" means all of LSPI Fiber, SRFC and SRFI.
(al) "SRFI Group Financial Statements" means (i) the audited financial
statements (for the year ended December 31, 1994) of SRFI and SRFC, (ii) the
unaudited financial statements (for the year ended December 31, 1993) of SRFI
and SRFC, (iii) the unaudited internal financial statements of the other
members of the SRFI Group for the fiscal years ended December 31, 1993 and
1994, (iv) the combined unaudited balance sheet for the fiscal year ended
December 31, 1994 reflecting the assets and liabilities of each member of the
SRFI Group as of those dates, with all applicable adjustments and eliminations
and as combined, and (v) the combined unaudited income statement for the year
ended December 31, 1994 reflecting all items of income and expense for each
member of the SRFI Group, with all applicable adjustments and eliminations and
as combined.
(am) "SRFI Pledges" means the pledges by LSPI Fiber and all of the
Affiliates of all of their interests, direct or indirect, including the stock
of Pentair Duluth Pulp, Minnesota Pulp and SRFC, in SRFI and the entities which
own such direct or indirect interests, all pursuant to the Note Purchase
Agreement.
(an) "SRFI Put and Call Rights" means the rights of each Parent to put
and the rights of the other Parent to call, each Parent's interest in its
respective Affiliates and in LSPI Fiber pursuant to Section 2 of the Amended
and Restated Agreement to Restrict Transfer of Stock dated January 19, 1994 and
Section 12 of the LSPI Fiber Joint Venture Agreement dated May 28, 1993, as
amended December 30, 1993 and January 18, 1994.
(ao) "SRFI Restrictions" means, with respect to the shares of SRFC and to
LSPI Fiber, the SRFI Put and Call Rights, the SRFI Rights of First Refusal and
the SRFI Pledges.
(ap) "SRFI Rights of First Refusal" means the right of first refusal
granted by each Parent to the other to purchase its stock in Duluth Holdings
and Minnesota Pulp, respectively, pursuant to Section 2 of the Restated
Agreement to Restrict Transfer of Stock dated January 19, 1994.
(aq) "Statement of Net Book Value" means the combined audited balance
sheet of the SRFI Group as of the Closing Date in substantially the form
reflected in
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Schedule 3.2 from which the calculation of the purchase price of the Purchased
Interests will be made in accordance with Section 3 hereof.
(ar) "Stock" means all of the issued and outstanding capital stock of
SRFC.
(as) "Surveys" shall have the meaning set forth in Section 10(o)(ii).
(at) "Survey Defect" shall have the meaning set forth in Section
10(o)(iii).
(au) "Tax" or "Taxes" means all income, gross receipts, sales, use,
employment, franchise, profits, property or other taxes, fees, stamp taxes and
duties, assessments or charges of any kind whatsoever (whether payable directly
or by withholding), together with any interest and any penalties, additions to
tax or additional amounts imposed by any taxing authority with respect thereto.
(av) "Title Company" shall have the meaning set forth in Section
10(o)(i).
(aw) "Title Policy" shall have the meaning set forth in Section
10(o)(i).
(ax) "Unpermitted Exception" shall have the meaning set forth in
Section 10(o)(iii).
2. Purchase and Sale Transaction. (a) Purchase of Assets. Subject to
the terms and conditions herein stated, LSPI Fiber shall sell, transfer, assign
and deliver to Buyer and Buyer shall purchase from LSPI Fiber, at the Closing,
all of the assets of LSPI Fiber including, but not limited to, its 24%
partnership interest in SRFI (collectively, the "Purchased Assets").
(b) Assumed Liabilities and Obligations. At the Closing, Buyer
shall assume and agree to satisfy and perform to the extent not satisfied or
performed prior to the Closing Date, without any cost or charge to Sellers, all
obligations of LSPI Fiber as set forth on Schedule 5 and under the Material
Contracts (collectively, the "Assumed Liabilities and Obligations").
(c) Purchase of Stock. Subject to the terms and conditions
herein stated, Synertec shall sell, transfer, assign and deliver to Buyer, and
Buyer shall purchase from Synertec, at the Closing, all of Synertec's right,
title and interest in the Stock.
3. Purchase Price. The aggregate purchase price to be paid by Buyer to
Sellers for the purchase of all the Stock and the Purchased Assets, shall be:
(a) $65,300,000;
(b) increased for any increase, or decreased for any decrease, in
the Net Book Value from December 31, 1994 to the Closing Date; and
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(c) the assumption by Buyer of the Assumed Liabilities and
Obligations.
The aggregate purchase price set forth above shall be paid to Sellers as set
forth on Schedule 3.1.
The Net Book Value shall be determined in accordance with GAAP as set
forth on Schedule 3.2, which Schedule sets forth sample calculations of the Net
Book Value as of December 31, 1994 and March 31, 1995 and the exceptions to
GAAP used in calculating Net Book Value.
Within sixty (60) days following the Closing Date, Sellers shall prepare
and deliver to Buyer a Statement of Net Book Value, which shall be audited by
SRFC's auditors based upon the audits of SRFI's, SRFC's and LSPI Fiber's books,
including an inventory taken by the SRFI Group beginning at 7:00 a.m. on the
Closing Date and a review of the liabilities as of the Closing Date. The
taking of such inventory may be observed by Buyer and Buyer's auditors. The
Statement of Net Book Value shall have attached thereto an auditor's report in
the form attached as Schedule 3.3. To the extent possible, Sellers will
provide Buyer with a preliminary draft of the Statement of Net Book Value.
Buyer and Parents will in good faith attempt to resolve any disputes with
respect to such calculation before the final Statement of Net Book Value is
rendered.
Buyer may review the Statement of Net Book Value and Sellers shall make
available the work papers of SRFC's auditors to Buyer and its accountants and
Buyer and its accountants may make inquiries of representatives of Sellers' and
SRFC's auditors. Buyer shall give written notice to Parents of any objection
to the Statement of Net Book Value within thirty (30) days after Buyer's
receipt thereof. The notice shall specify in reasonable detail the items in
the Statement of Net Book Value to which Buyer objects and shall provide a
summary of Buyer's reasons for such objections.
Any dispute between Buyer and either or both Parents with respect to the
Statement of Net Book Value which is not resolved within fifteen (15) business
days after receipt by Parents of the written notice from Buyer shall be
referred for decision to Ernst & Young LLP who shall cause an audit partner who
is not engaged in providing services to Sellers or Buyer to decide the dispute
within thirty (30) days of such referral. The decision by the partner shall be
final and binding on Parents and Buyer. In resolving any disputed item, such
audit partner may not assign a value to any item greater than the greatest
value for such item claimed by either party or less than the smallest value for
such item claimed by either party. The cost of retaining the audit partner
with respect to resolving disputes as to the Statement of Net Book Value shall
be borne by Parents and Buyer equally, unless such partner determines, based on
his or her evaluation of the good faith of the parties, that the fees should be
borne unequally.
4. Payment. The estimated purchase price shall be paid in U.S. dollars
in immediately available funds on the Closing Date. The amount to be paid on
the Closing Date shall be based upon a preliminary Statement of Net Book Value
delivered to Buyer at least five (5) business days prior to Closing, which
shall be calculated based
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on the unaudited combined balance sheet of the SRFI Group as of the month end
prior to the Closing Date, prepared by Sellers on a basis consistent with
Schedule 3.2. Following delivery of the final Statement of Net Book Value
under Section 3, any balance due to Sellers or refunds due to Buyer reflected
thereon shall be paid within ten (10) days of such delivery, (unless there is
an objection under Section 3, in which case the amount not in dispute shall be
paid within ten (10) days of such delivery, and the balance in dispute shall be
paid within ten (10) days of the resolution of such objection) together with
interest on such amount from the Closing Date at the announced large business
prime rate of Morgan Guaranty Trust Company of New York.
Except as Buyer may be otherwise advised in writing by Sellers at least
five (5) days prior to any payment, all payments of the purchase price by Buyer
to Sellers at the Closing or any other amounts owed by Buyer to Sellers or
Parents shall be by wire transfer to:
Parent and Bank Account
Affiliates Bank and Routing Number Number
Pentair First Bank National Association
(091000022) to attention of Karen
Johnson xxx-xxxxxxx
Minnesota Pulp First Bank National Association,
Incorporated II (091000022) to attention of Russell
Arneson xxx-xxxxxxx
Synertec First Bank National Association,
(091000022) to attention of Russell
Arneson xxx-xxxxxxx
Except as Parents may be otherwise advised in writing by Buyer at least five
(5) days prior to any payment, payment of any refund to Buyer based on the
final determination of the purchase price pursuant to Section 3 or any other
amounts owed by Sellers or Parents to Buyer hereunder shall be made by wire
transfer to Harris Trust and Savings Bank - Consolidated Papers, Inc., Account
No. xxxxxxx (ABA wire transfer routing number xxxx-xxxx-x), marked to the
attention of J.R. Matsch.
All wire transfers shall be sent by 10:00 a.m. Minneapolis time on the
date of such payment, unless otherwise agreed by the parties.
5. Assumption of Liabilities. At Closing, Buyer shall assume and agree
to satisfy and perform, to the extent not satisfied or performed prior to the
Closing Date, without any cost or charge to Sellers, all Assumed Liabilities
and Obligations. If the assumption of the Assumed Liabilities and Obligations
by Buyer under this Section 5 requires the consent of any third party, Buyer
and each respective Parent and/or Seller agree they will use their best efforts
to obtain such written consent to such assumption; provided, however, that in
no event shall Buyer be subject, without its consent, to terms and
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conditions more restrictive than those set forth in the existing obligations of
Parents being assumed.
6. Closing. (a) The Closing shall take place on the Closing Date at
the offices of Henson & Efron, P.A. in Minneapolis, Minnesota, at 9:00 o'clock
a.m., local time, or at such other time and place as may be mutually agreed
upon. Buyer and Sellers each agree they shall use their best efforts and shall
cause all relevant affiliates to use their best efforts to obtain fulfillment
of all conditions to Closing set forth in Sections 10 and 11 hereof.
(b) At the Closing, Sellers shall deliver to Buyer such documents and
instructions as provided herein, including the assignment to Buyer of the LSPI
Supply Contract, reasonably satisfactory in form and substance to Buyer and its
counsel, as shall be required to vest in Buyer good and marketable title, free
and clear of all liens, charges and encumbrances (except as specified in this
Agreement, if any) in and to the Purchased Interests. At the Closing, each
Seller and Parent shall deliver to Buyer a release of all claims of such Seller
and Parent and any person or entity affiliated therewith against all members of
the SRFI Group, in substantially the form of Schedule 6.
(c) At the Closing, Buyer shall deliver to Parents such documents and
instruments as provided herein and such undertakings, and other instruments as
shall be required to cause Buyer to assume the obligations as provided in
Section 5, all of which shall be reasonably satisfactory in form and substance
to Parents and their respective counsel.
7. Parents' Representations, Warranties and Covenants. Subject to the
several liability of Parents provided for in Section 25 hereof, Parents
represent, warrant and covenant to Buyer as follows:
(a) Organization and Authority of Seller. Each of Pentair, Duluth
Holdings, Pentair Duluth Pulp, Minnesota Power, Synertec, Minnesota Pulp,
Minnesota Pulp II and SRFC is a duly organized and validly existing corporation
in good standing under the laws of the state of Minnesota. Each of SRFI and
LSPI Fiber is a duly organized and validly existing joint venture organized as
a general partnership under the laws of the state of Minnesota. Sellers and
Parents have the complete and unrestricted right, power and authority to sell,
transfer and assign all of the Purchased Interests pursuant to this Agreement
and to carry out the transactions contemplated hereby without the consent of
any other person (except as otherwise set forth herein), subject only to the
SRFI Restrictions. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by the Boards of Directors and the general partners of each Seller
and Parent, respectively.
(b) Valid and Enforceable Agreement. This Agreement constitutes a valid
and binding agreement of each respective Seller and Parent, enforceable in
accordance with its terms, except insofar as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the rights of creditors generally, and
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by general equitable principles. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, nor
the performance of its obligations hereunder materially violates or conflicts
with, results in a material breach of, or constitutes a material default under
(i) to the best knowledge of each respective Seller and Parent, any law, rule,
or regulation, or (ii) subject to the obtaining of necessary consents, which
consents are listed on Schedule 7(b), under various loan agreements,
guarantees, leases, and other agreements (including without limitation the SRFI
Restrictions), any agreement or other restriction of any kind or character to
which such Seller, Parent or any member of the SRFI Group is a party, by which
such Seller, Parent or any member of the SRFI Group is bound, or to which any
of the properties of Sellers, Parents or any member of the SRFI Group is
subject. Neither the execution or delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor the performance of
its obligations hereunder violates or conflicts with, results in a breach of,
or constitutes a default under, (i) any judgment or order, decree, award or
ruling to which such Seller or Parent is subject, (ii) the Articles of
Incorporation, By-Laws or Partnership Agreement of such Seller or Parent,
excluding the SRFI Restrictions.
(c) Organization of Subsidiaries.
(i) Each member of the SRFI Group is a duly organized and validly
existing corporation or joint venture general partnership, as the case may
be, in good standing, to the extent applicable, in its respective state of
incorporation or organization, as set forth in Schedule 7(c). Each member
of the SRFI Group has all requisite corporate or general partnership power
and authority, as the case may be, to carry on its respective business as
presently conducted in all states in which it currently does business.
Each member of the SRFI Group is duly licensed, registered and qualified
to do business as a foreign corporation, partnership or joint venture and,
to the extent applicable, is in good standing in all jurisdictions in
which the ownership, leasing or operation of its assets or the conduct of
its business requires such qualification, except where the failure to be
so licensed, registered or qualified would not have a material adverse
effect upon its business or assets.
(ii) All of the outstanding shares of capital stock or partnership
interests of SRFC and LSPI Fiber have been duly authorized and validly
issued, are fully paid and nonassessable, and are owned, beneficially and
of record, by Synertec and Minnesota Pulp II and Pentair Duluth Pulp,
respectively, and are free and clear of all liens, claims, encumbrances
and restrictions whatsoever, other than the SRFI Restrictions. SRFC's
entire equity capital consists of 50 authorized shares of common stock, no
par value, of which 50 shares are issued and outstanding. No shares of
capital stock of, or other ownership interest in, SRFC or LSPI Fiber are
reserved for issuance and there are no outstanding options, warrants,
rights, other than the SRFI Restrictions, subscriptions, claims of any
character, agreements, obligations, convertible or exchangeable
securities, or other commitments, contingent or otherwise, relating to the
capital stock of, or
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other ownership interest in, either of such corporation or partnership
pursuant to which either of such corporation or partnership is or may
become obligated to issue or exchange any shares of capital stock of, or
other ownership interest in, such corporation or partnership.
(iii) Except as set forth on Schedule 7(c), no member of the SRFI
Group owns, directly or indirectly, any capital stock or other equity or
ownership or proprietary interest in any other corporation, partnership,
association, trust, joint venture (other than in SRFI) or other entity.
(iv) True and complete copies of the agreements containing the SRFI
Restrictions have been furnished or made available to Buyer; each of those
agreements is currently in good standing and in full force and effect and
no default by any Seller, Parent or any member of the SRFI Group party
thereto, or to the best knowledge of Sellers, any other party thereto,
exists thereunder.
(d) Financial Statements.
(i) Attached hereto as Schedule 7(d) are the SRFI Group Financial
Statements. The SRFI Group Financial Statements were (and the Statement
of Net Book Value will be) prepared in accordance with the books and
records of the respective members of the SRFI Group, which were used in
the preparation of each Parent's audited consolidated financial statements
for the fiscal years ended December 31, 1993 and December 31, 1994.
(ii) The SRFI Group Financial Statements were (and the Statement of
Net Book Value will be) prepared in accordance with GAAP consistently
applied, but, except for the audited financial statements of SRFI, do not
include all information and footnotes required by generally accepted
accounting principles for complete financial statements. The Statement of
Net Book Value will adequately reflect all liabilities and obligations of
the SRFI Group required to be shown thereon in accordance with GAAP,
except for those exceptions to GAAP set forth on Schedule 3.2.
(iii) The SRFI Group Financial Statements as of such dates or for
the period ending on such dates present fairly the financial position and
the results of operations of the members of the SRFI Group for the periods
covered thereby. All adjustments, consisting of normal recurring accruals
and eliminations and other similar adjustments, considered necessary for a
fair presentation have been included.
(e) No Material Change. To the best knowledge of Sellers, since
December 31, 1994 there has been no material adverse change in the business,
financial position or results of operations of the SRFI Group taken as a whole.
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(f) Leases. Sellers have furnished or made available to Buyer copies of
all leases and subleases of any personal property used in the operations of the
members of the SRFI Group to which any member of the SRFI Group is a party, all
of which are listed on Schedule 7(f). Except as set forth on Schedule 7(f), no
consents or approvals are required in connection with the transactions
contemplated hereby. No event has occurred which is or, after the giving of
notice or passage of time, or both, would constitute a default under or a
material breach of any lease by any member of the SRFI Group or, to the best
knowledge of Sellers, any other party to such leases. As of the Closing Date,
each lease shall be in full force and effect in accordance with its terms, as
amended from time to time.
(g) Title to Personal Property. Each member of the SRFI Group has
good and marketable title to its respective owned personal property as
reflected in the SRFI Group Financial Statements, free and clear of all liens,
claims, encumbrances and restrictions, except (i) those reflected on
Schedule 7(g), (ii) the lien of the Note Purchase Agreement and (iii) defects
in title, and liens, charges and encumbrances, if any, as do not materially
detract from the value of or otherwise materially impair the current operations
or financial conditions of the SRFI Group, taken as a whole.
(h) Real Estate.
(i) Schedule 7(h) sets forth an accurate legal description of all
Real Estate owned by a member of the SRFI Group for which a member of the
SRFI Group has contracted to become the owner (the "Owned Real Estate"),
including identification of the current owner of fee simple title thereto.
The party identified as the owner on Schedule 7(h) is the legal and
equitable owner of good and marketable title in fee simple absolute to
such Owned Real Estate, including the buildings, structures, spurtracks
(as set forth on Schedule 7(h) and improvements situated thereon and
appurtenances thereto, in each case free and clear of all tenancies and
other possessory interests, security interests, conditional sale or other
title retention agreements, liens, encumbrances, mortgages, pledges,
assessments, easements, rights of way, covenants, restrictions,
reservations, options, rights of first refusal, defects in title,
encroachments and other burdens, except as disclosed on Schedule 7(h).
Except as disclosed on Schedule 7(h), a member of the SRFI Group is in
possession of the Owned Real Estate. All contracts, agreements, options
and undertakings affecting the Owned Real Estate are set forth in Schedule
7(h) and are legally valid and binding and in full force and effect, and
to Seller's knowledge, there are no defaults, offsets, counterclaims or
defenses thereunder, and the SRFI Group has received no notice that any
default, offset, counterclaim or defense thereunder exists. Sellers have
delivered or made available to Buyer correct and complete copies of all
such contracts, agreements, options and undertakings.
(ii) There is no Real Estate leased, subleased or occupied by a
member of the SRFI Group.
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(iii) To the knowledge of Sellers, except as set forth on the Flood
Insurance Rate Maps prepared by the Federal Emergency Management Agency
(Community/Parcel No. 270420/004B; revised as of November 1992), no Real
Estate is located within a flood or lakeshore erosion hazard zone for
which flood insurance is now required under the National Flood Insurance
Program. Neither the whole nor any portion of any Real Estate has been
condemned, requisitioned or otherwise taken by any public authority, and
no notice of any such condemnation, requisition or taking has been
received. To the knowledge of Sellers, no such condemnation, requisition
or taking is threatened or contemplated, except as set forth on Schedule
7(h). Sellers have no knowledge of any public improvements which may
result in special assessments against or otherwise affect the Real Estate,
except as set forth on Schedule 7(h).
(iv) The Real Estate is in good operating condition and repair
(reasonable wear and tear excepted) and is suitable and adequate for the
purposes for which it is presently being used.
(v) To the knowledge of Sellers, except as set forth on Schedules
7(h) or 7(o), the Real Estate is in compliance with all applicable zoning,
building, health, fire, water, use or similar statutes, codes, ordinances,
laws, rules or regulations. To the knowledge of Sellers, the zoning of
each parcel of Real Estate permits the existing improvements and the
continuation following consummation of the transaction contemplated hereby
of the business of the SRFI Group as presently conducted thereon. The
SRFI Group has all certificates of occupancy and authorizations required
to utilize the Real Estate. To Sellers' knowledge, the SRFI Group has all
easements and rights necessary to conduct its business, including
easements for all utilities, services, roadway, railway and other means of
ingress and egress. To Sellers' knowledge, the SRFI Group holds such
rights to any off-site facilities as are necessary to ensure compliance in
all material respects with all zoning, building, health, fire, water, use
or similar statutes, codes, ordinances, laws, rules or regulations and all
such rights, to the extent held by the SRFI Group and Sellers, shall be
conveyed as directed by Buyer at Closing. Except as disclosed on Schedule
7(h), to the knowledge of Sellers, no fact or condition exists which would
result in the termination or impairment of access to the Real Estate or
discontinuation of sewer, water, electric, gas, telephone, waste disposal
or other utilities or services. Except as disclosed on Schedule 7(h), to
the knowledge of Sellers, the facilities servicing the Real Estate are in
full compliance with all codes, laws, rules and regulations.
(vi) Sellers have delivered or made available to Buyer accurate,
correct and complete copies of all existing title insurance policies,
title reports and surveys, if any, with respect to each parcel of Real
Estate.
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(i) Plant and Equipment. Sellers have furnished to Buyer an accurate
list of all plant and equipment, attached as Schedule 7(i), owned by the SRFI
Group. To the best knowledge of Sellers, all plant, structures and equipment
currently being used in the conduct of the operations of the SRFI Group are in
all material respects in good operating condition and repair, subject to normal
wear and tear, and to the best of each Seller's knowledge, are free from
material structural or mechanical deficiencies, except as disclosed on Schedule
7(i) attached.
(j) Intellectual Property. Sellers have furnished to Buyer an accurate
list of all Intellectual Property, attached as Schedule 1(t), owned or used by
the SRFI Group. To the best knowledge of Sellers, no one is infringing upon
any rights of the SRFI Group with respect to any of the Intellectual Property,
no member of the SRFI Group is infringing on or otherwise acting adversely to
the rights of any person under, or in respect to, any patents, patent rights,
copyrights, licenses, trademarks, trade names or trademark rights owned by any
person or persons, and there is no claim or action pending or threatened with
respect thereto. Except as set forth in Schedule 1(t), there are no royalty,
commission or similar arrangements, and no licenses, sublicenses or agreements
pertaining to any of the Intellectual Property.
(k) Employee Matters. No member of the SRFI Group has, nor has any
member of the SRFI Group ever had, any employees.
(l) Litigation. Except as set forth on Schedule 7(l), there are no
legal actions, suits, arbitrations or other legal, administrative or
governmental proceedings or investigations (other than tax audits or
investigations) pending or, to the best knowledge of Sellers, threatened
against any member of the SRFI Group which might have a material adverse effect
upon the operations or financial condition of the SRFI Group, taken as a whole.
No member of the SRFI Group is subject to any judgment, order, writ,
injunction, stipulation or decree of any court or any governmental agency or
any arbitrator, except as may be set forth herein or in any Schedule
hereto.
(m) Compliance with Laws.
(i) To the best knowledge of Sellers, the operations of the members
of the SRFI Group have been and are being conducted in accordance with all
applicable laws, rules and regulations of applicable governmental
authorities (other than those covered in Section 18 hereof), except for
such breaches that do not and cannot reasonably be expected to (either
individually or in the aggregate) materially and adversely affect the
financial condition or operations of the SRFI Group taken as a whole.
(ii) To the best knowledge of Sellers, no member of the SRFI Group
nor any of their officers or employees, has, directly or indirectly,
given, or agreed to give, any rebate, gift or similar benefit to any
supplier, customer, distributor, broker, governmental employee or other
person, who was, is or may be in a position to help or hinder the SRFI
Group's business (or assist in connection with any actual or proposed
transaction) which could subject Buyer or the SRFI
-14-
Group's business to any penalty in any civil, criminal or governmental
litigation or proceeding or which would have a material adverse effect on
the SRFI Group's business.
(n) Material Contracts. Sellers have furnished to Buyer a list,
attached as Schedule 7(n), of all contracts and arrangements, written or oral,
which alone or together with other contracts and arrangements with the same
party are material to the SRFI Group's business taken as a whole. All members
of the SRFI Group have, in all material respects, performed all of the
respective obligations required to be performed by them to date and are not,
and will not be as of the Closing Date, in default under any material provision
of such contracts or arrangements. All such contracts and arrangements are and
will be as of the Closing Date in good standing and full force and effect
according to their terms. For purposes of this Section 7(n), a contract shall
be deemed to be material, (i) if it involves remaining payments of more than
$300,000, or (ii) if it cannot by its terms be completed or terminated without
penalty within 180 days from the Closing Date, or (iii) if the absence of such
contract would have a material adverse effect on the business of the SRFI
Group.
(o) Licenses and Permits. Except as set forth on Schedule 7(o), each
member of the SRFI Group has all requisite licenses and permits to operate its
business as currently conducted and Sellers have not been advised of, nor to
the best knowledge of Sellers is there any basis for, any revocation or
anticipated revocation of any permits, licenses or zoning variances, or of any
changes to existing or pending zoning or other regulations, permits or licenses
which would materially and adversely affect the conduct of its operations as
presently conducted.
(p) Insurance. Schedule 7(p) contains an accurate and complete
list and description of insurance policies (including the name of the insurer,
coverage, premium and expiration date) which each member of the SRFI Group
currently maintains, or is named as an additional insured or is entitled to
benefits under (including coverage for events occurring under prior policies).
To the best knowledge of Sellers, except as set forth on Schedule 7(p), all
such policies are in full force and effect and shall survive the Closing for
the benefit of SRFC, SRFI or Buyer.
(q) Liabilities to PBGC or Multiemployer or Multiple Employer Plans. No
liability to the Pension Benefit Guaranty Corporation or to any multiemployer
or multiple employer plan has been incurred by the SRFI Group.
(r) Transactions with Related Parties.
(i) To the best knowledge of Sellers, except for interest and
corporate overhead and as set forth on Schedule 7(r), none of
the SRFI Group members are a party to any transaction or proposed
transaction, including, without limitation, the leasing of real or
personal property, the purchase or sale of raw materials or finished
goods, or the furnishing of services, with any Seller or Parent or with
any person who is related to or affiliated with Sellers or Parents
-15-
(other than another member of the SRFI Group), involving the payment or
accrual of more than $1,000,000 during fiscal years 1993 or 1994.
(ii) Except as set forth on Schedule 7(r) or as reflected in the
SRFI Group Financial Statements dated December 31, 1994, neither Sellers
nor Parents nor any person who is related to or affiliated with Sellers or
Parents has any cause of action or other claim whatsoever against or owes
any material amount to, or is owed any material amount by, any member of
the SRFI Group.
(s) Bank Accounts. Schedule 7(s) sets forth a true and complete list of
all banks in which any member of the SRFI Group has an account, safe deposit
box or line of credit, and the names and titles of all persons authorized to
draw thereon or to have access thereto, and a summary description of the use
thereof.
(t) Tax Matters.
(i) All Returns (including consolidated or combined Returns
including any member of the SRFI Group) required to be filed on or before
the Closing with respect to any member of the SRFI Group have been or will
be timely filed (within the time permitted by any timely filing extension)
by or on behalf of such member of the SRFI Group and all Taxes shown to be
due on such Returns have been timely paid.
(ii) No member of the SRFI Group has been a member of an affiliated
group (within the meaning of Section 1504 of the Code) filing a
consolidated federal Return, other than a group the common parent of which
is a Parent.
(iii) Schedule 7(t) lists all Returns filed with respect to any of
the members of the SRFI Group for taxable periods which remain open,
indicates those Returns that have been audited and indicates those Returns
that are currently the subject of audit or scheduled for an examination by
any relevant taxing authority.
(iv) Except as disclosed in Schedule 7(t):
(1) no notice or claim has ever been made by a governmental
authority in a jurisdiction where any member of the SRFI
Group does not file Returns that it is or may be subject
to Taxes in that jurisdiction;
(2) no extension of the statute of limitations with respect to
any assessment or claim for Taxes has been granted by or
on behalf of any member of the SRFI Group;
-16-
(3) there are no liens for Taxes upon the assets of any member
of the SRFI Group except liens for Taxes not yet due;
(4) no amended Returns or refund claims have been or are
scheduled to be filed by or on behalf of any member of the
SRFI Group;
(5) all Taxes and other liabilities with respect to completed
and settled audits, examinations or concluded litigation
have been paid; and
(6) there are no pending appeals or other administrative
proceeding with respect to any Return of any member of the
SRFI Group, and there is no deficiency or refund
litigation with respect to any Return of any member of the
SRFI Group. No material issues have been raised by any
relevant taxing authorities on the audit of the Returns of
any member of the SRFI Group. No member of the SRFI Group
has received any notice of any Tax deficiency or
assessment.
(v) No member of the SRFI Group has filed or had filed on its
behalf a consent to the application of Section 341(f) of the Code.
(vi) Except as disclosed in Schedule 7(t), no member of the SRFI
Group is a party to any contractual obligation requiring the
indemnification or reimbursement of any person with respect to the payment
of any Taxes. Except as disclosed in Schedule 7(t), no claim has been
asserted, which has not been resolved or satisfied, for any payment under
any agreement disclosed in Schedule 7(t).
(vii) Except as disclosed in Schedule 7(t), no member of the SRFI
Group is a party to or a beneficiary of any financing, the interest on
which is tax-exempt under the Code, and none of the assets of any member
of the SRFI Group is "tax-exempt use property."
(viii) As of the Closing Date, no member of the SRFI Group is a
party to any agreement, contract, arrangement, or plan that has resulted
or would result, separately or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of Section 280G of the
Code.
(ix) Each member of the SRFI Group is a "United States person"
within the meaning of the Code. No member of the SRFI Group has been a
United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code. The transactions contemplated
-17-
herein are not subject to the tax withholding provisions of Section 3406
of the Code, or of Subchapter A of Chapter 3 of the Code, or of any other
provision of law. No member of the SRFI Group has nor had a branch in any
foreign country.
(x) No member of the SRFI Group is a party to any joint venture,
partnership, or other arrangement or contract that could be treated as a
partnership for federal income Tax purposes, except for SRFI or LSPI
Fiber.
(xi) Each member of the SRFI Group has withheld and paid all Taxes
required to have been withheld and paid including (1) amounts paid to any
employee or statutory employee or any foreign person or entity; and (2)
any backup withholding required under Section 3406 of the Code.
(u) Accounts Receivable. Schedule 7(u) sets forth an accurate, correct
and complete aging of all outstanding accounts and notes receivable of SRFC,
SRFI and LSPI Fiber as of December 31, 1994. All outstanding accounts and
notes receivable reflected on the SRFI Group Financial Statements are, and on
the Statement of Net Book Value will be, due and valid claims against account
debtors for goods or services delivered or rendered and subject to no defenses,
offsets or counterclaims. All receivables arose in the ordinary course of
business. No receivables are subject to prior assignment, claim, lien or
security interest, except under the Note Purchase Agreement. The books and
records of SRFC, SRFI and LSPI Fiber reflect amounts taken as a reserve against
noncollection of accounts receivable, which reserve has been established in
accordance with SRFC's, SRFI's and LSPI Fiber's normal accounting policies
consistently maintained for the fiscal years ended December 31, 1993 and
December 31, 1994 and there is no reason to believe that such reserve will not
be adequate for its purpose. As of the Closing Date, neither SRFC, SRFI nor
LSPI Fiber will have incurred any liabilities to customers for discounts,
returns, promotional allowances or otherwise, except those granted in the
ordinary course of SRFC's, SRFI's or LSPI Fiber's operations and reflected on
the Statement of Net Book Value. No other member of the SRFI Group has any
business operations which would result in the establishment of any trade
accounts receivable or the granting of any discounts, returns, promotional
allowances or similar charges.
(v) Inventory. All inventories reflected on the SRFI Group Financial
Statements are, and on the Statement of Net Book Value will be, properly valued
at the lower of cost or market value on a first-in, first-out basis in
accordance with GAAP. Inventories of finished goods are of good and
merchantable quality, whether of first line, or off-quality pulp and contain no
material amounts that are not salable in the ordinary course of business and
meet the current standards and specifications of its business, except as
reserved for on the SRFI Group Financial Statements. Inventories of raw
materials, stores and replacement parts are, to the best knowledge of Sellers,
(i) of good and merchantable quality and contain no material amounts that are
not usable for the purposes intended in the ordinary course of the SRFI
Group's operations; (ii) in conformity with warranties customarily given to
purchasers of like products; and (iii) at
-18-
levels adequate for and not excessive in relation to the ordinary course of the
SRFI Group's operations and in accordance with past inventory stocking
practices. Sales of inventories subsequent to December 31, 1994 have been made
only in the ordinary course of business and at prices and under terms that are
normal and consistent with past practice.
(w) Motor Vehicles. Schedule 7(w) sets forth an accurate and complete
list of all motor vehicles used in the business of the SRFI Group, whether
owned or leased. All such vehicles are (i) properly licensed and registered in
accordance with applicable law; (ii) insured as set forth on Schedule 7(p);
(iii) in good operating condition and repair (reasonable wear and tear
excepted) and (iv) not subject to any lien or other encumbrance, except as set
forth on Schedule 7(w).
(x) Product Warranty. The books and records of each member of SRFI
Group reflect amounts taken as a reserve against claims and allowances for
product warranties, which reserve has been established in accordance with the
members of the SRFI Group's normal accounting policies consistently maintained
for the fiscal years ended December 31, 1993 and December 31, 1994 and there is
no reason to believe that such reserve will not be adequate for its purpose.
As of the Closing Date, neither SRFC, SRFI nor LSPI Fiber will have incurred
any unpaid liabilities to customers for such claims and allowances, except
those granted in the ordinary course of business and reflected on the Statement
of Net Book Value.
Disclosure of any fact in any provision of this Agreement or in any
Schedule attached hereto shall constitute disclosure thereof for the purposes
of any other provision or Schedule.
8. Buyer's Representations and Warranties. Buyer represents and
warrants to Parents as follows:
(a) Organization. Buyer is a duly organized and validly existing
corporation in good standing under the laws of the state of Wisconsin. Buyer
has all requisite corporate power to own its property and carry on its business
as presently conducted.
(b) Authority. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by the Board of Directors of Buyer.
(c) Valid and Enforceable Agreement. This Agreement constitutes a valid
and binding agreement of Buyer, enforceable in accordance with its terms,
except insofar as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally, and by general equitable principles. Neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, nor the performance of Buyer's obligations hereunder
materially violates or conflicts with, results in a material breach of, or
constitutes a material default under (i) to the best knowledge of Buyer, any
law, rule or regulation, or (ii) subject to the obtaining of necessary consents
under various
-19-
agreements, any agreement or other restriction of any kind or character to
which Buyer is a party, by which Buyer is bound, or to which any of the
properties of Buyer is subject. Neither the execution or delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, nor
the performance of Buyer's obligations hereunder, violates or conflicts with,
results in a breach of or constitutes a default under (i) any judgment or
order, decree, award or ruling to which Buyer is subject, or (ii) the Articles
of Incorporation or By-Laws of Buyer.
(d) No Insolvency. Buyer is not currently insolvent, and neither the
purchase of the Purchased Interests, the assumption of the Assumed Liabilities
and Obligations pursuant to Section 5, nor any related transaction or event
shall render Buyer insolvent or leave Buyer with assets which are unreasonably
small in relation to the business of the SRFI Group and its own business
operations, nor does Buyer intend to incur debts beyond its ability to pay them
as they come due.
(e) Financial Statements. Buyer's financial statements for the year
ended December 31, 1994, as filed with the Securities and Exchange Commission
(copies of which have been delivered to Seller) (i) were prepared in accordance
with and accurately reflect its books and records, (ii) were prepared in
accordance with generally accepted accounting principles, consistently applied,
and (iii) present fairly the financial position and the results of operations
of Buyer for the periods covered thereby.
(f) Investment Intent. Buyer is purchasing the Stock for its own
account and not with a view to, or present intention of, sale or distribution
thereof in violation of the Securities Act of 1933, as amended (the "1933 Act")
and such shares will not be disposed of in contravention of the 1933 Act.
Buyer acknowledges that such shares are not and have not been registered with
the Securities and Exchange Commission or any securities commission or agency
of any state, including the state of Minnesota, and may not be transferred or
disposed of without registration under the 1933 Act and applicable state
securities laws or an exemption from such registration.
Disclosure of any fact in any provision of this Agreement or in any
Schedule attached hereto shall constitute disclosure thereof for the purposes
of any other provision or Schedule.
9. Actions Pending Closing. From the date hereof through the Closing
Date, Sellers shall take, or cause their respective Affiliates to take, all
actions necessary and appropriate to comply with, or to refrain from taking any
action in breach of, the following provisions for the period between the
execution of this Agreement and the termination hereof or the Closing Date:
(a) Operations. Each member of the SRFI Group shall conduct its
operations only in the ordinary course of business and shall not enter or
permit any member of the SRFI Group to enter into any transaction or perform
any act that would constitute a breach of the representations, warranties, or
agreements contained herein. Each member of the SRFI Group shall use its best
efforts to preserve its business and its organization intact and to keep
available the services of its present employees.
-20-
Attached as Schedule 9(a) is a list of capital expenditures and commitments to
be initiated by the SRFI Group prior to the Closing Date. No member of the
SRFI Group shall initiate any capital expenditure or commitment other than as
set forth on Schedule 9(a) or initiate any capital expenditure or commitment as
set forth on Schedule 9(a) in excess of $25,000 without Buyer's approval, which
approval shall not be unreasonably withheld; provided, however, that any member
of the SRFI Group may initiate emergency capital expenditures or commitments
consistent with the past practices of such SRFI Group member. Sellers or
Parents shall promptly notify Buyer of such emergency expenditures or
commitments.
(b) Access to Records. Sellers shall, and shall cause the members of
the SRFI Group to, make available to Buyer, its agents and employees, all books
and records in their possession relating to the business of the SRFI Group;
provided, however, that Sellers have not made, and shall not be deemed to have
made, any representations or warranties whatsoever with respect to any of such
books or records or any other documents provided to or made available to Buyer,
except as expressly set forth in this Agreement.
(c) Access to Facilities. Buyer, its agents and employees, shall be
given full access during regular business hours to the physical facilities of
SRFI, upon appointment with the President thereof and accompanied by such
President or his or her designee(s). Sellers and each member of the SRFI Group
and their respective employees shall cooperate fully with Buyer in its
examinations and inspections, but not to the detriment of the ongoing business
operations of the SRFI Group prior to Closing.
(d) Hart-Scott-Rodino Filings. Parents and Buyer shall cooperate in the
prompt preparation and filing of all notifications and reports which may be
required with respect to the transactions contemplated by this Agreement
pursuant to Section 7A of the Clayton Act. Parents and Buyer shall also
cooperate in responding promptly to all inquiries from the Federal Trade
Commission or the Department of Justice resulting from the filing of such
notifications and reports.
(e) Notice of Developments. At least ten (10) business days prior to
the Closing Date, Sellers shall deliver to Buyer a complete update of the
Schedules from the date hereof. Each party hereto shall notify the other of
any development(s) which shall constitute a breach of any of the
representations and warranties in Sections 7 or 8 above. The party so notified
has the right to terminate this Agreement within the period of ten (10)
business days from the date of receipt of such notification, if as a result of
such development the financial condition, results of operations or prospects of
the SRFI Group as a whole, on the one hand, or Buyer, on the other hand, have
been materially and adversely affected. If within such ten (10)-day period,
the party notified shall not have exercised its right to terminate this
Agreement, the written notice shall be deemed to have amended this Agreement
and the relevant schedules attached thereto, to have qualified the
representations and warranties contained in Sections 7 or 8 above and to have
cured any misrepresentation or breach of warranty that otherwise might have
existed hereunder by reason of such development, including for purposes of
Section 15 hereof.
-21-
(f) SRFI Restrictions. Prior to the Closing Date, each Seller shall
waive or abandon its right of first refusal with respect to the transfer of the
other's interest in the entities that own indirectly an interest in LSPI Fiber,
SRFC or SRFI pursuant to this Agreement.
(g) Best Efforts. Sellers, Parents and Buyer shall use their best
efforts to consummate the transactions contemplated by this Agreement and shall
not take any other action inconsistent with their respective obligations
hereunder or which could hinder or delay the consummation of the transactions
contemplated hereby. From the date hereof through the Closing Date, Sellers,
Parents and Buyer shall use their best efforts to fulfill the conditions to
their obligations hereunder and to cause their representations and warranties
to remain true and correct as of the Closing Date.
10. Conditions Precedent to Obligations of Buyer. The obligations of
Buyer hereunder (unless expressly waived by Buyer) are subject to the
fulfillment, prior to or at Closing, as the case may be, of each of the
following conditions:
(a) No Errors; Performance of Obligations. The representations and
warranties of Parents herein shall be true and correct as of the Closing Date.
Sellers and Parents shall have performed the obligations set forth in Section 9
and in all material respects all of the other obligations to be performed by
them hereunder in the time and manner herein stated.
(b) Officer's Certificates. Sellers and Parents shall have delivered to
Buyer certificates, dated as of the Closing Date, executed by their respective
Secretaries, and in form and substance satisfactory to Buyer, certifying that
the covenants and conditions specified in this Agreement to be met by Sellers
and Parents have been performed or fulfilled and that the representations and
warranties herein made by Sellers and Parents are true and correct as of such
date.
(c) Certified Copy of Resolutions. Sellers and Parents shall have
delivered to Buyer a certified copy of resolutions adopted by their respective
Boards of Directors authorizing the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby.
(d) Opinion of Sellers' and Parent's Counsel. Sellers and Parents shall
have delivered to Buyer the opinion of their respective counsel, dated as of
the Closing Date, in form and substance satisfactory to Buyer and its counsel,
giving the following clean legal opinions:
(1) valid organization of Sellers, Parents and each of the members
of the SRFI Group;
(2) corporate power and authority of each Seller and Parent to
enter into the Agreement;
(3) necessary foreign qualification of members of the SRFI Group;
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(4) No Breach or Default Opinion with respect to members of the
SRFI Group;
(5) No Violation Opinion with respect to each Seller and Parent;
(6) Remedies Opinion with respect to each Seller and this
Agreement;
(7) Legal Proceedings Opinion with respect to each Seller, Parent
and members of the SRFI Group;
(8) other legal matters agreed upon between Sellers, Parents and
Buyer; and
(9) no violation of registration provisions of the 1933 Act and
applicable state securities laws;
all in accordance with, and subject to the General Qualifications and other
limitations and provisions contained in, the Legal Opinion Accord of the ABA
Section of Business Law (1991).
(e) Injunctions. No injunction shall have issued restricting or
prohibiting the transactions contemplated by this Agreement.
(f) Clayton Act Matters. The waiting period required by Section 7A of
the Clayton Act shall have expired or been terminated.
(g) Environmental Matters. The results of any inspections, soil test
boring, soil tests, drainage tests, surveys, topographical analyses,
engineering studies or other investigations performed or obtained by Buyer
shall not have disclosed evidence of Hazardous Materials in, on or adjacent to
any of the real properties owned or occupied by any member of the SRFI Group,
other than those disclosed in any environmental studies or other information
listed on Schedule 10(g) which would materially and adversely affect the
operations of the SRFI Group taken as a whole. Buyer shall not have received
any evidence that there are existing violations of any Environmental Law, other
than those described in Schedule 10(g), or that any requisite environmental
license or permit or any occupance, use or building permits or other approvals
from applicable governmental authorities are currently required for the
continued operation of the facilities owned by the SRFI Group which have not
been obtained or are not in effect. In order to enable Buyer to conduct a due
diligence investigation, Sellers, Parents, the SRFI Group, and any entity
within the LSPI Group with relevant information on the environmental status of
the operating facilities of the SRFI Group shall provide Buyer with access to
the environmental files, licenses, permits, permit applications, consultant
reports, notices from local, state and federal governmental entities,
environmental audit and inspection reports, insurance files, and other
information necessary for Buyer to assess the environmental status of the
operating facilities of the SRFI Group, as well as permit or obtain permission
for Buyer to conduct soil and groundwater testing on or beneath the real
properties owned or occupied by any member of the SRFI Group.
(h) SRFI Restrictions. Each Seller and Parent shall have waived or
abandoned its right of first refusal with respect to the transfer of the
other's interest in the entities
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that own indirectly an interest in LSPI Fiber, SRFC or SRFI pursuant to this
Agreement.
(i) Consents. All consents and releases by third parties that are
required for the transfer of the Purchased Interests or the Assumed Liabilities
and Obligations, or that are required for the consummation of the transactions
contemplated hereby, or that are required in order to prevent a breach of or a
default under or a termination of any agreement to which any Seller or any
member of the SRFI Group or Affiliates is a party or to which any portion of
the property of any Seller or any member of the SRFI Group or Affiliates is
subject, including, but not limited to, the consent of New York Life Insurance
Company relating to the Note Purchase Agreement, shall have been obtained or
provided for.
(j) Financing. Buyer shall have used its best efforts to maintain an
aggregate of at least $250 million available under Buyer's committed and
uncommitted lines of credit until the Closing Date, and such lenders shall not
have cancelled or revoked such lines of credit prior to the Closing Date.
(k) FIRPTA Certificate. Sellers shall have furnished Buyer with
certificates of non-foreign status signed by the appropriate party and
sufficient in form and substance to relieve Buyer of all withholding
obligations under Section 1445 of the Code. If Sellers cannot furnish such
certificates or Buyer is not entitled to rely upon such certificates under the
provisions of Section 1445 of the Code and the regulations thereunder, Sellers
shall take and/or permit Buyer to take any and all steps necessary to allow
Buyer to satisfy the requirements of Section 1445 of the Code.
(l) Assignments of Contracts. Sellers shall have assigned to Buyer
the LSPI Supply Contract and all other Material Contracts.
(m) Purchase of LSPI and Niagara Paper. On or prior to the Closing
Date, Buyer shall have purchased all of the issued and outstanding capital
stock of Pentair Duluth Corp., a Minnesota corporation, Minnesota Paper
Incorporated, a Minnesota corporation and Niagara of Wisconsin Paper
Corporation, a Wisconsin corporation.
(n) Real Estate Consents. Sellers shall deliver to Buyer any consents
or approvals of any parties required pursuant to the terms of any contract,
agreement, option or undertaking affecting the Owned Real Estate.
(o) Title Insurance and Surveys.
(i) Buyer shall have obtained an ALTA Owners Policy of Title
Insurance Form B Owner's Form (the "Title Policy") for each parcel of
Owned Real Estate issued by a nationally recognized title company
reasonably acceptable to Buyer (the "Title Company"). The Title Policy
shall be in the amount of the purchase price allocated to the Owned Real
Estate by Buyer, showing fee simple title to the Real Estate in a member
of the SRFI Group (or if the member of the SRFI Group is a contract
-24-
purchaser, the seller designated under the applicable sales contract),
subject only to current real estate taxes not yet due and payable as of
the Closing Date, liens and encumbrances reflected on Schedule 10(m)
hereto, and such other covenants, conditions, easements and exceptions to
title as Buyer may approve in writing (collectively, the "Permitted
Exceptions"). With reasonable promptness, after the date of this
Agreement, Buyer shall order commitments (the "Commitments") for the Title
Policy. Copies of the Commitments shall be promptly delivered to Sellers.
The Commitments and the Title Policy to be issued by the Title Company
shall have all Standard and General Exceptions deleted so as to afford
full "extended form coverage" and shall contain an ALTA Zoning Endorsement
3.1, contiguity, non-imputation, and such other endorsements as may be
reasonably requested by Buyer. At Closing, Sellers shall deliver to
Buyer, a seller's affidavit or similar instruments as the Title Company
may require. Buyer shall be responsible for the cost of all title
insurance charges, premiums and endorsements, title abstracts and
attorneys' opinions, including all search, continuation and later-date
fees. To the extent that any parcel of Owned Real Estate is registered
Torrens title, Sellers shall deliver the owner's duplicate certificates of
titles.
(ii) Buyer shall have obtained an as-built plat of survey of each
Copies of the Surveys shall be promptly delivered to Sellers.
(iii) If (i) any Commitment or owner's duplicate certificate of
title discloses a title exception other than a Permitted Exception that
represents a defect affecting the marketability of the title to any parcel
of Owned Real Estate (an "Unpermitted Exception") or (ii) any Survey
discloses that improvements located on the surveyed land encroach onto
adjoining land or onto any easements, building lines or set-back
requirements, or
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encroachments by improvements from adjoining land onto the surveyed land
or onto any easements for the benefit of the surveyed land or overlap or
reflects that any utility service to the improvements or access thereto
does not lie wholly within the Owned Real Estate or an unencumbered
easement for the benefit of the Owned Real Estate or reflects any other
matter, any of which materially and adversely affects the use or
improvements of such parcel of Owned Real Estate, or any other matter
which renders title to any Owned Real Estate unmarketable (a "Survey
Defect"), then, in any such event, Sellers shall have thirty (30) days
from the date of delivery thereof to have the Unpermitted Exception
removed from such Commitment and owner's duplicate certificate of title,
if applicable, or the Survey Defect corrected or insured over by an
appropriate title insurance endorsement, all at Sellers' cost in a manner
reasonably satisfactory to Buyer, and in any such event the Closing shall
be extended, if necessary, to the date which is five (5) business days
after the expiration of such 30-day period. If Sellers fail to have any
Unpermitted Exception removed or any Survey Defect corrected or otherwise
insured over to the reasonable satisfaction of Buyer within the time
specified therefor, Buyer, at its sole option, upon not less than three
(3) days' prior written notice to Sellers, may terminate this Agreement
and all of Buyer's obligations hereunder.
(p) Note Purchase Agreement. Sellers and Parents and their Affiliates
shall have been released under the Note Purchase Agreement or the outstanding
indebtedness under the Note Purchase Agreement shall have been repaid.
(q) Other Matters. All corporate and other proceedings and actions
taken in connection with the transactions contemplated hereby and all
certificates, opinions, agreements, instruments and documents mentioned herein
or incident to any such transaction shall be delivered to Buyer and be
reasonably satisfactory in form and substance to Buyer and its counsel.
11. Conditions Precedent to Obligations of Sellers. The obligations of
Sellers and Parents hereunder (unless expressly waived by Sellers) are subject
to fulfillment by Buyer, prior to or at Closing, as the case may be, of each of
the following conditions:
(a) No Errors; Performance of Obligations. The representations and
warranties of Buyer herein shall be true and correct as of the Closing Date.
Buyer shall have performed in all material respects all of the obligations to
be performed by it hereunder in the time and manner herein stated.
(b) Officer's Certificate. Buyer shall have delivered to Sellers a
certificate, dated as of the Closing Date, executed by an officer of Buyer, and
in form and substance satisfactory to Sellers, certifying that the covenants
and conditions specified in this Agreement to be met by Buyer have been
performed or fulfilled and that the representations and warranties herein made
by Buyer are true and correct as of such date.
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(c) Certified Copy of Resolutions. Buyer shall have delivered to
Sellers a certified copy of resolutions adopted by the Board of Directors of
Buyer authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
(d) Opinion of Buyer's Counsel. Buyer shall have delivered to Sellers
the opinion of its counsel, dated as of the Closing Date, in form and substance
satisfactory to Sellers, Parents and their counsel, giving the following clean
legal opinions:
(1) valid organization of Buyer;
(2) corporate power and authority of Buyer to enter into the
Agreement;
(3) No Breach or Default Opinion;
(4) No Violation Opinion;
(5) Legal Proceedings Opinion;
(6) Remedies Opinion with respect to this Agreement; and
(7) other legal matters agreed upon between Sellers, Parents and
Buyer;
all in accordance with, and subject to the General Qualifications and other
limitations and provisions contained in, the Legal Opinion Accord of the ABA
Section of Business Law (1991).
(e) Injunctions. No injunctions shall have issued restricting or
prohibiting the transactions contemplated by this Agreement.
(f) Clayton Act Matters. The waiting period required by Section 7A of
the Clayton Act shall have expired or been terminated.
(g) Financing. Buyer shall have used its best efforts to maintain an
aggregate of at least $250 million available under Buyer's committed and
uncommitted lines of credit until the Closing Date and such lenders shall not
have cancelled or revoked such lines of credit prior to the Closing Date.
(h) Purchase of LSPI and Niagara Paper. On or prior to the Closing
Date, Buyer shall have purchased all of the issued and outstanding capital
stock of Pentair Duluth Corp., a Minnesota corporation, Minnesota Paper
Incorporated, a Minnesota corporation and Niagara of Wisconsin Paper
Corporation, a Wisconsin corporation.
(i) Note Purchase Agreement. Sellers and Parents and their Affiliates
(except SRFC) shall have been released under the Note Purchase Agreement and
the SRFI Pledges by Buyer's assumption of the Note Purchase Agreement or the
repayment of the outstanding indebtedness under the Note Purchase Agreement
shall have been made by Buyer.
(j) Other Matters. All corporate and other proceedings and actions
taken in connection with the transactions contemplated hereby and all
certificates, opinions,
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agreements, instruments and documents mentioned herein or incident to any such
transaction shall be delivered to Sellers and be reasonably satisfactory in
form and substance to Sellers and their counsel.
12. Broker. Pentair represents and warrants that CS First Boston was
retained by it to represent it in this transaction. Minnesota Power represents
and warrants that PaineWebber Incorporated was retained by it to represent it
in this transaction. Buyer represents and warrants that Dillon, Read & Co.
Inc. has been retained by Buyer to represent it. Each Parent shall be
responsible for payment of all fees and expenses of its respective investment
banker and Buyer shall be responsible for payment of all fees and expenses of
Dillon, Read & Co. Inc. Should any claims for commissions be made by any other
person claiming an interest in this Agreement, or in the underlying
transactions, by reason of any agreement, understanding or other arrangement
with Buyer or with either Parent, or their respective agents, servants,
employees, or other representatives, then the party through, or on account of,
whom such claims are made shall indemnify and hold harmless the other parties
from any and all liabilities and expenses in connection therewith in accordance
with the provisions of Section 15 below. The foregoing provisions of this
Section 12 shall survive not only the Closing hereunder, but also any
termination or cancellation of this Agreement.
13. [Intentionally Left Blank].
14. Confidential Information. (a) Buyer acknowledges that pursuant to
its right to inspect Sellers' and the SRFI Group's records and facilities under
Section 9, Buyer shall become privy to Confidential Information. Buyer agrees
that in the event the transaction contemplated by this Agreement is not
completed, all Confidential Information disclosed to Buyer shall remain
confidential, shall not be used for the benefit of Buyer or any of Buyer's
affiliates or disclosed to any person or entity, and all recorded evidence
thereof shall be delivered to Sellers together with an officer's certificate to
the effect that no copies thereof or any extracts, derivatives or compilations
thereof remain in possession of Buyer, its employees, affiliates, agents,
counsel or auditors. The confidentiality and nonuse provisions hereof shall
survive any termination of this Agreement until August 26, 1997 with respect to
Pentair and January 9, 1998 with respect to Minnesota Power. Buyer
acknowledges that it has entered into a confidentiality letter dated August 26,
1994 between itself and CS First Boston on behalf of Pentair, and a
confidentiality letter dated January 9, 1995 between itself and PaineWebber on
behalf of Minnesota Power, and agrees that such confidentiality letters shall
continue in full force and effect for the duration of their respective terms
in addition to the provisions of this Section 14.
(b) Sellers and Parents agree that in the event the transaction
contemplated by this Agreement is completed, all confidential and proprietary
information related to the SRFI Group shall remain confidential, shall not be
used for the benefit of Sellers, Parent or any of their affiliates or disclosed
to any person or entity. The confidentiality and nonuse obligations of Sellers
and Parents hereunder shall be on the same terms and conditions as the
confidentiality letters set forth in Section 14(a) and shall survive any
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termination of this Agreement until August 26, 1997 with respect to Pentair and
January 9, 1998 with respect to Minnesota Power.
15. Indemnification.
(a) Without limiting any remedy Buyer may have hereunder, Parents hereby
agree to indemnify, defend and hold Buyer harmless from and against and in
respect of any and all liabilities, losses, damages, claims, costs and
expenses, including reasonable attorneys fees, suffered or incurred by Buyer,
when so suffered or incurred, by reason of or relating to:
(i) any representation or warranty of Parents or Sellers contained
in this Agreement being breached or untrue;
(ii) any covenant or agreement of Sellers or Parents contained in
this Agreement being breached or not fulfilled in any material respect,
and not waived;
(iii) the assertion against Buyer of any other liability of any
Seller or Parent not assumed by Buyer hereunder; or
(iv) the assertion against Buyer, SRFC or SRFI of any liability of
the SRFI Group assumed by Sellers or Parents;
provided, however, that any claim arising out of any breach of warranty or
otherwise relating to (x) environmental conditions, permits or liabilities or
obligations with respect to Hazardous Materials shall be dealt with solely in
accordance with Section 18 hereof and (y) taxes shall be dealt with solely in
accordance with Section 23 hereof.
(b) Without limiting any remedy Parents and Sellers may have hereunder,
Buyer hereby agrees to indemnify, defend, and hold Parents and Sellers harmless
from and against and in respect of any and all liabilities, losses, damages,
claims, costs and expenses, including reasonable attorneys fees, by reason of
or relating to:
(i) any representation or warranty by Buyer contained in this
Agreement being breached or untrue;
(ii) any covenant or agreement of Buyer contained in this Agreement
being breached or not fulfilled in a material respect, and not waived; or
(iii) the failure of Buyer to pay, discharge, or perform any
guaranty, obligation or liability assumed by Buyer hereunder (including
without limitation the Assumed Liabilities and Obligations.
(c) Notice of any claim of indemnification under this Agreement (other
than for claims pursuant to Sections 18 and 23) shall be effective only if such
notice shall have been given in writing to the Indemnitor (as hereinafter
defined) on or prior to
-29-
December 31, 1997. Notice of claims by the Parents against Buyer regarding
Assumed Liabilities and Obligations shall be effective only if given in writing
on or prior to the date six months following the date on which the liability of
Parents is discharged with respect to the last outstanding Assumed Liabilities
and Obligations.
(d) The first $1,500,000 in the aggregate of claims made by Buyer or by
Parents and Sellers as a group (except claims against Parents under Sections 19
or 23 or under subparagraphs 15 (a)(iii) and (iv) above, claims against Buyer
under Section 19 or under subparagraphs 15 (b)(iii) above or claims against
either Buyer or Parents under Sections 12 or 14 hereof) pursuant to this
Section shall be borne by that party and shall not be indemnifiable. The
minimum amount of each such claim shall be not less than $50,000 in the
aggregate.
(e) In the event that indemnification is sought with respect to any
obligation of Buyer and Parents and Sellers under this Agreement, the party
seeking indemnification (the "Indemnitee") shall give the party from whom
indemnification is sought (the "Indemnitor") notice of any claim of the
commencement of any action or proceeding promptly after the Indemnitee receives
notice thereof, and shall permit the Indemnitor to assume the defense of any
such claim or litigation resulting from such claim.
If the Indemnitor assumes the defense of any such claim or litigation
resulting therefrom, the obligations of Indemnitor as to such claim shall be
limited to taking all steps necessary in the defense or settlement of such
claim or litigation resulting therefrom and to holding the Indemnitee harmless
from and against any and all losses, damages and liabilities caused by or
arising out of any settlement approved by the Indemnitor or any judgment in
connection with such claim or litigation resulting therefrom.
The Indemnitee may participate, at its expense, in the defense of any such
claim or litigation, provided that the Indemnitor shall direct and control the
defense of such claim or litigation.
Except with the written consent of the Indemnitee, the Indemnitor shall
not, in the defense of such claim or any litigation resulting therefrom,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof, the giving by the claimant or the
plaintiff to the Indemnitee of a release from all liability with respect to the
claim or litigation.
If the Indemnitor shall not assume the defense of any such claim or
litigation resulting therefrom, the Indemnitee may defend against such claim or
litigation in such manner as it may deem appropriate and, unless the Indemnitor
shall deposit with the Indemnitee a sum equivalent to the total amount demanded
in such claim or litigation, or shall deliver to Indemnitee a surety bond for
such amount in form and substance reasonably satisfactory to Indemnitee,
Indemnitee may settle such claim or litigation on such terms as it may
reasonably deem appropriate, and the Indemnitor shall promptly reimburse
Indemnitee for the amount of all costs and expenses, legal or otherwise,
reasonably incurred by the Indemnitee in connection with the defense against or
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settlement of such claims or litigation. If no settlement of such claim or
litigation is made, the Indemnitor shall promptly reimburse the Indemnitee for
the amount of any final judgment rendered with respect to such claim or in such
litigation and for all reasonable costs and expenses, legal or otherwise,
incurred by the Indemnitee in the defense against such claim or litigation, but
only to the extent that such amounts are actually paid.
16. [Intentionally left blank].
17. Expenses. Parents, Sellers and Buyer shall each be responsible for
all of their own expenses incurred in connection with the transactions
contemplated hereby. Parents and Sellers shall be responsible for the
accounting and auditing fees and expenses related to the preparation of the
Statement of Net Book Value. Parents and Sellers shall cooperate and cause
their accountants and SRFI's accountants to cooperate and assist Buyer and its
accountants (including consenting to the use of the SRFI Group Financial
Statements) with respect to any filings by Buyer with the Securities and
Exchange Commission in connection with the transactions contemplated hereby.
Parents and Sellers shall be responsible for any and all fees and expenses of
Parents', Sellers' and SRFI's accountants with respect to the foregoing. Buyer
will pay the incremental costs and expenses of auditing the SRFI financial
statements or other information required by Buyer, other than the Statement of
Net Book Value as of the Closing Date. Buyer will pay the cost of the
Commitments, Title Policies and Surveys set forth in Section 10(o).
18. Environmental Matters.
(a) Warranty. Parents warrant that, other than as disclosed to Buyer
pursuant to Schedule 10(g) attached:
(i) Compliance with Environmental Laws. The business and
operations of each member of the SRFI Group comply in all material
respects with all applicable Environmental Laws, except to the extent that
such noncompliance could not be reasonably expected to have a material
adverse effect on the business, operations, properties, assets or
condition (financial or otherwise) of the SRFI Group.
(ii) Notice/Receipt of Notice. No member of the SRFI Group has
given, or is required to give, nor has any member of the SRFI Group
received, any written notice, letter, citation, or order, or any written
warning, complaint, inquiry, claim or demand (or if verbal, to the extent
the warning, complaint, inquiry, claim or demand is recorded in a written
log) that: (i) any member of the SRFI Group has violated, or is about to
violate, any Environmental Law; (ii) there has been a release, or there is
a threat of release, of a non-de minimis quantity of Hazardous Material
from any member of the SRFI Group's property, facilities, equipment or
vehicles or previously owned or leased properties; (iii) any member of the
SRFI Group may be or is liable, in whole or in part, for material costs of
cleaning up, remediating, restoring or responding to a release of
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Hazardous Material; (iv) any of the SRFI Group's property or assets or
previously owned or leased properties or assets are subject to a lien in
favor of any governmental entity for any liability, costs or damages,
under any Environmental Law; and (v) any member of the SRFI Group may be
or is liable in whole or in part, for natural resource damages; provided,
that for purposes of liability for natural resource damages such notice,
letter, citation, order, inquiry, claim or demand was made by a
governmental agency.
(iii) Property on Environmental Cleanup Lists. No property now or
previously owned or leased by the SRFI Group is listed (or with respect to
Owned Real Estate proposed for listing) on the National Priorities List
pursuant to Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.)
("CERCLA"), on the CERCLIS or on any similar state list of sites
requiring investigation or clean-up.
(iv) [Intentionally left blank.]
(v) Past Disposal -- On site. Neither any member of the SRFI Group
nor to the best knowledge of Sellers any previous owner or other person,
has ever caused or permitted any material release or disposal of any
Hazardous Material on, under or at any of the facilities or properties of
the SRFI Group or any part thereof, and none of such facilities or
properties, nor any part thereof have ever been used (whether by any
member of the SRFI Group or to Sellers' best knowledge by any other
person) as a permanent storage facility or disposal site for any Hazardous
Material.
(vi) Underground Storage Tanks. There are no underground storage
tanks, including any associated piping, active or abandoned, including
petroleum storage tanks, on or under any property now or previously owned
or leased by the SRFI Group that, singly or in the aggregate, have, or may
reasonably be expected to have, a material adverse effect on the financial
condition, operations, assets, business, or properties of the SRFI Group.
(vii) Off-Site Disposal. No member of the SRFI Group has directly
transported or directly arranged for the transportation of any Hazardous
Material to any location which is listed, proposed for listing or, to the
best knowledge of Sellers, which if known to the state or federal
government would warrant listing on the National Priorities List pursuant
to CERCLA, on the CERCLIS or on any similar state list or which is or
reasonably could be the subject of federal, state or local enforcement
actions or other investigations which may reasonably be expected to lead
to material claims for any remedial work, damage to natural resources or
personal injury, including claims under CERCLA.
(viii) PCBs/Asbestos. There are no PCB's or friable asbestos
present at any property now or previously owned or leased by the SRFI
Group that, singly or in the aggregate, have, or may reasonably be
expected to have, a material
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adverse effect on the financial condition, operations, assets, business or
properties of the SRFI Group.
(ix) Pollution Control Equipment. All pollution control equipment
is in proper operating condition, has been properly maintained, and, in
the case of major ("end-of-pipe") wastewater treatment and air pollution
control facilities, has been designed to maintain compliance with
applicable Environmental Laws based upon the current production rates and
operating policies of SRFI in effect since January 1, 1995. All material
actions necessary to maintain in force any original, as delivered,
manufacturer warranties have been taken with respect to all major
components of wastewater and air pollution control facilities.
(x) Other Environmental Conditions Off-Site. To Sellers' best
knowledge there are no sites or locations currently owned or leased by the
SRFI Group where Hazardous Materials were disposed of which with the
passage of time, or the giving of notice or both could reasonably be
expected to give rise to any material liability under any Environmental
Law, to any member of the SRFI Group.
(b) Indemnity. Subject to the provisions of Section 18(c) below and the
limitations on indemnification set forth in Section 15(d) above, Parents shall
indemnify and hold Buyer and the members of the SRFI Group harmless from and
against any and all losses, liabilities, damages, injuries, penalties, fines,
costs, expenses and claims of any and every kind whatsoever (including
reasonable attorneys' and consultants' fees and expenses), paid, incurred or
suffered by Buyer as a result of any breach of warranties set forth in Section
18(a). With respect to any liability for disposal or arranging for disposal of
Hazardous Materials at sites or locations not currently owned or leased by the
SRFI Group this indemnity shall apply notwithstanding the fact that Buyer may
have received or obtained information before the Closing Date, other than that
information disclosed on Schedule 10(g) indicating or otherwise showing that a
claim exists or may exist under this indemnity, including, but not limited to,
any information relating to a breach of the warranties set forth in Section
18(a) above.
(c) Special Provisions. The following provisions shall apply in the
event of any breach of warranty under this Section 18.
(i) Notice. Buyer shall promptly, and in no event later than 90
days from the date Buyer has knowledge, notify Parents in writing of any
claim, demand or action, situation or event covered by the warranty and
indemnification provisions of Section 18, with respect to any work or
activities undertaken by Buyer which is subject to this indemnity, Buyer
shall provide Parents in a timely manner, written documentation prepared
in the normal course of business describing the work or activities.
(ii) Disclosure of On-Site Environmental Matters. Buyer agrees
that environmental matters associated with the Real Estate which are
contained in the environmental reports and documents listed on Schedule
10(g), as well as any
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information obtained by Buyer during its due diligence activities
conducted on the Real Estate between the signing of this Agreement and the
Closing Date, shall be considered disclosed to Buyer.
(iii) Election of Control Off-Site Work. At Parents' option, to
the extent Parents are obligated to indemnify Buyer under this Section for
the costs of investigating, remediating, restoring, cleaning-up any site
where Hazardous Materials were disposed and the site is located on
property not currently owned, leased or otherwise used by the SRFI Group
(nor reasonably anticipated to be used by the SRFI Group), Parents may
elect to take control of the investigation, remediation, restoration
and/or clean-up ("Environmental Cleanup"). If they elect to do so,
Parents shall so notify Buyer and Parents thereafter shall be solely
responsible (as between the parties hereto) for managing and paying for
such Environmental Cleanup (to the extent it is obligated to indemnify
Buyer) including any fines, penalties or third-party actions associated
with the Environmental Cleanup.
(iv) Buyer's Control of Work. Other than in connection with
off-site Environmental Cleanups, Buyer and/or the SRFI Group shall manage
and conduct any Environmental Cleanup work and shall manage and control
the repair and replacement of any pollution control equipment. All such
work shall be done in a commercially reasonable, cost-effective manner
using good faith business judgment and without regard to the availability
of indemnification hereunder.
(v) Pollution Control Equipment. In situations where the
installation of pollution control equipment is required in order to obtain
compliance with the Environmental Laws, Parents' liability under this
Section shall include both capital and reasonable operation and
maintenance costs (calculated on a reasonable present value basis).
(vi) Interference with Operations. In situations where the
Environmental Cleanup or the installation, repair or replacement of the
pollution control equipment will materially interfere with the conduct of
the operations of the SRFI Group, Parents shall be responsible for the
reasonable costs, expenses or losses associated with or attributable to
any material business interruption losses, provided that Buyer shall do
the work or activities in a manner that is least disruptive of the SRFI
Group's ongoing operations.
(d) Exclusive Remedy. This Section provides to Buyer, the respective
SRFI Group members, and anyone claiming under or through Buyer the exclusive
remedy against Parents with respect to any matter covered by this Section 18,
and such exclusive remedy shall lapse and be of no further force or effect on
and after the fifth anniversary of the Closing Date.
(e) Inspection of Books and Records. In the event of any claims made by
Buyer for indemnification under this Section 18, Sellers shall be entitled to
access, at
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times reasonably convenient to Buyer and the members of the SRFI Group, to such
books, records and data related to such claim for indemnification hereunder, as
Parents deem necessary to verify the basis or amount of such claim.
19. Termination of Agreement. This Agreement may be terminated upon ten
(10) business days prior written notice at any time prior to Closing without
liability of any party to the other:
(a) by mutual consent of Parents and Buyer;
(b) by Buyer, if notice of a material adverse development with respect
to the financial condition, results of operations or prospects of the SRFI
Group has been given, in accordance with Section 9(e) hereof;
(c) by Buyer, if Closing has not occurred on or before September 30,
1995 as a result of the nonfulfillment of any of the conditions to Buyer's
obligation to perform contained in Section 10 of this Agreement;
(d) by Parents, if notice of a material adverse development with respect
to the financial condition, results of operations or prospects of Buyer has
been given, in accordance with Section 9(e) hereof;
(e) by Parents, if Closing has not occurred on or before September 30,
1995 as a result of the nonfulfillment of any of the conditions to Sellers'
obligation to perform contained in Section 11 of this Agreement; and
(f) by any party, if Closing has not occurred by October 31, 1995.
Termination of this Agreement shall not affect in any way the continuing
obligations of the parties hereto pursuant to Section 12 relating to brokers
and Section 14 hereof relating to the treatment of confidential information.
20. Announcements. Buyer and Parents shall cooperate in the
preparation of any announcements regarding the transactions contemplated by
this Agreement. Except as required by law, no party shall issue any
announcement regarding the transactions contemplated hereby without the prior
consent of the other parties, which consents shall not be unreasonably
withheld. The covenants set forth in this Section shall be enforceable in law
or at equity by either party.
21. Records. After the Closing Date, Buyer shall retain the books,
records or other data of each member of the SRFI Group existing at the Closing
Date for a period of ten (10) years. During the retention period specified
above, Parents shall be entitled to access, at times reasonably convenient to
Buyer, to such books, records and data in connection with the preparation or
handling of Sellers' and Parents' tax returns, financial reports, tax audits,
W-2 forms, litigation matters or any other reasonable need of any Seller or
Parent. If Buyer wishes to dispose of such material (whether during or
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following the 10-year period), it shall give Parents prior notice and the
opportunity to remove such material at the expense of the Parent(s) requesting
the same.
22. Assistance after Closing. Buyer shall furnish, at no cost to
Parents and Sellers, such assistance to Parents and Sellers in the preparation
of their respective fiscal 1994 and 1995 financial and tax reports as Parents
and Sellers may reasonably request. All such assistance shall be on a
confidential basis and Parents and Sellers agree to comply with the
confidentiality and limitation on use provisions of Section 14 hereof with
respect to such confidential information.
Buyer shall also provide Parents with reasonable assistance, including,
without limitation, furnishing of documents and making available to Parents
potential witnesses within its control or that of any member of the SRFI Group
and the assistance of their respective engineers or experts, in the defense of
any claim, lawsuit or tax examination arising out of the operations of SRFI
prior to the Closing Date for which Parents or Sellers retain liability under
this Agreement. Parents shall reimburse Buyer or such member of the SRFI Group
for its out of pocket expenses incurred in providing such assistance.
23. Tax Matters; Payment of Taxes.
(a) Tax Returns. Parents and Sellers shall prepare or cause to be
prepared and shall timely file all Returns (including any amendments thereto)
relating to any Taxes of the members of the SRFI Group with respect to any tax
period ending on or before the Closing. Parents or Sellers shall pay or cause
to be paid all Taxes of the members of the SRFI Group with respect to any
period ending on or before the Closing as determined in accordance with
Sections 23(b) and 23(c) hereof.
(b) Apportionment of Income. Parents and Sellers will include the
income of the SRFI Group (including any deferred income and any excess loss
accounts pursuant to relevant rules and regulations of the Internal Revenue
Service) on Parents' and Sellers' federal and state income tax Returns for all
periods through the Closing Date and shall pay any federal and state income
taxes attributable to such income. The SRFI Group will furnish all tax
information requested by Parents and Sellers to it for inclusion in Parents'
and Sellers' income tax Returns for the period which includes the Closing Date
in accordance with Parents' and Sellers' past custom and practice. The income
of the SRFI Group will be apportioned to the period up to and including the
Closing Date and the period after the Closing Date by closing the books of the
SRFI Group as of the end of the Closing Date.
(c) Allocation of Taxes. For purposes of this Agreement, in the case of
any Taxes that are imposed on a periodic basis and are payable for a period
that begins before the Closing Date and ends after the Closing Date, Parents or
Sellers shall reimburse Buyer for the portion of such Taxes payable for the
period ending on the Closing Date to the extent such Taxes are not reflected on
the Statement of Net Book Value as of the Closing Date. For this purpose, the
portion of such Tax payable for the period ending on the Closing Date shall in
the case of any Taxes other than Taxes based
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upon or related to income or sales or use taxes, be deemed to be the amount of
such Taxes for the entire period multiplied by a fraction, the numerator of
which is the number of days in the period ending on the Closing Date, and the
denominator of which is the number of days in the entire period. The preceding
sentence shall be applied with respect to Taxes relating to capital (including
net worth or long-term debt) or intangibles by reference to the level of such
items on the Closing Date to the extent such Taxes are not reflected on the
Statement of Net Book Value as of the Closing Date.
(d) Indemnity. Notwithstanding anything to the contrary in this
Agreement whether expressed or implied, Parents shall indemnify and hold
harmless Buyer, and each member of the SRFI Group, against:
(1) all Taxes imposed on any member of the SRFI Group with respect to
any period ending on or before the Closing;
(2) all Taxes imposed on Buyer or on any member of the SRFI Group with
respect to any period which begins before the Closing Date and ends
after the Closing Date to the extent allocated to the portion of
such period ending on the Closing Date, determined in accordance
with Section 23 hereof;
(3) all Taxes imposed on Buyer or on any member of the SRFI Group with
respect to income earned by any member of the SRFI Group for the
period beginning January 1, 1995 and ending on the Closing Date,
determined in accordance with Section 23(b) hereof;
(4) all Taxes imposed on any member of the SRFI Group as a result of the
Section 338(h)(10) Elections contemplated by Section 24 hereof;
(5) all Taxes imposed on any member of an affiliated, consolidated,
combined or unitary group which includes or has included any member
of the SRFI Group with respect to any taxable period that ends on or
prior to the Closing;
(6) all liability resulting from or attributable to a breach of the
representations, warranties and covenants contained in Section 7(t)
and this Section 23; and
(7) any claim under Treas. Reg. Section 1.1502-6 by the Internal Revenue
Service against any member of the SRFI Group which was a member of
Parents' respective consolidated groups prior to the Closing Date
with respect to any federal income tax liability of Parents and
Sellers for any period ending on or prior to December 31, 1995.
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(e) Post-Closing Elections. Parents and Sellers will (or will cause
members of the SRFI Group, as the case may be to) make or join, as necessary,
with Buyer in making any election relating to income taxes, including, but not
limited to, elections under Section 732(d) and Section 754 of the Code, for the
year in which the Closing Date occurs. Prior to Closing, Buyer shall retain an
appraiser to appraise the assets of the SRFI Group. Sellers and the members of
the SRFI Group and their respective employees shall cooperate fully with Buyer
and its appraiser in connection with the appraisal. The cost of the appraisal
shall be borne by Buyer.
(f) Control of Contest. Parents shall have the right, at their own
expense, to control any audit or determination by any taxing authority,
initiate any claim for refund or amended Return and contest, resolve and defend
against any assessment, notice of deficiency or other adjustment or proposed
adjustment of Taxes for any taxable period for which any Seller or Parent (or
any of their affiliates) is charged with responsibility for filing a Return
under this Agreement. Each party will allow the other and its counsel (at its
or their own expense) to be represented during any audits of income tax Returns
to the extent that disputed items therein relate to the SRFI Group. Buyer
shall, or shall cause its affiliates to, undertake or authorize actions in
their capacity as tax matters partner of the SRFI Group as requested by Parents
with respect to this Section 23(f).
(g) General. Each of Buyer, Parents and Sellers shall provide the
other, and Buyer shall following the Closing cause each member of the SRFI
Group to provide to Parents and Sellers, with the right, at reasonable times
and upon reasonable notice, to have access to personnel, and to copy and use,
any records or information that may be relevant in connection with the
preparation of any Returns, any audit or other examination by any taxing
authority or any litigation relating to liability for Taxes. Information
required in the filing of any Return shall be provided to the other party not
less than thirty (30) days before such Return is due. Parents and Sellers will
allow Buyer an opportunity to review and comment upon any Returns under
Subsection 23(a) (including any amended returns) to the extent that they relate
to any member of the SRFI Group. Parents and Sellers will take no position on
such Returns that relate to any member of the SRFI Group that would adversely
affect any member of the SRFI Group after the Closing. Parents, Sellers and
Buyer shall retain all records relating to Taxes for as long as the statute of
limitations with respect thereto shall remain open.
(h) Sales and Transfer Taxes. All sales and transfer Taxes (including
all stock transfer taxes, if any) incurred in connection with the transactions
contemplated hereby will be borne by the statutorily responsible party. If
required by applicable law, Buyer or Parents or Sellers, as the case may be,
will join in the preparation and execution of any Returns or other
documentation related to the payment of any sales or transfer Taxes.
(i) Tax Effective Time. For purposes of Taxes, the Closing shall be
deemed to have occurred, and shall be effective, as of the close of business on
the Closing.
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(j) Survival. All of the representations, warranties, covenants and
indemnities contained in this Agreement which relate to Taxes shall survive the
Closing (even if the Indemnified Party knew or had reason to know of any
misrepresentation or breach of warranty or covenant at the time of the Closing)
and continue in full force and effect until the expiration of the applicable
statute of limitations (including any extensions thereof).
(k) Tax Agreements. Minnesota Power and Buyer agree that, upon Closing,
the Tax Agreement dated October 5, 1993 and the State Tax Agreement dated
October 5, 1993, both between Minnesota Power and its subsidiaries, including
SRFC, shall terminate as to SRFC, and, that notwithstanding Section 7 of each
such agreement, following termination of each agreement, SRFC and Buyer shall
not be bound by the terms of the agreements and not be entitled to receive or
obligated to make payments under the agreements attributable to any period
during which SRFC was a party to each agreement.
24. Section 338(h)(10) Election. Minnesota Power and Synertec agree to
jointly file with Buyer the election (the "Election") provided for by Section
338(h)(10) of the Code and the corresponding election under applicable state or
local tax law with respect to the sale and purchase of the Stock. In
connection with the Election:
(a) Buyer and Minnesota Power and Synertec shall each provide to the
other all necessary information, including information as to tax basis, to
permit the Election to be made and its consequences to be accurately reflected
for all relevant accounting and tax reporting purposes, and to take all other
actions necessary to enable Buyer and Minnesota Power and Synertec to make the
Election.
(b) Buyer shall retain at Buyer's cost an appraiser to prepare a report
(a "Report") appraising the value of the assets of SRFC to determine the proper
allocations (the "Allocations") of the "adjusted grossed-up basis" (within the
meaning of Treasury Regulation Section 1.338(b)-1) and the modified adjusted
deemed selling price ("MADSP") (within the meaning of Treasury Regulation
Section 1.338(h)(10)-1) among the assets of SRFC in accordance with
Section 338(b)(5) and (h)(10) of the Code and Treasury Regulations thereunder.
The Report shall be finalized no later than 120 days after the Closing
Date. At least thirty (30) days before such Report is finalized, Buyer shall
provide Parents a copy of the appraiser's preliminary report or indication of
the Allocations. After receipt of such preliminary report or indication,
Minnesota Power shall give to Buyer in writing any objections or questions
which Minnesota Power may have to such preliminary report or indication, and
the parties shall thereafter use their best efforts to resolve such objections
or questions so that the Report is finalized no later than 120 days after the
Closing Date and the Election is timely made.
(c) Buyer and Minnesota Power and Synertec shall jointly prepare a Form
80-23A, together with all required attachments, and the corresponding forms
required or
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appropriate under state tax laws (collectively, an "Election Form") in a manner
consistent with the Allocation.
(d) As promptly as practicable after the Closing Date, Buyer and
Minnesota Power and Synertec shall take all action and file all documents to
effect and preserve a timely Election.
(e) Minnesota Power and Synertec shall allocate the MADSP, if any,
resulting from the Election in a manner consistent with the Allocations and
shall not take any position inconsistent with the Election or the Allocations
in connection with any Return; provided, however, that Minnesota Power and
Synertec may take into account their transaction costs when calculating such
MADSP.
(f) Buyer shall allocate the "adjusted grossed-up basis" of the capital
stock of SRFC among the assets of SRFC in a manner consistent with the
Allocations and shall not take any position inconsistent with the Election or
the Allocations in any Return or otherwise; provided, however, that Buyer may
add its transaction costs to the "adjusted grossed-up basis" of the capital
stock of SRFC for purposes of allocating among the assets of SRFC.
(g) Synertec and Buyer acknowledge that for federal income tax purposes
(and for state income tax purposes in those states whose income tax provisions
follow the federal income tax treatment), the sale of the capital stock of SRFC
from Synertec to Buyer will be treated as a sale of assets by SRFC to Buyer
followed by a complete liquidation of SRFC with and into Synertec, and the
parties agree to report the transaction in a manner consistent with this
treatment and to take no positions inconsistent with this treatment. The
parties also agree that neither Buyer nor SRFC shall be liable for any Taxes
resulting from the sale of the capital stock of SRFC or the Election.
25. Limitations on Liability.
(a) Any amount of indemnity payable by Parents under Sections 12, 14,
15, 18, 19 or 23 of, or relating to the transactions contemplated by, this
Agreement, or arising in connection with the operations, properties or
financial condition of members of the SRFI Group shall be paid by Parents
severally, and not jointly or jointly and severally, in accordance with the
following principles:
(i) if the claim arises out of any misrepresentation or breach of
warranty made with respect to either Parent or its respective Affiliates,
the claim shall be the sole responsibility of such Parent;
(ii) if the claim arises out of any misrepresentation or breach of
warranty made with respect to LSPI Fiber, SRFI or SRFC, the claim shall be
the responsibility of both Parents, who shall each pay an amount of
indemnity with respect thereto in proportion to their respective equity
interests therein;
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(iii) if the claim arises out of the breach of any covenant or
agreement by either Parent or its respective Affiliates, the claim shall
be the sole responsibility of such Parent;
(iv) if the claim arises out of the breach of any covenant or
agreement by LSPI Fiber, SRFI or SRFC, the claim shall be the
responsibility of both Parents, who shall each pay an amount of indemnity
with respect thereto in proportion to their respective equity interests
therein;
(v) if the claim arises out of assertion by any third party of any
claim (including tax claims), liability or obligation against or with
respect to any member of the SRFI Group which is assumed, or indemnified
against, by either Parent, with respect to its respective Affiliates, the
claim shall be the sole responsibility of such Parent;
(vi) if the claim arises out of assertion by any third party of any
claim (including tax claims), liability or obligation against or with
respect to any member of the SRFI Group which is assumed, or indemnified
against, by both Parents, with respect to LSPI Fiber, SRFI or SRFC, the
claim shall be the responsibility of both Parents, who shall each pay an
amount of indemnity with respect thereto in proportion to their respective
equity interests therein; and
(vii) if the claim arises from the termination of this Agreement,
compensation for which is provided in Section 19 hereof, the Parent(s) in
breach shall be solely responsible for such claim.
To the extent that any amount of indemnity is payable by Buyer to Parent(s),
the foregoing principles shall apply to the determination of the Parent to whom
such indemnity is payable, mutatis mutandis.
(b) No party is responsible for, and no party may recover from any other
party, any amount of consequential (e. g., lost profits or the like) or
punitive damages. Notwithstanding the foregoing exclusion, to the extent any
party hereto sustains any loss or incurs any expense compensable under this
Agreement that contains or includes any measure of consequential or punitive
damages awarded to a third party, then such indirect consequential and punitive
damages may be recovered.
(c) Parents and Buyer specifically agree that the total amount of
indemnification payable by Parents pursuant to Sections 15, 18 and 23 together
shall not exceed the amount of the purchase price paid to each Parent in cash
hereunder.
26. Amendment and Waiver. This Agreement may not be amended or modified
at any time or in any respect other than by an instrument in writing executed
by Buyer and Parents.
27. Notices. Any notice or communication provided for in this Agreement
shall be in writing and shall be deemed given when delivered personally,
against receipt, or
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when deposited in the United States mail, registered or certified mail, return
receipt requested to the following address:
(a) If to Pentair:
Pentair, Inc.
1500 County Road B2 West
St. Paul, Minnesota 55113-3105
Attention: Ronald V. Kelly
Facsimile: (612) 639-5209
with a copy to:
Henson & Efron, P.A.
1200 Title Insurance Building
400 Second Avenue South
Minneapolis, Minnesota 55401
Attention: Louis L. Ainsworth
Facsimile: (612) 339-6364
(b) If to Minnesota Power:
Minnesota Power & Light Company
30 West Superior Street
Duluth , Minnesota 55802
Attention: David G. Gartzke
Facsimile: (218) 723-3960
with a copy to:
Minnesota Power & Light Company
30 West Superior Street
Duluth , Minnesota 55802
Attention: Steven W. Tyacke
Facsimile: (218) 723-3955
(c) If to Buyer:
Consolidated Papers, Inc.
231 First Avenue North
P. O. Box 8050
Wisconsin Rapids, WI 54495-8050
Attention: Carl H. Wartman
Facsimile: (715) 422-3203
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with a copy to:
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606-5096
Attention: Robert A. Schreck, Jr.
Facsimile: (312) 984-3669
Any party may change the above address for notice by written notice to the
other parties in accordance with the provisions of this Section.
28. Parties in Interest. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by Parents, Sellers and Buyer, their respective successors and permitted
assigns. No party may assign this Agreement without the express written
consent of the other parties, except that Buyer may assign this Agreement to an
affiliate of Buyer provided that no such assignment shall relieve Buyer of its
obligations hereunder or otherwise prejudice Parents or Sellers. This
Agreement shall not confer any rights or remedies upon any person other than
Buyer, Parents and Sellers and their respective successors and permitted
assigns.
29. Further Assurances. Each party shall from time to time execute and
deliver such further documents and do such further acts as the other parties
may reasonably require for carrying out the purposes and intent of this
Agreement.
30. No Waivers. No failure of any party to this Agreement to pursue any
remedy resulting from a breach of this Agreement shall be construed as a waiver
of that breach or as a waiver of any subsequent or other breach.
31. Governing Law. This Agreement shall be construed in accordance with
and governed by the substantive laws of the state of Minnesota without giving
effect to the choice of law provisions thereof. This Agreement shall be
subject to the exclusive jurisdiction of the courts of, and United States
federal courts sitting in, the state of Minnesota, and all parties hereby
irrevocably submit to the jurisdiction of such courts with respect to any claim
arising out of this Agreement.
32. Severability. Should any provision of this Agreement be or become
invalid in whole or in part or be incapable of performance for whatever reason,
then the validity of the remaining provisions of this Agreement shall not be
affected thereby. In such event, the parties hereby undertake to substitute
for any such invalid provision or for any provision incapable of performance, a
provision which corresponds to the spirit and purpose of such invalid or
unperformable provision as far as permitted under applicable law, so as to
realize to the fullest extent possible the economic purpose and effect of this
Agreement.
33. Miscellaneous. This Agreement constitutes the entire agreement
between the parties and supersedes all prior representations, understandings or
agreements between them, written or oral, respecting the within subject matter.
Headings are for
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convenience only and are not intended to alter any of the provisions of this
Agreement. Words importing the singular number include the plural and vice
versa. This Agreement may be signed in multiple copies, each of which shall be
considered an original, but all of which shall together constitute one and the
same instrument.
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IN WITNESS WHEREOF, each party has caused this Agreement to be executed by
its authorized officer as of the date first above written.
PENTAIR, INC.
By: Winslow H. Buxton
--------------------------------------
Its: CEO
--------------------------------------
MINNESOTA POWER & LIGHT COMPANY
By: Arend J. Sandbulte
--------------------------------------
Its: Chairman and President
--------------------------------------
SYNERTEC, INC.
By: Gerald B. Ostroski
--------------------------------------
Its: President and General Manager
--------------------------------------
LSPI FIBER CO.
By Pentair Duluth Pulp Corp.,
its general partner
By Conrad V. Kelly
--------------------------------------
its CEO
--------------------------------------
By Minnesota Pulp Incorporated II,
its general partner
By: David G. Gartzke
--------------------------------------
Its: V. President & Chief Financial Officer
--------------------------------------
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CONSOLIDATED PAPERS, INC.
By: Patrick F. Brennan
--------------------------------------
Its: President & CEO
--------------------------------------
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