EXHIBIT
10.4
Purchase
Agreement
( KNRC/Equipment
Leases )
This PURCHASE AGREEMENT is made and
entered into as of July 9, 2004 (the “ Effective Date
”) by and between CROWN PACIFIC PARTNERS, L.P., a Delaware
limited partnership (“ Seller ”),
Debtor-in-Possession under Jointly Administered Case No.
03-11258-PHX-RJH (the “ Case ”) in the United
States Bankruptcy Court for the District of Arizona (the “
Bankruptcy Court ”) filed on June 29, 2003 under
Chapter 11 of Title 11 of the United States Code (the
“ Bankruptcy Code ”), and INTERNATIONAL FOREST
PRODUCTS LIMITED, a British Columbia corporation (“
Buyer ”).
Recitals :
A.
Seller (i) owns all of the issued
and outstanding capital stock of Klamath Northern Railway Company,
an Oregon corporation (“ Klamath Northern ”).
Klamath Northern owns and operates a short-line railroad in central
Oregon that serves a sawmill owned by CPLP (this term and all other
capitalized terms used herein having the respective meanings set
forth in Section 9.1) in Gilchrist, Oregon, and (ii) is party to
certain equipment leases more fully described herein.
B.
CPLP and Buyer have entered into
that certain Asset Purchase Agreement (Mills) of even date herewith
(the “ Mill Agreement ”), pursuant to which CPLP
has agreed to sell to Buyer, and Buyer has agreed to purchase from
CPLP, on the terms and conditions set forth therein, certain
sawmills and other assets owned by CPLP, including the sawmill
served by Klamath Northern.
C.
Seller wishes to sell to Buyer, and
Buyer wishes to purchase from Seller, the Klamath Northern Stock
and the Equipment Leases, in each case on the terms and conditions
set forth herein.
Agreements
:
In consideration of the foregoing,
the mutual covenants of the parties set forth in this Agreement,
and other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties, intending to be
legally bound, agree as follows:
1.
Agreement to
Purchase and Sell . On the terms and subject to
the conditions set forth in this Agreement, Seller agrees to sell,
transfer, assign, convey, and deliver to Buyer, and Buyer agrees to
purchase from Seller, the following assets, free and clear of all
Liens:
1.1
Klamath
Northern Stock . All of the issued and
outstanding capital stock of Klamath Northern, on a fully diluted
basis as of the Closing Date (the “ Klamath Northern
Stock ”); and
1.2
Equipment
Leases . All right, title, and
interest of Seller in and to those certain leases of equipment
listed on the attached Schedule 1.2 (the “
Equipment Leases ”).
2.
Purchase Price
and Payment; Assumption of Liabilities; Cure Costs
.
2.1
Purchase Price
and Payment . In consideration of the
sale, transfer, assignment, conveyance, and delivery to Buyer of
the Klamath Northern Stock and the Equipment Leases, Buyer shall,
at the Closing, pay to Seller, by wire transfer of immediately
available, good funds, an amount (the “ Purchase Price
”) equal to (i) Fifty-one Thousand Dollars ($51,000),
minus (ii) the aggregate amount of the Cure Costs, if
any.
2.2
Allocation of
Purchase Price . The Purchase Price shall be
allocated (i) $1,000 to the Klamath Northern Stock and (ii) $50,000
to the Equipment Leases.
1
2.3
Assumption of
Liabilities . Buyer shall assume and pay,
perform, and discharge in the Ordinary Course of Business in
accordance with their respective terms, subject to any defenses or
claimed offsets asserted in good faith against the obligee to whom
such liabilities or obligations are owed, all liabilities and
obligations of Seller under the Equipment Leases arising from and
after the Closing Date (the “ Assumed Liabilities
”).
2.4
Cure
Costs . Buyer agrees to satisfy, as
and when due, all cure obligations due and owing under the
Equipment Leases which the Bankruptcy Court orders to be paid as a
condition to Seller’s assumption and assignment to Buyer of
the Equipment Leases in accordance with Section 365 of the
Bankruptcy Code (the “ Cure Costs ”). To
Seller’s Knowledge, as of the Effective Date there are no
Cure Costs associated with the Equipment Leases.
3.
Pre-Closing
Matters .
3.1
Conduct of
Klamath Northern’s Business .
3.1.1
Between the
Effective Date and the Closing Date, Seller shall cause Klamath
Northern to:
(a)
Conduct the Business and operate
and maintain its assets in the Ordinary Course of Business, except
as may otherwise be provided herein; and
(b)
Use its commercially reasonable
efforts to maintain the relations and goodwill with employees,
suppliers, customers, and others having business relationships with
it.
3.1.2
Between the
Effective Date and the Closing Date, Seller shall not suffer or
permit Klamath Northern to:
(a)
Sell, lease, or otherwise transfer
or dispose of any material assets, or any interest therein, other
than transfers and dispositions made in the Ordinary Course of
Business, or permit or allow any material assets to become subject
to any Lien (other than Permitted Encumbrances);
(b)
Issue, sell, or pledge any stock
or any warrants or other rights to acquire stock;
(c)
Incur or assume any debt for
borrowed money or incur any material liability or
obligation;
(d)
Assume, guarantee, endorse, or
otherwise become liable or responsible (whether directly,
contingently, or otherwise) for the obligations of any other
Person, except in the Ordinary Course of Business;
(e)
Make any loans or advances to, or
any investments in, any Person;
(f)
Make any commitment for capital
expenditures for additions to property, equipment, or facilities to
be made after the Closing Date;
(g)
Change any of the accounting
principles or practices used by it, except as may be required by
generally accepted accounting principles;
(h)
Amend any of its Organizational
Documents;
(i)
Enter into any new employment,
severance, consulting, or salary continuation contract or grant any
increases in compensation or other benefits;
2
(j)
Otherwise modify or amend the
terms of employment of any of its employees, adopt any employee
benefit plan, or terminate more than five (5) employees;
or
(k)
Enter into any contract agreeing
to do any of the foregoing.
3.1.3
Prior to the
Closing, Seller shall cause Klamath Northern to (i) satisfy all of
its debts, liabilities, and obligations accruing up to the Closing
Date (other than a payable owed to Crown Pacific, Ltd., an
Affiliate of Seller, in an amount not to exceed $4,000), (ii)
distribute all of its cash and cash equivalents to Seller, and
(iii) close all of its bank accounts. Buyer acknowledges and agrees
CPLP will, prior to the Closing Date, write off all accounts
receivable owing to CPLP from KNRC, being in an aggregate amount
not to exceed $450,000.
3.2
Access to
Information . Between the Effective Date
and the Closing Date, Seller shall, upon reasonable advance notice
from Buyer to Seller, (i) cause Klamath Northern to afford to Buyer
and its Representatives access (during normal business hours), in a
manner so as not to interfere with Klamath Northern’s normal
operations and subject to reasonable restrictions imposed by
Seller, to the Business Employees and to Klamath Northern’s
assets, including its books and records, (ii) afford to Buyer and
its Representatives access (during normal business hours), in a
manner so as not to interfere with the normal operations of Seller
and its Affiliates and subject to reasonable restrictions imposed
by Seller, to employees of Seller and its Affiliates who are
involved in the operation of KNRC, and (iii) cause the Business
Employees and Seller’s Representatives to furnish Buyer with
such information with respect to Klamath Northern, its assets and
liabilities, and the Equipment Leases as may be within
Seller’s or Klamath Northern’s possession or control
and as Buyer may reasonably request. Buyer acknowledges and agrees
that nothing in this Section 3.2 is intended to give rise to any
contingency to Buyer’s obligation to proceed with this
transaction as provided in this Agreement.
3.3
Bankruptcy
Court Approval . Promptly following the
Effective Date, Seller shall file one or more motions with the
Bankruptcy Court requesting, and shall thereafter use commercially
reasonable efforts to obtain, entry of the Bidding Procedures Order
and an order (the “ Approval Order ”) which
(i) approves the sale of the Klamath Northern Stock and the
Equipment Leases to Buyer on the terms and conditions set forth in
this Agreement and authorizes Seller to proceed with this
transaction, (ii) includes a specific finding that Buyer is a
good faith purchaser of the Klamath Northern Stock and the
Equipment Leases and is entitled to the protection afforded by
Section 363(m) of the Bankruptcy Code, (iii) states that
the sale of the Klamath Northern Stock and the Equipment Leases to
Buyer shall be free and clear of all Liens whatsoever, except as
expressly provided in this Agreement, and (iv) approves
Seller’s assumption and assignment of the Equipment Leases
pursuant to Section 365 of the Bankruptcy Code and orders Buyer to
pay any cure amounts determined by the Bankruptcy Court to be
payable to the other parties to the Equipment Leases as a condition
to such assumption and assignment.
3.4
Filing with
Surface Transportation Board . Promptly following the
Effective Date, the parties, cooperating in good faith, shall make
such filings with the U.S. Surface Transportation Board as may be
necessary to obtain approval of this transaction pursuant to the
exemption process available to Class III railroads such as Klamath
Northern (the “ STB Approval ”). Buyer and
Seller shall each pay one-half of any fees associated with such
filings.
4.
Conditions to
Closing .
4.1
Seller’s
Conditions . Seller’s obligation
to close this transaction shall be subject to and contingent upon
the satisfaction (or waiver by Seller in its sole discretion) of
each of the following conditions:
4.1.1
All
representations and warranties of Buyer set forth in this Agreement
(considered collectively) and each such representation and warranty
(considered individually) shall have been true and correct in all
material respects as of the Effective Date and shall be true and
correct in all material respects as of the Closing Date, as if made
on the Closing Date.
3
4.1.2
All of the
covenants and obligations that Buyer is obligated to perform or
comply with pursuant to this Agreement prior to or at the Closing
(considered collectively) and each such covenant and obligation
(considered individually) shall have been performed and complied
with in all material respects.
4.1.3
As of the Closing
Date, the STB Approval shall have been obtained and there shall not
be in effect any Legal Requirement or any Order that prohibits the
transfer of the Klamath Northern Stock or the Equipment Leases by
Seller to Buyer.
4.1.4
Since the
Effective Date, there shall not have been commenced or Threatened
against Seller or any Affiliate of Seller any Proceeding (i)
seeking material Damages or other material relief in connection
with, any aspect of this transaction, or (ii) that could reasonably
be expected to have the effect of preventing or making illegal this
transaction.
4.1.5
Neither the
consummation of this transaction nor the performance of
Seller’s obligations hereunder shall, directly or indirectly
(with or without notice, lapse of time, or both), contravene,
conflict with, result in a violation of, or cause Seller or any
Affiliate of Seller to suffer any material adverse consequence
under any applicable Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any
Governmental Authority since the Effective Date.
4.1.6
The Bankruptcy
Court shall have entered the Approval Order and such order shall
not have been stayed as of the Closing Date.
4.2
Buyer’s
Conditions . Buyer’s obligation to
close this transaction shall be subject to and contingent upon the
satisfaction (or waiver by Buyer in its sole discretion) of each of
the following conditions:
4.2.1
All
representations and warranties of Seller set forth in this
Agreement (considered collectively) and each such representation
and warranty (considered individually) shall have been true and
correct in all material respects as of the Effective Date and shall
be true and correct in all material respects as of the Closing
Date, as if made on the Closing Date.
4.2.2
All of the
covenants and obligations that Seller is obligated to perform or
comply with pursuant to this Agreement prior to or at the Closing
(considered collectively) and each such covenant and obligation
(considered individually) shall have been performed and complied
with in all material respects.
4.2.3
As of the Closing
Date, the STB Approval shall have been obtained and there shall not
be in effect any Legal Requirement or any Order that prohibits the
transfer of the Klamath Northern Stock or the Equipment Leases by
Seller to Buyer.
4.2.4
Since the
Effective Date, there shall not have been commenced or Threatened
against Buyer or any Affiliate of Buyer any Proceeding (i) seeking
material Damages or material other relief in connection with any
aspect of this transaction, or (ii) that could reasonably be
expected to have the effect of preventing or making illegal this
transaction.
4.2.5
Neither the
consummation of this transaction nor the performance of
Buyer’s obligations hereunder shall, directly or indirectly
(with or without notice, lapse of time, or both), contravene,
conflict with, result in a violation of, or cause Buyer or any
Affiliate of Buyer to suffer any material adverse consequence under
any applicable Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental
Authority since the Effective Date.
4.2.6
The Bankruptcy
Court shall have entered the Approval Order and such order shall
not have been stayed as of the Closing Date.
4
5.
Closing
.
5.1
Time and Place
of Closing . The Closing shall take
place at the offices of Ball Janik LLP, 101 S.W. Main Street, Suite
1100, Portland, Oregon, or at such other location as the parties
may mutually agree. The Closing shall take place concurrently with
the closing under the Mill Agreement.
5.2
Seller’s
Closing Deliveries . At the Closing, Seller
shall deliver, or cause to be delivered, to Buyer:
5.2.1
The original
stock certificates representing the Klamath Northern Stock duly
endorsed by Seller (or accompanied by stock powers duly executed by
Seller) for transfer to Buyer;
5.2.2
The original
stock book, stock ledger, and minute book of Klamath
Northern;
5.2.3
A counterpart of
an agreement terminating the KNRC Management Contract without any
further liability or obligation thereunder, duly executed by CPLP,
Crown Management, and Klamath Northern;
5.2.4
Resignations by
all officers and directors of Klamath Northern;
5.2.5
General releases
of all claims (i) by each of CPLP, Crown Management, and the
officers and directors of Klamath Northern, made in favor of
Klamath Northern, and (ii) by Klamath Northern made in favor of
each of CPLP, Crown Management, and the officers and directors of
Klamath Northern;
5.2.6
An Assignment and
Assumption Agreement, in substantially the form attached as
Exhibit A (the “ Assignment and Assumption
Agreement ”), duly executed by Seller and providing for
(i) the assignment to Buyer of the Equipment Leases, and (ii)
Buyer’s assumption of the Assumed Liabilities and
indemnification of Seller in respect thereof (including
indemnification in respect of any legal fees or other costs
incurred by Seller in exercising its right to indemnity);
and
5.2.7
A certificate
executed by Seller certifying to Buyer that each of Seller’s
representations and warranties set forth in this Agreement was true
and correct in all material respects as of the Effective Date and
is true and correct in all material respects as of the Closing Date
as if made on the Closing Date.
5.3
Buyer’s
Closing Deliveries . At the Closing, Buyer shall
deliver, or cause to be delivered, to Seller:
5.3.1
The Purchase
Price by wire transfer of immediately available, good funds to a
bank account designated by Seller in writing to Buyer;
5.3.2
The Assignment
and Assumption Agreement, duly executed by Buyer;
5.3.3
A certificate
executed by Buyer certifying to Seller that each of Buyer’s
representations and warranties set forth in this Agreement was true
and correct in all material respects as of the Effective Date and
is true and correct in all material respects as of the Closing Date
as if made on the Closing Date; and
5.3.4
Appropriate
evidence of all necessary action by Buyer in connection with this
transaction, including (i) certified copies of resolutions
duly adopted by Buyer’s Board of Directors approving this
transaction and authorizing the execution, delivery, and
performance by Buyer of this Agreement; and (ii) a certificate
as to the incumbency of officers of Buyer executing this Agreement
and the Buyer Closing Documents.
5.4
Taxes . In accordance with Section
1146(c) of the Bankruptcy Code, the making or delivery of any
instrument to evidence, effectuate, or perfect the rights,
transfers, and conveyances contemplated by
5
this Agreement shall be in
contemplation of a plan or plans of reorganization to be confirmed
in the Case and, as such, shall be free and clear of any and all
Taxes and any such instrument may, at the request of Buyer, contain
an endorsement to that effect. In the event that,
notwithstanding the foregoing, any Taxes are assessed on the
transfer of the Klamath Northern Stock or the Equipment Leases to
Buyer, such Taxes shall be paid by Buyer and Buyer shall complete
and file all returns associated therewith.
6.
Representations and
Warranties .
6.1
Seller’s
Representations and Warranties . Seller represents and
warrants to Buyer as follows:
6.1.1
Organization
and Good Standing; Subsidiaries . Seller is a limited
partnership duly formed, validly existing, and in good standing
under the laws of the State of Delaware. Crown Management is a
limited partnership duly formed, validly existing, and in good
standing under the laws of the State of Delaware and is the
managing general partner of Seller. Klamath Northern is a
corporation duly incorporated, validly existing, and in good
standing under the laws of the State of Oregon. Klamath Northern
has full corporate power and authority to conduct its business as
it is now being conducted and to own and use the properties that it
owns and uses. Klamath Northern has no subsidiaries.
6.1.2
Authority; No
Conflict .
(a)
Upon entry of the Approval Order,
this Agreement will constitute the legal, valid, and binding
obligation of Seller, enforceable against Seller in accordance with
its terms. Upon their execution and delivery by Seller at the
Closing, each of the Seller Closing Documents will constitute the
legal, valid, and binding obligations of Seller, enforceable
against Seller in accordance with their respective terms. Subject
to obtaining the Approval Order and applicable provisions of
bankruptcy law, Seller has full partnership power, authority, and
capacity to execute and deliver this Agreement and each of the
Seller Closing Documents and to perform its obligations hereunder
and thereunder.
(b)
Upon entry of the Approval Order
and obtaining the STB Approval, neither the execution and delivery
of this Agreement, nor the performance of any of Seller’s
obligations hereunder, nor the consummation of this transaction
will, directly or indirectly (with or without notice, lapse of
time, or both), (i) contravene or result in a violation of any
provision of Seller’s or Klamath Northern’s
Organizational Documents, or any resolution adopted by the Board of
Control, by the general or limited partners of Crown Management, by
the limited partners of Seller, or by the board of directors or
shareholders of Klamath Northern; (ii) contravene or result in a
violation of any Legal Requirement or any Order to which Seller,
Klamath Northern, or any of Klamath Northern’s assets is
subject; (iii) contravene or result in a violation of any of the
terms or requirements of any Governmental Authorization held by
Klamath Northern; or (iv) contravene or result in a violation or
breach of any provision of, or give any Person the right to declare
a default or exercise any remedy under any agreement, instrument,
or writing of any nature to which Seller or Klamath Northern is a
party or by which Seller, Klamath Northern, or any of Klamath
Northern’s assets is bound.
6.1.3
Klamath
Northern Stock . The authorized equity
securities of Klamath Northern consist solely of 10,000 shares of
common stock, no par value, 100 of which are issued and
outstanding. Seller is and on the Closing Date will be the record
and beneficial owner of the Klamath Northern Stock, free and clear
of all Liens. All shares of the Klamath Northern Stock have been
duly authorized and validly issued and are fully paid and
nonassessable. None of the Klamath Northern Stock was issued in
violation of the Securities Act or any other Legal Requirement. No
Person has any right to acquire any stock in Klamath Northern
pursuant to any option, warrant, conversion right, or other
contract. There are no contracts relating to the issuance, sale, or
transfer of any stock in Klamath Northern. Upon the transfer of the
Klamath Northern Stock to Buyer pursuant to this Agreement, Buyer
will own all of the issued and outstanding stock in Klamath
Northern, free and clear of all Liens other than any Liens suffered
or incurred by Buyer.
6
6.1.4
Certain
Proceedings . Except for the Case, no
Proceeding is pending or, to Seller’s Knowledge, has been
Threatened, against (i) Seller that challenges, or could reasonably
be expected to have the effect of preventing, making illegal, or
otherwise materially interfering with, this transaction, or (ii)
Klamath Northern.
6.1.5
Conduct of the
Business . Klamath Northern presently
owns all of the assets required to conduct the Business as the same
has been conducted by Klamath Northern prior to the Effective
Date.
6.1.6
Real Property
Interests . The attached
Schedule 6.1.6 sets forth a complete and accurate
description of all the real property and interests in real property
used by Klamath Northern in connection with the Business (the
“ KNRC Real Property ”). Klamath Northern does
not own or lease and has not agreed to acquire or lease any real
property or interest in real property material to the Business
other than the KNRC Real Property. Except as otherwise described on
Schedule 6.1.6, Klamath Northern has the exclusive right to
possess, use, and occupy all of the KNRC Real Property, free and
clear of all Liens other than Permitted Encumbrances. Except as
described in that certain undated report regarding KNRC’s
tracks prepared at Buyer’s request by Jim L. Stutters, all
buildings, structures, improvements and appurtenances situated on
the KNRC Real Property are adequate and suitable in all material
respects for the purposes for which they are currently being used
and Klamath Northern has adequate rights of ingress and egress for
the operation of the Business in the ordinary course. To
Seller’s Knowledge, none of such buildings, structures,
improvements or appurtenances (or any equipment therein), nor the
operation or maintenance thereof, violates in any material respect
any restrictive covenant or any provision of any applicable Legal
Requirement, or encroaches on any property owned by any other
Person.
6.1.7
Tangible
Personal Property . All material tangible
personal property owned by Klamath Northern that is used in the
Business is located on the KNRC Real Property or at the Gilchrist
Mill. The attached Schedule 6.1.7 contains a true and
complete list of all machinery, equipment, motor vehicles,
furnishings, trade fixtures, chattels, and other tangible personal
property owned by Klamath Northern and used in connection with the
Business as of the Effective Date (other than items of tangible
personal property the aggregate cost of which to Klamath Northern
was less than $50,000).
6.1.8
Intangible
Property .
(a)
The attached Schedule 6.1.8
contains a complete and accurate list of all Governmental
Authorizations held by or issued to Klamath Northern in respect of
the Business (the “ Permits and Licenses ”). To
Seller’s Knowledge, the Permits and Licenses are all
licenses, permits, approvals, consents, certificates, registrations
and authorizations (governmental, regulatory, or otherwise)
required for the continued lawful conduct of the Business as the
same has been conducted by Klamath Northern prior to the Effective
Date.
(b)
Klamath Northern neither owns nor
is licensed to use any trademarks, trade names, business names,
patents, inventions, copyrights, service marks, brand names, or
industrial designs that are used in conducting the
Business.
6.1.9
Financial
Statements . The Financial
Statements have been prepared substantially in accordance with U.S.
generally accepted accounting principles applied on a basis
consistent with prior periods, are correct and complete in all
material respects, and present fairly and accurately the assets,
known and recorded liabilities, and financial condition of Klamath
Northern as at the respective dates of the Financial Statements and
the sales, earnings and results of operations of Klamath Northern
for the respective periods covered by the Financial
Statements. Between the Balance Sheet Date and the Effective
Date, no event or change has occurred that would or would
reasonably be expected to give rise to a Material Adverse Effect in
respect of the Business.
6.1.10
Employees
. Seller
has previously provided to Buyer the following information for each
of the Business Employees: Name, job title, current annual salary
or rate of pay, the date and amount of such employee’s most
recent pay increase, and such employee’s period of employment
with Klamath Northern. The
7
foregoing information
provided to Buyer is true, correct, and complete in all material
respects. There are no contracts of employment or service, whether
wholly or partly in writing or unwritten, with any Business
Employees. To Seller’s
Knowledge, none of the Business Employees is subject to any
non-competition or confidentiality agreement in favor of any other
Person. Klamath Northern has not (i) during the ninety (90) days
immediately preceding the Effective Date, terminated any employees
of the Business or (ii) since January 1, 2000, terminated any
employees of the Business in circumstances that gave rise to any
liability or obligation under the WARN Act.
6.1.11
Employee
Controversies . To Seller’s
Knowledge, since June 1, 2001, no written notice has been received
by Seller or Klamath Northern of any complaint filed or Threatened
by any of Klamath Northern’s employees claiming that Klamath
Northern is in breach of the terms of any contract of employment or
that Klamath Northern has violated any applicable Legal
Requirements with respect to employment matters. There are no
outstanding orders or charges against Klamath Northern under any
applicable Legal Requirements relating to occupational safety and
health. Any levies, assessments, and penalties made against Klamath
Northern pursuant to applicable Legal Requirements relating to
occupational safety and health have been paid in full
6.1.12
Employee
Benefits . There are no policies or
practices of Klamath Northern which confer benefits on employees of
Klamath Northern or create obligations of Klamath Northern with
respect to such employees and that will be binding upon Buyer or
Klamath Northern in connection with Klamath Northern’s
employment of the Business Employees from and after the Closing
Date. Seller has previously made available to Buyer all pension,
group insurance, profit sharing, and similar plans, incentive
arrangements, and deferred compensation plans of any kind made
available to any employees of Klamath Northe
|
