-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O8DJrE58vFCIHXSIoueHVM6gSw/eWfQ1uvyn3zyUHzcxDxNoqHHsf/LHJ323bKpI DjVxfIQGsKSpS6q01u5EcQ== 0000019731-99-000013.txt : 19991018 0000019731-99-000013.hdr.sgml : 19991018 ACCESSION NUMBER: 0000019731-99-000013 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19991003 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19991015 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHESAPEAKE CORP /VA/ CENTRAL INDEX KEY: 0000019731 STANDARD INDUSTRIAL CLASSIFICATION: PAPERBOARD MILLS [2631] IRS NUMBER: 540166880 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-03203 FILM NUMBER: 99729085 BUSINESS ADDRESS: STREET 1: 1021 E CARY ST STREET 2: PO BOX 2350 CITY: RICHMOND STATE: VA ZIP: 23219 BUSINESS PHONE: 8046971000 MAIL ADDRESS: STREET 1: P O BOX 2350 STREET 2: 1021 EAST CARY STREET CITY: RICHMOND STATE: VA ZIP: 23218 FORMER COMPANY: FORMER CONFORMED NAME: CHESAPEAKE CORP OF VIRGINIA DATE OF NAME CHANGE: 19840509 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------ FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (date of earliest event reported): October 3, 1999 ---------------- CHESAPEAKE CORPORATION ---------------------- (Exact Name of Registrant as Specified in Charter) Virginia 1-3203 54-0166880 -------- ------ ----------- (State or Other (Commission (IRS Employer Jurisdiction of File Number) Identification No.) Incorporation) 1021 East Cary Street, Richmond, VA 23219 ----------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (804)697-1000 -------------- Exhibit Index appears on page 13. Item 2: Acquisition or Disposition of Assets. Effective as of October 3, 1999, Wisconsin Tissue Mills Inc. ("WTM"), a wholly owned subsidiary of Chesapeake Corporation ("Chesapeake" or the "Company"), completed the formation of a joint venture with Georgia-Pacific Corporation ("G-P") through which the two companies combined their commercial tissue businesses. WTM contributed substantially all of its assets and liabilities to the joint venture, known as Georgia-Pacific Tissue, LLC (the "JV"), and received a 5% equity interest in the JV and a tax-deferred cash distribution of approximately $755 million (the "Special Distribution"). G-P contributed certain of its commercial tissue assets and related liabilities to the JV in return for a 95% equity interest. The respective net values of WTM's and G-P's contributed businesses were based on a multiple of each business' 1998 earnings before interest, income taxes, depreciation and amortization ("EBITDA"), which valuation principle was negotiated on an arms' length basis. In connection with its receipt of the Special Distribution, WTM entered into an Indemnity Agreement pursuant to which it agreed to indemnify G-P, under certain circumstances, against certain payments G-P may make under a guaranty of JV debt that was incurred to finance the Special Distribution (the "JV Debt"). At any time on or after the third anniversary of the October 4, 1999, closing date, WTM will have up to 3 "put" rights to sell to G-P, or cause the JV to redeem, all or any portion of WTM's equity interest in the JV. At any time after the tenth anniversary of the closing date, G-P will have the right to "call" all, but not less than all, of WTM's equity interest in the JV. The purchase and sale price of WTM's equity interest for both the put and call will be based on the JV's EBITDA for the immediately preceding 4 fiscal quarters and the same multiple used to value WTM's and GP's initial contributions to the JV. Certain events, including exercise of the put or call, reduction of the principal amount of the JV Debt or the JV's sale of the assets contributed to it by WTM, may trigger recognition of all or a portion of WTM's deferred tax liability related to the transaction. Under certain circumstances (primarily related to a sale by the JV of WTM contributed assets outside of the ordinary course of business prior to the tenth anniversary of the closing date, or a failure by the JV to maintain the principal amount of the JV Debt and any refinancings thereof outstanding for 30 years after the closing date, or G-P's exercise of the call or other buy out of WTM's equity interest in the JV), the JV will distribute to WTM an amount equal to the amount of WTM's federal and state income tax liability that is triggered, excluding the first $22 million triggered solely by sales of contributed assets. In certain other circumstances (primarily related to a determination that the transaction was not eligible for tax deferral or in the event of an involuntary dissolution of the JV), G-P will pay to WTM an amount equal to one-half of the net income tax benefit to G-P resulting therefrom. G-P will control and manage the JV, subject to obtaining WTM's consent in connection with certain actions. Chesapeake and WTM, on the one hand, and G-P, on the other hand, made customary representations, warranties and covenants to the JV in connection with their contributions of assets and liabilities, and agreed to indemnify the JV (subject to certain deductibles and caps on the amount of such indemnification, and limitations on the periods during which claims may be asserted) in connection with a breach of such representations, warranties and covenants. The JV has agreed to indemnify Chesapeake, G-P and their respective affiliates against, among other things, the liabilities assumed by the JV in connection with the transaction. The WTM assets contributed to the JV include production facilities located in Bellemont and Flagstaff, Arizona; Alsip, Illinois; Greenwich, New York; Menasha and Neenah, Wisconsin; and Toluca, Mexico. The JV has assumed all of WTM's liabilities that relate primarily to its contributed business, including any liabilities associated with certain alleged violations of antitrust laws (as more fully described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (the "1998 Form 10-K")), but specifically excluding most tax liabilities related to the contributed assets for periods prior to formation of the JV and certain liabilities that have been retained by WTM associated with the discharge of PCBs and other hazardous materials in the Fox River and Green Bay System (as more fully described in the 1998 Form 10-K). The foregoing description is qualified in its entirety by reference to the Joint Venture Agreement, Operating Agreement and Indemnity Agreement filed as exhibits hereto, which agreements are incorporated herein by reference. Item 7: Financial Statements, Pro Forma Financial Information and Exhibits. a) Financial Statements of Business Acquired. Not applicable b) Pro Forma Financial Information. Unaudited pro forma condensed consolidated balance sheet as of June 30, 1999, and unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 1999, and the year ended December 31, 1998, are set forth below under the heading Pro Forma Financial Information. c) Exhibits. Number Exhibit ------ ------- 2.1 Joint Venture Agreement among Georgia- Pacific Corporation, Chesapeake Corporation, Wisconsin Tissue Mills Inc. and Georgia-Pacific Tissue Company, LLC, dated as of October 4, 1999. 2.2 Operating Agreement of Georgia-Pacific Tissue, LLC, dated as of October 4, 1999, among Wisconsin Tissue Mills Inc. and Georgia-Pacific Corporation. 2.3 Indemnity Agreement, dated as of October 4, 1999, between Wisconsin Tissue Mills Inc. and Georgia-Pacific Corporation. The Company agrees to furnish supplementally to the Securities and Exchange Commission, upon request, copies of any schedules and exhibits to the foregoing exhibits that are not filed herewith in accordance with Item 601(b)(2) of Regulation S-K. PRO FORMA FINANCIAL INFORMATION Set forth below is certain pro forma condensed consolidated financial information with respect to WTM's contribution of substantially all of its assets and liabilities to the JV and its receipt of a 5% equity interest in the JV and the Special Distribution of approximately $755 million. The pro forma condensed consolidated financial information also reflects: (1) the acquisition, as of March 18, 1999, of substantially all of the outstanding capital shares of Field Group plc ("Field Group"), a European specialty packaging company headquartered in the United Kingdom, for approximately $373 million, as reported in the Company's Current Report on Form 8-K dated April 2, 1999, and its Current Report on Form 8-K/A filed May 28, 1999; and (2) the disposition of approximately 278,000 acres of the Company's timberlands (the "Timberlands"), which was completed September 10, 1999, and its Building Products business, which was completed July 30, 1999, for combined cash proceeds of approximately $185 million. The unaudited Pro Forma Condensed Consolidated Balance Sheet presents the consolidated financial position of Chesapeake assuming that the contribution of WTM's business to the JV and the sales of the Timberlands and the Building Products business had occurred on June 30, 1999. The unaudited Pro Forma Condensed Consolidated Statements of Operations for the six months ended June 30, 1999, and for the year ended December 31, 1998, present the consolidated results of operations of Chesapeake assuming that the contribution of WTM's business to the JV, the acquisition of Field Group and the sale of the Timberlands and the Building Products business had all occurred as of January 1, 1998, with the net proceeds of the dispositions being used to repay a portion of the Company's long-term debt and reduce related interest expense. The unaudited pro forma condensed consolidated financial information should be read in conjunction with the Company's historical consolidated financial statements as contained in the 1998 Form 10-K and the unaudited consolidated interim financial statements contained in its Quarterly Report on Form 10-Q for the quarter ended June 30, 1999. The historical financial statements of Field Group for its fiscal year ended April 4, 1999, are contained in the Company's Current Report on Form 8- K/A filed on May 28, 1999. Certain pro forma condensed consolidated financial information with respect to the Field Group acquisition is contained in the Company's Current Report on Form 8-K/A filed on May 28, 1999, and Chesapeake's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999. Additionally, in accordance with SEC rules, the Company has not included a pro forma adjustment to reflect the use of excess cash balances of approximately $487 million. As previously announced, the Company intends to use a portion of the Special Distribution and the net proceeds from the sale of Timberlands and the Building Products business to invest in strategic business acquisitions that would be expected to generate a return which is greater than Chesapeake's weighted-average cost of capital, which is currently estimated to be 10%. The unaudited Pro Forma Condensed Consolidated Balance Sheet and unaudited Pro Forma Condensed Consolidated Statements of Operations are presented for illustrative purposes only and are not intended to be indicative of actual results that may have been achieved had the transactions occurred as of the dates indicated above nor do they purport to indicate results which may be attained in the future. PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET JUNE 30, 1999 (In millions) (unaudited) Historical ----------- Chesapeake Divesti- Pro Forma Corporation tures(1) Adjustments Pro Forma ----------- ------- ----------- --------- ASSETS: Cash and cash equivalents $ 18.2 $ -- $486.8 (3) $ 505.0 Accounts receivable 202.9 53.6 149.3 Inventory 151.9 57.1 94.8 Other current assets 18.2 3.0 (0.3)(4) 14.9 -------- ------ ------ -------- Total current assets 391.2 113.7 486.5 764.0 Property, plant and equipment 751.0 374.2 376.8 Goodwill and intangible assets 263.9 23.6 240.3 Other assets 95.9 9.0 1.0 (4) 92.9 5.0 (4) -------- ------ ------ --------- Total assets $1,502.0 $520.5 $492.5 $1,474.0 ======== ====== ====== ======== LIABILITIES AND STOCKHOLDERS' EQUITY: Accounts payable and accrued expenses $ 218.0 $ 34.0 $ 22.3 (4) $ 206.3 Current portion of long-term debt 5.2 0.2 5.0 -------- ------ ------ -------- Total current liabilities 223.2 34.2 22.3 211.3 Long-term debt 696.8 0.1 (402.1)(3) 294.6 Other long-term liabilities 46.1 13.7 1.4 (4) 33.8 Deferred taxes 100.8 132.9 (4) 233.7 -------- ------ ------ -------- Total liabilities 1,066.9 48.0 (245.5) 773.4 Stockholders' equity 435.1 472.5 738.0 (4) 700.6 -------- ------ ------ -------- Total liabilities and stockholders' equity $1,502.0 $520.5 $492.5 $1,474.0 ======== ====== ====== ======== PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999 (In millions, except per share amounts) (unaudited) Pro Historical Forma ---------- ------- Chesapeake Divesti- Field Pro Forma Corporation tures(1) Group(2) Adjustments Pro Forma ----------- -------- -------- ----------- --------- Net sales $566.6 $227.2 $79.4 $ -- $418.8 Costs and expenses: Cost of products sold 408.8 150.7 66.9 325.0 Depreciation, amortization and cost of timber harvested 42.4 18.6 7.8 31.6 Selling, general and administrative expenses 77.5 24.7 7.7 60.5 ------ ------ ------ ------ ------ Income (loss) from operations 37.9 33.2 (3.0) 1.7 Other income, net 5.4 1.9 1.3 1.4(5) 6.2 Interest expense, net (17.4) (5.9) 12.7(3) (10.6) ------ ------ ------ ------ ------ Income (loss) before income taxes 25.9 35.1 (7.6) 14.1 (2.7) Income taxes 9.0 12.8 (2.7) 5.6(6) (0.9) ------ ------ ------ ------ ------ Net income (loss) $ 16.9 $ 22.3 ($4.9) $8.5 $ (1.8) ====== ====== ====== ====== ====== Basic earnings (loss) per share $ 0.79 $(0.08) ====== ====== Diluted earnings (loss) per share $ 0.78 $(0.07) ====== ====== PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 (In millions, except per share amounts) (unaudited) Pro Historical Forma ------------ ------- Chesapeake Divesti- Field Pro Forma Corporation tures(1) Group(2) Adjustments Pro Forma ------------ -------- --------- ----------- --------- Net sales $950.4 $470.9 $410.5 $ -- $890.0 Costs and expenses: Cost of products sold 679.8 309.2 316.1 686.7 Depreciation, amortization and cost of timber harvested 62.3 38.9 29.8 53.2 Selling, general and administrative expenses 132.9 48.3 35.7 120.3 Restructuring/special charges 11.8 5.0 6.8 ------ ------ ------ ------ ------ Income from operations 63.6 69.5 28.9 23.0 Other income, net 11.1 4.2 0.2 2.6(5) 9.7 Interest expense, net (18.9) (25.6) 25.1(3) (19.4) ------ ------ ------ ------ ------ Income before income taxes and cumulative effect of accounting change 55.8 73.7 3.5 27.7 13.3 Income taxes 21.8 28.3 0.4 10.7(6) 4.6 ------ ------ ------ ------ ------ Income before cumulative Effect of accounting Change $ 34.0 $ 45.4 $ 3.1 $17.0 $ 8.7 ====== ====== ====== ====== ====== Earnings per share: Basic earnings per share Before cumulative effect of accounting change $ 1.60 $ .41 ====== ====== Diluted earnings per share before cumulative effect of accounting change $ 1.57 $ .41 ====== ====== NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. This elimination reflects the historical net asset balances and related results of operations of WTM's business, Timberlands and the Building Products business. 2. Pro forma financial information with respect to the acquisition of Field Group is derived from the Company's Current Report on Form 8-K/A filed May 28, 1999, and the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999. 3. This adjustment reflects the cash received from divestitures of approximately $755.2 million for WTM's business and $185.3 million for the Timberlands and the Building Products business, offset in part by the payment of $51.6 million of income taxes and the following assumption for application of cash proceeds to debt reduction (in millions): June 30, 1999 December 31,1998 --------------- ---------------- Debt Interest Debt Interest Amount Expense Amount Expense ------- ------- ------- ------- Credit lines $372.6 $10.7 $338.4 $20.3 9.875% notes, due 2003 11.2 0.6 11.2 1.1 10.375% notes, due 2000 18.3 0.9 18.3 1.9 ------- ------- ------- ------- $402.1 12.2 $367.9 23.3 Eliminate interest ======= ====== income reduction assumed in Field Group pro forma 0.5 1.8 ------- ------- $12.7 $25.1 ======= ======= 4. The components of the net gain on the contribution of WTM's assets to the JV and the sale of the Timberlands and the Building Product business are as follows (in millions): Timberlands and Building WTM Products -------- -------- Net cash proceeds $755.2 $185.3 Net assets divested (399.1) (73.4) Deferred tax impact (144.0) 10.8 Taxes payable (51.6) Accrued disposition costs (14.7) (7.6) Curtailment gain on pensions 5.0 Post-retirement benefits (1.4) Equity investment in JV 1.0 ------- -------- $202.0 $ 63.5 ======= ======== 5. This adjustment reflects estimated equity in earnings of unconsolidated subsidiaries for WTM's retained 5% interest in the JV. 6. The effective income tax rates are estimated at 34.9% for the year ended December 31, 1998, and 34.1% for the six months ended June 30, 1999. The effective rate is lower than Chesapeake's historical rate for the year ended December 31, 1998, due to the lower effective tax rates in the countries in which Field Group does business. In accordance with SEC rules, the Company has not included a pro forma adjustment to reflect interest earned on excess cash balances, as uses of proceeds cannot be assumed. If the excess cash of $486.8 million, after repayment of debt, generated by the Special distribution, the sales of the Timberlands and the Building Products business were invested at the Company's average investment rate of 5%, pro forma income before cumulative effect of accounting change would have increased $16.0 million, or $.74 per diluted share, on an annual basis. As previously announced, the Company intends to invest a portion of the Special Distribution and the net proceeds from the sale of Timberlands and the Building Products business in strategic business acquisitions that would be expected to generate a return which is greater than Chesapeake's weighted-average cost of capital, which is currently estimated to be 10%. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CHESAPEAKE CORPORATION (Registrant) Date: October 15, 1999 BY: /s/ William T. Tolley William T. Tolley Senior Vice President - Finance & Chief Financial Officer EXHIBIT INDEX 2.1 Joint Venture Agreement among Georgia-Pacific Corporation, Chesapeake Corporation, Wisconsin Tissue Mills Inc. and Georgia-Pacific Tissue, LLC, dated as of October 4, 1999. 2.2 Operating Agreement of Georgia-Pacific Tissue, LLC, dated as of October 4, 1999, among Wisconsin Tissue Mills Inc. and Georgia-Pacific Corporation. 2.3 Indemnity Agreement, dated as of October 4, 1999, between Wisconsin Tissue Mills Inc. and Georgia-Pacific Corporation. EX-2 2 EX-2.1 JOINT VENTURE AGREEMENT AMONG GEORGIA-PACIFIC CORPORATION, CHESAPEAKE CORPORATION, WISCONSIN TISSUE MILLS INC., AND GEORGIA-PACIFIC TISSUE, LLC DATED AS OF OCTOBER 4, 1999 TABLE OF CONTENTS ARTICLE I ORGANIZATION OF THE COMPANY 1 1.1 FORMATION OF THE COMPANY 1 ARTICLE II CONTRIBUTION OF THE BUSINESSES 2 2.1 CONTRIBUTION OF ASSETS; ASSUMPTION OF LIABILITIES 2 2.2 RETAINED G-P ASSETS AND LIABILITIES 3 2.3 RETAINED WISCO ASSETS AND LIABILITIES 3 2.4 CLOSING OF TRANSACTION 3 2.5 POST-CLOSING ADJUSTMENT 6 2.6 TRANSFER TAXES AND RECORDING FEES 8 2.7 REQUIRED CONSENTS 8 2.8 OWNERSHIP OF THE COMPANY; SPECIAL DISTRIBUTION 8 ARTICLE III REPRESENTATIONS AND WARRANTIES OF CSK PARTIES 9 3.1 ORGANIZATION AND QUALIFICATION 9 3.2 CORPORATE AUTHORIZATION 9 3.3 CONSENTS AND APPROVALS 9 3.4 NON-CONTRAVENTION 10 3.5 BINDING EFFECT 10 3.6 FINANCIAL STATEMENTS: ABSENCE OF CERTAIN CHANGES 10 3.7 LITIGATION AND CLAIMS 11 3.8 TAXES 11 3.9 EMPLOYEES, PENSION AND OTHER BENEFIT PLANS 12 3.10 COMPLIANCE WITH LAWS 14 3.11 ENVIRONMENTAL MATTERS 14 3.12 INTELLECTUAL PROPERTY 15 3.13 LABOR MATTERS 16 3.14 CONTRACTS 17 3.15 REAL ESTATE LEASES 18 3.16 ENTIRE BUSINESS; TITLE TO PROPERTY 18 3.17 FINDER'S FEES 19 3.18 INSURANCE 19 3.19 NO UNDISCLOSED LIABILITIES 19 3.20 NO MATERIAL ADVERSE CHANGE 20 3.21 INDEBTEDNESS FOR BORROWED MONEY 21 3.22 KNOWLEDGE AS OF CLOSING DATE 21 3.23 NO OTHER REPRESENTATIONS OR WARRANTIES 21 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF G-P 22 4.1 ORGANIZATION AND QUALIFICATION 22 4.2 CORPORATE AUTHORIZATION 22 4.3 CONSENTS AND APPROVALS 22 4.4 NON-CONTRAVENTION 22 4.5 BINDING EFFECT 23 4.6 FINANCIAL STATEMENTS: ABSENCE OF CERTAIN CHANGES 23 4.7 LITIGATION AND CLAIMS 24 4.8 TAXES 24 4.9 EMPLOYEES, PENSION AND OTHER BENEFIT PLANS 25 4.10 COMPLIANCE WITH LAWS 27 4.11 ENVIRONMENTAL MATTERS 27 4.12 INTELLECTUAL PROPERTY 28 4.13 LABOR MATTERS 28 4.14 CONTRACTS 29 4.15 REAL ESTATE LEASES 30 4.16 ENTIRE BUSINESS; TITLE TO PROPERTY. 30 4.17 FINDER'S FEES 30 4.18 INSURANCE 30 4.19 NO UNDISCLOSED LIABILITIES 31 4.20 NO MATERIAL ADVERSE CHANGE 31 4.21 INDEBTEDNESS FOR BORROWED MONEY. 33 4.22 KNOWLEDGE AS OF CLOSING DATE 33 4.23 ORGANIZATION OF COMPANY 33 4.24 AUTHORIZATION OF COMPANY 33 4.25 ACTIVITIES OF COMPANY 33 4.26 NO OTHER REPRESENTATIONS OR WARRANTIES 33 ARTICLE V COVENANTS 33 5.1 COVENANTS REGARDING EMPLOYEES 33 5.2 COMPLIANCE WITH WARN AND SIMILAR LAWS 34 5.3 FURTHER ASSURANCES 34 5.4 USE OF G-P INTELLECTUAL PROPERTY AND CSK MARKS 34 5.5 CERTAIN MATTERS RELATED TO RETAINED AND ASSUMED LIABILITIES 34 5.6 INTERCOMPANY AGREEMENTS 34 5.7 RECORDS AND RETENTION AND ACCESS 35 5.8 INSURANCE 35 5.9 SPECIAL CSK RETAINED LIABILITY 36 5.10 PREPARATION OF REGISTRATION STATEMENT. 36 5.11 USE OF WISCO NAME 36 5.12 PRORATION OF CERTAIN CHARGES 36 ARTICLE VI CONDITIONS TO CLOSING 37 [Intentionally Deleted] 37 ARTICLE VII SURVIVAL; INDEMNIFICATION 37 7.1 SURVIVAL 37 7.2 INDEMNIFICATION BY G-P 37 7.3 INDEMNIFICATION BY CSK 38 7.4 INDEMNIFICATION BY THE COMPANY 39 7.5 INDEMNIFICATION PROCEDURES 39 7.6 ACKNOWLEDGMENT REGARDING ENVIRONMENTAL LIABILITIES 41 7.7 CHARACTERIZATION OF INDEMNIFICATION PAYMENTS 41 ARTICLE VIII TAX COVENANTS 42 8.1 LIABILITY FOR TAXES 42 8.2 PREPARATION OF TAX RETURNS 43 8.3 AMENDED TAX RETURNS 45 8.4 CARRY BACKS AND CARRY FORWARDS 45 8.5 ADDITIONAL TAX MATTERS 46 8.6 TAX CONTROVERSIES; COOPERATION 47 ARTICLE IX TERMINATION 48 [Intentionally Deleted] 48 ARTICLE X MISCELLANEOUS 48 10.1 NOTICES 48 10.2 AMENDMENT; WAIVER 49 10.3 ASSIGNMENT 49 10.4 ENTIRE AGREEMENT 49 10.5 FULFILLMENT OF OBLIGATIONS 49 10.6 PARTIES IN INTEREST 49 10.7 PUBLIC DISCLOSURE 50 10.8 EXPENSES 50 10.9 SCHEDULES 50 10.10 BULK TRANSFER LAWS 50 10.11 GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF 50 10.12 COUNTERPARTS 50 10.13 HEADINGS 50 10.14 SEVERABILITY 51 10.15 INJUNCTIVE RELIEF 51 ARTICLE XI DEFINITIONS AND TERMS 51 11.1 SPECIFIC DEFINITIONS 51 11.2 OTHER TERMS 67 11.3 OTHER DEFINITIONAL PROVISIONS 67 JOINT VENTURE AGREEMENT This JOINT VENTURE AGREEMENT (the "Agreement") dated as of October 4, 1999, among Chesapeake Corporation, a Virginia corporation ("CSK"), Wisconsin Tissue Mills Inc., a Delaware corporation and a wholly owned subsidiary of CSK ("WISCO"), Georgia-Pacific Corporation, a Georgia corporation ("G-P"), and Georgia-Pacific Tissue, LLC, a Delaware limited liability company (the "Company"). PRELIMINARY STATEMENTS WHEREAS, G-P is engaged, in part, in the business of producing, selling, licensing and manufacturing tissue products for the "away from home" markets and certain related products (the "Commercial Tissue Business"); WHEREAS, G-P has determined that it will contribute certain assets and liabilities of its Commercial Tissue Business to the Company; WHEREAS, WISCO is engaged in the Commercial Tissue Business through WISCO and its Contributed Subsidiaries (the "WISCO Business"); and WHEREAS, G-P and CSK have determined that it is in the best interests of their respective shareholders to engage in the Commercial Tissue Business through a joint venture. NOW, THEREFORE, G-P, the CSK Parties and the Company agree as follows: ARTICLE I ORGANIZATION OF THE COMPANY 1.1 FORMATION OF THE COMPANY. G-P has caused each of the following to occur: (a) ORGANIZATION OF THE COMPANY. The Company is organized as a limited liability company under the laws of the State of Delaware. (b) ORGANIZATIONAL DOCUMENTS. The Company's Certificate of Formation was filed with the Secretary of State of Delaware, a copy of which is set forth as Exhibit 1.1A hereto. 1 ARTICLE II CONTRIBUTION OF THE BUSINESSES 2.1 CONTRIBUTION OF ASSETS; ASSUMPTION OF LIABILITIES. On the terms and subject to the conditions set forth herein and in the Ancillary Agreements, at the Closing the parties shall take the following actions, which shall be deemed to take place simultaneously with the execution of this Agreement as part of the Closing: (a) WISCO CONTRIBUTION; ASSUMPTION OF LIABILITIES. (i) WISCO shall contribute, convey, transfer, assign and deliver to the Company, and the Company shall accept and acquire from WISCO, all right, title and interest of the CSK Parties in and to the WISCO Contributed Assets, free and clear of all Encumbrances (other than Permitted Encumbrances); and (ii) WISCO shall assign to the Company and the Company shall assume and agree to pay, honor, discharge and perform the WISCO Assumed Liabilities. The parties agree that the WISCO Assumed Liabilities are intended to be, and the parties shall treat them as, "qualified liabilities" under Section 1.707-5(a)(6) of the Treasury Regulations unless different treatment is required under applicable law. (b) BORROWING BY THE COMPANY; SPECIAL DISTRIBUTION. The Company will incur the Company Debt in such amounts and on such terms as set forth on Exhibit 2.8A and will use the net proceeds of the Company Debt solely (after deducting borrowing expenses consisting of legal fees, accounting fees, printing fees, filing fees and underwriting fees, not to exceed $8 million, including refinancings and replacements thereof) to fund the Special Distribution to WISCO in the amount of $755,200,000 which shall be declared and paid to WISCO immediately after the contribution of the WISCO Contributed Assets in accordance with Section 2.8 hereof. The parties agree that Company Debt (other than amounts borrowed and used to pay expenses incurred in connection with the related borrowing expenses) is allocable to, and shall be allocated to, WISCO under Sections 1.752-2 and 1.707-5(b) of the Treasury Regulations. (c) G-P CONTRIBUTION; ASSUMPTION OF LIABILITIES. (i) G-P shall contribute, convey, transfer, assign and deliver to the Company, and the Company shall accept and acquire from G-P, all right, title and interest of G-P in and to the G-P Contributed Assets, free and clear of all Encumbrances (other than Permitted Encumbrances); and (ii) G-P shall assign to the Company and the Company shall assume and agree to pay, honor, discharge and perform the G-P Assumed Liabilities. The parties agree that the G-P Assumed Liabilities are intended to be, and the parties shall treat them as, "qualified liabilities" under Section 1.707- 5(a)(6) of the Treasury Regulations unless different treatment is required under applicable law. (d) ISSUANCE OF UNITS. The Company will issue to WISCO and G-P the number of Units, evidencing their respective equity interests in the Company, in accordance with Section 2.8(b) hereof. 2 (e) OPERATING AGREEMENT. G-P and WISCO shall enter into an Operating Agreement, substantially in the form of Exhibit 2.1E hereto, the terms of which shall govern the management and operations of the Company. 2.2 RETAINED G-P ASSETS AND LIABILITIES. Notwithstanding anything herein to the contrary, (i) from and after the Closing each of G-P and its Affiliates shall retain all of its direct or indirect right, title and interest in and to, and there shall be excluded from the sale, conveyance, assignment or transfer to the Company hereunder, the G-P Retained Assets and the G-P Retained Liabilities, and (ii) the G-P Retained Liabilities shall not be assumed by the Company hereunder. 2.3 RETAINED WISCO ASSETS AND LIABILITIES. Notwithstanding anything herein to the contrary, (i) from and after the Closing each of the CSK Parties and their Affiliates shall retain all of its direct or indirect right, title and interest in and to, and there shall be excluded from the sale, conveyance, assignment or transfer to the Company hereunder, the WISCO Retained Assets and the WISCO Retained Liabilities, and (ii) the WISCO Retained Liabilities shall not be assumed by the Company hereunder. 2.4 CLOSING OF TRANSACTION. The Closing of the transactions contemplated by this Agreement shall take place at the offices of G-P at 10:00 a.m. (Atlanta time), on October 4, 1999, or at such other time and place as the parties hereto may mutually agree. The date on which the Closing occurs is called the "Closing Date." The Closing shall be deemed effective at 12:01 a.m. (Atlanta time), on October 3, 1999 (the "Effective Time"). To effect the steps set forth in Section 2.1 hereof, the parties shall execute and deliver to each other and to third parties, as appropriate, all documents reasonably necessary to effect the Closing. Without limiting the generality of the foregoing, (a) CSK PARTIES' DELIVERIES. The appropriate CSK Parties shall execute and deliver: (i) to the Company, limited warranty deeds, in form and substance reasonably acceptable to G-P, transferring all WISCO Owned Real Property to the Company; (ii) to the Company, assignments, or where necessary subleases, in form and substance reasonably acceptable to G-P, assigning or subleasing to the Company all WISCO Real Property Leases; (iii) to the Company, assignments, in form and substance reasonably acceptable to G-P, assigning to the Company all WISCO Intellectual Property; (iv) to the Company, bills of sale, certificates of title, assignments, and all other instruments of transfer, in form and substance reasonably acceptable to G-P, transferring to the Company all WISCO Contributed Assets other than the WISCO Real Property or the WISCO Intellectual Property which are being transferred to the Company pursuant to the conveyance documents described in clauses (i) - (iii) above; 3 (v) to the Company, such instruments of assumption and other instruments or documents, in form and substance reasonably acceptable to G-P, as may be necessary to effect assignment of the WISCO Assumed Liabilities to the Company; (vi) to the Company or G-P, as appropriate, a duly executed copy of each of the Ancillary Agreements to which any CSK Party is a party; (vii) to G-P and the Company, the opinion of Hunton & Williams, counsel to the CSK Parties, substantially in the form of Exhibit 2.4A(vii) hereto; (viii) to the Company, evidence reasonably satisfactory to G-P that all Encumbrances other than Permitted Encumbrances on any of the WISCO Contributed Assets have been released; (ix) to the Company, stock certificates or other evidence of ownership of each of the Contributed Subsidiaries, in each case duly endorsed for transfer to the Company; (x) to G-P and the Company from WISCO, a duly executed Operating Agreement; (xi) to G-P, the WISCO Debt Indemnity; (xii) to G-P, current title reports for all WISCO owned Real Property; (xiii) to G-P, evidence that all officers (other than officers of WMex) and directors of the WISCO Contributed Subsidiaries have resigned, effective as of the Closing, except as G-P shall otherwise request; and (xiv) to G-P and/or the Company, as appropriate, such other instruments or documents, in form and substance reasonably acceptable to G-P, as may be necessary to effect the Closing and the contribution of the WISCO Contributed Assets in accordance with this Agreement. (b) G-P DELIVERIES. G-P shall execute and deliver: (i) to the Company, limited warranty deeds, in form and substance reasonably acceptable to WISCO, transferring all G- P Owned Real Property to the Company; (ii) to the Company, assignments, or where necessary subleases, in form and substance reasonably acceptable to WISCO, assigning or subleasing to the Company all G-P Real Property Leases; (iii) to the Company, a royalty free license, substantially in the form set forth in Schedule 5.4, licensing to the Company the G-P Intellectual Property; 4 (iv) to the Company, bills of sale, certificates of title, assignments, and all other instruments of transfer, in form and substance reasonably acceptable to WISCO, transferring to the Company all G-P Contributed Assets other than the G-P Real Property or the G-P Intellectual Property which are being transferred or licensed to the Company pursuant to the conveyance documents described in clauses (i) - (iii) above; (v) to the Company, such instruments of assumption and other instruments or documents, in form and substance reasonably acceptable to WISCO, as may be necessary to effect assignment of the G-P Assumed Liabilities to the Company; (vi) to the Company or WISCO, as appropriate, a duly executed copy of each of the Ancillary Agreements, including the G-P Guarantee, to which G-P is a party; (vii) to the Company, WISCO and CSK, a copy of the opinion of the General Counsel of G-P, substantially in the form of Exhibit 2.4B(vii) hereto; (viii) to the Company, evidence reasonably satisfactory to WISCO that all Encumbrances other than Permitted Encumbrances on any of the G-P Contributed Assets have been released; (ix) to WISCO and the Company, a duly executed Operating Agreement; (x) to WISCO, current title reports for all G-P owned Real Property; and (xi) to WISCO and/or the Company, as appropriate, such other instruments or documents, in form and substance reasonably acceptable to WISCO, as may be necessary to effect the Closing and the contribution of the G-P Contributed Assets in accordance with this Agreement. (c) DELIVERIES BY THE COMPANY. The Company shall execute and deliver: (i) to the CSK Parties and G-P, such instruments of assumption and other instruments or documents, in form and substance reasonably acceptable to WISCO and G-P, as may be necessary to effect the Company's assumption of the Assumed Liabilities; (ii)to G-P or the CSK Parties, as appropriate, a duly executed copy of each of the Ancillary Agreements to which the Company is a party; (iii) to G-P, certificates representing the number of Units issuable to G-P as determined in accordance with Section 2.8 hereof; (iv)to WISCO, certificates representing the number of Units issuable to WISCO as determined in accordance with Section 2.8 hereof; 5 (v) to WISCO, the Special Distribution; and (vi)to G-P and WISCO, as appropriate, such other instruments or documents, in form and substance reasonably acceptable to WISCO and G-P, as may be necessary to effect the Closing. 2.5 POST-CLOSING ADJUSTMENT. (a) Within 90 days following the Closing, the Company shall prepare, or cause to be prepared, and deliver to G-P and WISCO a statement (the "Closing Working Capital Statement") which shall set forth the Working Capital of each of the G-P Business and the WISCO Business as of the Determination Date (the "Closing Working Capital"). The amounts so computed shall be used to determine the final amount of the Working Capital of each of the Businesses (the "Post-Closing Adjustment"). The Closing Working Capital Statement shall be prepared in accordance with GAAP using the same principles, practices and procedures that were used in preparing the WISCO Financial Statements and the G-P Financial Statements. (b) G-P, WISCO and their respective accountants and the Company's accountants shall have 30 days after the delivery of the Closing Working Capital Statement to review the Closing Working Capital Statement. In the event that G-P or WISCO determines that the Closing Working Capital for either party, as derived from the Closing Working Capital Statement, has not been determined on the basis set forth in Section 2.5(a), G-P or WISCO shall inform the other in writing (the "Objection"), setting forth a specific description of the basis of the Objection and the adjustments to the Closing Working Capital which either G-P or WISCO believes should be made, which Objection must be delivered to the other party on or before the last day of such 30- day period. The party receiving an Objection shall then have 30 days to review and respond to the Objection. The parties shall attempt in good faith to reach an agreement with respect to any matters in dispute. If the parties are unable to resolve all of their disagreements with respect to the determination of the foregoing items within 45 days following the delivery of an Objection, they shall refer their remaining differences to Ernst & Young LLP or such other firm mutually agreed to by the parties (the "CPA Firm"), who shall, acting as experts and not as arbitrators, determine in accordance with this Agreement, and only with respect to the remaining differences so submitted, whether and to what extent, if any, the Closing Working Capital as derived from the Closing Working Capital Statement requires adjustment. The parties shall direct the CPA Firm to use its best efforts to render its determination within 30 days after such submission. The CPA Firm's determination shall be conclusive and binding upon G-P, WISCO and the Company. The fees and disbursements of the CPA Firm shall be paid one-half by G-P and one-half by WISCO. G-P, the Company and WISCO shall make readily available to the CPA Firm all relevant Books and Records and any work papers (including those of the parties' respective accountants) Relating to the Closing Working Capital Statement and all other items reasonably requested by the CPA Firm. The "Final Working Capital Statement" shall be deemed to be (i) the Closing Working Capital Statement in the event that no Objection is delivered by G-P or WISCO during the 30-day period specified above, or (ii) if an objection is delivered by G-P or WISCO, the Closing Working Capital Statement, as adjusted by either (A) the agreement of the parties or (B) the CPA Firm. 6 (c) G-P and WISCO shall have the opportunity to participate in the preparation of the Closing Working Capital Statement by (i) observing the physical inventory taken in connection therewith (which may begin prior to the Closing Date), (ii) attending any audit planning meetings in connection therewith, (iii) meeting with and discussing procedures with the Company and its accountants, and (iv) otherwise having full access to all information used by the Company in preparing the Closing Working Capital Statement, including the Books and Records and the work papers of its accountants (subject to execution of any necessary waivers or indemnifications required by the Company's accountants). (d) In reviewing any Objection, G-P and WISCO and their respective accountants shall have full access to all information used by the other party in preparing such Objection, including the work papers of the other party's and the Company's accountants (subject to the reviewing party executing any necessary waivers or indemnifications required by the objecting party's accountants). (e) If the Closing Working Capital of either Business as reflected on the Final Working Capital Statement is less than $32,515,000 with respect to the G-P Business or $73,218,000 with respect to the WISCO Business (the "Target Working Capital"), then within 10 Business Days following issuance of the Final Working Capital Statement, any party whose Closing Working Capital is below its Target Working Capital shall (as an additional contribution to the Company) make a payment in immediately available funds to the Company equal to the difference between such Business' Target Working Capital, plus interest at the prime rate (as set forth in the "Money Rates" section of The Wall Street Journal) on such amount from the Closing Date through the date of payment. If the Closing Working Capital of either Business as reflected on the Final Working Capital Statement is greater than the Target Working Capital of such Business, then within 10 Business Days following issuance of the Final Working Capital Statement, the Company shall refund such excess by (i) making a payment to any party whose Closing Working Capital exceeded its Target Working Capital, in immediately available funds, equal to such excess to the extent of the sum of the amount of cash theretofor contributed to the Company by such party plus the amount of accounts receivable contributed by such party to and collected by the Company, and (ii) if the excess is greater than the amount described in (i), the remainder of the excess shall be refunded by the Company's reassignment to such party of accounts receivable (theretofor contributed by such party) in an aggregate amount equal to such remainder. In addition, the Company shall pay such party interest at the prime rate (as set forth in the "Money Rates" section of The Wall Street Journal) on such excess from the Closing Date through the date of payment. (f) In preparing the Closing Working Capital Statement, (i) liabilities of the Company Related to this transaction shall not be treated as liabilities, and (ii) no liabilities or reserves shall be established for matters for which G-P, CSK or the Company is (or but for the Cap or the Deductible would be) entitled to indemnification hereunder. (g) Any payments made to or from the Company pursuant to Section 2.5(e) shall not result in any change in the value of either party's Business as set forth in Section 2.8 hereof or 7 either party's Capital Account or Percentage Interest (as both terms are defined in the Operating Agreement). 2.6 TRANSFER TAXES AND RECORDING FEES. Each party shall be responsible for any and all Taxes or fees imposed or incurred by reason of the transfer of its Contributed Assets and Assumed Liabilities hereunder and/or the filing or recording of any instruments necessary to effect the transfer of its Contributed Assets and Assumed Liabilities hereunder, regardless of when such Taxes or fees are levied or imposed, including sales, use, value- added, excise, real estate transfer, lease assignment, stamp, documentary and similar Taxes and fees (the "Transfer Cost"). To the extent under applicable law the transferee is responsible for filing Tax Returns in respect of Transfer Costs, the Company shall prepare all such Tax Returns. The parties shall provide such certificates and other information and otherwise cooperate to the extent reasonably required to minimize Transfer Costs. 2.7 REQUIRED CONSENTS. Each of G-P and the CSK Parties shall use commercially reasonable efforts to obtain, at its sole expense, each Consent Related to its own Business listed on Schedule 3.3(a) for the CSK Parties and Schedule 4.3(a) for G-P (other than those Consents marked with an asterisk on either such Schedule), and any other material Consent not listed on Schedule 3.3 or Schedule 4.3, if any, if such Consent is required to operate such Business after Closing as such Business has been operated over the 12-month period immediately prior to Closing. If a party has not obtained a Consent (other than a Required Consent), the Closing of the transactions contemplated by this Agreement shall not constitute a transfer, or any attempted transfer, of any Contract or asset, the transfer of which requires such Consent. Rather, following the Closing, such party shall use commercially reasonable efforts at its sole expense, and the other party (or parties) and the Company shall cooperate in such efforts, to obtain promptly such Consent or to enter into reasonable and lawful arrangements (including subleasing or subcontracting if permitted) reasonably acceptable to the other party to provide to the Company the full economic (taking into account Tax Costs and benefits) and operational benefits and liabilities and for substantially similar time periods, as the Company would have had if such Consent had been obtained as of Closing. Once such Consent for the transfer of a Contributed Asset not transferred at the Closing is obtained, the party receiving such Consent shall promptly transfer, or cause to be transferred, such Contributed Asset to the Company for no additional consideration and without changing any party's Capital Account or Percentage Interest (as both terms are defined in the Operating Agreement). 2.8 OWNERSHIP OF THE COMPANY; SPECIAL DISTRIBUTION. (a) The value of contributions of each of G-P and WISCO has been determined by multiplying 7.38 by the actual 1998 EBITDA for the G-P Business and the WISCO Business respectively. The value of the WISCO Business for purposes of this Agreement shall be $775,000,000 and the value of the G-P Business for purposes of this Agreement shall be $376,400,000. (b) Simultaneously with the Closing, the Company shall incur debt in an amount sufficient to fund a special distribution to WISCO (the "Company Debt") that will result in a reduction in 8 WISCO's Percentage Interest (as defined in the Operating Agreement) in the Company to a 5% equity interest in the Company (the "Special Distribution") immediately after payment of the Special Distribution. The Company Debt shall be in such amount and on such terms as is set forth on Exhibit 2.8A. G-P shall provide to the Company's lenders a full and unconditional guaranty of payment of the Company Debt substantially in the form of Exhibit 2.8B hereto (the "G-P Guarantee"). WISCO shall provide to G-P an indemnity substantially in the form of Exhibit 2.8C hereto (the "WISCO Debt Indemnity") indemnifying G-P against certain amounts which may be incurred or paid by, or assessed against, G-P under the G-P Guarantee. ARTICLE III REPRESENTATIONS AND WARRANTIES OF CSK PARTIES The CSK Parties represent and warrant to G-P and the Company as follows: 3.1 ORGANIZATION AND QUALIFICATION. (a) Each of the CSK Parties is a corporation or limited liability company, duly organized, validly existing and in good standing under the laws of its state of organization as set forth on Schedule 3.1. The CSK Parties collectively have all requisite corporate or limited liability company power and authority to own and operate the WISCO Contributed Assets and to carry on the WISCO Business as currently conducted. (b) Each of the CSK Parties is duly qualified to do business and is in good standing as a foreign corporation or limited liability company in the jurisdictions listed on Schedule 3.1, which are the only jurisdictions where the ownership or operation of the WISCO Contributed Assets or the conduct of the WISCO Business requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect. 3.2 CORPORATE AUTHORIZATION. Each of the CSK Parties has full corporate power and authority to execute and deliver this Agreement, and to perform its obligations hereunder and under any agreement or contract contemplated hereby, including the Ancillary Agreements. The execution, delivery and performance by the CSK Parties of this Agreement and any agreement or contract contemplated hereby has been duly and validly authorized by all necessary corporate action and no additional corporate authorization is required in connection with the execution, delivery and performance by each of the CSK Parties of this Agreement and any agreement or contract contemplated hereby. 3.3 CONSENTS AND APPROVALS. Except as specifically set forth in Schedule 3.3 or as required by the HSR Act, no Consent is required to be obtained by the CSK Parties from, and no notice or filing is required to be given by the CSK Parties to, or made by the CSK Parties with, any Governmental Authority or other Person or under any Contract listed, or required to be listed, on Schedule 3.14 in connection with the execution, delivery and performance by the CSK Parties of this Agreement, each of the 9 Ancillary Agreements, any other agreement or contract contemplated hereby and the contribution of the WISCO Contributed Assets, except where the failure to obtain any such Consent or Consents, give any such notice or notices or make any such filing or filings would not have a Material Adverse Effect. 3.4 NON-CONTRAVENTION. Except as set forth on Schedule 3.3, the execution, delivery and performance by the CSK Parties of this Agreement and each of the Ancillary Agreements, and the consummation of the transactions contemplated hereby and thereby, does not and will not (i) violate any provision of the certificate of incorporation or bylaws of any of the CSK Parties or any Contributed Subsidiary; (ii) subject to obtaining the Consents referred to in Section 3.3, conflict with, or result in the breach of, or constitute a default under, or result in the termination, cancellation or acceleration (whether after the filing of notice or the lapse of time or both) of any right or obligation of any of the CSK Parties or any Contributed Subsidiary under, or to a loss of any benefit to which any of the CSK Parties or any Contributed Subsidiary is entitled under, any Contract or result in the creation of any Encumbrance (other than a Permitted Encumbrance) upon any of the WISCO Contributed Assets; or (iii) assuming compliance with the matters set forth in Section 3.3, violate, or result in a breach of or constitute a default under any Law, rule, regulation, judgment, injunction, order, decree or other restriction of any court or Governmental Authority to which any of the CSK Parties or any Contributed Subsidiary is subject, including any Governmental Authorization, except in each case, such matter or matters that would not have a Material Adverse Effect. 3.5 BINDING EFFECT. This Agreement constitutes, and each of the Ancillary Agreements when executed and delivered by the parties thereto will constitute, a valid and legally binding obligation of each of the CSK Parties that is a party thereto, enforceable with respect to such party in accordance with its terms, except as the enforceability thereof may be limited or otherwise effected by bankruptcy, insolvency, reorganization, moratorium and similar laws of general applicability Relating to, or affecting, creditors rights and to general equity principles. 3.6 FINANCIAL STATEMENTS: ABSENCE OF CERTAIN CHANGES. (a) Attached as Schedule 3.6(a) are the following financial statements of the WISCO Business: Unaudited Balance Sheet, Statement of Income and Statement of Cash Flows, as of and for (i) the years ended December 31, 1997 and 1998 (the "WISCO Annual Financial Statements"); and (ii) the period ended April 30, 1999 (the "WISCO April Financial Statements"). (Collectively the financial statements described in this Section 3.6(a) shall be referred to as the "WISCO Financial Statements.") (b) Exhibit 3.6(b) sets forth the line items and a definition for each such line item contained in each of the WISCO Financial Statements. (c) The WISCO Financial Statements are true and correct in all material respects, present fairly the combined financial position and results of operation, divisional equity and cash flows of the WISCO Business as of the dates and for the periods presented, and were prepared in accordance with GAAP applied on a basis consistent with past practice of the WISCO Business. 10 The WISCO Financial Statements reflect the underlying Books and Records of the WISCO Business, which are complete and accurate in all material respects. Except as described on Schedule 3.6(c), consistent accounting policies and accrual methods were used in all periods presented. All non-recurring or unusual income or expense items over $500,000, as reflected in the 1998 Statement of Income of WISCO, have been disclosed in footnotes to the WISCO Financial Statements. (d) Except as described in the notes to the WISCO Financial Statements, all accounts receivable reflected on the WISCO Financial Statements are bona fide receivables, accounted for in accordance with GAAP (including, without limitation, appropriate reserves), and represent amounts due with respect to actual transactions in the operation of the WISCO Business; it being understood that this representation shall not be deemed to constitute a warranty or guaranty that all such accounts receivable shall be collected. 3.7 LITIGATION AND CLAIMS. Except as disclosed on Schedule 3.7: (a) There is no action (whether civil, criminal or administrative), suit, demand, claim, dispute, hearing, proceeding (including condemnation or other proceeding in eminent domain) or investigation pending or, to the Knowledge of any of the CSK Parties, threatened, Related to the WISCO Business or any of the WISCO Contributed Assets or included in the WISCO Assumed Liabilities, that individually or in the aggregate is reasonably expected to have a Material Adverse Effect. (b) None of the WISCO Contributed Assets is subject to any order, writ, judgment, award, injunction, or decree of or settlement enforceable in any court or governmental or regulatory authority of competent jurisdiction or any arbitrator or arbitrators. 3.8 TAXES. Except as disclosed on Schedule 3.8: (a) The CSK Parties have duly and timely filed (or have caused to be duly and timely filed), taking into account any valid extension of the time for filing, each Tax Return required to be filed with any Tax Authority which includes or is based upon the WISCO Contributed Assets, or the operations, ownership or activities of the WISCO Business, and all Taxes due and payable (whether or not shown on or required to be shown on a Tax Return) have been paid prior to their due dates; provided, however, that the representations and warranties set forth in this paragraph are made only to the extent that (i) such Taxes are or may become Encumbrances on the WISCO Contributed Assets, or (ii) the Company is or may be liable in the capacity of transferee of the Contributed Assets. (b) The CSK Parties have duly and timely filed (or have caused to be duly and timely filed), taking into account any valid extension of the time for filing, each Tax Return which includes or is based upon the assets, operations, ownership or activities of any of the WISCO Contributed Subsidiaries, and all Taxes due and payable (whether or not shown on or required to be shown on a Tax Return) have been paid prior to their due dates. 11 (c) None of the WISCO Contributed Assets, including the assets of the WISCO Contributed Subsidiaries (i) is subject to any lien (other than a Permitted Encumbrance) arising in connection with any failure or alleged failure to pay any Taxes, (ii) secures any debt the interest on which is tax-exempt under Section 103(a) of the Code, (iii) is required to be or is being depreciated under the alternative depreciation system under Section 168(g)(2) of the Code, (iv) is "limited use property" with the meaning of Revenue Procedure 76-30, or (v) will be treated as owned by any other Person pursuant to the provisions of former Section 168(f)(8) of the Code. (d) The CSK Parties (with respect to the WISCO Business) or the WISCO Contributed Subsidiaries have withheld and paid all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any Employee, independent contractor, creditor, shareholder or other party. (e) There are no pending, proposed or, to the knowledge of WISCO, threatened audits, assessments or claims from any Tax Authority for deficiencies, penalties or interest against any of the CSK Parties (with respect to the WISCO Contributed Assets or the WISCO Business), any of the WISCO Contributed Subsidiaries or any of their assets, operations or activities; provided, however, that the representations and warranties set forth in this paragraph are made only to the extent that (i) such Taxes are or may become Encumbrances on the WISCO Contributed Assets, or (ii) the Company is or may be liable in the capacity of transferee of the Contributed Assets. (f) No CSK Party nor any WISCO Contributed Subsidiary owns, directly or indirectly, and none of the WISCO Contributed Assets consists of, any interest in any entity classified as a partnership for United States federal income Tax purposes. (g) With respect to the WISCO Business, other than WMex, the CSK Parties do not have and have not had a permanent establishment in any foreign country as defined in any applicable Tax treaty or convention between the United States and such foreign country. 3.9 EMPLOYEES, PENSION AND OTHER BENEFIT PLANS. (a) Schedule 3.9(a) lists all the Employees who, as of August 31, 1999, were employed by WISCO or the WISCO Contributed Subsidiaries with respect to the WISCO Business, together with their respective positions, years of employment, and rates of remuneration, as of August 31, 1999. (b) Except as disclosed on Schedule 3.9(b), no CSK Party is a party to nor does it sponsor, maintain, or contribute to any Employee Plans that provide benefits to Employees or Retired Employees of the WISCO Business. (c) WISCO has delivered to G-P true, complete and up-to- date copies of all documents embodying the CSK Plans including, without limitation, all amendments thereto, all funding agreements thereunder (including, but not limited to, trust agreements), all summaries of such CSK Plans provided to Employees, Retired Employees, directors, officers, shareholders 12 or their dependents with respect to the WISCO Business, and all material communications received from or sent to regulatory authorities within the prior two (2) plan years with respect to each such CSK Plan as well as the most recent valuation for each defined contribution retirement plan maintained by any of the CSK Parties and the most recent actuarial valuation for each of the CSK Plans for which such valuations are required. The applicable CSK Party has delivered to G-P a complete written description of all unwritten CSK Plans, and will deliver such other documentation with respect to any CSK Plan as is reasonably requested by G-P. (d) Except as disclosed on Schedule 3.9(d), no promise or commitment has been made by any CSK Party (i) to amend any of the CSK Plans or to provide increased benefits thereunder to any Employees, Retired Employees, directors, officers, shareholders of the WISCO Business or the WISCO Contributed Subsidiaries, or their dependents, except pursuant to the requirements, if any, of the CSK Plans or any collective bargaining agreement, or (ii) to establish any new Employee Plan. Except as disclosed on Schedule 3.9(d), no amendment to any CSK Plan has been adopted by any CSK Party since June 30, 1999. Except as disclosed on Schedule 3.9(d), one or more of the CSK Parties has the right pursuant to the terms of each CSK Plan and all agreements Related to such plan unilaterally to terminate such plan (or its participation in such plan) or to amend the terms of such plan at any time except as provided under a collective bargaining agreement. Except as disclosed on Schedule 3.6(a) or Schedule 3.9(d) or as set forth in the Human Resources Agreement, the transactions contemplated by this Agreement will not result in any additional payments to, or increase the vested interest of, any Employee, Retired Employee, director, officer, shareholder, or their dependents under any CSK Plan; and the transactions contemplated by this Agreement will not result in any payment to any Employee or Retired Employee, director, officer, or shareholder of any CSK Party which will be subject to Section 280G of the Code. (e) Each CSK Plan has been established, maintained, and administered in substantial compliance with its terms and all related documents or agreements and in substantial compliance with applicable provisions of ERISA, the Code, and other applicable Laws. (f) Except as disclosed on Schedule 3.9(f), all required employer contributions, premium payments and employee contributions under the CSK Plans have been made and remitted to the funding agents or accrued or booked thereunder within the time prescribed by any such CSK Plan and the Laws. All insurance premiums required with respect to any CSK Plan, including any premiums payable to the Pension Benefit Guarantee Corporation, have been paid, made, accrued or booked within the time prescribed by any such CSK Plan and the applicable Law. All benefits, expenses and other amounts due and payable to or under any CSK Plan, and all contributions, transfers or payments required to be made to any CSK Plan, have been paid, made, accrued or booked within the time prescribed by any such CSK Plan and the Laws. Except as disclosed on Schedule 3.9(f), all of the assets which have been set aside in a trust or account (other than an account which is part of a CSK Party's general assets) to satisfy any obligation under any CSK Plan are shown on the books and records of each such trust and each such account at their fair market value, such current fair market value as of the last valuation date is equal to or exceeds the present value of any obligation under the CSK Plan, and the liabilities for all other obligations under any CSK Plan are accurately set forth in the WISCO Financial Statements. 13 (g) Except as disclosed on Schedule 3.9(g), there is no pending or, to the Knowledge of the CSK Parties, threatened claim with respect to a CSK Plan (other than routine and reasonable claims for benefits made in the ordinary course of the WISCO Business) or with respect to the terms and conditions of employment or termination of employment by any Employee, or Retired Employee, and no audit or investigation by any governmental or other law enforcement agency is pending or has been proposed with respect to any CSK Plan. (h) Except as disclosed on Schedule 3.9(h), no CSK Plan is subject to Title IV of ERISA. Neither any of the CSK Parties nor any Related Person has incurred any material liability under or pursuant to Title I or IV of ERISA or the penalty, excise tax or joint and several liability provisions of the Code relating to employee benefit plans and, to the Knowledge of the CSK Parties, no event or condition has occurred or exists which could result in any material liability to a CSK Party, such Related Person or the Company or G-P under or pursuant to Title I or IV of ERISA or such penalty, excise tax or joint and several liability provisions of the Code. No CSK Plan has incurred an "accumulated funding deficiency" within the meaning of such sections of the Code and ERISA, whether or not waived; and no such CSK Plan has been terminated. Except as disclosed on Schedule 3.9(h), none of the CSK Parties contribute to, nor do they have any obligation to contribute to, a multiemployer plan as defined in Section 4001(a)(3) of ERISA with regard to the Employees or Retired Employees. (i) Each of the CSK Plans that is intended to be qualified under Section 401(a) of the Code, and the trust, if any, forming a part thereof, has received a favorable determination letter from the Internal Revenue Service as to the qualification of its form under the Code and to the effect that each such trust is exempt from taxation under Section 501(a) of the Code and, to the Knowledge of the CSK Parties, nothing has occurred since the date of such determination letter that adversely affects such qualification or tax-exempt status. Except as disclosed in Schedule 3.9(i), all reports and other documents required to be filed with any governmental agency or distributed to plan participants or beneficiaries (including, but not limited to, actuarial reports, audits or Tax Returns) have been duly filed or distributed on a timely basis, and copies thereof have been or will be furnished to G-P prior to the Closing. 3.10 COMPLIANCE WITH LAWS. Except as set forth in Schedule 3.10, the WISCO Business is being conducted in compliance with all Laws applicable to the WISCO Business and, as of the Closing, the Company will have (subject to obtaining the Consents) all Governmental Authorizations necessary for the conduct of the WISCO Business as currently conducted, except for such non- compliance or the failure to obtain such Consent or Consents which would not have a Material Adverse Effect; it being understood that nothing in this representation is intended to address any compliance issue that is the subject of the representations and warranties set forth in Sections 3.7, 3.8, 3.9, 3.11, 3.12, or 3.13 hereof, and that the CSK Parties make no representations in this Section 3.10 as to the transferability or assignability of any such Governmental Authorizations. None of the CSK Parties has received written notice that any material Governmental Authorization may be suspended, revoked, modified or canceled. 3.11 ENVIRONMENTAL MATTERS. 14 (a) Schedule 3.11(a) sets forth a list of all material Environmental Permits in connection with the WISCO Business. (b) Except as would not have a Material Adverse Effect, or as disclosed on Schedule 3.11(b): (i)The Environmental Permits are all the permits, licenses, certificates and authorizations of, and registrations with, any of the Environmental Authorities pursuant to the Environmental Laws necessary to conduct the WISCO Business substantially as presently conducted. The Environmental Permits are in full force and effect and the CSK Parties are in compliance in all respects thereunder. The consummation of the transactions contemplated hereunder will not require any renewal, consent, amendment or other action in connection with any of the Environmental Permits. The CSK Parties are in compliance with the Environmental Laws applicable to the conduct of the WISCO Business. (ii) There is no claim, suit, action or other proceeding, including appeals and applications for review, outstanding or pending against any CSK Party pursuant to any of the Environmental Laws Relating to the WISCO Business. (iii) No CSK Party has any liability for any release, spill, leakage, pumping, emission, emptying, discharge, injection, escape, leaching, disposal or dumping of any Hazardous Substances on or from any of the WISCO Real Property, except in such manner or quantity as would not constitute a violation of any of the Environmental Laws or Environmental Permits. (iv) The CSK Parties have maintained all records in respect of the WISCO Business required by the Environmental Laws and Environmental Permits in the manner and for the time periods so required. (v)Since June 30, 1994, no CSK Party has received any notice of investigation or non-compliance or written order from any of the Environmental Authorities, including any notice of contamination or clean-up requirements, pursuant to any of the Environmental Laws with respect to the WISCO Business. 3.12 INTELLECTUAL PROPERTY. (a) Schedule 3.12 sets forth a list and description (including the country of registration) of all issued or registered foreign and domestic Intellectual Property currently (or, to the Knowledge of the CSK Parties, within the last 12 months) used in the WISCO Business (other than "shrink wrap" consumer software licenses). No third party has rights in, or otherwise has the right to restrict use of, WISCO Intellectual Property owned by any CSK Party, and, to the Knowledge of the CSK Parties, no third party has rights in, or otherwise has the right to restrict the Company's use of, the WISCO Intellectual Property owned by any CSK Party as of and following the Closing. 15 (b) To the Knowledge of the CSK Parties, no product, component, method, process, or material (including computer software) used, sold or manufactured by the WISCO Business infringes on, misappropriates, or otherwise violates a valid and enforceable intellectual property right of any other Person. (c) There are no demands, actions or proceedings pending or, to the Knowledge of the CSK Parties, threatened, against the CSK Parties Relating to the WISCO Business alleging infringement, misappropriation, or violation of any intellectual property right of any other Person, and, to the Knowledge of the CSK Parties, no Person is infringing, misappropriating, challenging or violating, the Intellectual Property owned by any CSK Party, except for challenges, infringements, misappropriation or violations which, individually or in the aggregate, would not have a Material Adverse Effect. (d) All of the WISCO Intellectual Property will be transferred to the Company at Closing, except to the extent certain Intellectual Property used by the CSK Parties to provide services under the Transition Services Agreement is specifically excluded thereunder. The CSK Parties agree that Intellectual Property provided under the Transition Services Agreement will be provided to the Company on and after Closing on the same terms and conditions under which it was available to the WISCO Business prior to the Closing in accordance with the terms of the Transition Services Agreement. (e) Schedule 3.12(e) sets forth the CSK Parties' efforts at addressing the Year 2000 issue in the WISCO Business. The information set forth therein is accurate as of the date hereof, in all material respects. The CSK Parties have developed and begun implementing a Project Plan to remediate and/or replace Computer Systems that are used or relied upon in the WISCO Business but are not Year 2000 Ready. Such remediation and/or replacement is scheduled to be completed in 1999. 3.13 LABOR MATTERS. Except as disclosed on Schedule 3.13: (a) As of the date hereof, none of the CSK Parties is a party to any labor or collective bargaining agreement or similar agreement with respect to Employees of the WISCO Business, no such Employees are represented by any labor organization and, to the Knowledge of the CSK Parties, there are no organizing or de- certification activities (including any demand for recognition or certification proceedings pending or threatened to be brought or filed with the National Labor Relations Board or other labor relations tribunal) involving the WISCO Business; (b) As of the date hereof, there are no strikes, work stoppages, slowdowns, lockouts, unfair labor practice charges pending or, to the Knowledge of the CSK Parties, threatened against or involving the Employees of the WISCO Business; (c) Within the 90-day period immediately preceding the Effective Time, no Employee of the WISCO Business has been laid off or terminated for reasons other than a discharge for cause, voluntary resignation or retirement. 16 (d) There are no complaints, charges, claims or grievances against the CSK Parties pending or, to the Knowledge of the CSK Parties, threatened to be brought or filed with any Governmental Authority, arbitrator or court based on or arising out of the employment by the CSK Parties of any Employee of the WISCO Business, except for those which, individually or in the aggregate, would not have a Material Adverse Effect; (e) The CSK Parties are in compliance with all Laws Relating to the employment of labor, including all such Laws Relating to wages, hours, collective bargaining, discrimination, civil rights, safety and health, immigration, workers' compensation, layoffs, and the collection and payment of withholding and/or Social Security Taxes and similar Taxes, except where the failure to be in compliance would not have a Material Adverse Effect; and (f) The CSK Parties have given all notices required to be given prior to the Closing Date under the Worker Adjustment and Retraining Notification Act, 29 U.S.C. Section 2101 et seq. ("WARN"), or under any similar provision of any federal, state, regional, foreign, or local Law, rule, or regulation (referred to collectively with WARN as "WARN Obligations") Relating to any plant closing or mass layoff that occurred during the 90 days immediately preceding the Effective Time and pertaining to the WISCO Business. 3.14 CONTRACTS. Schedule 3.14 sets forth a list, as of the date hereof, of each Contract that is Related to the WISCO Business other than (a) WISCO Leased Real Property, which are listed on Schedule 3.15, and collective bargaining agreements which are listed on Schedule 3.13, (b) purchase orders or similar agreements for the purchase or sale of goods or services in the ordinary course of business, (c) confidentiality agreements entered into in the ordinary course of business in connection with the purchase and sale of Inventory, and (d) any Contract which requires a payment or imposes an obligation on either party thereto of less than $1,000,000 in the aggregate. Schedule 3.14 also identifies any Contract that contains a non-compete covenant or similar provision that could materially restrict the Company in its conduct of the WISCO Business following Closing, any employment agreement with any Employee of the WISCO Business, any employment agreement included in the WISCO Contributed Assets or WISCO Assumed Liabilities, any Contract between any Affiliates of CSK, on one hand, and any of the CSK Parties or any of the WISCO Contributed Subsidiaries, on the other, any agreements Related to payments in lieu of taxes, any agreement or license Related to Intellectual Property (other than "shrink wrap" consumer software licenses), leases and license agreements for any Computer Systems (other than "shrink wrap" consumer software licenses), all material agreements for telecommunications voice (including without limitation, local, long distance and toll free service) and data services, Internet access, hosting and use services. Schedule 3.14 also identifies any Contract concerning any environmental liability with respect to the WISCO Business. Each Contract set forth on Schedule 3.14 is a valid and binding agreement of the applicable CSK Party and, to the Knowledge of the CSK Parties, is in full force and effect. Except as otherwise provided in Schedule 3.14, no CSK Party is, and, to their Knowledge, no other party thereto is, in default in any material respect under any Contract listed on Schedule 3.14 or any collective bargaining agreement listed on Schedule 3.13. 17 3.15 REAL ESTATE LEASES. Schedule 3.15 sets forth a list, as of the date hereof, of each written WISCO Real Estate Lease with a term of more than one month that is Related to the WISCO Business. Each WISCO Real Estate Lease set forth on Schedule 3.15 is a valid and binding agreement of a CSK Party and is in full force and effect. There are no defaults by the applicable CSK Party under any WISCO Real Estate Lease listed on Schedule 3.15 which defaults have not been cured or waived and which would, individually or in the aggregate, have a Material Adverse Effect. 3.16 ENTIRE BUSINESS; TITLE TO PROPERTY. (a) Except as set forth in Schedule 3.16(a) and Schedule 3.6(a), the WISCO Contributed Assets, the assets held by the WISCO Contributed Subsidiaries, the WISCO Retained Assets (including cash and cash accounts, disbursement accounts, invested securities and other short and medium term investments, the CSK Marks and CSK Plans, and WISCO's and CSK's insurance policies), and the rights specifically provided or made available to the Company under the Ancillary Agreements, include all of the buildings, machinery, equipment and other assets (whether tangible or intangible) necessary for the Company immediately after Closing to conduct in all material respects the WISCO Business as conducted as of the date hereof, and as conducted during the 12-month period prior to the date hereof (subject to changes expressly permitted by the terms hereof to be made after the date hereof); provided, however, that no representation is made as to the assignability of Government Authorizations. (b) A CSK Party has good (and, in the case of its Owned Real Property, marketable) title to, or a valid and binding leasehold interest in, the WISCO Contributed Assets, free and clear of all Encumbrances, except (i) as set forth in Schedule 3.16(b), and (ii) any Permitted Encumbrances. (c) The capital structure of each of the WISCO Contributed Subsidiaries is as set forth in Schedule 3.16(c). The shares of stock or membership interests, as applicable, of the WISCO Contributed Subsidiaries included in the WISCO Contributed Assets constitute 100% of the issued and outstanding shares of stock or membership interests, as applicable, of each WISCO Contributed Subsidiary. All shares of stock , membership interests or other form of ownership of the WISCO Contributed Subsidiaries included in the WISCO Contributed Assets are validly issued, fully paid and non-assessable. Except as set forth on Schedule 3.16(c), (i) there are no options, warrants, or similar rights to purchase any of the shares or membership interests of any of the WISCO Contributed Subsidiaries, and no obligations binding upon any WISCO Contributed Subsidiary to issue, sell, redeem, purchase or exchange any of its capital stock or membership interests or any right relating thereto, and (ii) there are no shareholders' agreements, voting agreements, voting trusts or other agreements or rights of third parties with respect to or affecting any of the WISCO Contributed Subsidiaries or any of their shares of stock or membership interests, as applicable. Wisconsin Tissue Management, LLC has entered into no agreements and conducted no business and contains only those assets and liabilities specifically set forth in Schedule 3.16(c), except, in each case, as set forth in the Human Resources Agreement. WMex assumed no liabilities or obligations of any other CSK Party Related to or 18 arising from the sale of its capital stock to WISCO. CSK has provided G-P with true and correct copies of all documentation Related to such sale. (d) The WISCO Contributed Assets and the assets of the WISCO Contributed Subsidiaries are in good operating condition and repair (subject to normal wear and tear). Except as set forth on Schedule 3.16(d), the CSK Parties have no Knowledge of any material structural or mechanical defects with respect to any buildings, improvements or equipment included in the WISCO Contributed Assets, which defects are reasonably likely to have a Material Adverse Effect. (e) None of the WISCO Owned Real Property or the WISCO Leased Real Property or other assets of the WISCO Business (except as set forth in the Transition Services Agreement) are owned, used or occupied in whole or in part by CSK or any of its Affiliates other than in connection with the operation of the WISCO Business. 3.17 FINDER'S FEES. Except for Salomon Smith Barney & Co., whose fees will be paid by CSK, there is no investment banker, broker or finder which has been retained by or is authorized to act on behalf of any CSK Party who might be entitled to any fee or commission from G-P or the Company in connection with the transactions contemplated by this Agreement. 3.18 INSURANCE. Schedule 3.18 attached hereto sets forth the following information with respect to each insurance policy to which any CSK Party or a WISCO Contributed Subsidiary, with respect to the WISCO Business, has been a party, a named insured, or otherwise the beneficiary of coverage at any time within the past five years: (a) the name of the insurer, the name of the policyholder, and the name of each covered insured; (b) the scope, period and amount of coverage; and (c) a description of any retroactive premium adjustments or other loss-sharing arrangements. Schedule 3.18 also describes any self insurance arrangements affecting the WISCO Business. As of the date hereof, no CSK Party has received any written notice of any retroactive premium increase or assessment applicable to the WISCO Business. Except as disclosed on Schedule 3.18, all of such policies are in full force and effect. 3.19 NO UNDISCLOSED LIABILITIES. With respect to the WISCO Business no CSK Party has any obligations or liabilities (whether accrued, absolute, contingent, unliquidated or otherwise, whether or not known to such CSK Party, whether due or to become due and regardless of when asserted) arising out of transactions entered into at or prior to the Closing, or any action or inaction at or prior to the Closing, or any state of facts existing at or prior to the Closing other than: (a) liabilities set forth on the WISCO Financial Statements (including any notes thereto, if any); (b) liabilities and obligations arising from or in connection with 19 matters disclosed pursuant to the CSK Parties' representations and warranties in this Agreement or in the Disclosure Schedules (none of which, except as set forth on Schedule 3.7, is a liability resulting from a breach of contract, breach of warranty, tort, infringement claim or lawsuit), other than liabilities and obligations arising from or in connection with matters disclosed pursuant to Section 3.11; (c) liabilities and obligations arising from or in connection with matters disclosed pursuant to Section 3.11; (d) liabilities and obligations which have arisen after April 30, 1999 in the ordinary course of business (none of which, except as set forth on Schedule 3.7, is a liability resulting from a breach of contract, breach of warranty, tort, infringement claim or lawsuit); and (e) such other liabilities or obligations that do not have a Material Adverse Effect. 3.20 NO MATERIAL ADVERSE CHANGE. Except as disclosed on Schedule 3.20, since April 30, 1999, the CSK Parties have conducted the WISCO Business in the ordinary course and in a manner consistent with the practices applied during the periods specified in the WISCO Financial Statements, and there has been no Material Adverse Effect in the WISCO Business. Except as set forth on Schedule 3.20, and except as such does not have a Material Adverse Effect, no CSK Party has with respect to the WISCO Business: (a) been a party to any corporate reorganization, restructuring or merger or amalgamation or amended its certificate or articles of incorporation or bylaws; (b) declared or paid any dividend or declared or made any other distribution (whether in cash, stock or property) on any of the shares of its capital stock; (c) incurred or discharged any obligation or liability (whether accrued, absolute or contingent) other than in the ordinary course of and in a manner consistent with past practices for the WISCO Business; (d) entered into any transaction, contract, agreement, indenture, instrument or commitment other than in the ordinary course of and in a manner consistent with past practices for the WISCO Business; (e) suffered or incurred any material damage, destruction, loss or liability (whether or not covered by any insurance); (f) experienced any strike, lockout or other labor trouble such as slow down or work stoppage, or any loss of any of its key Employees, customers, suppliers or distributors; (g) suffered any shortage or cessation or interruption of raw materials, supplies or utilities that could have a Material Adverse Effect on the WISCO Business; (h) made any change in its accounting principles, policies and practices as utilized in the preparation of the WISCO Financial Statements; (i) made any loan or advance, or assumed, guaranteed, endorsed or otherwise become liable with respect to the liabilities or obligations of any other Person or entity, or permitted any of its assets to be subjected to any lien or security interest (except for Permitted Encumbrances); 20 (j) granted to any customer any allowance or discount or changed its pricing, credit or payment policies other than in the ordinary course of and in a manner consistent with past practices for the WISCO Business (except for non-material variations therefrom in the aggregate); (k) incurred any indebtedness, liability or obligation (absolute, accrued, contingent or otherwise) other than in the ordinary course of and in a manner consistent with past practices for the WISCO Business; (l) sold, leased or otherwise disposed of any of its assets or any right, title or interest therein other than in the ordinary course of and in a manner consistent with past practices for the WISCO Business; (m) made any payment to, or for the benefit of, any present or former Employee, director, officer or shareholder otherwise than at the regular rates payable to them, by way of salary, pension, bonus or other remuneration consistent with past practices for the WISCO Business; (n) committed to any capital expenditure project or made any investment, in either case in excess of Five Hundred Thousand Dollars ($500,000) not disclosed to G-P prior to the date of this Agreement; or (o) authorized or agreed to do any of the foregoing matters referred to in this Section 3.20. 3.21 INDEBTEDNESS FOR BORROWED MONEY. There is no indebtedness for borrowed money included in the WISCO Assumed Liabilities. 3.22 KNOWLEDGE AS OF CLOSING DATE. The CSK Parties have no Knowledge, as of the Closing Date, that any representation or warranty made by G-P in Article IV (and related schedules) is untrue. 3.23 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the representations and warranties contained in this Article III, no CSK Party nor any other Person makes any other express or implied representation or warranty on behalf of the CSK Parties. 21 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF G-P G-P represents and warrants to the CSK Parties and the Company as follows: 4.1 ORGANIZATION AND QUALIFICATION. G-P is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia and has all requisite corporate power and authority to own and operate the G-P Contributed Assets and to carry on the G-P Business as currently conducted. G-P is duly qualified to do business and is in good standing as a foreign corporation in the jurisdictions listed on Schedule 4.1, which are the only jurisdictions where the ownership or operation of the G-P Contributed Assets or the conduct of the G-P Business requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect. 4.2 CORPORATE AUTHORIZATION. G-P has full corporate power and authority to execute and deliver this Agreement, and to perform its obligations hereunder and under any agreement or contract contemplated hereby, including the Ancillary Agreements. The execution, delivery and performance by G-P of this Agreement and the agreements and contracts contemplated hereby has been duly and validly authorized by all necessary corporate action and no additional corporate authorization is required in connection with the execution, delivery and performance by G-P of this Agreement and the agreements and contracts contemplated hereby. 4.3 CONSENTS AND APPROVALS. Except as specifically set forth in Schedule 4.3 or as required by the HSR Act, no Consent is required to be obtained by G-P from, and no notice or filing is required to be given by G-P to or made by G-P with, any Governmental Authority or other Person or under any Contract listed, or required to be listed, on Schedule 4.14 in connection with the execution, delivery and performance by G-P of this Agreement, each of the Ancillary Agreements, any other agreement or contract contemplated hereby and the contribution of the G-P Contributed Assets, except where the failure to obtain any such Consent or Consents, give any such notice or notices or make any such filing or filings would not have a Material Adverse Effect. 4.4 NON-CONTRAVENTION. Except as set forth on Schedule 4.3, the execution, delivery and performance by G-P of this Agreement and each of the Ancillary Agreements, and the consummation of the transactions contemplated hereby and thereby, does not and will not (i) violate any provision of the certificate of incorporation or bylaws of G-P; (ii) subject to obtaining the Consents referred to in Section 4.3, conflict with, or result in the breach of, or constitute a default under, or result in the termination, cancellation or acceleration (whether after the filing of notice or the lapse of time or both) of any right or obligation of G-P under, or to a loss of any benefit to which G-P is entitled under, any Contract or result in the creation of any Encumbrance (other than a Permitted Encumbrance) upon any of the G-P Contributed Assets; or (iii) assuming compliance with the matters set forth in Section 4.3, violate, or result in a breach of or constitute a default under any Law, 22 rule, regulation, judgment, injunction, order, decree or other restriction of any court or Governmental Authority to which G-P is subject, including any Governmental Authorization, except in each case, such matter or matters that would not have a Material Adverse Effect. 4.5 BINDING EFFECT. This Agreement constitutes, and each of the Ancillary Agreements when executed and delivered by the parties thereto will constitute, a valid and legally binding obligation of G-P, enforceable with respect to G-P in accordance with its terms, except as the enforceability thereof may be limited or otherwise effected by bankruptcy, insolvency, reorganization, moratorium and similar laws of general applicability Relating to, or affecting, creditors rights and to general equity principles. 4.6 FINANCIAL STATEMENTS; ABSENCE OF CERTAIN CHANGES. (a) Attached as Schedule 4.6(a) are the following financial statements of the G-P Business: Unaudited Balance Sheet, Statement of Income and Statement of Cash Flows, as of and for (i) the years ended December 31, 1997 and 1998 (the "G-P Annual Financial Statements"); and (ii) the period ended April 30, 1999 (the "G-P April Financial Statements"). (Collectively the financial statements described in this Section 4.6(a) shall be referred to as the "G-P Financial Statements.") (b) Exhibit 3.6(b) sets forth the line items and a definition for each such line item contained in each of the G-P Financial Statements. (c) The G-P Financial Statements are true and correct in all material respects, present fairly the combined financial position and results of operation, divisional equity and cash flows of the G-P Business as of the dates and for the periods presented, and were prepared in accordance with GAAP applied on a basis consistent with past practice of the G-P Business. The G-P Financial Statements reflect the underlying Books and Records of the G-P Business, which are complete and accurate in all material respects. Except as described in the footnotes to the G-P Financial Statements, consistent accounting policies and accrual methods were used in all periods presented. All non-recurring or unusual income or expense items over $500,000, as reflected in the 1998 Statement of Income of G-P, have been disclosed in footnotes to the G-P Financial Statements. (d) Except as described in the notes to the G-P Financial Statements, all accounts receivable reflected on the G-P Financial Statements are bona fide receivables, accounted for in accordance with GAAP (including, without limitation, appropriate reserves), representing amounts due with respect to actual transactions in the operation of the G-P Business; it being understood that this representation shall not be deemed to constitute a warranty or guaranty that all such accounts receivable shall be collected. 23 4.7 LITIGATION AND CLAIMS. Except as disclosed on Schedule 4.7: (a) There is no action (whether civil, criminal or administrative), suit, demand, claim, dispute, hearing, proceeding (including condemnation or other proceeding in eminent domain) or investigation pending or, to the Knowledge of G-P, threatened, Related to the G-P Business or any of the G-P Contributed Assets or included in the G-P Assumed Liabilities, that individually or in the aggregate is reasonably expected to have a Material Adverse Effect. (b) None of the G-P Contributed Assets is subject to any order, writ, judgment, award, injunction, or decree of or settlement enforceable in any court or governmental or regulatory authority of competent jurisdiction or any arbitrator or arbitrators. 4.8 TAXES. Except as disclosed on Schedule 4.8: (a) G-P has duly and timely filed (or has caused to be duly and timely filed) taking into account any valid extension of the time for filing, each Tax Return required to be filed with any Tax Authority which includes or is based upon the G-P Contributed Assets, or the operations, ownership or activities of the G-P Business, and all Taxes due and payable (whether or not shown on or required to be shown on a Tax Return) have been paid prior to their due dates; provided, however, that the representations and warranties set forth in this paragraph are made only to the extent that (i) such Taxes are or may become Encumbrances on the G-P Contributed Assets, or (ii) the Company is or may be liable in the capacity of transferee of the Contributed Assets. (b) G-P has duly and timely filed (or has caused to be duly and timely filed), taking into account any valid extension of the time for filing, each Tax Return which includes or is based upon the assets, operations, ownership or activities of the G-P Business, and all Taxes due and payable (whether or not shown on or required to be shown on a Tax Return) have been paid prior to their due dates. (c) None of the G-P Contributed Assets (i) is subject to any lien (other than a Permitted Encumbrance) arising in connection with any failure or alleged failure to pay any Taxes, (ii) secures any debt the interest on which is Tax-exempt under Section 103(a) of the Code, (iii) is required to be or is being depreciated under the alternative depreciation system under Section 168(g)(2) of the Code, (iv) is "limited use property" with the meaning of Revenue Procedure 76-30, or (v) will be treated as owned by any other Person pursuant to the provisions of former Section 168(f)(8) of the Code. (d) G-P (with respect to the G-P Business) has withheld and paid all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any Employee, independent contractor, creditor, shareholder or other party. (e) There are no pending, proposed or, to the Knowledge of G-P, threatened audits, assessments or claims from any Tax Authority for deficiencies, penalties or interest against G-P (with respect to the G-P Contributed Assets or the G-P Business 24 or any of its assets, operations or activities); provided, however, that the representations and warranties set forth in this paragraph are made only to the extent that (i) such Taxes are or may become Encumbrances on the G-P Contributed Assets, or (ii) the Company is or may be liable in the capacity of transferee of the Contributed Assets. (f) None of the G-P Contributed Assets consists of any interest in any entity classified as a partnership for United States federal income Tax purposes. (g) With respect to the G-P Business, G-P does not have and has not had a permanent establishment in any foreign country, as defined in any applicable Tax treaty or convention between the United States and such foreign country. 4.9 EMPLOYEES, PENSION AND OTHER BENEFIT PLANS. (a) Schedule 4.9(a) lists all the Employees who, as of October 1, 1999, were employed by G-P with respect to the G-P Business, together with their respective positions, years of employment, and rates of remuneration, as of August 20, 1999. (b) Except as disclosed on Schedule 4.9(b), G-P is not a party to nor does it sponsor, maintain, or contribute to any Employee Plans that provide benefits to Employees or Retired Employees of the G-P Business. (c) G-P has delivered to CSK true, complete and up-to-date copies of all documents embodying the G-P Plans including, without limitation, all amendments thereto, all funding agreements thereunder (including, but not limited to, trust agreements), all summaries of such G-P Plans provided to any of their Employees, directors, officers, shareholders or their dependents with respect to the G-P Business, as well as the most recent valuation for each defined contribution retirement plan maintained by G-P and the most recent actuarial valuation for each of the G-P Plans for which such valuations are required. G- P has delivered to CSK a complete written description of all unwritten G-P Plans, and will deliver such other documentation with respect to any G-P Plan as is reasonably requested by CSK. (d) Except as disclosed on Schedule 4.6(a) or Schedule 4.9(d) or as set forth in the Human Resources Agreement, the transactions contemplated by this Agreement will not result in any additional payments to, or increase the vested interest of, any Employee, Retired Employee, director, officer, shareholder, or their dependents under any G-P Plan; and the transactions contemplated by this Agreement will not result in any payment to any Employee or Retired Employee, director, officer, or shareholder of G-P which will be subject to Section 280G of the Code. (e) Each G-P Plan has been established, maintained and administered in substantial compliance with its terms and all related documents or agreements and in substantial compliance with applicable provisions of ERISA, the Code, and other applicable Laws. (f) Except as disclosed on Schedule 4.9(f), all required employer contributions, premium payments and employee contributions under the G-P Plans have been made and remitted to 25 the funding agents or accrued or booked thereunder within the time prescribed by any such G-P Plan and the Laws. All insurance premiums required with respect to any G-P Plan, including any premiums payable to the Pension Benefit Guarantee Corporation, have been paid, made, accrued or booked within the time prescribed by any such G-P Plan and the applicable Law. All benefits, expenses and other amounts due and payable to or under any G-P Plan, have been paid, made, accrued or booked within the time prescribed by any such G-P Plan and the Laws. Except as disclosed on Schedule 4.9(f), all of the assets which have been set aside in a trust or account (other than an account which is part of G-P's general assets) to satisfy any obligation under any G-P Plan are shown on the books and records of each such trust and each such account at their fair market value, such current fair market value as of the last valuation date is equal to or exceeds the present value of any obligation under the G-P Plan, and the liabilities for all other obligations under any G-P Plan are accurately set forth in the G-P Financial Statements. (g) Except as disclosed on Schedule 4.9(g), there is no pending or, to the Knowledge of G-P, threatened claim with respect to a G-P Plan (other than routine and reasonable claims for benefits made in the ordinary course of the G-P Business) or with respect to the terms and conditions of employment or termination of employment by any Employee, or Retired Employee, and no audit or investigation by any governmental or other law enforcement agency is pending or has been proposed with respect to any G-P Plan. (h) Except as disclosed on Schedule 4.9(h), no G-P Plan is subject to Title IV of ERISA. Neither G-P nor any Related Person has incurred any material liability under or pursuant to Title I or IV of ERISA or the penalty, excise tax or joint and several liability provisions of the Code Relating to employee benefit plans and, to the Knowledge of G-P, no event or condition has occurred or exists which could result in any material liability to G-P, such Related Person or the Company or a CSK Party under or pursuant to Title I or IV of ERISA or such penalty, excise tax or joint and several liability provisions of the Code. No G-P Plan has incurred an "accumulated funding deficiency" within the meaning of such sections of the Code and ERISA, whether or not waived; and no such G-P Plan has been terminated. Except as disclosed on Schedule 4.9(h), G-P does not contribute to, or have any obligation to contribute to, a multiemployer plan as defined in Section 4001(a)(3) of ERISA with regard to the Employees or Retired Employees. (i) Each of the G-P Plans that is intended to be qualified under Section 401(a) of the Code, and the trust, if any, forming a part thereof, has received a favorable determination letter from the Internal Revenue Service as to the qualification of its form under the Code and to the effect that each such trust is exempt from taxation under Section 501(a) of the Code and, to the Knowledge of G-P nothing has occurred since the date of such determination letter that adversely affects such qualification or tax-exempt status. Except as disclosed in Schedule 4.9(i), all reports and other documents required to be filed with any governmental agency or distributed to plan participants or beneficiaries (including, but not limited to, actuarial reports, audits or Tax Returns) have been duly filed or distributed on a timely basis, and copies thereof have been or will be furnished to CSK upon reasonable request. 26 4.10 COMPLIANCE WITH LAWS. Except as set forth in Schedule 4.10, the G-P Business is being conducted in compliance with all applicable Laws to the G-P Business and, as of the Closing, the Company will have (subject to obtaining the Consents) all Governmental Authorizations necessary for the conduct of the G-P Business as currently conducted, except for such non-compliance or the failure to obtain such Consent or Consents which would not have a Material Adverse Effect; it being understood that nothing in this representation is intended to address any compliance issue that is the subject of the representations and warranties set forth in Sections 4.7, 4.8, 4.9, 4.11, 4.12, or 4.13 hereof, and that G-P makes no representations in this Section 4.10 as to the transferability or assignability of any such Governmental Authorizations. G-P has not received written notice that any Governmental Authorization may be suspended, revoked, materially modified or canceled. 4.11 ENVIRONMENTAL MATTERS. (a) Schedule 4.11(a) sets forth a list of all material Environmental Permits in connection with the G-P Business. (b) Except as would not have a Material Adverse Effect, or as disclosed on Schedule 4.11(b): (i) The Environmental Permits are all the permits, licenses, certificates and authorizations of, and registrations with, any of the Environmental Authorities pursuant to the Environmental Laws necessary to conduct the G-P Business substantially as presently conducted. The Environmental Permits are in full force and effect and G-P is in compliance in all respects thereunder. The consummation of the transactions contemplated hereunder will not require any renewal, consent, amendment or other action in connection with any of the Environmental Permits. G-P is in compliance with the Environmental Laws applicable to the conduct of the G-P Business. (ii) There is no claim, suit, action or other proceeding, including appeals and applications for review, outstanding or pending against G-P pursuant to any of the Environmental Laws Relating to the G-P Business. (iii) G-P has no liability for any release, spill, leakage, pumping, emission, empty, discharge, injection, escape, leaching, disposal or dumping of any Hazardous Substances on or from any of the G-P Real Property, except in such manner or quantity as would not constitute a violation of any of the Environmental Laws or Environmental Permits. (iv) G-P has maintained all records in respect of the G- P Business required by the Environmental Laws and Environmental Permits, in the manner and for the time periods as so required. (v) Since June 30, 1994, G-P has received no notice of investigation or non-compliance or written order from any of the Environmental Authorities, including any notice of contamination or clean-up requirements, pursuant to any of the Environmental Laws with respect to the G-P Business. 27 (c) G-P has no liability for release of PCB's and other Hazardous Substances into the Fox River, Wisconsin or its associated waterways. 4.12 INTELLECTUAL PROPERTY. (a) Schedule 4.12 sets forth a list and description (including the country of registration) of all issued or registered U.S., Canadian and Mexican patents and trademarks comprising the owned G-P Intellectual Property currently (or, to the Knowledge of G-P, within the last 12 months) used in the G-P Business (other than "shrink wrap" consumer software licenses). No third party has rights in, or otherwise has the right to restrict G-P's use of, G-P Intellectual Property owned by G-P, and, to G-P's Knowledge, no third party has rights in, or otherwise has the right to restrict the Company's use of the G-P Intellectual Property as of and following the Closing. (b) To the Knowledge of G-P, no product, component, method, process, or material (including computer software) used, sold or manufactured by the G-P Business infringes on, misappropriates, or otherwise violates a valid and enforceable intellectual property right of any other Person. (c) There are no demands, actions or proceedings pending or, to the Knowledge of G-P, threatened, against G-P Relating to the G-P Business alleging infringement, misappropriation or violation of any intellectual property right of any other Person, and, to the Knowledge of G-P, no Person is infringing, misappropriating, challenging, or violating, the Intellectual Property owned by G-P, except for challenges, infringements, misappropriation or violations which, individually or in the aggregate, would not have a Material Adverse Effect. (d) All of the G-P Intellectual Property will be licensed to the Company at Closing, except to the extent certain Intellectual Property used by G-P to provide services under the Operational Support Agreement is specifically excluded thereunder. G-P agrees that Intellectual Property provided under the Operational Support Agreement will be provided to the Company on and after Closing on the same terms and conditions under which it was available to the G-P Business prior to the Closing in accordance with the terms of the Transition Services Agreement. (e) Schedule 4.12(e) sets forth G-P's efforts at addressing the Year 2000 issue in the G-P Business. The information set forth therein is accurate as of the date hereof, in all material respects. G-P has developed and begun implementing a Project Plan to remediate and/or replace Computer Systems that are used or relied upon in the G-P Business but are not Year 2000 Ready. Such remediation and/or replacement is scheduled to be completed in 1999. 4.13 LABOR MATTERS. Except as disclosed on Schedule 4.13: (a) As of the date hereof, G-P is not a party to any labor or collective bargaining agreement or similar agreement with respect to Employees of the G-P Business, no such Employees are represented by any labor organization and, to the Knowledge of G- P, there are no organizing or de-certification activities (including any demand for recognition or certification 28 proceedings pending or threatened to be brought or filed with the National Labor Relations Board or other labor relations tribunal) involving the G-P Business; (b) As of the date hereof, there are no strikes, work stoppages, slowdowns, lockouts, unfair labor practice charges pending or, to the Knowledge of G-P, threatened against or involving the Employees of the G-P Business; (c) There are no complaints, charges, claims or grievances against G-P pending or, to the Knowledge of G-P, threatened to be brought or filed with any Governmental Authority, arbitrator or court based on or arising out of the employment by G-P of any Employee of the G-P Business, except for those which, individually or in the aggregate, would not have a Material Adverse Effect; (d) G-P is in compliance with all Laws Relating to the employment of labor, including all such Laws Relating to wages, hours, collective bargaining, discrimination, civil rights, safety and health, immigration, workers' compensation, layoffs, and the collection and payment of withholding and/or Social Security Taxes and similar Taxes, except where the failure to be in compliance would not have a Material Adverse Effect; and (e) G-P has given all notices required to be given prior to the Closing Date under WARN Obligations Relating to any plant closing or mass layoff that occurred during the 90 days immediately preceding the Effective Time pertaining to the G-P Business. 4.14 CONTRACTS. Schedule 4.14 sets forth a list, as of the date hereof, of each Contract that is Related to the G-P Business other than (a) G-P Real Property Leases, which are listed on Schedule 4.15, and collective bargaining agreements, which are listed on Schedule 4.13, (b) purchase orders or similar agreements for the purchase or sale of goods or services in the ordinary course of business, (c) confidentiality agreements entered into in the ordinary course of business in connection with the purchase and sale of Inventory, and (d) any Contract which requires a payment or imposes an obligation on either party thereto of less than $1,000,000 in the aggregate. Schedule 4.14 also identifies any Contract that contains a non-compete covenant or similar provision that could materially restrict the Company in its conduct of the G-P Business following Closing, any employment agreement with any Employee of the G-P Business, any employment agreement included in the G-P Contributed Assets or G- P Assumed Liabilities, any Contract between any Affiliates of G- P, on one hand, and G-P on the other hand, any agreements Related to payments in lieu of taxes, any agreement or license Related to Intellectual Property (other than "shrink wrap" consumer software licenses), leases and license agreements for any Computer Systems (other than "shrink wrap" consumer software licenses), all material agreements for telecommunications voice (including without limitation, local, long distance and toll free service) and data services, Internet access, hosting and use services. Each Contract set forth on Schedule 4.14 is a valid and binding agreement of G-P and, to the Knowledge of G-P, is in full force and effect. Except as otherwise provided in Schedule 4.14, G-P is not, and, to G-P's Knowledge, no other party thereto is, in default in any material respect under any Contract listed on Schedule 4.14 or any collective bargaining agreement listed on Schedule 4.13. 29 4.15 REAL ESTATE LEASES. Schedule 4.15 sets forth a list, as of the date hereof, of each material written G-P Real Estate Lease with a term of more than one month that is Related to the G- P Business. Each G-P Real Estate Lease set forth on Schedule 4.15 is a valid and binding agreement of G-P and is in full force and effect. There are no defaults under any G-P Real Estate Lease listed on Schedule 4.15 which defaults have not been cured or waived and which would, individually or in the aggregate, have a Material Adverse Effect. 4.16 ENTIRE BUSINESS; TITLE TO PROPERTY. (a) Except as set forth in Schedule 4.16(a) and Schedule 4.6(a), the G-P Contributed Assets, the G-P Retained Assets (including cash and cash accounts, disbursement accounts, invested securities and other short and medium term investments, the G-P Marks, the G-P Plans, and G-P's insurance policies), and the rights specifically provided or made available to the Company under the Ancillary Agreements, include all of the buildings, machinery, equipment and other assets (whether tangible or intangible) necessary for the Company immediately after Closing to conduct in all material respects the G-P Business as conducted as of the date hereof, and as conducted during the 12-month period prior to the date hereof (subject to changes expressly permitted by the terms hereof to be made after the date hereof); provided, however, that no representation is made as to the assignability of Government Authorizations. (b) G-P has good (and, in the case of its Owned Real Property, marketable) title to, or a valid and binding leasehold interest in, the G-P Contributed Assets, free and clear of all Encumbrances, except (i) as set forth in Schedule 4.16(b) and (ii) any Permitted Encumbrances. (c) G-P Contributed Assets do not include any equity interest in any Subsidiary. (d) The G-P Contributed Assets are in good operating condition and repair (subject to normal wear and tear). Except as set forth on Schedule 4.16(d), to G-P's Knowledge, there are no material structural or mechanical defects with respect to any buildings, improvements or equipment included in the G-P Contributed Assets, which defects are reasonably likely to have a Material Adverse Effect. 4.17 FINDER'S FEES. Except for Morgan Stanley Dean Witter Co., whose fees will be paid by G-P, there is no investment banker, broker or finder which has been retained by or is authorized to act on behalf of G-P who might be entitled to any fee or commission from G-P or the Company in connection with the transactions contemplated by this Agreement. 4.18 INSURANCE. Schedule 4.18 attached hereto sets forth the following information with respect to each insurance policy to which G-P, with respect to the G-P Business, has been a party, a named insured, or otherwise the beneficiary of coverage at any time with in the past five years: (a) the name of the insurer, the name of the policyholder, and the name of each covered insured; 30 (b) the scope, period and amount of coverage; and (c) a description of any retroactive premium adjustments or other loss-sharing arrangements. Schedule 4.18 also describes any self insurance arrangements affecting the G-P Business. As of the date hereof, G-P has not received any written notice of any retroactive premium increase or assessment applicable to the G-P Business. Except as disclosed on Schedule 4.18, all of such policies are in full force and effect. 4.19 NO UNDISCLOSED LIABILITIES. With respect to the G-P Business, G-P does not have any obligations or liabilities (whether accrued, absolute, contingent, unliquidated or otherwise, whether or not known to G-P, whether due or to become due and regardless of when asserted) arising out of transactions entered into at or prior to the Closing, or any action or inaction at or prior to the Closing, or any state of facts existing at or prior to the Closing other than: (a) liabilities set forth on G-P's Financial Statements (including any notes thereto, if any); (b) liabilities and obligations arising from or in connection with matters disclosed pursuant to G-P's representations and warranties in this Agreement or in the Disclosure Schedules (none of which, except as set forth on Schedule 4.7, is a liability resulting from a breach of contract, breach of warranty, tort, infringement claim or lawsuit), other than liabilities and obligations arising from or in connection with matters disclosed pursuant to Section 4.11; (c) liabilities and obligations arising from or in connection with matters disclosed pursuant to Section 4.11; (d) liabilities and obligations which have arisen after April 30, 1999 in the ordinary course of business (none of which, except as set forth on Schedule 4.7, is a liability resulting from a breach of contract, breach of warranty, tort, infringement claim or lawsuit); and (e) such other liabilities or obligations that do not have a Material Adverse Effect. 4.20 NO MATERIAL ADVERSE CHANGE. Except as disclosed on Schedule 4.20, since April 30, 1999, G-P has conducted the G-P Business in the ordinary course and in a manner consistent with the practices applied during the periods specified in the G-P Financial Statements, and there has been no Material Adverse Effect in the G-P Business. Except as set forth on Schedule 4.20, and except as such does not have a Material Adverse Effect, G-P has not with respect to the G-P Business: (a) been a party to any corporate reorganization, restructuring or merger or amalgamation or amended its certificate or articles of incorporation or bylaws; (b) declared or paid any dividend or declared or made any other distribution (whether in cash, stock or property) on any of the shares of its capital stock; (c) incurred or discharged any obligation or liability (whether accrued, absolute or contingent) other than in the ordinary course of and in a manner consistent with past practices for the G-P Business; 31 (d) entered into any transaction, contract, agreement, indenture, instrument or commitment other than in the ordinary course of and in a manner consistent with past practices for the G-P Business; (e) suffered or incurred any material damage, destruction, loss or liability (whether or not covered by any insurance); (f) experienced any strike, lockout or other labor trouble such as slow down or work stoppage, or any loss of any of its key Employees, customers, suppliers or distributors; (g) suffered any shortage or cessation or interruption of raw materials, supplies or utilities that could have a Material Adverse Effect on the G-P Business; (h) made any change in its accounting principles, policies and practices as utilized in the preparation of the G-P Financial Statements; (i) made any loan or advance, or assumed, guaranteed, endorsed or otherwise become liable with respect to the liabilities or obligations of any other Person or entity, or permitted any of its assets to be subjected to any lien or security interest (except for Permitted Encumbrances); (j) granted to any customer any allowance or discount or changed its pricing, credit or payment policies other than in the ordinary course of and in a manner consistent with past practices for the G-P Business (except for non-material variations therefrom in the aggregate; (k) incurred any indebtedness, liability or obligation (absolute, accrued, contingent or otherwise) other than in the ordinary course of and in a manner consistent with past practices for the G-P Business; (l) sold, leased or otherwise disposed of any of its assets or any right, title or interest therein other than in the ordinary course of and in a manner consistent with past practices for the G-P Business; (m) made any payment to, or for the benefit of, any present or former Employee, director, officer or shareholder otherwise than at the regular rates payable to them, by way of salary, pension, bonus or other remuneration consistent with past practices for the G-P Business; (n) committed to any capital expenditure project or made any investment, in either case in excess of Five Hundred Thousand Dollars ($500,000) not disclosed to CSK prior to the date of this Agreement; or (o) authorized or agreed to do any of the foregoing matters referred to in this Section 4.20. 32 4.21 INDEBTEDNESS FOR BORROWED MONEY. There is no indebtedness for borrowed money included in the G-P Assumed Liabilities. 4.22 KNOWLEDGE AS OF CLOSING DATE. G-P has no Knowledge, as of the Closing Date, that any representation or warranty made by the CSK Parties in Article III (and related schedules) is untrue. 4.23 ORGANIZATION OF COMPANY. The Company is a limited liability company, duly organized, validly existing and in good standing under the laws of the State of Delaware. 4.24 AUTHORIZATION OF COMPANY. The Company has full limited liability company power and authority to execute and deliver this Agreement, and to perform its obligations hereunder and under any agreement or contract contemplated hereby, including the Ancillary Agreements. The execution, delivery and performance by the Company of this Agreement and the agreements and contracts contemplated hereby has been duly and validly authorized and no additional limited liability company authorization or consent is required in connection with the execution, delivery and performance by the Company of this Agreement and the agreements and contracts contemplated hereby. 4.25 ACTIVITIES OF COMPANY. Other than entering into this Agreement and the agreements and contracts contemplated hereby, the Company has not entered into any agreements or conducted any other business. 4.26 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the representations and warranties contained in this Article IV, neither G-P, nor any other Person makes any other express or implied representation or warranty on behalf of G-P. ARTICLE V COVENANTS 5.1 COVENANTS REGARDING EMPLOYEES. (a) At the Closing, G-P, the CSK Parties and the Company shall enter into the Human Resources Agreement, and shall take all actions required by them pursuant to such Human Resources Agreement. (b) CSK shall retain sponsorship of the CSK Plans, and neither the Company nor G-P shall be entitled to any assets or be liable for any obligations of the CSK Plans except as provided in the Human Resources Agreement. (c) G-P shall retain sponsorship of the G-P Plans and no CSK Party shall be entitled to any assets or be liable for any obligations of the G-P Plans except as provided in the Human Resources Agreement. 33 5.2 COMPLIANCE WITH WARN AND SIMILAR LAWS. The Company will timely give all notices required to be given with respect to WARN Obligations Relating to actions taken on and after the Closing Date. 5.3 FURTHER ASSURANCES. At any time after the Closing Date, the CSK Parties, G-P and the Company shall promptly execute, acknowledge and deliver any other assurances or documents reasonably requested by the Company, G-P or the CSK Parties, as the case may be, and necessary for them or it to satisfy their or its respective obligations hereunder or obtain the benefits contemplated hereby. Without limiting the generality of the foregoing, the Company agrees that if any of the Contributed Subsidiaries are found to own assets that are not part of the WISCO Contributed Assets, or if any Retained Assets are inadvertently transferred to the Company, the Company shall transfer such assets to G-P or the appropriate CSK Party, as applicable, at G-P's or such CSK Party's expense, as applicable, but without consideration. If after the Closing either the Company, a CSK Party or G-P identifies any assets of any CSK Party or G-P that Relates to the Business and is not a Retained Asset of the CSK Party or GP, the party retaining any such assets shall transfer such assets to the Company at the transferring party's expense without further consideration. 5.4 USE OF G-P INTELLECTUAL PROPERTY AND CSK MARKS. At Closing, G-P shall provide to the Company a non-exclusive license, substantially in the form set forth in Schedule 5.4(a) hereto, to use the G-P Intellectual Property. 5.5 CERTAIN MATTERS RELATED TO RETAINED AND ASSUMED LIABILITIES. (a) With respect to all Retained Liabilities and in particular indemnification under Sections 7.2(a)(ii) and 7.3(a)(ii), the Company shall, at the expense of the CSK Parties or G-P as applicable, provide reasonable cooperation including providing the CSK Parties or G-P, as applicable, as promptly as practicable with any notices and other information received by the Company as well as all relevant materials, information and data requested by the CSK Parties or G-P, as applicable, including reasonable access (without charge) to Employees of the Company and to the Real Property. (b) With respect to all Assumed Liabilities, G-P or the CSK Parties, as the case may be, shall, at the Company's expense, reasonably cooperate with the Company, provide the Company as promptly as possible with any notices and other information received by such parties as well as all relevant materials, information and data requested by the Company and shall grant the Company, without charge, reasonable access to Employees of the CSK Parties or G-P, as applicable. 5.6 INTERCOMPANY AGREEMENTS. (a) As of the Effective Time, G-P shall terminate and shall cause its Affiliates to terminate, any and all agreements between G-P and its Affiliates to the extent such agreements Relate to the G-P Business, except as contemplated in the Ancillary 34 Agreements. Without limiting the foregoing, all intercompany loans between G-P and any of its Affiliates Relating to the G-P Business shall be paid or otherwise eliminated prior to the Effective Time. (b) As of the Effective Time, the CSK Parties shall terminate and shall cause its Affiliates to terminate, any and all agreements between any of the CSK Parties and its Affiliates to the extent such agreements Relate to the WISCO Business, except as contemplated in the Ancillary Agreements. Without limiting the foregoing, all intercompany loans between the CSK Parties and any of its Affiliates Relating to the WISCO Business shall be paid or otherwise eliminated prior to the Effective Time. 5.7 RECORDS AND RETENTION AND ACCESS. The Company shall keep and preserve in an organized and retrievable manner the Books and Records it receives from either party for at least seven years from the Closing Date. The Company shall neither dispose of nor destroy such Books and Records without first offering to turn over possession thereof to the party that contributed such Books and Records by written notice to such party at least thirty (30) days prior to the proposed date of such disposition or destruction. While such Books and Records remain in existence, each party shall allow the other party, its representatives, attorneys and accountants, at the requesting party's expense, access to the Books and Records upon reasonable request and advance notice and during normal business hours for the purpose of interviewing, examining and copying in connection with such parties' preparation of financial statements. 5.8 INSURANCE. (a) G-P and the CSK Parties shall use commercially reasonable efforts to assign to the Company, to the fullest extent, all of the benefits and rights under any insurance policies held by them and/or any of their Affiliates with respect to any Losses arising out of, Related to or in connection with the Contributed Assets, the Assumed Liabilities and their respective Businesses (other than benefits and rights to the extent Related to Retained Assets or Liabilities) with respect to events occurring prior to the Closing Date (it being understood that to the extent rights under such insurance policies include claims for Losses related to Contributed Assets, then such claims shall be reflected as an insurance receivable on the Closing Working Capital Statement). The Company shall have the right to such benefits and rights only to the extent actually paid or payable, and exclusive of any deductibles (including pass through deductibles for which either party or any Affiliate of such party is required to reimburse the insurer). To the extent such assignment is not permitted, G-P or the CSK Parties, as applicable, shall use commercially reasonable efforts on the Company's behalf to obtain such proceeds or benefits for the Company, or otherwise to provide the Company with the benefit equivalent to that which would have been available had such assignment been permitted. (b) The CSK Parties and G-P shall cooperate with the Company in obtaining insurance policies for the Business to be in effect from and after Closing. Notwithstanding such assistance, all decisions with respect to such policies shall be made solely by the Company, and neither the CSK Parties nor G-P shall have any liability, whether to the Company or to any other Person, whether as an advisor, broker or otherwise, under any other theory, in connection with providing such assistance and 35 cooperation. The CSK Parties and G-P make no assurances whatsoever with respect to such insurance coverage, including the availability or price thereof. 5.9 SPECIAL CSK RETAINED LIABILITY. Notwithstanding Section 2.1(a) hereof, CSK shall retain and be solely responsible for, and CSK and WISCO shall indemnify and hold harmless the Company, G-P and all G-P Affiliates from and against, any and all costs, liabilities, damages, expenses or Losses of any kind whatsoever which may be incurred by or assessed against any of them arising out of or in any way related to the release, spill, leak, pumping, pouring, emitting, emptying, discharge, injecting, escaping, leaching, dumping, disposal or arranging for disposal (hereinafter "release") of (i) PCBs and/or any other Hazardous Substance into, on or around the Fox River in Wisconsin and its associated waterways by any CSK Parties, and (ii) PCBs into, on or around any landfill, disposal site or dump located in Wisconsin, by CSK, WISCO or any of their Affiliates or successors or predecessors in interest (the "Fox River Liability"). The Company shall provide reasonable cooperation to CSK, WISCO and their predecessors or successors in interest in their defense of any liability for the release of PCBs and/or other Hazardous Substances into, on or around the Fox River and its associated waterways, and all costs incurred by the Company in so cooperating will be reimbursed to it by CSK or WISCO. Such indemnification shall not be limited by any Survival Period, Deductible or WISCO Cap set forth in Article VII. For purposes of this Section 5.9, the term "Fox River Liability" shall not include liability for dumping or disposal of Hazardous Substances by WISCO at the Vinland #1 and #2 disposal sites owned by WISCO. 5.10 PREPARATION OF REGISTRATION STATEMENT. As soon as practicable after the execution and delivery of this Agreement, the Company and G-P shall prepare and file with the Securities and Exchange Commission the Registration Statement in connection with the registration under the Securities Act of debt to be incurred by the Company to refinance the Company Debt. The CSK Parties each shall cooperate to the extent such cooperation is reasonably required to file such Registration Statement; provided that the CSK Parties shall not be required to execute any documents other than a WISCO debt indemnity as contemplated in the Operating Agreement. 5.11 USE OF WISCO NAME. As soon as practicable and in any event within three months following the Closing, WISCO shall change its corporate name, and immediately following the Closing neither WISCO, CSK nor any Subsidiary or Affiliate of CSK shall make use of the names "Wisconsin Tissue Mills", "Wisconsin Tissue" or "WISCO" or any names confusingly similar to such names other than in connection with the defense of litigation. 5.12 PRORATION OF CERTAIN CHARGES. The following charges and payments may be prorated on a per diem basis and apportioned between each party transferring Contributed Assets on the one hand and the Company on the other, as of the Closing Date: property taxes, utility charges, prepaid items, license and permit fees, and similar charges imposed with respect to the Contributed Assets. To the extent not reflected on the Final Working Capital Statement, each party transferring Contributed Assets shall be liable for (and shall reimburse the Company to 36 the extent the Company shall have paid) that portion of such charges Relating to, or arising in respect to, periods on or prior to the Closing Date, and the Company shall be liable for (and shall reimburse the Party contributing such assets to the extent the contributing party shall have paid) that portion of the charges Relating to, or arising in respect to, periods after the Closing Date. ARTICLE VI CONDITIONS TO CLOSING [Intentionally Deleted] ARTICLE VII SURVIVAL; INDEMNIFICATION 7.1 SURVIVAL. The representations and warranties contained in this Agreement shall survive the Closing (regardless of any investigation, inquiry or examination made by or on behalf of, or any Knowledge of any party hereto or the acceptance of any party or on its behalf of a certificate and opinion) for the respective periods (each, a "Survival Period") set forth in this Section 7.1. All of the representations and warranties of the CSK Parties and G-P contained in this Agreement and all claims and causes of action with respect thereto shall terminate on April 30, 2001, except that (a) the representations and warranties set forth in Section 3.11, 3.19(c) and 4.11(a)-(b) shall terminate upon the expiration of the 36 month period commencing on the Closing Date, (b) the representations and warranties set forth in Sections 3.8, 3.9, 3.12, and 4.8, 4.9, and 4.12 shall survive until the expiration of the applicable statute of limitation (including any extension thereof), and (c) the representations and warranties set forth in Sections 3.1, 3.2, 3.5, 3.17, and 4.1, 4.2, 4.5, 4.11(c), and 4.17 shall have no expiration date. Any claim for indemnification for breach of a representation and warranty must be made during the applicable Survival Period. In the event notice (within the meaning of Section 7.5(a)) of any claim for indemnification for a breach of a representation or warranty is given within the applicable Survival Period, an Indemnifying Party's obligations with respect to such indemnification claim shall survive until such time as such claim is finally resolved. 7.2 INDEMNIFICATION BY G-P (a) G-P shall indemnify, defend and hold harmless CSK, WISCO, their Affiliates and, if applicable, their respective directors, officers, shareholders, partners, members, attorneys, accountants, agents and Employees and their heirs, successors and assigns (the "WISCO Indemnified Parties") and the Company from, against and in respect of any damages, claims, losses, charges, actions, suits, proceedings, deficiencies, Taxes, interest, penalties, and reasonable costs and expenses (including reasonable attorneys' fees, removal costs, remediation costs, closure costs, fines, penalties and expenses of investigation and ongoing monitoring) (collectively, the "Losses") imposed on, sustained, incurred or suffered by or asserted against any of the 37 WISCO Indemnified Parties or the Company, directly or indirectly, Relating to or arising out of: (i) subject to Section 7.2(b), any breach of any representation or warranty made by G-P in this Agreement; (ii) the G-P Retained Liabilities; and (iii)the breach of any covenant or agreement of G- P contained in this Agreement. (b) G-P shall not be liable to the WISCO Indemnified Parties or the Company for any Losses with respect to the matters contained in Section 7.2(a)(i) (other than the representation in Section 4.6) until the Losses therefrom first exceed an aggregate amount equal to $3,760,000 (the "G-P Deductible"), and in that event, G-P shall be liable for all Losses in excess thereof up to an aggregate amount equal to 50% of the value of the G-P Business as set forth in Section 2.8(a) hereof (the "G-P Cap"); provided, however, that the G-P Deductible and the G-P Cap shall not apply to claims arising out of the breach of a representation or warranty, if such representation or warranty was made fraudulently by G-P or if such representation or warranty was, to the Knowledge of G-P, false at the time made. 7.3 INDEMNIFICATION BY CSK. (a) CSK and its Affiliates shall indemnify, defend and hold harmless G-P, its Affiliates and, if applicable, their respective directors, officers, shareholders, partners, members, lenders, attorneys, accountants, agents and Employees and their heirs, successors and assigns (the "G-P Indemnified Parties") and the Company from, against and in respect and to the extent of any Losses imposed on, sustained, incurred or suffered by or asserted against each of the G-P Indemnified Parties or the Company, directly or indirectly, Relating to or arising out of: (i) subject to Section 7.3(b), any breach of any representation or warranty made by any CSK Party in this Agreement; (ii) the WISCO Retained Liabilities; and (iii)the breach of any covenant or agreement of any CSK Party contained in this Agreement. (b) CSK shall not be liable to the G-P Indemnified Parties or the Company for any Losses with respect to the matters contained in Section 7.3(a)(i) (other than the representation in Section 3.6) until the Losses therefrom first exceed an aggregate amount equal to $7,750,000 (the "WISCO Deductible"), and in that event, WISCO shall be liable for all Losses in excess thereof paid or suffered by G-P or the Company up to an aggregate amount equal to 50% of the value of the WISCO Business as set forth in Section 2.8 hereof (the "WISCO Cap"); provided, however, that the WISCO Deductible and the WISCO Cap shall not apply to claims arising out of the breach of a representation or warranty, if 38 such representation or warranty was made fraudulently by WISCO or if such representation or warranty was, to the Knowledge of WISCO, false at the time made. 7.4 INDEMNIFICATION BY THE COMPANY. The Company shall indemnify, defend and hold harmless the G-P Indemnified Parties or the WISCO Indemnified Parties, as the case may be, from and against and in respect and to the extent of any Losses imposed on, sustained, incurred or suffered by or asserted against either the G-P Indemnified Parties or the WISCO Indemnified Parties, directly or indirectly, Relating to or arising out of (i) the breach of any covenant or agreement of the Company in this Agreement; or (ii) the Assumed Liabilities; provided that the Company shall have no indemnification obligations hereunder for any Losses resulting from a payment of a claim made pursuant to clauses (i) and (ii) above and incurred or suffered by any Person solely in such Person's capacity as a member of the Company, equity owner or debt holder of the Company, including Losses for diminution of the value of such equity, debt or member interest. 7.5 INDEMNIFICATION PROCEDURES. (a) Any Indemnified Person making a claim for indemnification pursuant to Section 7.2, 7.3 or 7.4 above (an "Indemnified Party") must give the party from whom indemnification is sought (an "Indemnifying Party") notice of such claim (in a manner consistent with Section 10.1 hereof) describing such claim with reasonable particularity and the nature and amount of the Loss to the extent that the nature and amount of such Loss is known at such time (an "Indemnification Claim Notice") promptly after the Indemnified Party receives any written notice of any action, lawsuit, proceeding, investigation or other claim (a "Proceeding") against or involving the Indemnified Party by a Governmental Authority or other third party or otherwise discovers the liability, obligations or facts giving rise to such claim for indemnification; provided that the failure to notify or delay in notifying an Indemnifying Party will not relieve the Indemnifying Party of its obligations pursuant to Section 7.2, 7.3 or 7.4, as applicable, except to the extent that (and only to the extent that) such failure shall have (i) caused or materially increased the Indemnifying Party's liability, (ii) resulted in the forfeiture by the Indemnifying Party of substantial rights and defenses or (iii) otherwise materially prejudiced the Indemnifying Party. (b) The Indemnifying Party shall have 30 days from the date the Indemnification Claim Notice is deemed given pursuant to Section 10.1 hereof (the "Notice Period") to notify the Indemnified Party (i) whether or not the Indemnifying Party disputes the liability of the Indemnifying Party to the Indemnified Party with respect to such claim or demand and (ii) whether or not it desires to defend the Indemnified Party against such claim or demand. (c) If (i) the Indemnifying Party agrees in writing that the subject matter of the claim is subject to indemnification under this Article VII and (ii) the claim for indemnification does not relate to a matter (A) that, if determined adversely, could reasonably be expected to expose the Indemnified Party to criminal prosecution or penalties, (B) that, if determined adversely, could reasonably be expected to result in the imposition of a consent order, injunction or decree which would 39 significantly restrict the activity or conduct of the Indemnified Party or any Affiliate thereof, or (C) as to which the Indemnified Party shall have reasonably concluded, in good faith, after consultation with the Indemnifying Party, that such representation is likely to result in a conflict of interest or materially jeopardize the viability of such defense, then the Indemnifying Party shall have the right to defend the Indemnified Party by appropriate proceedings and shall have the sole power to direct and control such defense. If any Indemnified Party desires to participate in any such defense, it may do so at its sole cost and expense. (d) If the claim relates to a matter for which both the Indemnifying Party and any Indemnified Party could be liable or responsible hereunder, such as a Loss for which both parties could be partially liable due to the applicable Cap and the Deductible, the Indemnifying Party and the Indemnified Parties shall cooperate in good faith in the defense of such action. In such event, no party shall settle any claim without the prior consent of the other party (which consent shall not be unreasonably withheld); provided, however, that neither an Indemnified Party nor an Indemnifying Party shall be required to consent to any settlement if the proposed settlement (i) does not provide for a full release of all claims against such party, (ii) is on a basis which would result in the imposition of a consent order, injunction or decree or any other restriction on the activity or conduct of such party, or (iii) is on a basis which could, in such party's judgment, expose such party to criminal liability or requires an admission of wrongdoing by such party. If an Indemnified Party or an Indemnifying Party does not consent to a definitive settlement proposed by the other party (with respect to which a settlement agreement has been agreed to by all parties other than such party) which settlement satisfies the foregoing clauses (i) through (iii), then the party declining such settlement shall thereafter have full control of the defense of such claim, and the maximum liability of the party that proposed such settlement shall be as though such matter had settled on the terms so proposed, including the amount of the proposed settlement, together with all legal costs and expenses incurred in connection with such matter through and including the proposed settlement date. For purposes of Section 7.2 or 7.3, the actual amount of the Loss up to the amount of such party's maximum liability (determined in accordance with the preceding sentence) shall be the amount of the Loss of such Party for purposes of determining whether the applicable Deductible has been met. Notwithstanding anything in Section 7.2 or 7.3 to the contrary, if an Indemnified Party and all other parties other than the Indemnifying Parties have reached a definitive settlement agreement which satisfies the foregoing clauses (i) through (iii), the amount of the Loss for purposes of determining whether the applicable Cap has been met shall equal the amount contemplated by such definitive settlement regardless of the actual amount of such Loss. If the parties agree to the settlement, the relative liabilities of the parties for such Losses shall be determined as provided in the other provisions of this Article VII. (e) All costs and expenses incurred by the Indemnifying Party in defending a claim or demand under Section 7.4(c), and all costs and expenses incurred by the Indemnified Party in defending a claim or demand which the Indemnifying Party has elected not to defend (including by virtue of its failure to give timely notice to the Indemnified Party) or is not permitted to defend under Section 7.4(c) shall be a liability of, and shall be paid by, the Indemnifying Party, subject to any applicable Deductible and Cap. 40 (f) To the extent the Indemnifying Party shall direct, control or participate in the defense or settlement of any third- party claim or demand, the Indemnified Party will give the Indemnifying Party and its counsel access to, during normal business hours, the relevant business records and other documents, and shall permit them to consult with the Employees and counsel of the Indemnified Party. The Indemnifying Party and Indemnified Parties shall use their best efforts in the defense of all such claims. (g) In connection with the indemnification obligations set forth in Sections 7.2(a)(ii) and 7.3(a)(ii), CSK Parties, G-P and the Company shall comply with the obligations contained in Section 5.5. 7.6 ACKNOWLEDGMENT REGARDING ENVIRONMENTAL LIABILITIES. G- P and each of the CSK Parties acknowledge the allocation of relative responsibility for liabilities under Environmental Laws under this Agreement is a material term of this Agreement, and that (i) they have taken such matters into consideration in determining the financial and other terms of this transaction, and (ii) they understand that the Company is accepting all risks resulting or arising in any way from any known or unknown liabilities in connection with such matters arising in connection with or in any way relating to the Businesses (other than the Retained Environmental Liabilities of either G-P or the CSK Parties) and that CSK and WISCO are retaining all risks Relating to the Retained Environmental Liabilities and indemnifying G-P and the Company for certain Losses Relating to environmental matters under Section 7.3(a) and Section 5.9. G-P and the CSK Parties acknowledge that none of them shall have any claim of any nature against the other or the other's Affiliates in connection with any matters Relating to known or unknown soil or groundwater contamination or any other claims under any Environmental Laws, other than as set forth herein. 7.7 CHARACTERIZATION OF INDEMNIFICATION PAYMENTS. (a) To the extent the Company is an Indemnified Party, any payments to the Company pursuant to this Article VII shall not result in an adjustment to any party's capital account in the Company or percentage of ownership interest of the Company; and (b) all amounts paid to G-P, or CSK, as the case may be, under this Article VII shall not be treated as adjustments to the amount contributed to the Company by G-P or CSK, pursuant to Section 2.4(a) or (b) hereof. 41 ARTICLE VIII TAX COVENANTS 8.1 LIABILITY FOR TAXES. (a) CSK shall be liable for, and shall indemnify, defend and hold the Company harmless from and against, and shall be entitled to all refunds of, any and all Taxes imposed on or with respect to the WISCO Contributed Subsidiaries, or their respective assets, operations or activities for any Pre-Closing Period, except to the extent that any such Taxes are reflected on the Final Working Capital Statement or result from a carryback from any Post-Closing Period; provided, however, that the amount of any indemnity obligation of CSK shall be reduced by the amount of any Tax Benefits (for any period) realized or to be realized by the Company, G-P or its Affiliates, or any Contributed Subsidiary as a result of any adjustment to a Tax item for any Pre-Closing Period. (b) The Company shall be liable for, and shall indemnify, defend and hold CSK harmless from and against, any and all Taxes imposed on or with respect to the Contributed Subsidiaries or their respective operations, ownership, assets or activities for any Post-Closing Period. (c) Tax items shall be apportioned between Pre-Closing Periods and Post-Closing Periods based on a closing of the Books and Records of the relevant entity or entities as of the Closing Date (provided that (i) depreciation, amortization and depletion for any Straddle Period shall be apportioned on a daily pro rata basis and (ii) any Taxes imposed on a periodic basis (including Real Property Taxes, but not including Taxes based on income and receipts) for any Straddle Period shall be apportioned on a daily pro rata basis). Notwithstanding anything to the contrary in the preceding sentence, the parties agree that for U.S. federal income Tax purposes, Tax items for any Straddle Period shall be apportioned between Pre-Closing Periods and Post-Closing Periods in accordance with U.S. Treasury Regulation Section 1.1502-76(b), which regulation shall be reasonably interpreted by the parties in a manner intended to achieve the method of apportionment described in the preceding sentence. Neither CSK nor G-P will exercise any option or election (including any election to ratably allocate a Tax year's items under Treasury Regulation Section 1.1502-76(b) (2) (ii)) to allocate Tax items in a manner inconsistent with this section. (d) G-P shall be liable for, and shall indemnify, defend and hold the Company harmless from and against, and shall be entitled to all refunds of, any and all Taxes imposed on or with respect to the G-P Contributed Subsidiaries, or their respective assets, operations or activities for any Pre-Closing Period, except to the extent that any such Taxes are reflected on the Final Working Capital Statement or result from a carryback from any Post-Closing Period; provided, however, that the amount of any indemnity obligation of G-P shall be reduced by the amount of any Tax Benefits (for any period) realized or to be realized by the Company, CSK or its Affiliates, or any Contributed Subsidiary 42 as a result of any adjustment to a Tax item for any Pre-Closing Period. (e) The Company shall be liable for, and shall indemnify, defend and hold G-P harmless from and against, any and all Taxes imposed on or with respect to the Contributed Subsidiaries or their respective operations, ownership, assets or activities for any Post-Closing Period. (f) Tax items shall be apportioned between Pre-Closing Periods and Post-Closing Periods based on a closing of the Books and Records of the relevant entity or entities as of the Closing Date (provided that (i) depreciation, amortization and depletion for any Straddle Period shall be apportioned on a daily pro rata basis and (ii) any Taxes imposed on a periodic basis (including Real Property Taxes, but not including Taxes based on income and receipts) for any Straddle Period shall be apportioned on a daily pro rata basis). Notwithstanding anything to the contrary in the preceding sentence, the parties agree that for U.S. federal income Tax purposes, Tax items for any Straddle Period shall be apportioned between Pre-Closing Periods and Post-Closing Periods in accordance with U.S. Treasury Regulation Section 1.1502-76(b), which regulation shall be reasonably interpreted by the parties in a manner intended to achieve the method of apportionment described in the preceding sentence. Neither G-P nor CSK will exercise any option or election (including any election to ratably allocate a Tax year's items under Treasury Regulation Section 1.1502-76(b) (2) (ii)) to allocate Tax items in a manner inconsistent with this section. 8.2 PREPARATION OF TAX RETURNS. (a) CSK shall have the right and obligation to timely prepare and file, and cause to be timely prepared and filed, when due (taking into account any valid extension of the time for filing), any Tax Return that is required to include the operations, ownership, assets or activities of WISCO, with respect to the WISCO Contributed Assets, or of any WISCO Contributed Subsidiary for Tax Periods ending on or before the Closing Date. CSK shall provide the Company with copies of any such Tax Returns (to the extent that they relate to the WISCO Contributed Assets or the Business and reasonably may have a material effect on the Company's or its Affiliates' liability for Taxes) at least 30 days prior to the due date (as extended) for filing such Tax Returns. In the event that the Company reasonably determines that any such Tax Return should be modified, the Company shall notify CSK of the Company's proposed modifications no later than 15 days from the date of receipt of such Tax Return. To the extent that CSK disagrees with such modifications, the Company and CSK shall endeavor to agree on the positions to be taken on such return. To the extent that they are unable to do so, a CPA Firm (other than the regular auditor of CSK, G-P or the Company) shall be retained to determine the position to be taken, with the fees and expenses of such CPA Firm to be borne equally by WISCO and the Company. Any such Tax Return which CSK is required to prepare under the terms hereof shall (to the extent such Tax Return relates to the WISCO Contributed Assets or the Business and reasonably may have a material effect on the Company or its Affiliates' Tax liability) be prepared in accordance with past Tax accounting practices used with respect to the Tax Returns in question (unless such past practices are no longer permissible under the Applicable Tax 43 Law), and to the extent any item is not covered by such past practices (or such past practices are no longer permissible under the Applicable Tax Law), in accordance with reasonable Tax accounting practices selected by CSK. The Company shall have the right and obligation to timely prepare and file, or cause to be timely prepared and filed, when due (taking into account any valid extension of the time for filing), all Tax Returns that are required to include the operations, ownership, assets or activities Related to the Business after the Closing Date or of any WISCO Contributed Subsidiary for any Tax Period ending after the Closing Date (including, solely with respect to the WISCO Contributed Subsidiaries, Straddle Period Tax Returns). The Company shall provide CSK with copies of any Straddle Period Tax Returns required to be filed by the Company hereunder at least 30 days prior to the due date (as extended) for filing such Tax Returns. In the event CSK reasonably determines that any Straddle Period Tax Return should be modified, CSK shall notify the Company of CSK's proposed modifications no later than fifteen days from the date of receipt of such Tax Return. To the extent that the Company disagrees with such modifications, the Company and CSK shall endeavor to agree on the positions to be taken on such return. To the extent that they are unable to do so, a CPA Firm (other than the regular auditor of CSK, the Company or G-P) shall be retained to determine the position to be taken, with the fees and expenses of such accounting firm to be borne equally by CSK and the Company. Any Straddle Period Tax Return which the Company is required to prepare under the terms hereof shall be prepared in accordance with past Tax accounting practices used with respect to the Tax Returns in question (unless such past practices are no longer permissible under the Applicable Tax Law), and to the extent any item is not covered by such past practices (or such past practices are no longer permissible under the Applicable Tax Law), in accordance with reasonable Tax accounting practices selected by the Company and CSK. (b) CSK and the Company shall prepare and provide to each other such Tax information as is reasonably requested by the other party with respect to the operations, ownership, assets or activities of the WISCO Business, with respect to the WISCO Contributed Assets, or of any WISCO Contributed Subsidiary to the extent such information is relevant to any Tax Return which CSK or the Company has the right and obligation hereunder to file. (c) To the extent necessary to comply with the provisions of Section 8.1, as between CSK and the Company, the party not preparing a Tax Return shall pay the party preparing such Tax Return an amount equal to the non-preparing party's share of the Taxes shown on such Tax Return, if any, determined in accordance with the principles of Section 8.1, not later than 2 Business Days before the filing of such Tax Return. 44 8.3 AMENDED TAX RETURNS. (a) Any amended Tax Return or claim for Tax refund for any WISCO Contributed Subsidiary for any Pre-Closing Period other than a Straddle Period shall be filed, or caused to be filed, only by CSK, who shall not be obligated to make (or cause to be made) such filing. CSK shall not, without the prior written consent of the Company (which consent shall not be unreasonably withheld or delayed), make or cause to be made, any such filing, to the extent such filing, if accepted, reasonably might change the Tax liability of the Company or any Affiliate of the Company for any Post-Closing Period. At the Company's request, CSK shall file an amended Tax Return with respect to Taxes accrued on the Final Working Capital Statement, except to the extent CSK reasonably objects. (b) Any amended Tax Return or claim for Tax refund for any Straddle Period shall be filed by the party responsible for filing the original Tax Return hereunder if either the Company or CSK so requests, except that such filing shall not be done without the consent (which shall not be unreasonably withheld or delayed) of the Company (if the request is made by CSK) or of CSK (if the request is made by the Company). (c) Any amended Tax Return or claim for Tax refund for any Post-Closing Period other than a Straddle Period shall be filed, or caused to be filed, only by the Company, who shall not be obligated to make (or cause to be made) such filing. The Company shall not, without the prior written consent of CSK file, or cause to be filed, any such filing to the extent that such filing, if accepted, reasonably might change the Tax liability of CSK or any Affiliates of CSK for any Pre-Closing Period or otherwise under this Agreement. 8.4 CARRY BACKS AND CARRY FORWARDS. (a) Unless CSK, in its sole and absolute discretion, consents, the Company shall not and shall not permit any WISCO Contributed Subsidiary to carry back any Losses or credits accruing after the Closing Date to any Tax Return of CSK, a WISCO Contributed Subsidiary, or any Affiliate of either CSK or a WISCO Contributed Subsidiary for any Pre-Closing Period. To the extent permitted by Applicable Tax Law, the Company shall and shall cause each WISCO Contributed Subsidiary to make any elections and take all such actions necessary to avoid any such carry back. To the extent that, under Applicable Tax Law, and with CSK's consent, a WISCO Contributed Subsidiary carries back any Losses or credits accruing after the Closing Date to any Tax Return of CSK or its Affiliates, CSK shall pay to the Company the excess of the amount of (i) any Tax Benefit actually realized by CSK and its Affiliates as a result of such carry back promptly after such Tax Benefits are realized, over (ii) the amount of any Taxes incurred by CSK and its Affiliates as a result of such carryback (including without limitation, any Taxes incurred or to be incurred as a result of any refund of Taxes or interest thereon). The amount of any Tax Benefit shall be determined (i) by comparing the liability of CSK and its Affiliates for Taxes, determined without the carry back, to the liability of CSK and its Affiliates for Taxes, taking into account the carry back and (ii) by treating the carry back as the last item claimed by CSK and its Affiliates in any given Tax Period. 45 (b) CSK shall not be liable hereunder for any decrease to any net operating loss carry forward or any other Tax attributes available to a WISCO Contributed Subsidiary resulting from adjustments by any Tax Authority to any item of income, deduction, credit, or exclusion on Tax Returns for which CSK is responsible. 8.5 ADDITIONAL TAX MATTERS. (a) As of the Closing Date, CSK shall cause all Tax allocation, Tax sharing, Tax reimbursement and similar arrangements or agreements applicable to the WISCO Business between CSK and any Affiliates, on the one hand, and any of the WISCO Contributed Subsidiaries, on the other, to be extinguished and terminated with respect to such WISCO Contributed Subsidiaries and any rights or obligations existing under any such agreement or arrangement to be no longer enforceable, except to the extent reflected on the Final Working Capital Statement. (b) After the Closing Date, the Company will cause appropriate Employees of the WISCO Contributed Subsidiaries to prepare usual and customary Tax Return packages with respect to the Tax Period beginning January 1, 1999 and ending as of the Closing Date. The Company will use its commercially reasonable efforts to cause such Tax Return packages to be delivered to CSK on or before March 1, 2000, but in any event not later that May 1, 2000. (c) CSK and G-P agree that the Company will acquire hereunder substantially all of the property used in the WISCO Business and that in connection therewith the Company will employ individuals who immediately before the Closing Date were employed in such trade or business by WISCO or the WISCO Contributed Subsidiaries. Accordingly, pursuant to the Alternate Procedure permitted by Rev. Proc. 96-60, 1996-2 C.B. 399, provided that the applicable CSK Party makes available to the Company all necessary payroll records for the calendar year that includes the Closing Date, the Company will furnish a Form W-2 to each Employee employed by the Company who had been employed by the WISCO Business, disclosing all wages and other compensation paid for such calendar year, and Taxes withheld therefrom, and WISCO and the applicable CSK Party will be relieved of the responsibility to do so. (d) If the Company or any WISCO Contributed Subsidiary receives a refund with respect to Taxes of any WISCO Contributed Subsidiary attributable to a Pre-Closing Period (other than a Tax refund accrued as an asset on the Final Working Capital Statement) or a refund of Taxes accrued as a liability on the Final Working Capital Statement, the Company shall pay, within the thirty (30) days following the receipt of such Tax refund, the amount of such Tax refund (reduced by the amount of any Taxes it incurs or will incur as a result of its accrual or receipt of such refund or any interest thereon), to CSK. If CSK receives a Tax refund with respect to Taxes of any WISCO Contributed Subsidiary attributable to any Post-Closing Period or any Tax refund accrued as an asset on the Final Working Capital Statement, CSK will pay, within thirty (30) days following the receipt of such refund, the amount of such Tax refund (reduced by the amount of any Taxes it incurs or will incur as a result of its accrual or receipt of such refund or any interest thereon), to the Company. In the case of any refund with respect to Taxes 46 of a WISCO Contributed Subsidiary attributable to a Straddle Period, the Tax refund shall be apportioned between Pre-Closing Periods and Post-Closing Periods in accordance with the principles of Section 8.1(c) hereof; provided that to the extent any Tax refund for a Straddle Period was accrued on the Final Working Capital Statement, such refund shall be for the account of the Company. 8.6 TAX CONTROVERSIES; COOPERATION. (a) CSK shall control any audit, dispute, administrative, judicial or other proceeding Related to Tax Returns filed for Pre- Closing Periods, and the Company shall control any audit, dispute, administrative, judicial or other proceeding Related to Tax Returns filed for Post-Closing Periods and Straddle Periods of any WISCO Contributed Subsidiary. Subject to the preceding sentence, in the event an adverse determination may result in each party having responsibility for any amount of Taxes, each party shall be entitled to fully participate in that portion of the proceedings Relating to the Taxes with respect to which it may incur liability hereunder. For purposes of this Section 8.6(a), the term "participation" shall include (i) participation in conferences, meetings or proceedings with any Tax Authority, the subject matter of which includes an item for which such party may have liability hereunder, (ii) participation in appearances before any court or tribunal, the subject matter of which includes an item for which a party may have liability hereunder, and (iii) with respect to the matters described in the preceding clauses (i) and (ii), participation in the submission and determination of the content of the documentation, protests, memorandum of fact and law, briefs, and the conduct of oral arguments and presentations. (b) The Company and CSK shall not agree to settle any Tax liability or compromise any claim with respect to Taxes, which settlement or compromise may affect the liability for Taxes (or right to a Tax Benefit) hereunder of the other party, without such other party's consent (which consent shall not be unreasonably withheld or delayed). (c) G-P and CSK shall bear their own expenses incurred in connection with audits and other administrative judicial proceedings Relating to Taxes for which such party or its Affiliates are liable. (d) The CSK Parties, G-P, the Company, and the Contributed Subsidiaries shall cooperate (and cause their Affiliates to cooperate) with each other and with each other's agents, including accounting firms and legal counsel, in connection with Tax matters Relating to the Contributed Assets or the Contributed Subsidiaries, including (i) preparation and filing of Tax Returns, (ii) determining the liability and amount of any Taxes due or the right to and amount of any refund of Taxes, (iii) examinations of Tax Returns, and (iv) any administrative or judicial proceeding in respect of Taxes assessed or proposed to be assessed. Such cooperation shall include (without limitation) each party making all information and documents in its possession relating to the Contributed Subsidiaries available to the other party. The parties shall retain all Tax Returns, schedules and work papers, and all material records and other documents Relating thereto, until one year after the expiration of the applicable statute of limitations (including, to the extent notified by any party, any extension thereof) of the Tax Period to which such Tax Returns and other documents and information 47 relate. Each of the parties shall also make available to the other party, as reasonably requested and available, personnel (including officers, directors, Employees and agents) responsible for preparing, maintaining, and interpreting information and documents relevant to Taxes, and personnel reasonably required as witnesses or for purposes of providing information or documents in connection with any administrative or judicial proceedings Relating to Taxes. ARTICLE IX TERMINATION [Intentionally Deleted] ARTICLE X MISCELLANEOUS 10.1 NOTICES. All notices and other communications required or permitted by this Agreement shall be in writing and shall be delivered by personal delivery, by nationally recognized overnight carrier service, by facsimile, by first class mail or by certified or registered mail, return receipt requested, addressed to the party for whom it is intended at its address below, or such other address as may be designated in writing hereafter by such Person. Notices shall be deemed given one day after sent, if sent by overnight courier; when delivered and receipted for, if hand delivered; when received, if sent by facsimile or other electronic means or by first class mail; or when receipted for (or upon the date of attempted delivery where delivery is refused or unclaimed), if sent by certified or registered mail, return receipt requested. To G-P: GEORGIA-PACIFIC CORPORATION 133 Peachtree Street, N.E. Atlanta, GA 30303 Attn: General Counsel Facsimile: (404) 230-7543 To CSK or WISCO: CHESAPEAKE CORPORATION 1021 East Cary Street Richmond, VA 23218-2350 Attn: General Counsel Facsimile: (804) 697-1192 48 To the Company: GEORGIA-PACIFIC TISSUE, LLC 55 Park Place Atlanta, GA 30303 Attn: President Facsimile: (404) 230-1763 With a copy to: GEORGIA-PACIFIC CORPORATION 133 Peachtree Street, N.E. Atlanta, GA 30303 Attn: General Counsel Facsimile: (404) 230-7543 10.2 AMENDMENT; WAIVER. Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by G-P, CSK and the Company, or in the case of a waiver, by the party against whom the waiver is to be effective. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by Law. 10.3 ASSIGNMENT. No party to this Agreement may assign any of its rights or obligations under this Agreement without the prior written consent of the other party hereto (which consent shall not be unreasonably withheld), except that (i) G-P may collaterally assign its rights and obligations under this Agreement to a lender as security for the Company Debt and (ii) following Closing, G-P and CSK may assign their rights, but not their obligations, to any Person to whom G-P or CSK may transfer their Units in the Company if permitted under the Operating Agreement. 10.4 ENTIRE AGREEMENT. This Agreement (including the Preliminary Statements, all Schedules and Exhibits hereto and the Ancillary Agreements) contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters, except for the obligations of the parties under the Confidentiality Agreement. 10.5 FULFILLMENT OF OBLIGATIONS. Any obligation of any party to any other party under this Agreement or any of the Ancillary Agreements, which obligation is performed, satisfied or fulfilled by an Affiliate of such party, shall be deemed to have been performed, satisfied or fulfilled by such party. 10.6 PARTIES IN INTEREST. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to confer upon any Person other than G-P, the CSK Parties, the Company or their respective successors or permitted assigns, any rights or remedies under or by reason of this Agreement. 49 10.7 PUBLIC DISCLOSURE. Notwithstanding anything herein to the contrary, except as may be required to comply with the requirements of any applicable Laws and the rules and regulations of any stock exchange upon which the securities of one of the parties (or its Affiliate) is listed, no press release or similar public announcement or communication shall, prior to the Closing, be made or caused to be made concerning the execution or performance of this Agreement unless specifically approved in advance by all parties hereto which approval shall not be unreasonably withheld, conditioned or delayed. 10.8 EXPENSES. Except as otherwise expressly provided in this Agreement, whether or not the transactions contemplated by this Agreement are consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the party incurring such expenses. 10.9 SCHEDULES. The disclosure of any matter in any Disclosure Schedule shall not be deemed to constitute an admission by G-P or the CSK Parties or to otherwise imply that any such matter is material for the purposes of this Agreement. 10.10 BULK TRANSFER LAWS. The parties acknowledge that none of them has taken, and none of them intends to take, any action required to comply with any applicable bulk sale or bulk transfer laws or similar laws; provided that the CSK parties on the one hand and G-P on the other shall indemnify the other party and the Company for any Losses arising from such non-compliance. 10.11 GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF FORUM. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware. Each party hereto agrees that it shall bring any action or proceeding in respect of any claim arising out of or Related to this Agreement or the transactions contained in or contemplated by this Agreement, whether in tort or contract or at law or in equity, exclusively in the United States District Court or the state court sitting in New Castle County, Delaware (the "Chosen Court") and (i) irrevocably submits to the exclusive jurisdiction of the Chosen Court, (ii) waives any objection to laying venue in any such action or proceeding in the Chosen Court, (iii) waives any objection that the Chosen Courts are an inconvenient forum or do not have jurisdiction over any party hereto, and (iv) agrees that service of process upon such party in any such action or proceeding shall be effective if notice is given in accordance with Section 10.1 of this Agreement. 10.12 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same Agreement. 10.13 HEADINGS. The heading references herein and the table of contents hereto are for convenience purposes only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. 50 10.14 SEVERABILITY. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any Person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction. 10.15 INJUNCTIVE RELIEF. The parties hereto acknowledge and agree that in the event of breach or non-compliance with any of the provisions of this Agreement monetary damages shall not constitute a sufficient remedy. Consequently, in the event of such a breach, G-P, the Company, WISCO or CSK, as the aggrieved party shall be entitled to injunctive or other equitable relief, including specific performance, in order to enforce or prevent any violation of such provisions, in addition to any other rights or remedies to which it may be entitled at law or otherwise. ARTICLE XI DEFINITIONS AND TERMS 11.1 SPECIFIC DEFINITIONS. As used in this Agreement, the following terms shall have the meanings set forth or as referenced below: 11.1.1 "AFFILIATES" shall mean, with respect to any Person, any Persons directly or indirectly controlling, controlled by or under common control with, such other Person as of the date on which, or at any time during the period for which, the determination of affiliation is being made. For the purpose of this definition, "control" means (i) the ownership or control of 50% or more of the equity interest in any Person, or (ii) the ability to direct or cause the direction of the management or affairs of a Person, whether through the direct or indirect ownership of voting interests, by contract or otherwise. 11.1.2 "AGREEMENT" shall mean this Agreement (including the Preliminary Statements set forth above and all Schedules and Exhibits), as the same may be amended or supplemented from time to time in accordance with the terms hereof. 11.1.3 "ANCILLARY AGREEMENTS" shall mean the Human Resources Agreement, the Operating Agreement, the Parent Roll Supply Agreement, the Management Support Agreement, the Operational Support Agreement, the Transition Services Agreement, the G-P Guarantee and the WISCO Debt Indemnity. 51 11.1.4 "APPLICABLE TAX LAW" shall mean any Law of any nation, state, region, province, locality, municipality or other jurisdiction Relating to Taxes, including regulations and other official pronouncements of any governmental entity or political subdivision of such jurisdiction charged with interpreting such Laws. 11.1.5 "ASSUMED LIABILITIES" shall mean all debts, liabilities, commitments, or obligations whatsoever, other than Retained Liabilities, Related to either WISCO's or G-P's Business or Related to either WISCO's or G-P's Contributed Assets, whether arising before or after the Closing and whether known or unknown, fixed or contingent, including the following: (i) all debts, liabilities, obligations or commitments Related to or arising under the Contracts to the extent such Contracts are assigned to the Company, including the Real Estate Leases; (ii) all debts, liabilities, obligations or commitments Related to the Real Property; (iii)the current liabilities; (iv) except for the Retained Environmental Liabilities, all liabilities under Environmental Laws Related to the ownership, operation or conduct of the Business or the Real Property; and (v) all liabilities with respect to all actions, suits, proceedings, disputes, claims or investigations Related to the Business or that otherwise are Related to the Contributed Assets, at law, in equity or otherwise. 11.1.6 "BOOKS AND RECORDS" shall mean originals or true and correct copies of all lists, files, data and databases and documents Relating to customers, suppliers and products of the Business, the Contributed Assets, or the Assumed Liabilities, all personnel records or files regarding any Employee of the WISCO Business or the G-P Business as applicable, all environmental audit reports (and similar documentation) and assessments with respect to the Business, and all general ledgers and underlying books of original entry and other financial records of the Business, except to the extent included in the Retained Assets. 11.1.7 "BUSINESS" shall mean with respect to either G-P on the one hand, or the CSK Parties on the other hand, its Commercial Tissue Business. 11.1.8 "BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or a day on which banks in New York City are authorized or obligated by law or executive order to close. 11.1.9 "CHOSEN COURT" shall have the meaning set forth in Section 10.11. 11.1.10 "CLOSING" shall mean the closing of the transactions contemplated by this Agreement. 52 11.1.11 "CLOSING DATE" shall have the meaning set forth in Section 2.4. 11.1.12 "CLOSING WORKING CAPITAL" shall have the meaning set forth in Section 2.5(a). 11.1.13 "CLOSING WORKING CAPITAL STATEMENT" shall have the meaning set forth in Section 2.5(a). 11.1.14 "CODE" shall mean the Internal Revenue Code of 1986, as amended. 11.1.15 "COMMERCIAL TISSUE BUSINESS" shall have the meaning set forth in the Preliminary Statements to this Agreement. 11.1.16 "COMPANY" shall have the meaning set forth in the preamble to this Agreement. 11.1.17 "COMPANY DEBT" shall have the meaning set forth in Section 2.8(b). 11.1.18 "COMPUTER SYSTEM" shall mean any and all computers (including without limitation personal computers, mid-range computers and mainframes), process and distributed control systems and software applications and operating systems and any other hardware, equipment, and facilities and infrastructure systems containing an embedded computer chip. 11.1.19 "CONFIDENTIALITY AGREEMENT" shall mean the Confidentiality Agreement between CSK and G-P dated as of November 4, 1997, as amended by letter dated June 11, 1999. 11.1.20 "CONSENT" shall mean any consent, approval, authorization, waiver, permit, grant, franchise, concession, agreement, license, exemption or order of, registration, certificate, declaration or filing with, or report or notice to any Person, including any Governmental Authority, including those identified on Schedules 3.3 and 4.3. 11.1.21 "CONTRACTS" shall mean all agreements, contracts, leases, purchase orders, trade billback, refund and other arrangements, incentive agreements, commitments, collective bargaining agreements, and licenses that are related to the G-P Business or the WISCO Business or their respective Contributed Assets or to which such Contributed Assets are subject, except to the extent included in such party's Retained Assets. 11.1.22 "CONTRIBUTED ASSETS" shall mean all of the assets of a party which Relate to the G-P Business or the WISCO Business, whether tangible or intangible, real or personal, as they exist on the date hereof, with such changes, deletions or additions thereto as may occur from the date hereof to the Closing Date in the ordinary course of business or are otherwise 53 permitted by this Agreement (except, in each case, for the Retained Assets), including the following: (i) the Real Property; (ii) the Fixtures and Equipment; (iii) the current assets; (iv) in the case of WISCO, the WISCO Intellectual Property; (v) the Books and Records; (vi) the Contracts; (vii) the stock or other ownership interests of the Contributed Subsidiaries; (viii)all Governmental Authorizations which are transferable without obtaining any Consent; and (ix) with respect to the WISCO Business, all computer hardware and peripherals, audio-visual equipment, RF and barcode scanning and telecommunications equipment, whether owned or leased by any of the CSK Parties, and all software (including without limitation all operating system and application software), whether owned or licensed by any of the CSK Parties. 11.1.23 "CPA FIRM" shall have the meaning set forth in Section 2.5(b). 11.1.24A "CSK" shall have the meaning set forth in the preamble to this Agreement. 11.1.24B "CSK MARKS" shall mean any mark that is owned by CSK and that is described in the license agreement between CSK and WISCO that is among the Contracts assigned by WISCO to the Company at Closing pursuant to Section 2.4(a)(iv) hereof. 11.1.24C "CSK PARTIES" or "CSK PARTY" shall mean, as the context requires, CSK, WISCO and the WISCO Contributed Subsidiaries, or as the context requires, any one of the foregoing. 11.1.24D "CSK PLAN" shall mean those Employee Plans (including all assets and liabilities Related to such Employee Plans) pursuant to which any Employee or Retired Employee of the WISCO Business or the WISCO Contributed Subsidiaries is entitled to benefits. 11.1.25 "DEDUCTIBLE" shall have the meaning set forth in Section 7.2(b). 11.1.26 "DETERMINATION DATE" as used in Section 2.5(a) shall mean the Effective Time. 54 11.1.27 "DISCLOSURE SCHEDULES" shall mean the Disclosure Schedules dated the date hereof delivered by G-P or the CSK Parties in connection with this Agreement. 11.1.28 "EFFECTIVE TIME" shall have the meaning set forth in Section 2.4. 11.1.29 "EMPLOYEE" shall mean, with respect to the G-P Business or the WISCO Business, an individual who is employed by such party, whether salaried or hourly and whether on lay-off or medical, family or other authorized leave of absence; provided that, with respect to the G-P Business, Employee shall not include any Employee located at G-P's Palatka, Florida, Crossett, Arkansas, Port Hudson, Louisiana, Plattsburgh, New York or Bellingham, Washington facilities. 11.1.29A "EMPLOYEE PLANS" shall mean as to any party all "employee welfare benefit plans" and "employee pension benefit plans" as respectively defined in Sections 3(1) and 3(2) of ERISA, all employee benefit and pension plans, all other bonus, deferred compensation, retirement, savings, excess benefit, stock option or purchase, retention, termination, severance and incentive plans, contracts, programs, funds, arrangements, policies, or practices and all other plans, contracts, programs, funds, arrangements, policies, or practices (whether voluntary or compulsory) that provide or may provide money (other than as current salary or wages), services, property or other benefits, whether written or oral and whether funded or unfunded, including (without limitation) any that have been frozen or terminated since April 30, 1999, and any trust, escrow or similar agreement related thereto, whether written or oral and whether funded or unfunded, which are established and maintained by any of the parties hereto with respect to any of their Employees, Retired Employees, independent contractors, directors, officers, shareholders, or their dependents or which are established or maintained by any party (or any Person that together with any party is or would have been as of the date of the Agreement treated as a single employer under Section 414 of the Code) (the "Related Persons") or with respect to which any party or any Affiliate thereof have made or are required to make payments, transfers or contributions. 11.1.30 "ENCUMBRANCES" shall mean liens, charges, encumbrances, security interests, options or any other restrictions or third-party rights, including any required third party consents. 11.1.31A "ENVIRONMENT" means soil, land, water and air in their natural state, including, without limitation, land surface or subsurface strata, surface water, ground water and ambient air. 11.1.31B "ENVIRONMENTAL AUTHORITIES" means all federal, state or local governmental bodies or regulatory agencies, foreign or domestic, charged with enforcing any of the Environmental Laws. 11.1.31C "ENVIRONMENTAL LAW" shall mean any applicable federal, state, local, common or foreign law, statute, ordinance, rule, regulation, code, order, judgment, decree or injunction 55 Relating to (i) the protection of the Environment (including air, water vapor, surface water, groundwater, drinking water supply, surface or subsurface land), (ii) the exposure to, or the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, protection, release, spill or discharge or disposal of Hazardous Substances, or (iii) workplace safety or health. 11.1.31D "ENVIRONMENTAL PERMITS" means all permits, licenses, certificates and authorizations of, and registrations with, any of the Environmental Authorities pursuant to any of the Environmental Laws, issued or granted to any of the CSK Parties or G-P, as the context requires for the purpose of conducting the WISCO Business or the G-P Business as presently conducted. 11.1.32 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and regulations promulgated thereunder. 11.1.33 "FINAL WORKING CAPITAL STATEMENT" shall have the meaning set forth in Section 2.5(b). 11.1.34 "FINANCIAL STATEMENTS" shall mean the WISCO Financial Statements, the G-P Financial Statements or both, as the context may require, as defined in Sections 3.6 and 4.6 respectively. 11.1.35 "FIXTURES AND EQUIPMENT" shall mean all furniture, fixtures, furnishings, machinery, vehicles, equipment (including computer hardware, computer terminals, network servers, and research and development equipment) and other tangible personal property Related to either the G-P Business or the WISCO Business. 11.1.36 "FORMER FACILITY" shall mean a facility or property previously owned or operated by a party or its predecessors in the conduct of the G-P Business or the WISCO Business that is not located on the Real Property or the Retained Real Property. 11.1.37 "FOX RIVER LIABILITY" shall have the meaning set forth in Section 5.9. 11.1.38 "GAAP" shall mean United States generally accepted accounting principles, consistently applied. 11.1.39A "G-P" shall have the meaning set forth in the preamble to this Agreement. 11.1.39B "G-P APRIL FINANCIAL STATEMENTS" shall have the meaning set forth in Section 4.6(a). 11.1.39C "G-P ASSUMED LIABILITIES" shall mean the Assumed Liabilities transferred to the Company by G-P. 56 11.1.39D "G-P BUSINESS" shall mean all of the business of G- P conducted at its Gary, Indiana, Battleboro, Vermont, and LaGrange, Georgia facilities, together with certain assets and liabilities associated with its Crossett, Arkansas, and Palatka, Florida facilities, as more fully described in Schedule 2.1(c) hereof. 11.1.39E "G-P CAP" shall have the meaning set forth in Section 7.2(b). 11.1.39F "G-P CONTRIBUTED ASSETS" shall mean the Contributed Assets transferred to the Company by G-P as set forth on Schedule 2.1(c). 11.1.39G "G-P FINANCIAL STATEMENTS" shall have the meaning set forth in Section 4.6(a). 11.1.39H "G-P GUARANTEE" shall have the meaning set forth in Section 2.8(b). 11.1.39I "G-P INDEMNIFIED PARTIES" shall have the meaning set forth in Section 7.3(a). 11.1.39J "G-P INTELLECTUAL PROPERTY" shall mean the Intellectual Property of G-P. 11.1.39K "G-P OWNED REAL PROPERTY" shall mean the Owned Real Property of the G-P Business. 11.1.39L "G-P PLAN" shall mean those Employee Plans (including all assets and liabilities Related to such Employee Plans) of G-P or any Affiliate of G-P pursuant to which any Employee or Retired Employee of the G-P Business is entitled to benefits. 11.1.39M "G-P REAL PROPERTY" shall mean the Real Property of the G-P Business. 11.1.39N "G-P REAL PROPERTY LEASES" shall mean the leases Relating to the Leased Real Property of the G-P Business. 11.1.39O "G-P RETAINED ASSETS" shall mean the Retained Assets of the G-P Business as described in Section 11.1.74 hereof. 11.1.39P "G-P RETAINED LIABILITIES" shall mean the Retained Liabilities of the G-P Business. 11.1.40 "GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state, province or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any government authority, agency, department, board, commission or instrumentality of the United States, any State of the United States or any political subdivision thereof. 57 11.1.41 "GOVERNMENTAL AUTHORIZATIONS" shall mean all licenses, permits, franchises, certificates of occupancy, other certificates and other authorizations and approvals required to carry on a Business as currently conducted under the applicable laws, ordinances or regulations of any Governmental Authority. 11.1.42 "HAZARDOUS SUBSTANCES" shall mean (i) petroleum, petroleum byproducts and any petroleum fractions; (ii) any substance or any material containing a substance, defined as hazardous or toxic or words of similar meaning or effect under the following United States federal statutes and their state counterparts, as well as such statutes' implementing regulations: the Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Toxic Substances Control Act, the Federal Insecticide, Fungicide, and Rodenticide Act, and the Clean Air Act; and (iii) any other materials as to which liability or standards of conduct are imposed pursuant to any Environmental Law. 11.1.43 "HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. 11.1.44 "HUMAN RESOURCES AGREEMENT" shall mean an agreement to be entered into on the Closing Date by and among G- P, WISCO, CSK and the Company substantially in the form of Exhibit 11.1.44 attached hereto. 11.1.45 "INDEMNIFICATION CLAIM NOTICE" shall have the meaning set forth in Section 7.5(a). 11.1.46 "INDEMNIFIED PARTIES" shall have the meaning set forth in Section 7.5(a). 11.1.47 "INDEMNIFYING PARTY" shall have the meaning set forth in Section 7.5(a). 11.1.48 "INTELLECTUAL PROPERTY" shall mean (except to the extent included in the Retained Assets) the following intellectual property (and the rights associated therewith) Related to the G-P Business or the WISCO Business or their Contributed Assets: (a) trademarks, service marks, brand names, certification marks, trade dress, assumed names, Internet domain names, trade names and other indications of origin, the goodwill associated with the foregoing and registrations in any jurisdiction of, and applications in any jurisdiction to register, the foregoing (including any extension, modification or renewal of any such registration or application); (b) patents, applications for patents (including provisional, divisional, continuation, and continuation-in-part applications), and any renewals, extensions or reissues thereof, in any jurisdiction; 58 (c) invention disclosures and innovations (whether or not patentable and whether or not reduced to practice); (d) non-public information, trade secrets confidential information, know how, proprietary technology and rights in any jurisdiction to limit the use or disclosure thereof by any Person; (e) copyrighted works and registrations or applications for registration of copyrights in any jurisdiction, and any renewals or extensions thereof; (f) any similar intellectual property or proprietary rights; and (g) any claims or causes of action arising out of or Related to any infringement or misappropriation of any of the foregoing occurring before or after the Closing. 11.1.49 "INVENTORY" shall mean all inventory held for resale in connection with the G-P Business or the WISCO Business, all raw materials, work in process, finished products, office supplies, storeroom inventory, spare parts and equipment, wrapping, supply and packaging items, of such Business. 11.1.50 "IRS" shall mean the Internal Revenue Service. 11.1.51 "KNOWLEDGE" or any similar phrase means the actual knowledge without investigation of those management employees of G-P, CSK and WISCO identified on Exhibit 11.1.51. 11.1.52 "LAWS" shall mean any federal, state, foreign or local law, statute, ordinance, rule, code, regulation, order, judgment or decree of any Governmental Authority. 11.1.53 "LEASED REAL PROPERTY" shall mean all land (including, to the extent included in any such lease, any timberlands and tree farms associated with the Contributed Assets), buildings, fixtures and other Real Property leased on the date hereof by a party or one of the Contributed Subsidiaries as lessee pursuant to the Real Estate Leases used by the G-P Business or the WISCO Business. 11.1.54 "LOSSES" shall have the meaning set forth in Section 7.2. 11.1.55 "MANAGEMENT SUPPORT AGREEMENT" shall mean the agreement substantially in the form set forth as Exhibit 11.1.55 attached hereto between G-P and the Company pursuant to which G-P shall supply management services to the Company. 11.1.56 "MATERIAL ADVERSE EFFECT" shall mean any and all events, changes or effects that have occurred which have a material adverse effect upon the value of the Contributed Assets 59 or the G-P Business or the WISCO Business, as the case may be, taken as a whole, involving an aggregate amount equal to or exceeding $350,000. 11.1.57 "NOTICE PERIOD" shall have the meaning set forth in Section 7.5(b). 11.1.58 "OBJECTION" shall have the meaning set forth in Section 2.5(b). 11.1.59 "OPERATING AGREEMENT" shall mean that certain Operating Agreement among G-P, CSK and the Company to be dated as of the Closing substantially in the form of Exhibit 2.1E, that shall govern the rights and obligations of the Members of the Company. 11.1.60 "OPERATIONAL SUPPORT AGREEMENT" shall mean the agreement substantially in the form set forth as Exhibit 11.1.60 attached hereto by and among G-P, WISCO, CSK and the Company. 11.1.61 "OWNED REAL PROPERTY" shall mean all land and all buildings, fixtures, and other improvements owned by either the WISCO Business or the G-P Business. 11.1.62 "PARENT ROLL SUPPLY AGREEMENT" shall mean the agreement substantially in the form of Exhibit 11.1.62 attached hereto pursuant to which G-P shall supply paper products to the Company. 11.1.63 "PERMITTED ENCUMBRANCES" shall mean, with respect to any party's Encumbrances, (i) those expressly disclosed in the G-P or WISCO Financial Statements; (ii) liens for Taxes (which are not related to income, sales or withholding Taxes), assessments and other governmental charges not yet due and payable or due but not delinquent as of the Closing Date or being contested in good faith by appropriate proceedings and for which adequate reserves have been established on the Final Working Capital Statement; (iii) mechanic's, workmen's, repairmen's, warehousemen's, carriers, or other like liens arising or incurred in the ordinary course of business for amounts which are not delinquent and which will not individually or in the aggregate have a Material Adverse Effect, original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business; (iv) with respect to either the G-P Real Property or the WISCO Real Property, (A) easements, quasi-easements, licenses, covenants, rights-of-way and other similar restrictions, including any other agreements, conditions, restrictions, or other matters which would be shown by a current title report or other similar report or listing, (B) any conditions that may be shown by a current survey, title report or physical inspection, and (C) zoning, building and other similar restrictions; and (v) Encumbrances not described in the foregoing clauses (i) through (iv) and which, individually or in the aggregate, would not have a Material Adverse Effect (all items included in the foregoing clauses (i) through (v), including any matter set forth in Schedules 3.16(b) or 4.16(b), are referred to collectively herein as the "Permitted Encumbrances"). 11.1.64 "PERSON" shall mean an individual, a corporation, a partnership, an association, a trust or other entity or organization. 60 11.1.65 "POST-CLOSING PERIOD" shall mean, with respect to any Contributed Subsidiary, any Tax Period commencing after the Closing Date and the portion of any Straddle Period commencing after the Closing Date. 11.1.66 "PRE-CLOSING PERIOD" shall-mean, with respect to any Contributed Subsidiary, any Tax Period ending on or before the Closing Date and the portion of any Straddle Period ending on the Closing Date. 11.1.67 "PROCEEDING" shall have the meaning set forth in Section 7.5(a). 11.1.68 "PROJECT PLAN" shall mean a plan to remediate and/or replace Computer Systems that are not Year 2000 Ready. 11.1.69 "REAL ESTATE LEASES" shall mean those agreements pursuant to which a party or one or more of its Contributed Subsidiaries leases, subleases, licenses, or otherwise uses or licenses, Real Property, including land (and everything growing upon the land, to the extent included in such Real Estate Lease), buildings, structures and improvements thereon or appurtenances thereto, which are identified on Schedules 3.15 and 4.15. 11.1.70 "REAL PROPERTY" shall mean the Owned Real Property and the Leased Real Property. 11.1.71 "REGISTRATION STATEMENT" shall mean the Registration Statement on Form S-1, or other appropriate form, including any pre-effective or post-effective amendments or supplements thereto, filed with the Securities and Exchange Commission by the Company under the Securities Act with respect to the Company Debt. 11.1.72 "RELATED TO" OR "RELATING TO" shall mean primarily related to, or used primarily in connection with. 11.1.73 "REQUIRED CONSENT" shall mean any Consents specifically identified on Schedule 3.3 or Schedule 4.3 as a "Required Consent" and each other material Consent, which may be a Consent listed on Schedule 3.3 or Schedule 4.3. 11.1.74 "RETAINED ASSETS" shall mean (i) the assets (including Real Property, tangible personal property, accounts receivable, intellectual property and contracts) Related to all businesses conducted by CSK or G-P and any of their respective Affiliates other than the Commercial Tissue Business, provided, however, with respect to G-P, all tangible assets located at G-P's Palatka, Florida, Crossett, Arkansas, Port Hudson, Louisiana, Plattsburgh, New York, Bellingham, Washington and Atlanta, Georgia facilities and any tangible asset used in part in the consumer tissue business at G- P's offices located in Atlanta, Georgia shall constitute G-P Retained Assets, except for the assets specifically listed on Schedule 2.1(c) consisting of dedicated commercial tissue converting lines which shall be included in the G-P Contributed Assets, and all G-P Intellectual Property; 61 (ii) the stock or other ownership interests of all Subsidiaries of either G-P or CSK other than the Contributed Subsidiaries; (iii) all cash and cash accounts, disbursement accounts, outstanding checks and disbursements, investment securities and other short-term and medium-term investments and non-trade accounts receivable from either G-P or CSK or their respective Affiliates and owing to the G-P Business or WISCO Business, respectively; (iv) all deferred Tax assets of G-P or CSK; (v) all prepaid Taxes to the extent such prepaid Taxes are not reflected on the Final Working Capital Statement; (vi) all refunds of Taxes to the extent such Taxes are not reflected on the Final Working Capital Statement; (vii) all Tax Returns and related work papers of G-P, CSK or their respective Affiliates; (viii) all Books and Records which G-P or the CSK Parties are required by law to retain, provided that G-P, CSK or WISCO shall provide the Company with complete copies of such Books and Records; (ix) all G-P Plans, all CSK Plans, and all assets of such Plans except as contemplated by the Human Resources Agreement; (x) all Governmental Authorizations to the extent not transferable without obtaining a Consent; (xi) the CSK Marks subject to the license assigned pursuant hereto; (xii) the Retained Real Property and any financial instruments Related to the Retained Real Property; (xiii) all of G-P's or CSK's insurance policies, subject to the rights of WISCO or any Contributed Subsidiary under such insurance policies of CSK and the rights of the Company if any under such policies; (xiv) all contracts between either G-P or CSK and their respective Subsidiaries other than the Contributed Subsidiaries, including Georgia-Pacific S.A.; and (xv) those assets of the CSK Parties specifically identified on Schedule 2.3. 62 11.1.75 "RETAINED ENVIRONMENTAL LIABILITIES" has the meaning set forth in the definition of "Retained Liabilities." 11.1.76 "RETAINED LIABILITIES" shall mean all of the following debts, liabilities, commitments or obligations, whether arising before or after the Closing and whether known or unknown, fixed or contingent: (i) all liabilities Related to the Retained Assets; (ii) all (A) liabilities under Environmental Laws with respect to any Former Facility, (B) liabilities in connection with the Retained Real Property and (C) with respect to WISCO and CSK, the Fox River Liability (collectively, the "Retained Environmental Liabilities"); (iii) all liabilities which are retained by G-P or WISCO or CSK under the Ancillary Agreements; (iv) all liabilities under the G-P or CSK Plans, except to the extent such liabilities are specifically assumed by the Company or G-P pursuant to the Human Resources Agreement; (v) all liabilities for Taxes imposed with respect to the taxable periods, or portions thereof, ending on or before the Closing Date except to the extent that any such Taxes are reflected on the Final Working Capital Statement; (vi) all liabilities for non-trade accounts payable to CSK or G-P or their respective Affiliates which arise prior to the Closing Date; (vii) all liabilities for indebtedness for borrowed money and any other obligation which are fixed as to amount and certainty as of the Closing or which are secured by a lien that is not a Permitted Encumbrance on any of the Contributed Assets, but not including liabilities under Contracts included in the Contributed Assets and Assumed Liabilities; (viii) all severance, termination, change of control and similar agreements, payments, debts, obligations or liabilities with respect to any director, officer, employee or consultant of G-P, the CSK Parties or any of their Subsidiaries which exist as of or prior to the Closing (after taking into account the transactions contemplated by this Agreement), other than (i) obligations under any collective bargaining agreement, and (ii) obligations under any severance employment, consulting, or other agreement entered into or assumed by the Company; (ix) all liabilities and obligations with respect to G-P's interest in Georgia-Pacific S.A., including all contractual obligations; (x) all liabilities and obligations that any party hereto agrees to retain in any Ancillary Agreement; 63 (xi) all other liabilities and obligations for which CSK, WISCO or G-P has expressly assumed responsibility pursuant to this Agreement or the Ancillary Agreements; (xii) all debts, liabilities or obligations whatsoever, that do not Relate to the G-P Business or the WISCO Business or that do not otherwise Relate to the Contributed Assets; and (xiii) all liabilities and obligations of the WISCO Business described on Schedule 2.3. 11.1.77 "RETAINED REAL PROPERTY" shall mean the Real Property retained by WISCO or G-P. 11.1.78 "RETIRED EMPLOYEE" means as to any party, former Employees who retain rights under any of such party's Employee Plans. 11.1.79 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended. 11.1.80 "STRADDLE PERIOD" shall mean, with respect to any Contributed Subsidiary, any Tax Period that begins before and ends after the Closing Date. 11.1.81 "SPECIAL DISTRIBUTION" shall have the meaning set forth in Section 2.8(b). 11.1.82 "SUBSIDIARY" shall mean, with respect to any Person, any corporation, partnership, joint venture or other legal entity of which such Person, either directly or through or together with any other Subsidiary of such Person, owns any equity interests. 11.1.83 "SURVIVAL PERIOD" shall have the meaning set forth in Section 7.1. 11.1.84 "TARGET WORKING CAPITAL" shall have the meaning set forth in Section 2.5(e). 11.1.85 "TAX" or "TAXES" shall mean all federal, state, local or foreign taxes, including but not limited to income, gross receipts, windfall profits, goods and services, value added, severance, property, production, sales, use, license, excise, franchise, employment, withholding or similar taxes, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties. 11.1.86 "TAX AUTHORITY" shall mean, with respect to any Tax, the governmental entity or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the administration or collection of such Taxes for such entity or subdivision. 11.1.87 "TAX BENEFIT" shall mean the amount by which a Person's Tax liability is actually reduced (including any related interest actually received from a Tax Authority in connection therewith). 64 11.1.88 "TAX PERIOD" shall mean, with respect to any Tax, the period for which the Tax is reported as provided under Applicable Tax Laws. 11.1.89 "TAX RETURN" shall mean, with respect to any Tax, any information return with respect to such Tax, any report, statement, declaration or document required to be filed under the Applicable Tax Law in respect of such Tax, any claim for refund of Taxes paid, and any amendment or supplement to any of the foregoing. 11.1.90 "TRANSFER COSTS" shall have the meaning set forth in Section 2.6. 11.1.91 "TRANSITION SERVICES AGREEMENT" shall mean the agreement substantially in the form of Exhibit 11.1.91 attached hereto to be entered into at the Closing among the Company, CSK and WISCO under which CSK and its Affiliates will provide transition services requested by the Company in order to allow it to operate the WISCO Business after the Closing in a manner consistent with past practices. 11.1.92 "WARN" shall have the meaning set forth in Section 3.13(e). 11.1.93 "WARN OBLIGATIONS" shall have the meaning set forth in Section 3.13(e). 11.1.94A "WISCO" shall have the meaning set forth in the preamble to this Agreement. 11.1.94B "WISCO APRIL FINANCIAL STATEMENTS" shall have the meaning set forth in Section 3.6(a). 11.1.94C "WISCO ASSUMED LIABILITIES" shall mean all Assumed Liabilities transferred to the Company by WISCO. 11.1.94D "WISCO BUSINESS" shall have the meaning set forth in the Preliminary Statements to this Agreement. 11.1.94E "WISCO CAP" shall have the meaning set forth in Section 7.3(b). 11.1.94F "WISCO CONTRIBUTED ASSETS" shall mean all assets used directly and predominantly in the Commercial Tissue Business conducted by CSK whether directly or through WISCO or its Contributed Subsidiaries. 11.1.94G "WISCO CONTRIBUTED SUBSIDIARIES" shall mean the Contributed Subsidiaries of WISCO as set forth on Schedule 3.16(c). 11.1.94H "WISCO DEBT INDEMNITY" shall have the meaning set forth in Section 2.8(b). 11.1.94I "WISCO FINANCIAL STATEMENTS" shall have the meaning set forth in Section 3.6(a). 65 11.1.94J "WISCO INDEMNIFIED PARTIES" shall have the meaning set forth in Section 7.2(a). 11.1.94K "WISCO INTELLECTUAL PROPERTY" shall mean the Intellectual Property of WISCO (and CSK to the extent utilized in the WISCO Business) and includes, without limitation, the WISCO Marks. 11.1.94L "WISCO LEASED REAL PROPERTY" shall mean the Leased Real Property of WISCO. 11.1.94M "WISCO MARKS" shall mean any mark currently owned by the WISCO Business and any mark owned by the CSK Parties that include the words, phrases and names "Wisconsin Tissue Mills", "Wisconsin Tissue" or "WISCO", or any variation thereof, and any trademark, service mark, trade dress, symbol or logo using such words, phrases or names and any variation thereof. 11.1.94N "WISCO OWNED REAL PROPERTY" shall mean the Owned Real Property Related to the WISCO Business. 11.1.94O "WISCO REAL PROPERTY" shall mean the Real Property used in connection with the WISCO Business. 11.1.94P "WISCO REQUIRED CONSENT" shall mean the Required Consents pursuant to the WISCO Business and set forth on Schedule 3.3. 11.1.94Q "WISCO RETAINED ASSETS" shall mean the Retained Assets of the WISCO Business as described in Section 11.1.74 hereof. 11.1.94R "WISCO RETAINED LIABILITIES" shall mean the Retained Liabilities of the WISCO Business. 11.1.95 "WMEX" shall mean Wisconsin Tissue de Mexico, S.A. de C.V., a corporation organized under the laws of Mexico and a wholly owned subsidiary of WISCO. 11.1.96 "WORKING CAPITAL" shall mean the excess of current assets over current liabilities at the Determination Date on a consolidated basis as determined in accordance with Section 2.5. 11.1.97 "YEAR 2000 READY" shall mean that the Computer System when used in accordance with its associated documentation, will not be materially adversely affected by date data but instead will process such date data accurately with the implementation of a tested procedure, or is not Year 2000 compliant but will not cause any such processing problem. Year 2000 Ready also means that the applicable Computer System when used in accordance with its associated documentation will accurately process date data such that, no value for a date prior 66 to year 2028 will cause any interruption in processing; date- based functionality operates consistently for dates prior to, during and after Year 2000 (through year 2027); in all interfaces and data storage, the century or any other date is specified either explicitly or by algorithms or inferencing rules; and leap years will be accurately recognized and processed. If implemented properly, the Project Plan should be successful in making all material Computer Systems Year 2000 Ready, except to the extent that a Computer System interfaces or exchanges data with other software, firmware, hardware or other similar or related items of automated, computerized or software systems that are not Year 2000 compliant. 11.2 OTHER TERMS. Other terms may be defined elsewhere in the text of this Agreement, and unless otherwise indicated shall have such meanings throughout this Agreement. 11.3 OTHER DEFINITIONAL PROVISIONS. (a) The words "whereof", "herein", and "hereunder" and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The word "including" means "including without limitation." (b) The terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa. (c) The terms "dollars" and "$" shall mean United States dollars. 67 IN WITNESS WHEREOF, the parties have executed this Joint Venture Agreement as of the date first written above. WISCONSIN TISSUE MILLS INC. By: ____________________________ Name: William T. Tolley Title: Vice President GEORGIA-PACIFIC CORPORATION By: ___________________________ Name: Michael C. Burandt Title: Senior Vice President - Packaged Products CHESAPEAKE CORPORATION By: ___________________________ Name: William T. Tolley Title: Senior Vice President - Finance and Chief Financial Officer GEORGIA-PACIFIC TISSUE, LLC By:______________________________ Name: Michael C. Burandt Title: Manager 68 EXHIBIT 3.6(b) - The "Unaudited Balance Sheet" should be defined to - include the following line items, with specific representations for each line item: - Receivables (Represents amounts due from sales to - outside customers; determined in accordance with GAAP; stated at estimated net realizable value with adequate reserves for customer deductions, cash rebates, and uncollectible accounts). - Inventories (Represents raw materials, operating - supplies and packaging materials, storeroom parts and supplies, work in process, and finished goods held for resale; determined in accordance with GAAP stated at cost without LIFO reserves, and with adequate reserves for obsolescence). - Prepaid Expenses and Other Current Assets (all known - prepaid expenses, deferred expenses and other current assets; expected to be amortized or settled within one year; excluding income taxes and debt. - Current Assets (Represents the sum total of - Receivables plus Inventories plus Prepaid Expenses and Other Current Assets as defined above). - Property, Plant and Equipment (Represents land, - buildings, machinery and equipment, and construction in progress; owned or leased under capital leases; stated at cost less accumulated depreciation in accordance with GAAP). - Other Noncurrent Assets (Represents all known other - noncurrent assets; excluding any noncurrent assets related to income taxes and debt). - Total Assets (Represents the sum total of Current - Assets plus Property, Plant and Equipment plus Other Noncurrent Assets as defined above). - Accounts Payable (Represents all known amounts - payable to vendors; payable within one year; incurred in the normal conduct of business). - Accrued Expenses and Other Current Liabilities - (Represents all known other accrued expenses, deferred revenues and current liabilities; expected to be amortized or settled within one year; incurred in the normal conduct of business; including adequate provision for the current portion of any loss contingencies required to be accrued in accordance with SFAS No. 5; excluding any liabilities related to income taxes and debt). - Current Liabilities (Represents the sum total of - Accounts Payable plus Accrued Expenses and Other Current Liabilities as defined above). - Long-term Liabilities (Represents all known long- - term liabilities; incurred in the normal conduct of business; including adequate provision for the non- current portion of any loss contingencies required to be accrued in accordance with SFAS No. 5; excluding any liabilities related to income taxes and debt). - Total Liabilities (Represents the sum total of - Current Liabilities plus Long-term Liabilities as defined above). - Equity (Represents Total Assets minus Total - Liabilities as defined above). - Total Liabilities and Equity (Represents the sum - total of Total Liabilities plus Equity as defined above). - Working Capital (Represents Current Assets minus - Current Liabilities as defined above). - The "Unaudited Statement of Income" should be defined - to include the following income statement line items, with specific representations for each line item: - Net Sales (Represents net revenues from sales to - outside customers; determined in accordance with GAAP; excluding sales to Affiliates). - Cost of Sales (Represents all known costs for - procuring, manufacturing and handling products sold to outside customers; excluding depreciation and amortization expenses; - Selling, General and Administrative Expenses - (Represents all known selling, general and administrative expenses for the period; excluding depreciation and amortization expenses); - Other Income (Represents all known other income for - the period). - Other Expense (Represents all known other expenses - for the period; excluding depreciation and amortization expenses; excluding interest expense; and excluding income taxes). - Earnings Before Interest, Income Taxes, Depreciation - and Amortization (Represents Net Sales minus Cost of Sales minus Selling, General and Administrative Expenses plus Other Income minus Other Expense as defined above). - Depreciation and Amortization Expenses (Represents - all known depreciation and amortization expenses for the period, including the depreciation expense component of tissue parent roll manufacturing costs). - Earnings Before Interest and Income Taxes - (Represents Earnings Before Interest, Income Taxes, Depreciation and Amortization minus Depreciation and Amortization Expenses as defined above). - The "Unaudited Statement of Cash Flows" should be defined - to include the following cash flow statement line items: - Earnings Before Interest and Income Taxes (As - defined above). - Depreciation and Amortization Expenses (As defined - above). - Earnings Before Interest, Income Taxes, Depreciation - and Amortization (As defined above). - Income Tax Expense (Represents the provision for - income taxes, based on the estimated effective tax rate for the period). - Change in Working Capital (Represents Working - Capital as of the beginning of the period minus Working Capital as of the end of the period). - Cash Provided by Operations (Represents Earnings - Before Interest, Income Taxes, Depreciation and Amortization minus Income Tax Expense) - Capital Expenditures (Represents all known - capitalizable expenditures for property, plant and equipment in the period). - Other Investing Activities (Represents other cash - provided or used in the period, not reflected elsewhere in the Statement of Free Cash Flows; excluding cash provided by or used for financing activities). - Free Cash Flow (Cash Provided by Operations minus - Capital Expenditures minus Other Investing Activities as defined above). SCHEDULES AND EXHIBITS SCHEDULES Schedule 2.1(c) G-P Contributed Assets Schedule 2.3 WISCO Retained Assets and Retained Liabilities Schedule 3.1 CSK Parties Qualifications Schedule 3.3 WISCO Consent and Approvals Schedule 3.6(a) Financial Statements Schedule 3.6(c) Changes in Accounting Methods Schedule 3.7 Litigation and Claims Schedule 3.8 Taxes Schedule 3.9(a) Employees Schedule 3.9(b) Employee Plans Schedule 3.9(d) Changes to Plans Schedule 3.9(f) Funding of Plans Schedule 3.9(g) Claims Regarding Plans Schedule 3.9(h) Multi-Employer Plans Schedule 3.9(i) Plan Documents Schedule 3.10 Compliance with Laws Schedule 3.11(a) Environmental Permits Schedule 3.11(b) Environmental Matters Schedule 3.12 Intellectual Property Schedule 3.12(e) Year 2000 Schedule 3.13 Labor Matters Schedule 3.14 Material Contracts Schedule 3.15 WISCO Real Estate Leases Schedule 3.16(a) Exceptions to Entire Business Schedule 3.16(b) Encumbrances Schedule 3.16(c) Contributed Subsidiaries Schedule 3.16(d) Condition of Assets Schedule 3.18 Insurance Schedule 3.20 Material Adverse Change Schedule 4.1 G-P Qualifications Schedule 4.3 G-P Consent and Approvals Schedule 4.6(a) Financial Statements Schedule 4.7 Litigation and Claims Schedule 4.8 Taxes Schedule 4.9(a) Employees Schedule 4.9(b) Employee Plans Schedule 4.9(d) Changes to Plans Schedule 4.9(f) Funding of Plans Schedule 4.9(g) Claims Regarding Plans Schedule 4.9(h) Multi-Employer Plans Schedule 4.9(i) Plan Documents Schedule 4.10 Compliance with Laws Schedule 4.11(a) Environmental Permits Schedule 4.11(b) Environmental Matters Schedule 4.12 Intellectual Property Schedule 4.12(e) Year 2000 Schedule 4.13 Labor Matters Schedule 4.14 Material Contracts Schedule 4.15 G-P Real Estate Leases Schedule 4.16(a) Exceptions to Entire Business Schedule 4.16(b) Encumbrances Schedule 4.16(c) Condition of Assets Schedule 4.18 Insurance Schedule 4.20 Material Adverse Changes Schedule 5.4(a) G-P Intellectual Property EXHIBITS Exhibit 1.1A Certificate of Formation Exhibit 2.1E Form of Operating Agreement Exhibit 2.4A(vii) Opinion of Hunton & Williams Exhibit 2.4B(vii) Opinion of General Counsel of G-P Exhibit 2.8A Company Debt Commitment Letter and Promissory Note Exhibit 2.8B G-P Guarantee Exhibit 2.8C WISCO Debt Indemnity Exhibit 3.6(b) Financial Statement Line Items Exhibit 11.1.44 Form of Human Resources Agreement Exhibit 11.1.51 Individuals with Knowledge Exhibit 11.1.55 Form of Management Support Agreement Exhibit 11.1.60 Form of Operational Support Agreement Exhibit 11.1.62 Form of Parent Roll Supply Agreement Exhibit 11.1.91 Form of Transition Services Agreement EX-2 3 EX-2.2 OPERATING AGREEMENT OF GEORGIA-PACIFIC TISSUE, LLC Dated As Of: October 4, 1999 TABLE OF CONTENTS Page No. ARTICLE I DEFINITIONS AND TERMS 1 Section 1.1 Certain Definitions. 1 Section 1.2 Rules of Construction. 11 ARTICLE II GENERAL MATTERS 12 Section 2.1 Formation. 12 Section 2.2 Purposes and Business. 12 Section 2.3 Offices. 12 Section 2.4 Name. 12 Section 2.5 Term. 13 Section 2.6 Members. 13 ARTICLE III FINANCIAL AND TAX MATTERS 13 Section 3.1 Capital Contributions. 13 Section 3.2 Loans from Members. 14 Section 3.3 Restrictions Relating to Capital; Company Property. 14 Section 3.4 Tax Treatment. 15 Section 3.5 Allocation of Profits. 15 Section 3.6 Allocation of Losses. 15 Section 3.7 Special Allocations. 16 Section 3.8 Offsetting Special Allocations. 17 Section 3.9 Other Allocation Rules. 18 Section 3.10 Tax Elections. 18 Section 3.11 Tax Allocations; Code Section 704(c). 19 Section 3.12 Tax Matters Member. 19 Section 3.13 Regular Distribution Policy. 20 Section 3.14 Special Distribution. 20 Section 3.15 Accelerated Gains Tax Liability of WISCO. 20 Section 3.16 Sharing of Company Tax Benefits. 23 Section 3.17 Permanent Company Debt. 25 ARTICLE IV MANAGEMENT 27 Section 4.1 General. 27 Section 4.2 Board Composition. 27 Section 4.3 Term; Removal; Vacancies. 27 Section 4.4 Notice; Quorum. 27 Section 4.5 Voting. 28 Section 4.6 Telephonic Meeting; Written Consents. 29 Section 4.7 Committees of the Board; Officers. 29 Section 4.8 Execution of Documents. 29 Section 4.9 Reliance on Documents and Reports. 30 Section 4.10 Standard of Care; Indemnification. 30 Section 4.11 Member Action. 31 Section 4.12 Certain Transactions. 31 ARTICLE V ACCOUNTING, BOOKS AND RECORDS 32 Section 5.1 Fiscal Year. 32 Section 5.2 Books and Records. 32 Section 5.3 Auditors. 32 Section 5.4 Reporting. 32 Section 5.5 Banking. 33 Section 5.6 Tax Return Information. 33 Section 5.7 Delegation of Responsibility for Accounting and Reports. 33 ARTICLE VI CONFIDENTIALITY 33 Section 6.1 Confidentiality Obligation. 33 Section 6.2 Exceptions from Confidentiality Obligation. 34 Section 6.3 Employees, Agents and Advisers. 35 Section 6.4 Return of Confidential Information. 35 Section 6.5 Survival After Termination. 36 ARTICLE VII TRANSFER OF UNITS; PUT AND CALL RIGHTS 36 Section 7.1 General. 36 Section 7.2 Put and Call Rights. 37 Section 7.3 Member Transfers. 38 Section 7.4 Retirement. 38 ARTICLE VIII DISSOLUTION AND WINDING UP; BUY OUT RIGHTS 38 Section 8.1 Dissolution. 38 Section 8.2 Winding Up. 39 Section 8.3 In-Kind Distributions. 39 Section 8.4 Cancellation of Certificate of Formation. 40 Section 8.5 Buy Out Rights. 40 ARTICLE IX CERTIFICATES EVIDENCING UNITS 40 Section 9.1 Certificates. 40 Section 9.2 Register. 40 Section 9.3 New Certificates. 41 Section 9.4 Interest as a Security. 41 Section 9.5 Legends. 41 ARTICLE X MISCELLANEOUS 42 Section 10.1 Notices. 42 Section 10.2 Amendment; Waiver. 42 Section 10.3 Assignment. 42 Section 10.4 Entire Agreement. 42 Section 10.5 Public Disclosure. 42 Section 10.6 Parties in Interest. 43 Section 10.7 Governing Law; Submission to Jurisdiction; Selection of Forum. 43 Section 10.8 Counterparts. 43 Section 10.9 Severability. 43 Section 10.10 Equitable Relief. 44 Section 10.11 No Agency. 44 Section 10.12 Limitation of Liability. 44 Section 10.13 Non-Exclusive Business. 44 Section 10.14 Dispute Resolution. 45 EXHIBIT A Form of Unit Certificate SCHEDULE 1 Identification of Members OPERATING AGREEMENT OF GEORGIA-PACIFIC TISSUE, LLC THIS OPERATING AGREEMENT of GEORGIA-PACIFIC TISSUE, LLC, a Delaware limited liability company (the "Company"), is made and entered into as of October 4, 1999, among WISCONSIN TISSUE MILLS INC., a Delaware corporation and a wholly owned subsidiary of Chesapeake Corporation ("WISCO"), GEORGIA-PACIFIC CORPORATION, a Georgia corporation ("G-P"), and such other Persons that become Members as herein provided. RECITALS WHEREAS, the Company, G-P, WISCO and certain WISCO Affiliates are parties to that certain Joint Venture Agreement, dated as of October 4, 1999 (the "Joint Venture Agreement"); WHEREAS, pursuant to and subject to the terms and conditions of the Joint Venture Agreement, each of WISCO and G-P will contribute, or cause to be contributed, to the Company certain assets and liabilities in exchange for equity interests in the Company; WHEREAS, the Members desire to enter into this Agreement, which shall constitute the limited liability company agreement of the Members under the Delaware Act, for the purpose of setting forth the agreements of the Members as to the affairs of the Company and the conduct of its business; NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and undertakings contained herein, the parties agree as follows: ARTICLE I DEFINITIONS AND TERMS Section 1.1 Certain Definitions. As used herein, the following terms shall have the meanings set forth or as referenced below: "Adjusted Capital Account Deficit" means, with respect to any Member, the deficit balance, if any, in such Member's Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments: (i) Add to such Capital Account any amounts which such Member is treated as obligated to restore pursuant to Regulations Section 1.704-1(b)(2)(ii)(c) by virtue of such Member's guarantee or indemnity agreement with respect to the Company Debt or is deemed to be obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and 1 (ii) Subtract from such Capital Account the items described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the Regulations. The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently therewith. "Adjusted Property" means any property the Carrying Value of which has been adjusted pursuant to Section 3.5(e); "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with such first Person as of the date on which, or at any time during the period for which, the determination of affiliation is being made. For the purpose of this definition, "control" means (i) the direct or indirect ownership or control of more than 50% of the voting stock or general partnership interest or other voting interest in any Person, or (ii) the ability to direct or cause the direction of the management or affairs of a Person, whether through the direct or indirect ownership of voting interests, by contract or otherwise. "Affiliate Member" shall have the meaning set forth in Section 7.3(a). "Agreed Value" means the Fair Market Value of Contributed Assets; provided that the initial Agreed Value of Contributed Assets that a Member is obligated to transfer, or cause to be transferred, to the Company pursuant to the Joint Venture Agreement shall be the amount set forth in, or determined pursuant to, Section 3.1 of this Agreement. "Agreement" shall mean this Operating Agreement, including the schedules and exhibits hereto, as the same may be amended or supplemented from time to time in accordance with the terms hereof. "Ancillary Agreements" shall have the meaning set forth in the Joint Venture Agreement. "Board" means the governance board of the Company consisting of all Managers or, as may be applicable, any duly appointed committee of the Board. "Built In Gain" means, with respect to any Contributed Asset, the excess of the Fair Market Value of such Contributed Asset on the Closing Date as determined under Section 3.1(a) over the Company's adjusted basis for federal income tax purposes in such Contributed Asset immediately following its contribution to the Company. "Business Day" means a day, other than a Saturday or Sunday, on which banks generally are open in New York City for a full range of business. "Call Price" shall have the meaning set forth in Section 7.2(b). 2 "Capital Account" means, with respect to any Member, the Capital Account maintained for such Member in accordance with the following provisions: (i) To each Member's Capital Account there shall be added the amount of money and the initial Gross Asset Value of any property (other than money) contributed to the Company by such Member (or its predecessors in interest) with respect to the Interest in the Company held by such Member, such Member's distributive share of Profits and any items in the nature of income or gain which are specially allocated pursuant to Section 3.7 or Section 3.8, and the amount of any Company liabilities assumed by such Member or which are secured by any Company property distributed to such Member. (ii) From each Member's Capital Account there shall be subtracted the amount of money and the Gross Asset Value of any property distributed to such Member pursuant to any provision of this Agreement, such Member's distributive share of Losses and any items in the nature of expense or loss which are specially allocated pursuant to Section 3.7 or Section 3.8, and the amount of any liabilities of such Member assumed by the Company or which are secured by any property contributed by such Member to the Company. (iii) In the event all or a portion of an Interest in the Company is transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred Interest. (iv) In determining the amount of any liability for purposes of subparagraphs (i) and (ii) above, there shall be taken into account Code Section 752(c) and any other applicable provisions of the Code and Regulations. The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Regulations. In the event the Board shall determine that it is necessary to modify the manner in which the Capital Accounts, or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities which are secured by contributions or distributed property or which are assumed by the Company or any Member) are computed in order to comply with such Regulations, the Board may make such modification, provided that such modification is not likely to have a material adverse effect on the amounts distributed to any Member upon the dissolution of the Company. The Board also shall (i) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Members and the amount of Company capital reflected on the Company's balance sheet, as computed for book purposes in accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b), provided that, to the extent that any such adjustment is inconsistent with other provisions of this Agreement and would have a material adverse effect on any Member, such adjustment shall require the consent of such Member. 3 "Capital Contribution" means, with respect to any Member, the amount of cash and the Agreed Value of Contributed Assets contributed by such Member to the Company in accordance with Section 3.1. "Cash Balances" means all cash accounts on a balance sheet representing paper currency and coins, negotiable money orders, checks and bank balances as well as cash equivalents in the form of highly liquid securities with a known market value and a maturity, when acquired, of less than three months. "Certificate" means a certificate evidencing Units substantially in the form of Exhibit A to this Agreement. "Certificate of Formation" shall have the meaning set forth in Section 2.1. "Closing" and "Closing Date" shall have the respective meanings set forth in the Joint Venture Agreement. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor to such statute. "Commercial Tissue Business" shall have the meaning set forth in the Joint Venture Agreement. "Company" shall have the meaning set forth in the preamble hereto. "Company Business" means the business intended to be carried on by the Company Group, as described in Section 2.2 hereof. "Company Debt" means the debt incurred by the Company on or about the Closing Date solely to fund the Special Distribution, as further described in Section 2.8(b) of the Joint Venture Agreement, and refinancing or replacement therefor (including up to $8 million of related expenses, including legal fees, accounting fees, printing fees, filing fees, and underwriting fees). "Company Group" means the Company and any Subsidiaries of the Company from time to time. "Company Group Affiliate" means any Person that is an Affiliate of the Company. "Company Property" means any and all property of whatsoever nature, tangible or intangible, real or personal, of the Company Group from time to time. "Confidential Information" shall have the meaning set forth in Section 6.1. "Contributed Assets" means the property or other consideration (other than cash) contributed to the Company in exchange for Units in the Company. 4 "CPA Firm" means the independent public auditor determined pursuant to Section 5.3. "CSK" means Chesapeake Corporation, a Virginia corporation, of which WISCO is a wholly-owned subsidiary. "CSK Group" means CSK, WISCO, and all other CSK Subsidiaries from time to time. "CSK Group Affiliate" means any Person that is an Affiliate of CSK. "Debt" means any liability of the Company (including, without limitation, liabilities to Members) for borrowed money, or any liability for the payment of money by the Company in connection with any guarantees, surety agreements, letters of credit, or other interest bearing liabilities evidenced by any bond, debenture, note or other similar instrument, excluding any trade liabilities or any non-interest bearing liabilities or obligations; capital lease (but not operating lease) liabilities and other liabilities which are in the nature of financing; and any interest bearing off-balance sheet liabilities and the net liability of off balance sheet derivative contracts. "Delaware Act" means the Delaware Limited Liability Company Act, 6 Del. C. 18-101 et seq., as amended from time to time, and any successor to such statute. "Depreciation" means, for each Fiscal Year, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable for federal income tax purposes with respect to an asset for such Fiscal Year, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such Fiscal Year, Depreciation shall be determined by the Board in the manner described in Regulations Section 1.704-1(b)(2)(iv)(g)(3). "Distributable Cash" means the amount of cash that the Board reasonably determines is available for distribution to Members at any applicable time, taking into account available cash and anticipated cash flow and current and anticipated expenses of the Company and after setting aside reserves in an amount reasonably deemed necessary to provide for the Company's planned capital expenditures, debt service and working capital. "EBITDA" means, at any time of determination as specified in this Agreement, the earnings before interest, taxes, depreciation and amortization of the Company Group, computed on a consolidated basis in accordance with GAAP consistently applied, for the four fiscal quarters next preceding such date of determination, excluding any one time, unusual or extraordinary items (and, if determined at a time prior to the expiration of four fiscal quarters following the Closing Date, then such EBITDA shall be deemed to be the EBITDA of the Company Group for post- Closing completed fiscal quarters of the Company plus combined EBITDA of the WISCO Business and the G-P Business for such number of pre-Closing fiscal quarters as, together with the completed fiscal quarters of the Company, shall equal four (4)). "Exercise Notice" shall have the meaning set forth in Section 7.2(c). 5 "Fair Market Value" means, with respect to property, as of any date of determination, the price for such property that could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of whom is under pressure or compulsion to complete the transaction, as of such date of determination, as determined in good faith by the Board using a reasonable valuation method, which determination must include the vote or consent of the WISCO Member; provided that if the full Board is unable to reach such a determination with the vote or consent of the WISCO Member, the WISCO Member and the G-P Member shall each select an independent and nationally recognized accounting firm as its representative, and such accounting firms shall select one independent and nationally recognized investment banking firm, accounting firm or appraisal company as they deem appropriate and in the best position to determine the Fair Market Value, whose determination of the Fair Market Value shall be final and binding. "Final Determination" means (i) a decision, judgment, decree or other order by any court of competent jurisdiction, which binds WISCO or CSK and has become final and not subject to further appeal, (ii) a closing agreement which binds WISCO or CSK entered into under Section 7121 of the Code or any other binding settlement agreement with the Internal Revenue Service entered into in connection with or in contemplation of an administrative or judicial proceeding, or (iii) the completion of Internal Revenue Service administrative proceedings which binds WISCO or CSK and if a judicial contest is not or is no longer available or, in the sole discretion of WISCO or CSK, is not to be commenced or continued. "Financing Agreements" means any agreement pursuant to which the Company or any Company Affiliate incurs Debt. "Fiscal Year" means the fiscal year of the Company as specified in 5.1. "Formula Price" means, at any date of determination, the EBITDA of the Company less Net Debt as of such date multiplied by 7.38. "G-P Books" means any books and records of G-P Related to calculation of volume, price or cost allocation methodology for purposes of the Ancillary Agreements. "G-P Call" shall have the meaning set forth in Section 7.2(b). "G-P Group" means G-P and its Subsidiaries from time to time. "G-P Group Affiliate" means any Person that is an Affiliate of G-P. "G-P Guarantee" shall have the meaning set forth in Section 3.17. "G-P Member" means, collectively if more than one, the G-P Group Affiliate(s) who from time to time is (are) Member(s) of the Company. "Gross Asset Value" means, with respect to any asset, the asset's adjusted basis for federal income tax purposes, except as follows: 6 (i) The initial Gross Asset Value of any asset contributed by a Member to Company shall be the Agreed Value of such asset except as otherwise provided in Section 3.1; (ii) The Gross Asset Values of all Company assets shall be adjusted to equal their respective gross Fair Market Values as of the following times: (A) the acquisition of an additional Interest in the Company by any new or existing Member in exchange for more than a de minimis capital contribution; (B) the distribution by the Company to a Member of more than a de minimis amount of money or other property as consideration for an Interest in the Company; and (C) the liquidation of the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses (A) and (B) above shall be made only if such adjustments are reasonably necessary or appropriate to reflect the relative economic interests of the Members in the Company; (iii) The Gross Asset Value of any Company asset distributed to any Member shall be adjusted to equal the gross Fair Market Value of such asset on the date of distribution; and (iv) The Gross Asset Values of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulation Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi) of the definition of "Profits" and "Losses" or Section 3.7(g); provided, however, that Gross Asset Values shall not be adjusted pursuant to this subparagraph (iv) to the extent the Board makes an adjustment pursuant to subparagraph (ii) that would otherwise result in an adjustment pursuant to this subparagraph (iv). If the Gross Asset Value of an asset has been determined or adjusted pursuant to subparagraphs (i), (ii), or (iv), such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses. "Group" means the Company Group, the CSK Group or the G- P Group, or both, as the context may require. "Independent Third Party" means any Person who, immediately prior to the contemplated transaction, is not the owner of in excess of a 5% Percentage Interest in the Company and who is not a Member of any such 5% Owner. "Indemnitee" shall have the meaning set forth in Section 4.10. "Interest" means the ownership interest of a Member in the Company (which shall be considered personal property for all purposes), consisting of (i) such Member's interest in profits, losses, allocations and distributions, (ii) such Member's right to vote or grant or withhold consents with respect to Company matters as provided herein or in the Delaware Act and (iii) such Member's other rights and privileges as provided herein or under the Delaware Act. 7 "Involuntary Dissolution Event" shall mean any event described in Section 8.1(d) hereof if no Member filed a motion, petition, or other request before a court or an administrative agency seeking a dissolution of the Company. "Joint Venture Agreement" shall have the meaning set forth in the recitals hereto. "Law" means any federal, state, foreign or local law, constitutional provision, code, statute, ordinance, rule, regulation, order, judgment or decree of any governmental authority. "Manager" means a person duly elected to the Board pursuant to the provisions of Section 4.2 or Section 4.3 hereof. Each Manager shall constitute a "manager" of the Company as such term is defined in Section 18-101 of the Delaware Act. "Members" mean WISCO and G-P and all other Persons admitted as additional or substituted Members pursuant to this Agreement, so long as they remain Members. Each Member shall constitute a "Member" of the Company, as such term is defined in Section 18-101 of the Delaware Act. "Net Debt" means, at any date of determination, the amount of all Debt of the Company Group on such date, less all Cash Balances held by or on behalf of any Company Group Member and less loans made to the Members as of such date. "Nonrecourse Deductions" has the meaning set forth in Section 1.704-2(b)(1) and 1.704-2(c) of the Regulations. "Obligations" shall have the meaning set forth in Section 3.17(b). "Nonrecourse Liability" has the meaning set forth in Section 1.704-2(b)(3) of the Regulations. "Option Closing" shall have the meaning set forth in Section 7.2(c). "Option Right" shall have the meaning set forth in Section 7.2(c). "Partner Nonrecourse Debt" has the same meaning as the term "partner nonrecourse debt" set forth in Section 1.704-2(b)(4) of the Regulations. "Partner Nonrecourse Debt Minimum Gain" means an amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of the Regulations. "Partner Nonrecourse Deductions" has the same meaning as the term "partner nonrecourse deductions" set forth in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations. 8 "Partnership Minimum Gain" has the meaning set forth in Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations. "Percentage Interests" means the respective proportions in which the Members hold their Interests in the Company, determined for any Member as of any date by dividing the number of Units held by such Member on such date by the total number of Units outstanding and held by all Members as of such date. "Permanent Company Debt" shall mean the indebtedness incurred by the Company to refinance the Company Debt, as further described in Section 3.17 hereof, and shall include, where the context requires, any replacement or refinancing thereof. "Person" shall mean an individual, a corporation, a partnership, an association, a trust, a limited liability company, a governmental authority or any other entity or organization. "Products" shall have the meaning set forth in Section 10.13(a). "Profits" and "Losses" means, for each Fiscal Year, an amount equal to the Company's taxable income or loss for such Fiscal Year, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments: (i) Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this definition of "Profits" and "Losses" shall be added to such taxable income or loss; (ii) Any expenditures of the Company described in Code Section 705(a)(2)(B), or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits or Losses pursuant to this definition of "Profits" and "Losses" shall be subtracted from such taxable income or loss; (iii) In the event the Gross Asset Value of any Company asset is adjusted pursuant to subparagraphs (ii) or (iii) of the definition of "Gross Asset Value," the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Profits or Losses; (iv) Gain or loss resulting from any disposition of property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value; (v) In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in 9 computing such taxable income or loss, there shall be taken into account Depreciation for such Allocation Year, computed in accordance with the definition of "Depreciation"; (vi) To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as a result of a distribution other than in complete liquidation of a Member's Interest, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for purposes of computing Profits or Losses; and (vii) Any items which are specially allocated pursuant to Section 3.7 or Section 3.8 shall not be taken into account in computing Profits or Losses. The amounts of the items of Company income, gain, loss or deduction available to be specially allocated pursuant to Sections 3.7 and 3.8 shall be determined by applying rules analogous to those set forth in subparagraphs (i) through (vi) above. "Put Price" shall have the meaning set forth in Section 7.2(a). "Regulations" means the regulations promulgated by the U.S. Treasury Department pursuant to the Code. "Regulatory Allocations" shall have the meaning set forth in Section 3.8. "Special Distribution" shall have the meaning set forth in Section 2.8(b) of the Joint Venture Agreement. "Subsidiary" means, with respect to any Person, any corporation, partnership, association, trust, limited liability company or other legal entity or organization of which such person, either directly or indirectly or through or together with any other Subsidiary of such Person, owns more than 50% of the equity interests. "Tax Matters Member" shall have the meaning set forth in Section 3.12. "Tax Opinion" means an opinion of CSK's legal counsel or public accounting firm to the effect that it is substantially more likely than not that (1) the transfer of the WISCO Business constituted a sale to the Company (in whole or in part) for federal income tax purposes, or (2) the Special Distribution is taxable to WISCO in whole or in part. Such opinion must be based upon an addition, amendment, or other modification to the Code or the Regulations, the issuance by the Internal Revenue Service (or any other administrative agency or authority having jurisdiction over the interpretation, administration, or enforcement of federal income tax laws) of a ruling, notice, or other administrative pronouncement, or the issuance or publication of a decision by a court, in any such event occurring after the Closing but before the eighth anniversary of the Closing Date. 10 "Transfer" shall have the meaning set forth in Section 7.1. "Units" means the equal proportional units into which Interests in the Company shall be divided, which term may include fractions of Units as well as whole Units. Subject to the Capital Contribution obligations of the Members hereunder, all Units issued hereunder shall be fully paid and non-assessable. "Voluntary Dissolution Event" shall mean any event described in Section 8.1 hereof other than an Involuntary Dissolution Event. "Voluntary Dissolution Event Without WISCO's Consent" shall mean any Voluntary Dissolution Event which is described in Section 8.1 hereof if the event occurs without the consent of the WISCO Member. For this purpose, the WISCO Member shall be deemed to have consented to (i) any action approved by the Manager designated by the WISCO Member, (ii) any reduction of the WISCO Member's (or the CSK Group's) ownership of the outstanding Units below 5% if such reduction occurs because of an exercise of the WISCO Put, and (iii) the dissolution of the Company under Section 8.1(d) hereof at the request of the WISCO Member. "WISCO" shall have the meaning set forth in the preamble hereto. "WISCO Business" shall have the meaning set forth in the Joint Venture Agreement. "WISCO Indemnity Period" shall have the meaning set forth in Section 3.17. "WISCO Manager" shall mean a Manager designated by the WISCO Member. "WISCO Member" means, collectively if more than one, the CSK Group Affiliate(s) which from time to time is (are) Member(s) of the Company. "WISCO Put" shall have the meaning set forth in Section 7.2(a). Section 1.2 Rules of Construction. (a) Words used herein, regardless of the number and gender used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires, and, as used herein, unless the context requires otherwise, the words "hereof", "herein", and "hereunder" and words of similar import shall refer to this Agreement as a whole and not to any particular provision of this Agreement. (b) A reference to any statute or statutory provision shall be construed as a reference to the same as it may have been, or may from time to time be, amended, modified or re- enacted. (c) The terms "dollars" and "$" shall mean United States dollars. 11 (d) The term "including" shall be deemed to mean "including without limitation." (e) Article and section headings used in this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. (f) This Agreement is among financially sophisticated and knowledgeable parties and is entered into by the parties in reliance upon the economic and legal bargains contained herein and shall be interpreted and construed in a fair and impartial manner without regard to such factors as the party who prepared, or caused the preparation of, this Agreement or the relative bargaining power of the parties. ARTICLE II GENERAL MATTERS Section 2.1 Formation. The Members have caused the formation of the Company as a Delaware Limited Liability Company pursuant to the Delaware Act by filing a Certificate of Formation of the Company (the "Certificate of Formation") with the Delaware Secretary of State in accordance with the Delaware Act and, in connection therewith, each Member has contributed $10.00 to the capital of the Company prior to the date hereof. The rights and liabilities of the Members shall be as provided in the Delaware Act, except as otherwise provided in this Agreement. Section 2.2 Purposes and Business. Except as may otherwise be approved by the Board (which approval must include the affirmative vote or consent of the WISCO Manager), the purpose of the Company and the Company Group shall be to engage in any lawful business in any way related to the business of producing, licensing for production and selling commercial tissue products and related products for the "away from home" market, on a worldwide basis. The Company shall have all powers necessary or desirable to accomplish the aforesaid purposes. In connection therewith, the Company may engage in and enter into any and all activities, contracts and agreements related or incident to the above-stated purposes as the Board may determine to be appropriate from time to time. The Company shall have the power to do all things necessary, appropriate, advisable, convenient, or incidental in connection with the fulfillment of its business purposes. The Company shall not, and shall not permit any of its Subsidiaries to, engage in any other activity or business except to the extent approved by the Board (which approval must include the affirmative vote or consent of the WISCO Manager). Section 2.3 Offices. (a) The principal executive offices of the Company shall be located at 55 Park Place, Atlanta, Georgia at the offices of G-P or such other location as determined by the Board from time to time. 12 (b) The registered office of the Company in the State of Delaware is located at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The registered agent of the Company for service of process at such address is The Corporation Trust Company. Such registered office or registered agent may be changed by the Board from time to time. Section 2.4 Name. The name of the Company shall be Georgia-Pacific Tissue, LLC or such other name as the Board may from time to time select. Section 2.5 Term. The existence of the Company commenced on the date its Certificate of Formation was filed with the Secretary of State of the State of Delaware, and shall continue in perpetuity unless dissolved in accordance with Section 8.1. Section 2.6 Members. The name and business or mailing address of each Member of the Company are set forth on Schedule 1 to this Agreement. The Board shall cause Schedule 1 to be amended from time to time to reflect the addition or retirement of Members, or transfers of Units, in accordance with the terms of this Agreement. Except in connection with a permitted redemption or transfer of a Member's entire Interest in accordance with the terms of this Agreement, no Member shall have the right to retire from the Company prior to the termination of the Company following dissolution and winding up. ARTICLE III FINANCIAL AND TAX MATTERS Section 3.1 Capital Contributions. (a) Simultaneously with the execution of this Agreement, WISCO is contributing to the Company the WISCO Business, as defined and identified in the Joint Venture Agreement, with an aggregate agreed value of $775,000,000 in exchange for 5 Units, which number of Units reflects the Special Distribution. Specifically, the various categories of assets comprising the Contributed Assets of WISCO are as follows: Shares of Wisconsin Tissue de Mexico, S.A. Shares of Wisconsin Tissue Management LLC Interest in Alsip Condominium Association Working Capital Land Buildings Equipment Inventory Goodwill 13 For purposes of maintaining the Company's books in accordance with Regulations Section 1.704-1(b)(2)(iv), the initial Gross Asset Value of each asset within each of the above categories shall be based on the relative Fair Market Values of the assets within each category. (b) Simultaneously with the execution of this Agreement, G-P is contributing to the Company the G-P Contributed Assets, as defined and identified in the Joint Venture Agreement, with an aggregate agreed value of $376,400,000 in exchange for 95 Units, which number of Units reflects the Special Distribution. Specifically, the various categories of assets comprising the Contributed Assets of G-P are as follows: Working Capital Land Buildings Equipment Inventory Goodwill For purposes of maintaining the Company's books in accordance with Regulations Section 1.704-1(b)(2)(iv), the initial Gross Asset Value of each asset within each of the above categories shall be based on the relative Fair Market Values of the assets within each category. (c) Except as may otherwise be unanimously agreed to in writing by the Members, the Members shall have no right or obligation to make any additional Capital Contributions to the Company. (d) Unless otherwise unanimously agreed by the Members, any additional Capital Contributions made by the Members shall be made in accordance with the Members' respective Percentage Interests, and additional Units shall be issued in respect of any such additional Capital Contributions pro rata based on the Members' respective Percentage Interests. Section 3.2 Loans from Members. Loans by a Member to the Company shall not be considered Capital Contributions. Such loans shall bear interest at arm's length market rates and may contain other customary commercial terms as agreed by the Company and the Member; provided, however, that any such loans shall be fully subordinated to the Company Debt and the Permanent Company Debt in accordance with terms that are reasonably acceptable to each Member. If any Member shall advance funds to the Company in excess of the amounts required hereunder to be contributed by such Member to the capital of the Company, such advances shall not increase the Capital Account of such Member. The amounts of any such advances shall be a debt of the Company to such Member and shall be payable or collectible only out of Company assets in accordance with the terms and conditions upon which such advances are made. The repayment of debt owed to a Member upon 14 liquidation of the Company shall be subject to the order of priority set forth in Section 8.2. Section 3.3 Restrictions Relating to Capital; Company Property. (a) Except as otherwise provided herein or by the Delaware Act, no Member shall have the right to withdraw, or receive any return of, all or a portion of such Member's Capital Contribution, nor shall any Member have the right to demand and receive property other than cash in return for its Capital Contribution, except as provided in Section 8.3(a). (b) No interest shall be paid by the Company on Capital Contributions or on balances in Members' Capital Accounts. (c) All Company Property, whether contributed by a Member or otherwise acquired by the Company, shall be owned by the Company as a separate legal entity and no Member shall have any right of partition with respect to any Company Property. The Board shall cause the Company to execute, file and record such documents as may be necessary or appropriate to reflect the Company's ownership of Company Property in appropriate public offices. (d) No Member shall be liable to the Company or to any other Member to restore any deficit balance in its Capital Account (except as may be required by the Delaware Act) or to reimburse any other Member for any portion of such other Member's investment in the Company. No Member shall have priority over any other Member, either as to the return of its Capital Contribution or as to income, losses, interest, returns, or distributions, except for the priority of the WISCO Member with respect to the Special Distributions and as set forth in Section 8.3(a). (e) The Company shall not enter into any transaction, other than the Ancillary Agreements, with any Member or any Affiliate of any Member except on arms length terms. Section 3.4 Tax Treatment. It is the intention of the Members that the Company shall be taxed as a "partnership" for United States federal, state and local income tax purposes, and, except as otherwise required by law, no Member shall take any action inconsistent with the classification of the Company as a partnership for U.S. tax purposes, including any action to cause the Company to be treated as an association taxable as a corporation for U.S. tax purposes. Section 3.5 Allocation of Profits. After giving effect to the special allocations set forth in Sections 3.7 and 3.8, Profits for any Fiscal Year shall be allocated among the Members in proportion to their respective Percentage Interests. 15 Section 3.6 Allocation of Losses. After giving effect to the special allocations set forth in Sections 3.7 and 3.8, Losses for any Fiscal Year shall be allocated as set forth in Section 3.6(a), subject to the limitation in Section 3.6(b). (a) Losses for any Fiscal Year shall be allocated among the Members in proportion to their respective Percentage Interests. (b) The Losses allocated pursuant to Section 3.6(a) shall not exceed the maximum amount of Losses that can be so allocated without causing any Member to have an Adjusted Capital Account Deficit at the end of any Fiscal Year. In the event some but not all of the Members would have Adjusted Capital Account Deficits as a consequence of an allocation of Losses pursuant to Section 3.6(a), the limitation set forth in this Section 3.6(b) shall be applied on a Member by Member basis so as to allocate the maximum permissible Losses to each Member under Section 1.704-1(b)(2)(ii)(d) of the Regulations. Section 3.7 Special Allocations. The following special allocations shall be made in the following order: (a) Minimum Gain Chargeback Except as otherwise provided in Section 1.704-2(f) of the Regulations, notwithstanding any other provision of this Article III, if there is a net decrease in Partnership Minimum Gain during any Fiscal Year, each Member shall be specially allocated items of Company income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member's share of the net decrease in Partnership Minimum Gain, determined in accordance with Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations. This Section 3.7(a) is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(f) of the Regulations and shall be interpreted consistently therewith. (b) Partner Minimum Gain Chargeback. Except as otherwise provided in Section 1.704-2(i)(4) of the Regulations, notwithstanding any other provision of this Article III, if there is a net decrease in Partner Nonrecourse Debt Minimum Gain attributable to a Partner Nonrecourse Debt during any Fiscal Year, each Member who has a share of the Partner Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of the Regulations, shall be specially allocated items of Company income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member's share of the net decrease in Partner Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(i)(4) and 16 1.704-2(j)(2) of the Regulations. This Section 3.7(b) is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(i)(4) of the Regulations and shall be interpreted consistently therewith. (c) Qualified Income Offset. In the event any Member unexpectedly receives any adjustments, allocations, or distributions described in Section 1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5) or Section 1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Company income and gain shall be specially allocated to each such Member in an amount and manner sufficient to eliminate, to the extent required by the Regulations, the Adjusted Capital Account Deficit of such Member as quickly as possible, provided that an allocation pursuant to this Section 3.7(c) shall be made only if and to the extent that such Member would have an Adjusted Capital Account Deficit after all other allocations provided for in this Article III have been tentatively made as if this Section 3.7(c) were not in the Agreement. (d) Gross Income Allocation. In the event any Member has a deficit Capital Account at the end of any Fiscal Year which is in excess of the sum of (i) the amount such Member is treated as obligated to restore pursuant to Regulations Section 1.704-1(b)(2)(ii)(c) by virtue of such Partner's guarantee or indemnity with respect to the Company Debt, and (ii) the amount such Member is deemed to be obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be specially allocated items of Company income and gain in the amount of such excess as quickly as possible, provided that an allocation pursuant to this Section 3.7(d) shall be made only if and to the extent that such Member would have a deficit Capital Account in excess of such sum after all other allocations provided for in this Article III have been made as if Section 3.7(c) and this Section 3.7(d) were not in the Agreement. (e) Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions for any Fiscal Year shall be allocated to the Member who bears the economic risk of loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Regulations Section 1.704-2(i)(1). (f) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year shall be allocated to the Members in proportion to their respective Percentage Interests. (g) Section 754 Adjustments. To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of its interest in the Company, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members in accordance with their Interests in the Company in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom such distribution was made in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies. 17 (h) In the event that the Company makes a distribution to WISCO pursuant to Section 3.15 hereof, then WISCO shall be specially allocated items of Company income and gain from each Fiscal Year in which such distribution is made (and, if necessary, subsequent Fiscal Years in the case of distributions under Section 3.15(a) or (b)) in an amount equal to the total of such distributions made to WISCO. Section 3.8 Offsetting Special Allocations. The allocations set forth in Sections 3.6(b), and 3.7(a), (b), (c), (d), (e), (f), and (g) (the "Regulatory Allocations") are intended to comply with certain requirements of the Regulations. It is the intent of the Members that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Company income, gain, loss or deduction pursuant to this Section 3.8. Therefore, notwithstanding any other provision of this Article III (other than the Regulatory Allocations), the Board shall make such offsetting special allocations of Company income, gain, loss or deduction in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Member's Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Regulatory Allocations were not part of the Agreement and all Company items were allocated pursuant to Sections 3.5, 3.6(a) and 3.7(h). In exercising its discretion under this Section 3.8, the Board shall take into account future Regulatory Allocations under Sections 3.7(a) and 3.7(b) that, although not yet made, are likely to offset other Regulatory Allocations previously made under Sections 3.7(e) and 3.7(f). Section 3.9 Other Allocation Rules. (a) Profits, Losses, and any other items of income, gain, loss or deduction shall be allocated to the Members pursuant to this Article III as of the last day of each Fiscal Year; provided that Profits, Losses and such other items shall also be allocated at such times as the Gross Asset Values of Company Property are adjusted pursuant to subparagraph (ii) of the definition of Gross Asset Value. (b) For purposes of determining the Profits, Losses, or any other items allocable to any period, Profits, Losses, and any such other items shall be determined on a daily, monthly, or other basis, as determined by the Board using any permissible method under Code Section 706 and the Regulations thereunder. (c) All allocations to the Members pursuant to this Article III shall, except as otherwise provided, be divided among them in proportion to their respective Percentage Interests. (d) The Members are aware of the income tax consequences of the allocations made by this Article III and hereby agree to be bound by the provisions of this Article III in reporting their shares of Company income and loss for income tax purposes, except to the extent otherwise required by law. (e) Solely for purposes of determining a Member's proportionate share of the "excess nonrecourse liabilities" of the Company within the meaning of Regulations 18 Section 1.752-3(a)(3), the Members' interests in Company profits are in proportion to their Percentage Interests. (f) To the extent permitted by Section 1.704-2(h)(3) of the Regulations, the Board shall endeavor to treat distributions as having been made from the proceeds of a Nonrecourse Liability or a Partner Nonrecourse Debt only to the extent that such distributions would cause or increase an Adjusted Capital Account Deficit for any Member. Section 3.10 Tax Elections. The Company shall make the following elections on the appropriate tax returns: (a) to adopt the accrual method of accounting, if permitted by the Code, and to keep the Company's books and records in a manner consistent therewith; (b) to elect to amortize the organizational expenses and the start-up expenditures of the Company ratably over a period of sixty (60) months as permitted by Sections 709(b) and 195(b) of the Code; (c) if so requested by any Member, an election under Section 754 of the Code to adjust the basis of the Company's property in the circumstances described therein; and (d) any other election not inconsistent with this Agreement or the Joint Venture Agreement that the Tax Matters Member may deem appropriate and in the best interests of the Members. Neither the Company nor any Member may make an election for the Company to be excluded from the application of the provisions of subchapter K of chapter 1 of subtitle A of the Code or any similar provisions of applicable state law. Section 3.11 Tax Allocations; Code Section 704(c). In accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss, and deduction with respect to any Contributed Asset shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such Contributed Asset to the Company for federal income tax purposes and its initial Gross Asset Value (computed in accordance with subparagraph (i) of the definition of "Gross Asset Value"). In addition, in the event the Gross Asset Value of any Company asset is adjusted pursuant to subparagraph (ii) of the definition of the "Gross Asset Value," subsequent allocations of income, gain, loss, and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Gross Asset Value in the same manner as under Code Section 704(c) and the Regulations thereunder. The Company shall adopt and use only the "traditional method" permitted by the Regulations under Code Section 704(c), and therefore shall not make any curative allocations and/or 19 remedial allocations. Allocations pursuant to this Section 3.11 are solely for purposes of federal, state, and local taxes and shall not affect, or in any way be taken into account in computing, any Member's Capital Account or share of Profits, Losses, other items, or distributions pursuant to any provision of this Agreement. Except as otherwise provided in this Agreement, all items of Company income, gain, loss, deduction, and any other allocations not otherwise provided for shall be divided among the Members in the same proportions as the Percentage Interest for the Fiscal Year. Section 3.12 Tax Matters Member. The Member having the highest Percentage Interest shall be the tax matters partner (the "Tax Matters Member") of the Company pursuant to Section 6231(a)(7) of the Code. Such Member shall take such action as may be necessary to cause each other Member to become a notice partner within the meaning of Section 6223 of the Code. Such Member shall inform each other Member of all significant matters that may come to its attention in its capacity as Tax Matters Member by giving prompt notice thereof. The Company agrees to defend, indemnify and hold harmless the Tax Matters Member from and against all claims and damages relating to actions taken in good faith in discharging its responsibilities as Tax Matters Member. Section 3.13 Regular Distribution Policy. (a) The Board shall determine from time to time, in its complete discretion whether and to what extent the Company shall distribute any portion of available Distributable Cash to Members; provided, however, that aside from the Special Distribution, distributions declared or made on or before January 1, 2002 shall not exceed the Company's "net cash flow from operations" as determined under Section 1.707-4(b), unless unanimously approved by the Members. All funds distributed to the Members pursuant to this Section 3.12 shall be distributed to them in accordance with their respective Percentage Interests. (b) Subject to Section 8.3 hereof, to the extent that the Board approves any distribution that consists of property of a type or in a form other than cash, the types and forms of such property shall be allocated in an equitable manner among the Members entitled thereto, such that each Member shall, except for immaterial variances, receive the same type or form of property. (c) Any distributions to be made by the Company shall be made only to the extent permitted by the Company Debt and any other Financing Agreements to which any Company Group Affiliate is a party and only if and to the extent permitted by applicable Law (including, without limitation, Sections 18-607 and 18-804 of the Delaware Act). Section 3.14 Special Distribution. Simultaneous with the Closing, the Company shall use the net proceeds of the Company Debt (after deducting borrowing expenses) to make the Special Distribution to the WISCO Member in an amount that will result in the WISCO Member's Percentage 20 Interest equaling 5%. The amount of the Special Distribution shall be determined in accordance with Section 2.1(b) of the Joint Venture Agreement. Section 3.15 Accelerated Gains Tax Liability of WISCO. (a) If (on one or more occasions) prior to the tenth anniversary of the Closing Date, the Company sells or otherwise disposes of all or any part of the WISCO Contributed Assets, and if WISCO therefore incurs and pays (either directly or as an offset against a tax refund or overpayment of tax) federal and/or state income tax liabilities (on a cumulative basis, taking into account all such sales or other dispositions) exceeding $22 million as a result of the allocation to it of income or gain(s) recognized by the Company from such sales or dispositions (up to the total Built In Gain with respect to the WISCO Contributed Assets sold or disposed of, determined by assuming, absent a Final Determination or receipt by CSK of a Tax Opinion, that no income or gain is recognized by WISCO on the transfer of such assets to the Company), then the Company shall distribute to WISCO (after each such occasion and within 10 days after WISCO has demonstrated to the Company's reasonable satisfaction the appropriate amount to be distributed) an amount of money equal to the actual amount, if any, of WISCO's total federal and state income tax liability in excess of $22 million resulting from the allocation to it of income or gain so recognized by the Company. No distribution to WISCO under this Section 3.15(a), however, shall be made with respect to the Company's sale of inventory, the collection or disposition of accounts receivable, or the retirement of other assets in the ordinary course of operating the WISCO Business (it being understood that the disposition or partial liquidation of a manufacturing facility or of any stock or other equity interest in any WISCO Contributed Subsidiary shall not be considered to be a transaction in the ordinary course of business) regardless of whether the $22 million limit otherwise has been exceeded. (b) (i) Subject to the compliance of WISCO with its obligations under clause (ii) of this Section 3.15(b), if (on one or more occasions) the Company or G-P (other than satisfying its obligations under the G-P Guarantee) pays all or any part of the principal amount of the Permanent Company Debt prior to the thirtieth (30th) anniversary of the Closing Date, or if the Company takes any action prior to such thirtieth (30th) anniversary that would result in a reduction, after the funding of the Permanent Company Debt, of the portion of such debt for which WISCO "bears the economic risk of loss" within the meaning of Section 1.752-2 of the Regulations, then the Company shall distribute to WISCO (after each such occasion and within 10 days after WISCO has demonstrated to the Company's reasonable satisfaction the appropriate amount to be distributed) an amount of money equal to the actual increase, if any, in WISCO's total federal and state income tax liability incurred and paid by WISCO (either directly or as an offset against a tax refund or overpayment of tax) as a result of such payment or other action by the Company. Similar principles shall apply if the Company repays the principal amount of the Company Debt other than by replacing such debt with the Permanent Company Debt as provided in Section 3.17 hereof. WISCO has determined that it "bears the economic risk of loss" within such meaning for the Company Debt up to the amount of the Special Distribution as of the Closing Date and acknowledges that it will need to make a similar determination with respect to the Permanent Company Debt, and the Members acknowledge that no distribution will be made pursuant to this Section 3.15(b) to compensate WISCO for any tax liability attributable to the incorrectness of WISCO's determinations. 21 (ii) The Members acknowledge that the Company shall replace the Company Debt and may replace the Permanent Company Debt from time to time with other indebtedness so long as (x) such replacement does not result in a reduction in the total amount of Company indebtedness for which WISCO "bears the economic risk of loss," (y) such indebtedness is on terms that are no less favorable to the Company (taking into account the Company's credit rating) than prevailing terms in the credit markets in all material respects at the time such indebtedness is incurred, and (z) the Company shall have provided notice to WISCO of the terms of such indebtedness as soon after agreeing to such terms as is reasonably practicable. WISCO hereby agrees to cooperate to the extent reasonably required to facilitate such one or more refinancings, including but not limited to, executing agreements (in form and substance reasonably satisfactory to WISCO) necessary for it to "bear the economic risk of loss" for such replacement indebtedness in an amount not less than the Special Distribution. In such event, any such replacement indebtedness (and any and all subsequent replacement indebtedness) shall be treated as Permanent Company Debt for purposes of this Section 3.15(b). (c) For the avoidance of doubt, the Members acknowledge that no distribution will be made pursuant to this Section 3.15 as a result of the exercise of the WISCO Put, nor shall any distribution be made pursuant to this Section 3.15 to compensate WISCO for any tax liability resulting from any treatment of the contribution of the WISCO Contributed Assets to the Company as a sale in whole or in part for federal and/or state income tax purposes (such treatment being evidenced by a Final Determination or by a Tax Opinion). In making any determination of the appropriate amount to be distributed pursuant to this Section 3.15, any effect on WISCO's taxable income and/or gain resulting from any distribution made to WISCO pursuant to this Section 3.15, or from any corresponding special allocation of income under Section 3.7(h), shall be disregarded. (d) If G-P purchases WISCO's Interest in the Company pursuant to Section 7.2(b) hereof, or if a Voluntary Dissolution Event Without WISCO's Consent occurs, then the Company shall distribute to WISCO an amount of money equal to the lesser of the following two amounts: (i) the amount of federal and state income tax liability that WISCO actually incurred and paid (either directly or as an offset against a tax refund or overpayment of tax) as a result of the income and/or gain it recognized on the sale of its Interest to G-P (or an Affiliate of G-P) pursuant to Section 7.2(b) or Section 8.5(b) hereof, or upon the receipt of distributions in liquidation of its Interest pursuant to Section 8.2 hereof, or (ii) the amount of federal and state income tax liability that WISCO would have incurred on the sale of its Interest to G-P (or an Affiliate of G-P), or upon the receipt of distributions in liquidation of its Interest, if the income or gain recognized from such sale or liquidation were an amount equal to the excess of (x) the aggregate Built In Gain in all of the WISCO Contributed Assets over (y) any such Built In Gain previously recognized by WISCO. For purposes of clause (y) of the preceding sentence, the following items shall be treated as recognized Built In Gain: (1) any gain actually recognized by WISCO from action taken by the Company with respect to the Company Debt if such action would give rise to a distribution obligation under Section 3.15(b) and (2) any Built In Gain in WISCO Contributed Assets consisting of inventory or accounts receivable (whether or not recognized). For purposes of this Section 3.15(d), in computing the amount of income and/or gain 22 recognized by WISCO on the sale its Interest pursuant to Section 7.2(b) or Section 8.5(b) hereof, or upon the receipt of distributions in liquidation of its Interest pursuant to Section 8.2 hereof, there shall be included in the amount realized by WISCO the entire amount of Company Debt (including for this purpose the Permanent Company Debt) for which WISCO "bears the economic risk of loss" within the meaning of Section 1.752-2 of the Regulations immediately before such sale or liquidation, regardless of whether the indemnity agreement or other arrangement causing WISCO to "bear the economic risk of loss" remains in effect after such sale or liquidation. The Company shall distribute to WISCO the amount determined in this Section 3.15(d) within 10 days after WISCO has demonstrated to the Company's reasonable satisfaction the amount to be distributed. If, following a Voluntary Dissolution Event Without WISCO's Consent, the Company does not have sufficient funds to make the distribution to WISCO required under this Section 3.15(d), G-P shall pay WISCO the amount of any shortfall. (e) If any distribution to WISCO pursuant to this Section 3.15 is smaller than it otherwise would have been because the event triggering the Company's obligation to make the distribution reduced, eliminated, or prevented the creation of or addition to a net operating loss carryover, capital loss carryover, tax credit carryover, or other tax attribute of WISCO (collectively, a "WISCO Tax Attribute"), then the Company shall distribute to WISCO (within 10 days after WISCO has demonstrated to the Company's reasonable satisfaction the amount to be distributed) an amount equal to any actual increase in WISCO's federal and state income tax liability in one or more prior or subsequent taxable years of WISCO, but only to the extent that such increased liability is attributable to the decrease in such WISCO Tax Attribute. (f) Upon the occurrence of an event requiring a distribution to WISCO under Section 3.15(b) or (d), the amount of such distribution shall be increased pursuant to this Section 3.15(f) if WISCO has theretofore incurred and paid (either directly or as an offset against a tax refund or overpayment of tax), and has not been indemnified by the Company pursuant to Section 3.15(a) (due to the $22 million limit), federal and/or state income tax liabilities resulting from the allocation to WISCO of Built In Gain in the WISCO Contributed Assets upon the Company's sale or other disposition of all or any part of such assets. The amount of the increased distribution, if any, under this Section 3.15(f) shall be determined by multiplying (i) the federal and/or state income tax liabilities actually incurred and paid by WISCO (either directly or as an offset against a tax refund or overpayment of tax) from asset sales or other dispositions by the Company to the extent that such liabilities were not indemnified by the Company under Section 3.15(a) by reason of the $22 million limit times (ii) the "Built In Gain Percentage." For purposes of this Section 3.15(f), the "Built In Gain Percentage" in the case of a distribution to WISCO pursuant to Section 3.15(b) is the percentage obtained by dividing (i) the income or gain actually recognized by WISCO from action taken by the Company with respect to the Company Debt or the Permanent Company Debt if such action would give rise to a distribution obligation under Section 3.15(b) by (ii) the aggregate Built In Gain in all of the WISCO Contributed Assets. In the case of a distribution to WISCO pursuant to Section 3.15(d), the "Built In Gain Percentage" is 100%. (h) Notwithstanding anything to the contrary in this Section 3.15, no distribution shall be made to WISCO pursuant to this Section 3.15 prior to the day after the second anniversary 23 of the Closing Date. If a distribution otherwise would have been due to WISCO under this Section 3.15 before the second anniversary of the Closing Date, the amount of the distribution shall be increased by an amount computed like interest at the prime rate published in the "Money Rates" table (or any successor thereto) of The Wall Street Journal from time to time from the date such distribution otherwise would have been due. (i) For purposes of applying this Section 3.15, the Company's adjusted basis for federal and state income tax purposes in the stock of Wisconsin Tissue de Mexico, S.A. de C.V. immediately after the contribution of such stock to the Company shall be increased by the amount of any intercompany loss with respect to such stock recognized by the CSK Group as a result of the contribution. WISCO shall inform the Company of the amount of any such recognized loss on or before September 15, 2000, and shall inform the Company of any adjustments to the amount of such recognized loss promptly after any such adjustment is made (whether by the CSK Group or by the Internal Revenue Service). Section 3.16 Sharing of Company Tax Benefits. (a) (i) The Members believe that the contribution of the WISCO Business constitutes a nonrecognition transaction pursuant to Section 721(a) of the Code, and the Members and the Company shall report and otherwise treat the transfer of the WISCO Contributed Assets to the Company as solely a nonrecognition transaction pursuant to Section 721(a) of the Code on all relevant tax returns and reports unless there is a Final Determination to the contrary or CSK receives a Tax Opinion to the contrary. In addition, unless there is a Final Determination to the contrary or CSK receives a Tax Opinion to the contrary, the Members and the Company agree to treat any excess of the Special Distribution over WISCO's "allocable share" of the Company Debt (within the meaning of Regulations Section 1.707- 5(b)), and any excess of the Special Distribution over WISCO's "allocable share" of the Permanent Company Debt (within the meaning of Regulations Section 1.707-5(b)), as reimbursements of capital expenditures incurred by WISCO with respect to the WISCO Contributed Assets during the two-year period prior to the Closing Date to the extent permitted by Regulations Section 1.707- 4(d). If CSK receives a Tax Opinion or, prior to the eighth anniversary of the Closing Date, there is a Final Determination that the transfer of the WISCO Business to the Company constituted a sale to the Company (in whole or in part) for federal income tax purposes, then WISCO and G-P shall jointly determine the change in the Company's adjusted basis for federal income tax purposes in the WISCO Contributed Assets (such change being referred to herein as the "Sale Step-Up"). (ii) If the Company is dissolved because of an Involuntary Dissolution Event and WISCO recognizes taxable income and/or gain resulting from the receipt of liquidating distributions pursuant to Section 8.2 hereof or upon the sale of its Interest pursuant to Section 8.5 hereof, then WISCO and G-P shall jointly determine the change, if any, in the Company's (or G-P's) adjusted basis for federal income tax purposes in the WISCO Contributed Assets (such change being referred to herein as the "Involuntary Dissolution Step-Up," and together with the Sale Step-Up, the "Step-Up"). 24 (b) Within 10 days after G-P or an Affiliate of G-P files any federal or state income tax return (including for this purpose any amended return or claim for refund) with the Internal Revenue Service or the applicable state income tax authority, G-P shall pay to WISCO an amount equal to one-half of the net income tax benefit to G-P or the Affiliate reflected on such return to the extent that such benefit is attributable to the Step-Up. In the case of any tax return described in the preceding sentence in which a net operating loss or a net capital loss is reported, the net income tax benefit attributable to the Step-Up shall be determined as if each deduction or recognized loss of G-P (or its Affiliate) claimed on such return were used in proportion to (i) the total amount of deductions or losses claimed on such return before creating any net operating loss or net capital loss, divided by (ii) the total amount of deductions or losses claimed on such return (taking into account the amount of deductions and losses resulting in a net operating loss or net capital loss for the year). Any deduction resulting from a net operating loss carryover, and any net capital loss carryover used to offset a recognized capital gain, shall be treated as a deduction or loss attributable to the Step-Up in proportion to a fraction, the numerator of which is any portion of a deduction or loss attributable to the Step-Up that is deemed not to have been used previously and the denominator of which is the total amount of the deduction resulting from the net operating loss carryover or, as the case may be, the total amount of the capital loss carryover that is used to offset a recognized capital gain. To the extent that G-P or its Affiliate receives (either directly or as an offset against a liability) a payment of interest or realizes a reduction in interest expense as a result of filing a tax return described in the first sentence of this Section 3.16(b), G-P shall pay to WISCO an amount computed in the same manner as such interest on the amount described in such sentence. (c) If CSK receives a Tax Opinion or, prior to the eighth anniversary of the Closing Date, there is a Final Determination that the transfer of the WISCO Business to the Company constituted a sale to the Company (in whole or in part) for federal income tax purposes, and the WISCO Put is exercised in full following receipt of such Tax Opinion or such Final Determination, G-P shall continue to make payments to WISCO pursuant to Section 3.16(b) hereof until the net income tax benefit attributable to the Step-Up is exhausted. If, however, WISCO exercises the WISCO Put (in whole or in part) prior to CSK's receipt of a Tax Opinion or prior to a Final Determination that the transfer of the WISCO Business to the Company constituted a sale to the Company (in whole or in part) for federal income tax purposes, G-P's payment obligation under Section 3.16(b) shall not apply to any income tax deductions or losses attributable to the Step-Up which are claimed in any taxable year (or portion thereof, determined by pro rating the number of days in such taxable year) of G-P (or its Affiliate) that occurs after the first such exercise of the WISCO Put. (d) If G-P makes a payment to WISCO under this Section 3.16 and if WISCO and G-P jointly determine that there should have been no change in the basis of assets or that the change was more or less than the amount they originally determined, then (i) the amount of G-P's income tax savings previously determined shall be redetermined to reflect the correct change (or no change) in the basis of assets, and (ii) WISCO shall refund to G- P or G-P shall pay to WISCO, as appropriate, the difference between the total amount previously paid by G-P to WISCO under this Section 3.16 and the total amount that should have been paid based on the redetermined tax savings. To facilitate the application of this Section 3.16(d), each party shall promptly 25 notify the other of any event (of which the party becomes aware) that the party believes likely would give rise to a redetermination under this Section 3.16(d). Section 3.17 Permanent Company Debt. The Company shall refinance the Company Debt (in accordance with Section 3.15(b)(ii)) with new non-amortizing indebtedness that remains outstanding for an aggregate term (taking into account the initial refinancing and any subsequent refinancings) of 30 years from the maturity date of the Company Debt (the "Permanent Company Debt"). The principal amount of the Permanent Company Debt shall be equal to the Company Debt plus an amount of expenses incurred in obtaining the Permanent Company Debt (including any refinancings thereof) that does not exceed the difference between (i) $8,000,000 in the aggregate and (ii) the amount of any borrowing expenses that were incurred to obtain the Company Debt and added to the principal amount thereof. After deducting such expenses, the net proceeds of the Permanent Company Debt shall be used solely to repay in full the principal amount of the Company Debt (or, in the case of refinancings of Permanent Company Debt, such refinanced Debt). In accordance with Section 3.15(b)(ii), WISCO hereby agrees to cooperate to the extent reasonably required to facilitate the obtaining of the Permanent Company Debt, including but not limited to, executing agreements (in form and substance reasonably satisfactory to WISCO) necessary for it to "bear the economic risk of loss" for such debt in an amount not less than the Special Distribution. The Company agrees that the Permanent Company Debt shall be issued pursuant to an indenture or credit agreement that contains covenants that are substantially similar to those contained in the G-P Member's public bond indenture dated March 1, 1983, from G-P to Chase Manhattan Bank National Association, as trustee, a copy of which has been provided to the WISCO Member. Further, the G-P Member shall fully and unconditionally guarantee all refinancings of the Company Debt or Permanent Company Debt (such guarantee to be in substance sufficient for G-P to bear the "economic risk of loss" for such Debt, but for the WISCO Debt Indemnity (the "G-P Guarantee")), subject to an indemnity from WISCO on substantially the same terms as the WISCO Debt Indemnity. In addition, at all times that WISCO is subject to any continuing liability under a WISCO debt indemnity (the "WISCO Indemnity Period"), the Company agrees (and each of the G-P Member and WISCO Member agrees to cause the Company) to abide by the following covenants: (a) Notwithstanding Section 3.13 hereof, in the event the Company or any of its Subsidiaries sells any assets (other than sales of inventory in the ordinary course of its business) or incurs any indebtedness in addition to the Permanent Company Debt, the proceeds of such sales or borrowings may not be distributed to Members, or loaned or contributed to any Person (including, without limitation, Subsidiaries of the Company); provided, however, that the Company or any of its Subsidiaries shall be permitted to lend such proceeds to G-P or a Subsidiary of the Company (such loan to be evidenced by a G-P note or Company Subsidiary note, as the case may be, that is not subordinated to G-P's or such Company Subsidiary's, as the case may be, other senior unsecured debt). 26 (b) Neither the Company nor any of its Subsidiaries shall guarantee the debt or other obligations (the "Obligations") of any other Person (including, without limitation, Subsidiaries of the Company) other than in the ordinary course, consistent with the past practices of either Business, except that (i) the Company or such Subsidiary shall be permitted to guarantee the Obligations of G-P (including, without limitation, Obligations pursuant to G-P's senior bank credit agreement), and (ii) the Company or such Subsidiary shall be permitted to guarantee the Obligations of other Persons, provided that, with respect to clause (ii) hereof, G-P has also guaranteed such Obligations on terms that provide that the beneficiaries of such guarantees will exhaust their rights and remedies against G-P before exercising any rights or remedies against the Company or such Subsidiary, as the case may be, pursuant to its guarantee. (c) In addition to the negative pledge provisions to be included in the indenture or credit agreement for the Permanent Company Debt, neither the Company nor any Subsidiary of the Company shall grant any liens or encumbrances on any of its assets to secure Obligations of any other Person (including, without limitation, Subsidiaries of the Company), except (i) the Company or such Subsidiary of the Company shall be permitted to grant liens to secure Obligations of G-P, and (ii) the Company or such Subsidiary of the Company shall be permitted to grant liens on its assets to secure Obligations of other Persons, provided that with respect to clause (ii), G-P has guaranteed such Obligations on terms that provide that the beneficiaries of such Obligations will exhaust their rights and remedies against G-P before exercising any rights or remedies with respect to the pledged assets of the Company or such Subsidiary of the Company, as the case may be. (d) In connection with the G-P guarantees referred to in the provisos of clauses (b) and (c) of this section, G-P agrees to provide the WISCO Member with the proposed form of such guarantee (which shall be the same in all material respects as the actual guarantee entered into by G-P in connection with the subject transaction) as soon as practicable, but in any event within five (5) Business Days prior to G-P's execution of such guarantee. (e) If the WISCO Debt Indemnity has terminated in accordance with its terms, this Section 3.17 shall have no further effect. 27 ARTICLE IV MANAGEMENT Section 4.1 General. Subject to the delegation of rights and powers provided herein, the Board shall have the sole right to manage the business of the Company and shall have all powers and rights necessary, appropriate or advisable to effectuate and carry out the purposes and business of the Company. No Member, by reason of its status as such, shall have any authority to act for or bind the Company or otherwise take part in the management of the Company, but shall have only the right to vote on or approve the matters specifically provided herein or in the Delaware Act (or hereafter specified by the Board) to be voted on or approved or determined by the Members. Section 4.2 Board Composition. The Board shall consist of 5 Managers or such other number as the Board shall determine. Each Member shall have the right to designate such number of Managers (rounded up or down to the nearest whole number) as is in proportion to its respective Percentage Interest; provided that the WISCO Member shall, so long as it holds any Units in the Company, be entitled to appoint at least one Manager to the Board. Each of CSK and G-P shall provide notice of its initial designations of Managers in writing to the other on or prior to the Closing Date. Each Manager shall hold office until such Manager's resignation, removal, death or incapacity; provided, however, that if the number of Managers that a Member is entitled to designate is reduced by reason of a change in Unit ownership, the one or more affected Managers appointed by such Member shall automatically cease to be Managers (if more than one, in the reverse order of the date of their respective appointments). Section 4.3 Term; Removal; Vacancies. Managers shall hold office at the pleasure of the Member that designated them. Any Member may at any time, by written notice to the other Members and the Company, remove (with or without cause) any Manager designated by such Member. Subject to applicable Law and to the provisions of Section 4.2, a Manager may not be removed except by written request of the Member that designated the Manager. In the event a vacancy occurs on the Board for any reason, the vacancy will be filled by the written designation of the Member that designated the Manager creating the vacancy. Section 4.4 Notice; Quorum. Meetings of the Board may be called by any Manager on two Business Days' prior written notice to all Managers stating in general the purpose or purposes thereof; provided, however, that any Manager may waive such notice prior to, at or after the meeting. The presence in person of a majority of the Managers shall constitute a quorum for the transaction of business at any meeting of the Board. Each Member shall use its reasonable efforts to ensure that a quorum is present at any duly convened meeting of the Board and each Member may designate by written 28 notice to the others an alternate to act in the absence of any of its previously designated Managers at any such meeting. If at any meeting of the Board a quorum is not present, a majority of the Managers present may, without further notice, adjourn the meeting from time to time until a quorum is obtained. Section 4.5 Voting. (a) Each Manager shall be entitled to cast one vote on each matter considered by the Board. Except as otherwise expressly provided by this Agreement, the act of a majority of the Managers present at any meeting at which a quorum is present shall constitute an act of the Board. (b) The following matters shall require, in addition to any other vote required by applicable Law or as otherwise provided for herein, the affirmative vote of a majority of the Board in attendance, which majority must include a Manager designated by the WISCO Member: (i) except as provided in Article VIII hereof, and subject to applicable Law, any dissolution or liquidation of the Company; (ii) any merger, consolidation, conversion or other reorganization involving the Company, or the sale or other disposition of all or substantially all of the assets of the Company in one transaction or a series of related transactions; (iii) the admission of an additional Member except as provided in Section 7.1; and (iv) any amendment to or waiver or termination of, any Ancillary Agreement, which amendment or waiver or termination would have the effect of adversely altering the methodology for establishing the price of goods or the cost allocation of services provided to the Company in the Ancillary Agreements (other than the Parent Roll Supply Agreement) or adversely amend or waive Section 4.1 of the Parent Roll Supply Agreement or terminate the Parent Roll Supply Agreement. (c) Any Manager, when making any determination in such capacity, including voting or acting by consent with respect to any matter, shall be entitled to act in his or her discretion, considering only such interests and factors as such Manager desires, and such Manager shall have no duty or obligation to give any consideration to any interest of, or other factors affecting, the Company or any Member. Further, a Manager may consider and act in accordance with the interests of the Member appointing him or her, without regard to the other interests or factors, including any fiduciary duties, when acting on any matter presented to the Board for determination, and to the extent permitted by the Delaware Limited Liability Company Act, the Members hereby eliminate and waive any and all fiduciary duties and liabilities of the Manager and their Affiliates to the Company and any other Members. 29 Section 4.6 Telephonic Meeting; Written Consents. (a) Any meeting of the Board may be held by conference telephone or similar communication equipment so long as all Managers participating in the meeting can hear one another. All Managers participating by telephone or similar communication equipment shall be deemed to be present in person at the meeting. (b) Any action to be taken by the Managers at a meeting of the Board may be taken without such meeting by the written consent of a majority of the Managers then in office (or such higher number of Managers as is required take such action under the terms of this Agreement or applicable Law). Any such written consent may be executed and given by telecopy or similar electronic means and shall be filed with the minutes of the proceedings of the Board. If any action is so taken by the Board by the written consent of less than all of the Managers, prior notice of the taking of such action shall be furnished to each Manager, which notice shall include a copy of the proposed consent, as well as any other information provided by the Company to any Manager with such consent (provided that the effectiveness of such action shall not be impaired by any delay or failure to furnish such notice). Section 4.7 Committees of the Board; Officers. (a) The Managers may, by resolution (which resolution shall have been approved by the WISCO Manager), delegate any of the Board's powers to one or more committees of the Board, each consisting of one or more Managers (other than the power to take the actions specified in Section 4.5(b)). The Board, by resolution, may adopt further procedures relating to the conduct of business by any of the committees established by it. (b) The Company shall have such officers as shall be appointed by the Board, each having such powers and duties as shall be provided by resolution of the Board. In addition, the Board may appoint, employ or otherwise cause the Company to contract with such other Persons for the transaction of the business of the Company or the performance of services for or on behalf of the Company as it shall determine in its discretion from time to time. The Board may delegate to any officer of the Company or to any such other Person such authority to act on behalf of the Company as the Board may from time to time determine appropriate in its discretion. The salaries or other compensation, if any, of the officers and agents of the Company shall be fixed from time to time by the Board. The Managers shall not be responsible for any misconduct or negligence on the part of any officer, agent or other Person to whom authority is delegated, provided that such Person was appointed by the Managers with reasonable care. Section 4.8 Execution of Documents. No Manager (acting solely in his capacity as such) shall have any authority to bind the Company to any third party with respect to any action except pursuant to a resolution authorizing such action. Any Manager or officer of the Company, or any other persons specifically authorized by the Board, may execute any contract or other agreement or document on behalf of the Company and may execute on behalf of the Company and file with the Secretary of State of the State of Delaware any certificates or filings provided for in the Delaware Act. The 30 filing of the Certificate of Formation with the Secretary of State of the State of Delaware by the authorized person therein specified is hereby ratified and confirmed. Section 4.9 Reliance on Documents and Reports. A Manager shall be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company by any of its other Managers, Members, officers, employees or committees, or by any other Person, as to matters the Manager reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Company (including, without limitation, information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, or losses of the Company or any other facts pertinent to the existence and amount of assets from which distributions to Members might properly be paid). In addition, the Managers may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisors selected by them, and reliance upon any opinion of any such Person as to matters which the Managers reasonably believe to be within such Person's professional or expert competence shall be full and complete protection in respect of any action taken or suffered or omitted by the Managers hereunder in good faith and in accordance with such opinion. Section 4.10 Standard of Care; Indemnification. Subject to Section 4.5(c), in carrying out his duties, a Manager or officer of the Company shall not be liable to the Company or to any Member for any actions taken in good faith and reasonably believed by the Manager or officer to be in, or not opposed to, the best interests of the Company Group, or for errors of judgment, neglect or omission, including any losses sustained, liabilities incurred, or benefits not derived by Members in connection with any action or inaction of the Manager, provided, however, that a Manager or officer shall be liable for his willful misconduct or gross negligence. (a) Each Manager shall, and each officer at the discretion of the Board may (as so indemnified, an "Indemnitee") be indemnified and held harmless by the Company from and against any and all losses, claims, damages, liabilities, expenses (including legal fees and disbursements), judgments, fines, settlements and all other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, in which the Indemnitee may be involved, or threatened to be involved, as a party or otherwise by reason of his status as a Manager or officer, or his management of the affairs of the Company, or which relate to the Company, its property, business or affairs, whether or not the Indemnitee continues to be a Manager or officer at the time any such liability or expense is paid or incurred, if the Indemnitee (i) acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Company Group and, (ii) with respect to any criminal proceeding, had no reasonable cause to believe his conduct to be unlawful; provided however, that no Indemnitee shall be entitled to indemnification if it shall be finally determined that such Indemnitee's act or omission constituted willful misconduct or gross negligence. 31 (b) Expenses (including legal fees and disbursements) incurred in defending any proceeding shall be paid by the Company in advance of the final disposition of such proceeding upon receipt of an undertaking by or on behalf of the Indemnitee to repay such amount if it is ultimately determined by a court of competent jurisdiction that the Indemnitee is not entitled to be indemnified by the Company as authorized hereunder. Section 4.11 Member Action. In the event that any matter is required to be submitted to the Members for their approval under the terms of this Agreement or the Delaware Act, the following provisions shall apply: (a) The Members may vote on any such matter at a meeting to be held at such time and place as shall be designated by the Board. Any meeting of the Members may be held by conference telephone or similar communication equipment so long as all Members participating in the meeting can hear one another. All Members participating by telephone or similar communication equipment shall be deemed to be present in person at the meeting. Members shall be given at least three Business Days' prior notice of any meeting; provided that any Member may waive such notice prior to, at or after the meeting. The notice shall specify the place, date and hour of the meeting and the general nature of the business to be transacted. Every Member entitled to vote or act on any matter at a meeting of Members shall have the right to do so either in person or by proxy. (b) Each Member shall be entitled to one vote for each Unit owned by it. At any meeting of Members, the presence in person or by proxy of Members having the right to vote more than 50% of the Units entitled to vote at such meeting shall constitute a quorum for the transaction of business. Except as otherwise required by this Agreement or applicable Law, the affirmative vote of Members having the right to cast more than 50% of the votes present at a meeting of Members at which a quorum is present is required to approve any action requiring the Members' approval at such meeting. (c) Any action that may be taken at any meeting of Members may be taken without a meeting and without prior notice if a consent in writing setting forth the action so taken is signed by all Members. Any such written consent may be executed and given by telecopy or similar electronic means and such consents shall be filed with the minutes of the proceedings of the Members. Section 4.12 Certain Transactions. (a) Without requirement of further consent or action of the Members or Managers of the Company, the Company is authorized to enter into the Joint Venture Agreement and each of the Ancillary Agreements and all other documents and agreements to be delivered by the Company at the Closing pursuant to the Joint Venture Agreement, to perform the Company's obligations thereunder, and to consummate the transactions contemplated thereby, all of which actions are approved, ratified and confirmed by the Members. Without limiting the foregoing, it is understood and agreed that, pursuant to the Management Agreement 32 (as defined in the Joint Venture Agreement) G-P shall, subject to the authority of the Board, be responsible for the management and operations of the Company. (b) Notwithstanding anything herein to the contrary, prior to agreeing to terminate any Ancillary Agreement (other than the Parent Roll Supply Agreement, which may not be terminated at any time that WISCO is a Member of the Company without the WISCO Manager's consent thereto), the Board must make a good faith determination that it no longer requires the services provided by G-P in such Ancillary Agreement. ARTICLE V ACCOUNTING, BOOKS AND RECORDS Section 5.1 Fiscal Year. The fiscal year and fiscal periods of the Company shall be the same as the fiscal year and fiscal periods of G-P, as the same may be changed or modified from time to time. The G-P Member shall give the WISCO Member prompt notice of any material change in the fiscal year or fiscal periods of G-P. Section 5.2 Books and Records. The Company shall keep at its principal executive offices books and records typically maintained by Persons engaged in similar businesses and which shall set forth a true, and complete account of the Company Business and affairs of the Company Group in all material respects. Such books and records shall be kept in accordance with GAAP in a manner reasonably designed to provide such information as well as permit preparation by Members of their Federal and State tax returns and to calculate EBITDA of the Company. Each of the Members and their respective authorized representatives (and with respect to the G-P Books the WISCO Member) shall have the right, at all reasonable times and upon reasonable advance written notice to the Company, at such Member's expense, to inspect, audit and copy the books and records of the Company Group (and with respect to the G-P Books the WISCO Member) for any purpose reasonably related to the Member's interests as a Member of the Company. A Member requesting any such access to books and records shall reimburse the Company or G-P, as the case may be, for any costs reasonably incurred by it in connection therewith. Section 5.3 Auditors. The CPA Firm of the Company shall be the same firm used by G-P, as such CPA Firm may be changed from time to time so long as it is an auditing firm of national standing. Section 5.4 Reporting. The Company shall use reasonable commercial efforts to deliver to each Member (i) prior to each fiscal quarter, a quarterly forecast of the results of operations of the Company 33 Group for such quarter, and, as soon as practicable, any material changes to such forecast; (ii) within 15 days after the close of each fiscal quarter, estimated financial statements for the Company Group; (iii) within 30 days after the close of each fiscal quarter, an Unaudited Balance Sheet, Statement of Income and Statement of Cash Flows for the Company Group, together with the notes related thereto; and (iv) within 60 days after the close of each Fiscal Year, an Audited Balance Sheet, Statement of Income and Statement of Cash Flows for the Company Group for such Fiscal Year, together with the notes related thereto. The Members acknowledge and agree that the Members shall have no recourse against the Company or each other in the event the forecast is incorrect and that no Member shall be entitled to rely on such forecast for any purpose. Section 5.5 Banking. All funds of the Company received from any and all sources shall be deposited in the Company's name in such separate checking or other such accounts as shall be determined by the Board. In connection with the maintenance of such bank accounts, the Board shall designate those individuals who will have authority to write checks or otherwise disburse funds from such bank accounts on behalf of the Company in connection with its activities. Nothing contained herein shall be construed to limit the ability of the Company to obtain and utilize cash management services pursuant to the Management Agreement, as defined in the Joint Venture Agreement. Section 5.6 Tax Return Information. The Company shall prepare all federal, foreign, state and local income tax returns that the Company is required to file. Within 120 days following the close of each Fiscal Year, the Company shall send or deliver to each Person that was a Member at any time during such year such tax information as shall reasonably be required for the preparation by such Person of its federal, foreign, state and local income and other income tax returns. Section 5.7 Delegation of Responsibility for Accounting and Reports. Subject to the provisions of Section 5.3, the Board may cause the Company to contract with any other Person for the provision of any of the accounting, cash management and tax services required under Article III or this Article V and may pay reasonable compensation for such services. ARTICLE VI CONFIDENTIALITY Section 6.1 Confidentiality Obligation. The WISCO Member (and, in the case of Section 6.1(c) below, the Company) shall use (and shall ensure that each of its Affiliates shall use) all reasonable efforts to keep confidential (and to ensure that its officers, employees, agents and professional and other advisers keep confidential) the following ("Confidential Information"): 34 (a) all technical information, formulae, designs, specifications, drawings, data, manuals, instructions and other know-how relating to the products and technical processes of the Company Group, the Company Business or the business of any other Member; (b) any information which the WISCO Member may have or acquire before or after the date of this Agreement with respect to the customers, business, assets or affairs of any G-P Group Affiliate, or any Company Group Affiliate, resulting from: (i) negotiating this Agreement, the Joint Venture Agreement or any other agreement referred to in or entered into pursuant to this Agreement or the Joint Venture Agreement; (ii) being a Member in the Company; (iii) appointing Managers to the Board and their exercise of their duties; or (iv) exercising its rights or performing its obligations under this Agreement; (c) any information which the Company may have or acquire before or after the date of this Agreement in relation to the customers, business, assets or affairs of any G-P Group Affiliate or any CSK Group Affiliate resulting from the exercise of its rights or performance of its obligations under this Agreement, the Joint Venture Agreement or any other agreement referred to in or entered into pursuant to this Agreement or the Joint Venture Agreement; or (d) any information which such Member may have or acquire before or after the date of this Agreement with respect to the customers, business, assets or affairs of the Company Business. The WISCO Member (and, in the case of Section 6.1(c), the Company) shall not (and shall cause its Affiliates not to) disclose to any third party any Confidential Information without the consent of the G-P Member. In performing its obligations under this Article VI, the WISCO Member and the Company shall (and shall cause its Affiliates to) apply no lesser confidentiality standards and procedures than it applies generally in relation to its own confidential information. Notwithstanding anything herein to the contrary, for purposes of this Agreement, the term Confidential Information shall not include information of the type described in Sections 6.2(b) and 6.2(g). Section 6.2 Exceptions from Confidentiality Obligation. The obligation not to disclose Confidential Information to any third party under this Article VI does not apply to: (a) the disclosure (subject to Section 6.3) on a `need to know' basis to a company which is another CSK Group Member where the disclosure is for a purpose reasonably incidental to 35 this Agreement; including, without limitation, as necessary for the performance of its obligations under any Ancillary Agreement, in which case such company shall be subject to the confidentiality obligations of Article VI in this Agreement; (b) information which is independently developed by the WISCO Member or acquired from a third party to the extent that it is acquired with the right to disclose the same after the date hereof; (c) the disclosure of information to the extent required to be disclosed by law, any stock exchange regulation or any binding judgment, order or requirement of any court or other competent authority (subject to the obligation to consult with the G-P Member in advance and to take account of its reasonable requirements); (d) disclosure of information to lenders and rating agencies; (e) the disclosure of information to any tax authority to the extent reasonably required for the purposes of the tax affairs of the WISCO Member concerned or any Member of its Group; (f) the disclosure (subject to Section 6.3) in confidence to the WISCO Member's professional advisers of information reasonably required to be disclosed for a purpose reasonably incidental to this Agreement; or (g) information which becomes within the public domain (otherwise than as a result of a breach of Article VI). Section 6.3 Employees, Agents and Advisers. The WISCO Member shall inform (and shall ensure that each of its Subsidiaries or Affiliates shall inform) any officer, employee or agent or any professional or other adviser advising it in relation to the matters referred to in this Agreement, or any other Person to whom it provides Confidential Information, that such information is confidential and shall instruct them (i) to keep it confidential and (ii) not to disclose it to any third party (other than those persons to whom it has already been disclosed in accordance with the terms of this Agreement). The disclosing Member is responsible for any breach of this Article VI by the person to whom the Confidential Information is disclosed. Section 6.4 Return of Confidential Information. If the Company dissolves and terminates, either the WISCO Member or the G-P Member may by notice to any other Member require the other Member to destroy or return the first Member's (but not the Company's) Confidential Information. In addition, if at any time either the WISCO Member or the G-P Member shall cease directly or indirectly to be a Member, the other Member may, by notice to the first Member, require the first Member to destroy or return the other Member's Confidential Information. If so, the first Member shall (and shall ensure that its Affiliates and its officers and employees shall): 36 (a) destroy or return all documents containing Confidential Information which have been provided by or on behalf of the Member demanding the return of Confidential Information; and (b) destroy or return any copies of such documents and any document or other record (including in electronic form) reproducing, containing or made from or with reference to the Confidential Information (except, in each case, for a record of any submission to or filings with governmental, tax or regulatory authorities or papers required for a Member's board or other corporate records or documents required in connection with litigation). The first Member shall return or destroy the Confidential Information as soon as practicable after receiving notice and, in the case of destruction, shall provide a certificate of an officer of that Member confirming that destruction. (c) The provisions of Section 6.4(a) shall not apply in the event of a dissolution and termination in which the Board has expressed its rights under Section 8.3(a) hereof. Section 6.5 Survival After Termination. The provisions of this Section 6.5 shall survive the dissolution and termination of the Company and any Transfer of a Member's Units. If either the WISCO Member or the G-P Member shall cease to be a Member following a Transfer of Units pursuant to this Agreement, then: (a) the term Confidential Information for the purposes of this Article VI shall extend to and include all Confidential Information held by CSK Group Members or G-P Group Members (as the case may be) about the other (excluding the Company) and the confidentiality obligations set out in Section 6.1 shall (subject to Section 6.2) thereafter apply to each CSK Group Member ceasing to be a Member (as the case may be) as if it were a Member; and (b) the provisions of Section 6.4 relating to return or destruction of Confidential Information shall similarly apply to such extended application of the term Confidential Information, pursuant to Section 6.5(a), as if it were Confidential Information of the remaining Member. ARTICLE VII TRANSFER OF UNITS; PUT AND CALL RIGHTS Section 7.1 General. Except as permitted by Section 7.2, or with the prior written consent of all other Members, no Member will directly or indirectly (i) sell, assign, pledge, encumber, hypothecate, dispose of or otherwise transfer (collectively, "Transfer") any 37 Units, or any interest in any Units, (ii) agree to any such Transfer or (iii) permit or suffer any such interest to be subject to Transfer, directly or indirectly, by merger or other operation of law, agreement or otherwise. Any purported Transfer in any manner not permitted by this Article VII shall be null and void and shall not be recognized or given effect by the Company or any Member; provided, however, that a change of control of CSK or G-P shall not be deemed to be a Transfer. Section 7.2 Put and Call Rights. (a) At any time on or after the third anniversary of the Closing Date, the WISCO Member shall have a right to sell to G-P, or to obligate the Company to redeem, in WISCO's sole discretion, all or any portion of the WISCO Member's Units (the "WISCO Put") at a purchase or redemption price, as the case may be, equal to the Formula Price multiplied by a fraction, the numerator of which shall be the number of Units being sold or redeemed and the denominator of which shall be the total number of Units of the Company then outstanding (the "Put Price"); provided, however, that WISCO shall not have the right to exercise the WISCO Put on more than (3) three occasions. (b) At any time commencing after the tenth anniversary of the Closing, G-P shall have the right to purchase, and the WISCO Member shall be obligated to sell, all but not less than all of the Units owned by the WISCO Member (the "G-P Call") at a purchase price equal to the Formula Price multiplied by a fraction, the numerator of which shall be the number of Units then owned by the WISCO Member and the denominator of which shall be the total number of Units of the Company then outstanding (the "Call Price"). (c) In the event the WISCO Put or the G-P Call (either being referred to as "Option Right") is exercised, the following procedure shall be applicable: (i) The Member exercising its Option Right shall deliver a written notice to the other Member and the Company (the "Exercise Notice"). (ii) The Exercise Notice shall: (a) specify the identity of each Member electing to exercise an Option Right; (b) specify the number of Units to be sold, purchased or redeemed pursuant to such Exercise Notice; and (c) be executed by a duly authorized officer of such Member. (iii) In the event of exercise of a WISCO Put, the G-P Member or the Company, as specified in any Exercise Notice regarding such WISCO Put, shall purchase and the WISCO Member shall sell the Units specified in the Exercise Notice. In the event of exercise of the G-P Call, the WISCO Member shall sell and the G-P Member shall purchase all Units owned by the WISCO Member. 38 (iv) The closing of a Transfer pursuant to exercise of an Option Right (an "Option Closing") shall take place at a time and place to be designated by mutual agreement between the Members; provided, however, that the date designated for the Option Closing shall not be more than ten (10) Business Days from the date of receipt by the Company of the Exercise Notice. At the Option Closing, the WISCO Member shall deliver to the Company certificates representing the Units subject to the Exercise Notice (free and clear of all liens, charges and encumbrances) and the Company or the G-P Member, as applicable, shall pay to the WISCO Member the Put Price or the Call Price, as applicable, by cashier's or certified check payable to any such WISCO Member, or by wire transfer of immediately available funds to an account designated by such WISCO Member. (v) At the Option Closing, the WISCO Member shall execute and deliver such documents as reasonably requested by the G-P Member to fully transfer title to the Units subject to such Exercise Notice, including documents representing and warranting good and marketable title to such Units and that such Units are owned free and clear of all liens, charges and encumbrances. Section 7.3 Member Transfers. (a) Upon not less than fifteen (15) days advance written notice to the Company and effective as of the first day of the next calendar month, any Member may Transfer any of the Units held by it to any of its Affiliates and such transferee shall become a Member hereunder (an "Affiliate Member"), provided that (i) such transferee shall execute a counterpart of this Agreement, agreeing thereby to be bound by all of the provisions hereof and (ii) in the event that such transferee would at any time thereafter cease to be an Affiliate of the CSK Group or the G-P Group, as the case may be, then the Units so transferred to such former Affiliate shall be Transferred back to CSK or G-P, or an Affiliate of their respective Groups, as applicable, prior to such CSK Group Affiliate or G-P Group Affiliate ceasing to be such (and if such transfer back does not occur prior to the Affiliate ceasing to be such, the transaction which results in the transferee ceasing to be an Affiliate shall be deemed a Transfer which is subject to the restrictions of this Section 7.3). (b) Notwithstanding anything herein to the contrary, G- P or an Affiliate Member of G-P may transfer its Units or interests in its Units to any third party at any time after the tenth anniversary of the date hereof, provided that such transferee shall execute a counterpart of this Agreement, agreeing thereby to be bound by all of the provisions hereof. Section 7.4 Retirement. Any Member that Transfers all of its Units pursuant to the terms hereof shall be deemed to have retired and to have ceased to be a Member as of the effective date of such Transfer. 39 ARTICLE VIII DISSOLUTION AND WINDING UP; BUY OUT RIGHTS Section 8.1 Dissolution. Subject to Section 8.5 hereof, the Company may, at the sole discretion of the Board, be dissolved and its affairs wound up and terminated upon the first to occur of the following: (a) the unanimous consent of all Members to dissolve the Company, it being expressly understood that Section 18- 801(a)(3) of the Delaware Act shall not apply to the Company; (b) the sale or other disposition of all or substantially all of the assets of the Company in one transaction or a series of related transactions; (c) the date the WISCO Member or the CSK Group holds less than 5% of the outstanding Units; and (d) the occurrence of an event causing a dissolution of the Company under Section 18-801 of the Delaware Act, unless the Company is continued as permitted under the Delaware Act. Section 8.2 Winding Up. If the Company is dissolved pursuant to Section 8.1, this Agreement shall remain in full force and effect and shall continue to govern the rights and obligations of the Members and Managers and the conduct of the Company during the period of winding up the Company's affairs. The Board shall apply and distribute the assets of the Company in the following order of priority (subject to Section 8.3), unless otherwise required by mandatory provisions of applicable law: (a) to satisfy the Company Debt or the Permanent Company Debt; (b) to other creditors, including Members who are creditors, to the extent otherwise permitted by law, in satisfaction of the liabilities of the Company (whether by payment, by the establishment of reserves of cash or other assets of the Company for contingent liabilities in amounts, if any, determined by the Board to be appropriate for such purposes or by other reasonable provision for payment), other than liabilities for distributions to Members and former Members under Sections 18- 601 or 18-604 of the Delaware Act; (c) to Members and former Members in satisfaction of liabilities for distributions under 18-601 or 18-604 of the Delaware Act; and (d) thereafter to the Members in proportion to the positive balances of their respective Capital Accounts (determined after allocating all income, gain, deduction, loss 40 and other like items arising in connection with the liquidation of Company assets and otherwise making all Capital Account adjustments required under the definition of Capital Account); Section 8.3 In-Kind Distributions. In the event of a dissolution or winding up of the Company, the Board shall, to the extent permitted by law, (a) distribute to the G-P Member the amount required by Section 8.2 in kind, from the Company's assets, and to the WISCO Member the amount required by Section 8.2 in cash, or (b) if the Board determines (which determination must include the affirmative vote or consent of the WISCO Manager) that a prompt sale of part or all of the Company's assets would be impractical or would cause undue loss to the value of Company assets, the Board may defer for a reasonable time (up to three (3) years) the liquidation of any assets, except those necessary to timely satisfy liabilities of the Company (other than those to Members), and/or may distribute to the Members, in lieu of cash, as tenants in common, undivided interests in such Company assets as the Board deems not suitable for liquidation. Any such in-kind distributions shall be made in accordance with the priorities set forth in Section 8.2 as if cash equal to the Fair Market Value of the distributed assets were being distributed. Any such distributions in kind shall be subject to such conditions relating to the disposition and management of such properties as are reasonable and equitable and to any joint operating agreements or other agreements governing the operation of such properties at such time. The liquidating distributions to be made pursuant to this section shall be made within the time set forth in Regulations Section 1.704-1(b)(2)(ii)(b)(2). Section 8.4 Cancellation of Certificate of Formation. Upon the completion of the distribution of Company Property as provided in Sections 8.2 and 8.3, the Company shall be terminated, and the Board shall cause the cancellation of the Certificate of Formation and all qualifications of the Company as a foreign limited liability company and shall take such other actions as may be necessary to terminate the Company. Section 8.5 Buy Out Rights. In the event of the occurrence of any of the events described in Section 8.1, G-P shall have the option to either (a) cause the dissolution and wind up the Company pursuant to this Article VIII; or (b) cause a Subsidiary of G-P to purchase the Units held by the WISCO Member at a purchase price calculated by multiplying the Formula Price times the WISCO Member's Percentage Interest, in which case the Company shall not be dissolved; or (c) to the extent legally permissible, take no action and continue the existence of the Company. Such option shall be exercised, and notice of such exercise provided to the WISCO Member, within 120 days after the occurrence of any of such events described in Section 8.1. 41 ARTICLE IX CERTIFICATES EVIDENCING UNITS Section 9.1 Certificates. The Units owned by each Member shall be evidenced by one or more Certificates. Each Certificate shall be executed by such Managers or such officers of the Company as the Board shall designate. Section 9.2 Register. The Company shall keep or cause to be kept a register in which, subject to such regulations as the Board may adopt, the Company will provide for the registration of Units and the registration of Transfers of Units. Upon surrender for registration of Transfer of any Certificate, and subject to the further provisions of this Section 9.2 and Section 9.3 and the limitations on Transfer contained elsewhere in this Agreement, the Company will cause the execution, in the name of the registered holder or the designated transferee, of one or more new Certificates, evidencing the same aggregate number of Units as did the Certificate surrendered or such other number as is appropriate in the event such Transfer is pursuant to exercise of an Option Right. Every Certificate surrendered for registration of Transfer shall be duly endorsed, or be accompanied by a written instrument of Transfer in form satisfactory to the Board, duly executed by the registered holder thereof or such holder's authorized attorney. Section 9.3 New Certificates. The Company shall issue a new Certificate in place of any Certificate previously issued if the record holder of the Certificate (i) makes proof by affidavit, in form and substance satisfactory to the Board, that a previously issued Certificate has been lost, destroyed or stolen, (ii) requests the issuance of a new Certificate before the Company has received notice that the Certificate has been acquired by a purchaser for value in good faith and without notice of an adverse claim, (iii) if requested by the Board, delivers to the Company a bond, in form and substance satisfactory to the Board, with such surety or sureties and with fixed or open liability as the Board may direct, to indemnify the Company, as registrar, against any claim that may be made on account of the alleged loss, destruction or theft of the Certificate, and (iv) satisfies any other reasonable requirements imposed by the Board. Section 9.4 Interest as a Security. A Unit in the Company evidenced by a Certificate shall constitute a security for all purposes of Article 8 of the Uniform Commercial Code promulgated by the National Conference of Commissioners on Uniform State Laws, as in effect in Delaware or any other applicable jurisdiction. Delaware law shall constitute the local law of the Company's jurisdiction in its capacity as the issuer of Units. 42 Section 9.5 Legends. A copy of this Agreement shall be kept with the records of the Company. Each of the Members hereby agrees that each outstanding Certificate shall bear a conspicuous legend reading substantially as follows: The Units represented by this Certificate have not been registered under the Securities Act of 1933 or applicable state and other securities laws and may not be sold, pledged, hypothecated, encumbered, disposed of or otherwise transferred without compliance with the Securities Act of 1933 or any exemption thereunder and applicable state and other securities laws. The Units represented by this Certificate are subject to the restrictions on transfer and other provisions of an Operating Agreement dated as of October 4, 1999 (as amended from time to time, the "Agreement") by and among Company and its Members, and may not be sold, pledged, hypothecated, encumbered, disposed of or otherwise transferred except in accordance therewith. A copy of the Agreement is on file at the principal executive offices of the Company. ARTICLE X MISCELLANEOUS Section 10.1 Notices. All notices and other communications required or permitted by this Agreement shall be in writing and shall be delivered by personal delivery, by nationally recognized overnight courier service, by facsimile, by first class mail or by certified or registered mail, return receipt requested, addressed, to any Member at its address as set forth on Schedule 1 (as the same may be updated from time to time at the direction of such Member) or to the Company at 55 Park Place, Atlanta, Georgia 30303 (or to such other address as the Company shall have designated to each of the Members by written notice given in the manner hereinabove set forth). Notices shall be deemed given one day after sent, if sent by overnight courier; when delivered and receipted for, if hand delivered; when received, if sent by facsimile or other electronic means or by first class mail; or when receipted for (or upon the date of attempted delivery where delivery is refused or unclaimed), if sent by certified or registered mail, return receipt requested. Section 10.2 Amendment; Waiver. Any provision of this Agreement may, (i) in the case of an amendment, be amended if, and only if, such amendment is in writing and signed by each Member, or (ii) in the case of a waiver, be waived if such waiver is contained in a writing, and signed by the party against whom the waiver is to be effective. No failure or delay by any party in exercising any right, power 43 or privilege hereunder shall operate as a waiver thereof nor shall any single exercise thereof preclude any other or further exercise thereof or of any other right, power or privilege. Except as otherwise provided rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. Section 10.3 Assignment. Except as otherwise expressly provided herein, no party to this Agreement may assign any of its rights or obligations under this Agreement without the prior written consent of the other parties hereto. Section 10.4 Entire Agreement. This Agreement, the Joint Venture Agreement and the Ancillary Agreements (including the schedules and exhibits hereto and thereto) contain the entire agreement among the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters. Section 10.5 Public Disclosure. Each Member hereby agrees that, except as may be required to comply with the requirements of any applicable Laws or the rules and regulations of any exchange upon which its securities (or the securities of one of its Affiliates) are traded, it shall not make or permit to be made any press release or similar public announcement or communication concerning the execution or performance of this Agreement unless specifically approved in advance by all parties hereto, which approval shall not be unreasonably withheld, conditioned or delayed. In the event that, in the absence of such approval, legal counsel for any party is of the opinion that a press release or similar public announcement or communication is required by Law or by the rules and regulations of any exchange on which such party's securities (or the securities of one of its Affiliates) are traded, then such party may issue a public announcement limited solely to that which legal counsel for such party advises is required under such Law or such rules and regulations (and the party making any such announcement shall provide a copy thereof to the other parties for review before issuing such announcement). Section 10.6 Parties in Interest. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to confer upon any Person other than the Company, WISCO, G-P or their respective successors or permitted assigns, any rights or remedies under or by reason of this Agreement. The Company is executing this Agreement as a party, and this Agreement shall constitute a contract among the Members and between the Company and each of the Members. Section 10.7 Governing Law; Submission to Jurisdiction; Selection of Forum. This Agreement shall be governed by, and construed and enforced in accordance with the laws of the State of Delaware without giving effect to any choice of law provision or rule 44 (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the internal Laws of the State of Delaware. Each of the Parties agrees that any legal action between the parties, or any of them, relating to this Agreement, the interpretation of the terms hereof or the performance hereof or the consummation of the transactions contemplated hereby, whether in tort or contract or at law or in equity, shall exclusively be brought in a Federal or State Court located in New Castle County, Delaware, having jurisdiction of the subject matter thereof, and each party irrevocably (i) consents to personal jurisdiction in any such Federal or State Court, (ii) waives any objection to laying venue in any such action or proceeding in any such Court, (iii) waives any immunity from suit and any objection that any such Court is an inconvenient forum or does not have jurisdiction over any party hereto and (iv) agrees that service of complaint or other process may be made by certified or registered mail addressed to such party at its address determined in accordance with Section 10.1 of this Agreement. Section 10.8 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same Agreement. Section 10.9 Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any Person or any circumstance, is invalid or unenforceable (i) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (ii) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction. Section 10.10 Equitable Relief. Each party acknowledges that money damages would be inadequate to protect against any actual or threatened breach of this Agreement by any party and that each party shall be entitled to equitable relief, including specific performance and/or injunction, without posting bond or other security, in order to enforce or prevent any violations of the provisions of this Agreement. Section 10.11 No Agency. This Agreement shall not constitute an appointment of any party as the agent of any other party, nor shall any party have any right or authority to assume, create or incur in any manner any obligation or other liability of any kind, express or implied, against, in the name or on behalf of, any other party. Nothing herein or in the transactions contemplated by this Agreement shall be construed as, or deemed to be, the formation 45 of a partnership by or among the parties hereto (provided that nothing in this Section 10.11 shall affect the tax treatment of the Company under Article III hereof). Section 10.12 Limitation of Liability. The debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Member, Manager or officer of the Company shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member, Manager and/or officer. Section 10.13 Non-Exclusive Business. (a) Notwithstanding anything herein to the contrary, the parties hereto agree that the Company shall not be the exclusive vehicle for G-P to engage in the manufacture or sale of commercial tissue products or "away from home" tissue products (the "Products"), or to engage in the Commercial Tissue Business and that G-P shall have the right to engage in the manufacture or sale of Products and otherwise engage in the Commercial Tissue Business, whether directly or through other Affiliates, without regard to the Company or any requirement that G-P make such opportunity or Commercial Tissue Business available to the Company in any way. (b) Notwithstanding anything herein to the contrary, the parties hereto agree that the Company may provide to any member of the G-P Group the right to use intangible Company Property, and such member of the G-P Group will have no obligation to reimburse the Company for such use. (c) In the event G-P or a G-P Affiliate uses production equipment and machines owned by the Company to produce products for G-P or a G-P Affiliate, all costs, revenues and profits relating to such products shall be allocated to the Company. (d) In the event G-P or a G-P Affiliate uses production equipment or machines it owns that are located in facilities owned or operated by the Company to produce products for G-P or a G-P Affiliate, G-P shall reimburse to the Company an amount equal to the allocated overhead (including facility costs) determined pursuant to the cost allocation methodology set forth in Exhibit B to the Operating Support Services Agreement. Section 10.14 Dispute Resolution. Except as otherwise provided in this Agreement, any dispute among the Members hereto, including disputes related to the Ancillary Agreements and the review of G-P Books related thereto, shall be resolved by the Members through good faith negotiations. If such dispute cannot be resolved by such negotiation it shall be submitted to non-binding commercial arbitration pursuant to the commercial arbitration rules then in effect of the American Arbitration Association, before a panel of not less than three arbitrators. All costs and expenses incurred in connection with such proceeding shall be shared equally by the Members, however each Member shall bear the cost of its legal fees. Only upon the conclusion of arbitration proceedings in 46 which a decision was rendered may the Members bring an action in connection with such dispute in the United States District Court or the state court sitting in New Castle County, Delaware. Each Member agrees to irrevocably submit to the exclusive jurisdiction of such court and agrees to waive any objection to laying venue in such court or that such court is an inconvenient forum or does not have jurisdiction over the Member. 47 IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of the date first written above. GEORGIA-PACIFIC CORPORATION By: Name: Michael C. Burandt Title: Senior Vice President - Packaged Products WISCONSIN TISSUE MILLS INC. By: Name: William T. Tolley Title: Senior Vice President - Finance and Chief Financial Officer Consented/Agreed To By the Company as Referenced In Section 10.6 GEORGIA-PACIFIC TISSUE, LLC By: Name: Michael C. Burandt Title: Manager EX-2 4 EX-2.3 INDEMNITY AGREEMENT INDEMNITY AGREEMENT (the "Agreement"), dated as of October 4, 1999, between WISCONSIN TISSUE MILLS INC., a Delaware corporation and wholly owned subsidiary of Chesapeake Corporation ("WISCO" or the "Indemnitor"), and GEORGIA-PACIFIC CORPORATION, a Georgia corporation ("G-P"). Capitalized terms used but not otherwise defined herein shall have the respective meanings given to such terms in the Joint Venture Agreement or the Operating Agreement, each referred to below. W I T N E S S E T H: WHEREAS, Chesapeake Corporation, WISCO, G-P and Georgia Pacific Tissue, LLC, a Delaware limited liability company (the "Company"), are parties to a Joint Venture Agreement, dated as of October 4, 1999 (the "Joint Venture Agreement"); WHEREAS, WISCO and G-P are parties to the Operating Agreement of the Company, dated as of October 4, 1999 (the "Operating Agreement"); WHEREAS, the Company is a party to a Credit Agreement, dated as of September 13, 1999, among the Company and Bank of America, N.A. (the "Lender") (as amended, supplemented or otherwise modified from time to time in accordance with the Operating Agreement, the "Credit Agreement"), pursuant to which the Lender has agreed to make a loan to the Company in the amount of up to $800 million (the "Company Debt"); WHEREAS, the Company has executed a promissory note, dated as of October 4, 1999, evidencing the Company Debt; WHEREAS, G-P has provided to the Lender a full and unconditional guaranty of payment of the Company Debt pursuant to a Guaranty Agreement, dated as of October 4, 1999 (the "G-P Guaranty"); WHEREAS, the Indemnitor has agreed to indemnify G-P against amounts that may be actually paid by G-P to the Lender under the G-P Guaranty for the original principal amount of the Company Debt, subject to the terms and limitations set forth herein. NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. Indemnity. Subject to Sections 3 and 4 hereof, the Indemnitor unconditionally agrees to indemnify G- P as follows for payments of the original principal amount of the Company Debt that G-P may make under the G-P Guaranty: If (i) G-P shall have made a payment of principal (excluding any accrued and unpaid interest that may be added to 1 principal) of the Company Debt to the Lender under the G-P Guaranty, (ii) G-P shall have exhausted all of its rights (whether by subrogation or otherwise) to reimbursement or recovery from the Company or the Company's assets, and (iii) G-P shall have demanded reimbursement from the Indemnitor within 120 days after G-P exhausts such rights, the Indemnitor shall reimburse G-P upon demand for the amount of such payment in excess of the amount so recovered from or reimbursed by the Company or its assets. SECTION 2. Subrogation/Acquisition of Interest. (a) Upon such reimbursement by the Indemnitor pursuant to Section 1 hereof, the Indemnitor shall (i) be subrogated to the remaining rights of G-P against the Company to the extent of such reimbursement and (ii) at the Indemnitor's option, obtain an Interest or (if the Indemnitor is then a Member) an increased Interest in the Company in satisfaction of such rights. To exercise the option to obtain an Interest or increased Interest, the Indemnitor shall give G-P notice of exercise within 30 days after the payment of such reimbursement. Such Interest or increase in Interest shall consist of (i) a Capital Account, or increase in Capital Account, equal to the amount of such reimbursement and (ii) a Percentage Interest, or increase in Percentage Interest, equal to the ratio of (A) the amount of such reimbursement to (B) the sum of the total of all Capital Accounts immediately before the payment of the reimbursement plus the amount of such reimbursement. For this purpose, the amount of Capital Accounts immediately before the payment of the reimbursement shall take into account the revaluation of Capital Accounts, pursuant to the Regulations under Section 704(b) of the Code, occasioned by the Indemnitor's acquisition of the Interest or increased Interest pursuant to this paragraph. G-P shall, either directly or through any of its Affiliates that is then a Member, cause the Company to issue to the Indemnitor the appropriate number of Units to represent such Interest or increase in Interest. (b) Notwithstanding any other provision of this Agreement or of applicable Law to the contrary, the Indemnitor hereby waives any and all claims and other rights (whether legal or equitable) that it may now have or hereafter acquire against G-P, any other Member, or any other person (other than the Company) by reason of making a payment pursuant to Section 1 hereof, including, without limitation, any right of indemnification, subrogation, reimbursement, exoneration, or contribution or any right to participate in any claim or remedy of the Lender or G-P against any person (other than the Company). SECTION 3. Limitation on Amount of Indemnity. Notwithstanding any provision of this Agreement to the contrary, the aggregate obligation of the Indemnitor hereunder shall in no event exceed the amount of the Special Distribution (that is, $755.2 million). 2 SECTION 4. Termination. Except as otherwise provided in this Section 4, this Agreement shall survive and be in full force and effect so long as any of the original principal amount of the Company Debt is outstanding and has not been paid in full. On the third anniversary and on each subsequent anniversary of the date hereof, the Indemnitor may terminate this Agreement by giving written notice of such termination (the "Termination Notice") to G-P at least 15 days and not more than 30 days before the anniversary date on which such termination is to take effect (the "Termination Date"), provided that (i) no Default (as defined in the Credit Agreement) relating to the nonpayment of principal or interest or Event of Default (as defined in the Credit Agreement) is pending under the Credit Agreement on the date of the Termination Notice, and (ii) either (A) neither WISCO nor any Affiliate of WISCO owns any Interest on the Termination Date, or (B) notice of exercise of an Option Right with respect to all Units owned by WISCO and any Affiliate of WISCO is given under the Operating Agreement on or before the Termination Date. In addition, this Agreement shall terminate on the first date (the "Cessation Date") that both of the following circumstances exist: (x) neither WISCO nor any Affiliate of WISCO owns any Interest, if WISCO (or such Affiliate) ceases to own its Interest as a result of the exercise of the G-P Call or G-P's option under Section 8.5(b) of the Operating Agreement; and (y) no Default (as defined in the Credit Agreement) relating to the nonpayment of principal or interest or Event of Default (as defined in the Credit Agreement) is pending under the Credit Agreement . As of the Termination Date or the Cessation Date, as applicable, the Indemnitor shall be released from any and all liabilities hereunder; provided, however, that the Indemnitor shall not be released from any unpaid liability of the Indemnitor for which G-P has made or is then entitled to make a demand pursuant to Section 1 hereof, or for which G-P then would be so entitled to make a demand upon exhaustion of its rights to reimbursement or recovery from the Company or the Company's assets. SECTION 5. No Third Party Reliance. Nothing in this Agreement, expressed or implied, is intended to confer upon any person other than the parties hereto and their respective permitted successors and assigns any rights or remedies under or by reason of this Agreement. Without limiting the foregoing, it is expressly understood that the Lender shall have no rights against the Indemnitor hereunder. SECTION 6. Governing Law. This agreement shall be governed by, and construed in accordance with, the laws of the State of Virginia. SECTION 7. No Waiver; Amendment. (a) No failure on the part of the Indemnitor or G-P to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy by the Indemnitor or G-P preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not 3 exclusive of any other remedies provided by law. Neither the Indemnitor nor G-P shall be deemed to have waived any rights hereunder unless such waiver shall be in writing and signed by such parties. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between all of the parties hereto. SECTION 8. Notices. All communications and notices hereunder between and among the parties hereto shall be in writing and given as provided in the Operating Agreement and addressed as specified therein. SECTION 9. Binding Agreement; Assignments. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the parties that are contained in this Agreement shall bind and inure to the benefit of their respective permitted successors and assigns. No party hereto may assign or transfer any of its rights or obligations hereunder (and any such attempted assignment or transfer shall be void) without the prior written consent of the other party hereto. SECTION 10. Severability. In case any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, no party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 11. Counterparts; Effectiveness; Execution. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement. SECTION 12. Rules of Interpretation. The rules of interpretation specified in Section 1.2 of the Operating Agreement shall be applicable to this Agreement. 4 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the date first appearing above. WISCONSIN TISSUE MILLS INC. By:_________________________ William T. Tolley Vice President GEORGIA-PACIFIC CORPORATION By:________________________ Kenneth F. Khoury Vice President, Deputy General Counsel and Secretary 5 -----END PRIVACY-ENHANCED MESSAGE-----