Document:

Exhibit 10.69

 

CONTRIBUTION AND EXCHANGE
AGREEMENT

 

by and between

 

ALBERT H. SMALL,

 

THEODORE N. LERNER,

 

RALPH OCHSMAN,

 

RICHARD PERKINS,

 

GUDELSKY BROTHERS,

 

TENTH SPRINGHILL LAKE
ASSOCIATES L.L.L.P.,

 

ELEVENTH SPRINGHILL LAKE
ASSOCIATES L.L.L.P.,

 

TWELFTH SPRINGHILL LAKE
ASSOCIATES L.L.L.P.,

 

FOURTEENTH SPRINGHILL LAKE
ASSOCIATES L.L.L.P.,

 

GREENBELT ASSOCIATES,

 

SIXTEENTH SPRINGHILL LAKE
ASSOCIATES L.L.L.P.

 

and

 

MACK-CALI REALTY, L.P.

 

 

Date: November 21, 2005

 

 

CONTRIBUTION AND EXCHANGE AGREEMENT

 

THIS CONTRIBUTION AND EXCHANGE
AGREEMENT (this “Agreement”)
made this 21st day of November, 2005 (the “Execution
Date”), by and between the persons set forth on Exhibit A
annexed hereto (each a “GP Contributor”
and collectively, the “GP Contributors”),
Tenth Springhill Lake Associates L.L.L.P. (“Tenth LLLP”),
a Maryland limited liability limited partnership, Eleventh Springhill Lake
Associates L.L.L.P. (“Eleventh LLLP”),
a Maryland limited liability limited partnership, Twelfth Springhill Lake
Associates L.L.L.P. (“Twelfth LLLP”),
a Maryland limited liability limited partnership, Fourteenth Springhill Lake
Associates L.L.L.P. (“Fourteenth LLLP”
and together with Tenth LLLP, Eleventh LLLP and Twelfth LLLP each shall be
referred to herein individually as a “Property LLLP”
and together as the “Property LLLPs”),
a Maryland limited liability limited partnership, Greenbelt Associates (“Greenbelt”), a Maryland general partnership, and Sixteenth
Springhill Lake Associates L.L.L.P. (“Sixteenth LLLP”
and together with Greenbelt each shall be referred to herein individually as an
“Option Property Owner” and together as
the “Option Property Owners”), a Maryland
limited liability limited partnership and MACK-CALI REALTY, L.P.
(“MCRLP”),
a Delaware limited partnership. The Property LLLPs and the Option Property
Owners shall hereinafter be referred to individually as a “Capital
Office Owner” and collectively as the “Capital
Office Owners”.

 

RECITALS

 

WHEREAS,
MCRLP desires to acquire from the GP Contributors and the limited partner
contributors set forth on Exhibit B
annexed hereto (the “LP Contributors”
and together with the GP Contributors the “Contributors”)
and the Contributors desire to either (i) transfer to MCRLP all of the
ownership and beneficial interests in and to each Property LLLP following the
Conversion (as hereinafter defined) of each Property LLLP to a limited
liability company, or (ii) in the event that the Conversion of any
Property LLLP cannot be accomplished in accordance with the terms of this
Agreement, cause to be transferred to MCRLP the fee interest in each Property
(as defined below);

 

WHEREAS, MCRLP desires to acquire the Option (as
hereinafter defined) to acquire from the Contributors and the Contributors
desire to grant the Option to MCRLP to acquire all of the ownership and
beneficial interests in and to each Option Property Owner following the
Conversion (as such term is defined in the Option Agreement (as hereinafter
defined)) of each Option Property Owner to a limited liability company;
however, in the event that the Conversion of any Option Property Owner cannot
be accomplished in accordance with the terms of the Option Agreement, MCRLP
desires to acquire an option to acquire the fee interest in each Option
Property from the Option Property Owners;

 

WHEREAS, provided the requisite consent of the LP
Contributors is obtained authorizing the Conversion at or prior to Closing,
each LP Contributor and MCRLP shall execute and deliver the LP Contributors
Joinder Agreement in the form annexed hereto as Exhibit C  whereby each LP
Contributor shall make certain representations, warranties and agreements with
respect to such LP Contributor’s ownership in any applicable Property Owner and
shall agree to be bound by the terms and conditions of this Agreement;

 

 

WHEREAS,
each Contributor is a partner in a Property LLLP or a partner in an Option
Property Owner (an “Option Contributor”)
and in such capacity is the record and beneficial owner of the limited
liability limited partnership interest or the general partnership interest (the
“Property Owner Interests”) in the
Capital Office Owner set forth opposite such Contributor’s name on Exhibit D-1 through Exhibit D-6 annexed hereto;

 

WHEREAS,
the Capital Office Owners are the owners of that certain real property known as
“Capital Office Park”, which includes 6301 Ivy Lane, 6303 Ivy Lane, 6305 Ivy
Lane, 6404 Ivy Lane, 6406 Ivy Lane and 6411 Ivy Lane, Greenbelt, Maryland, and
9200 Edmonston Road, Greenbelt, Maryland, which is located outside of Capital
Office Park, all such real property as more particularly described in Exhibit E annexed hereto (each
a “Property” and together the “Properties”), and certain unimproved real property
designated as Parcel J, Parcel K, Parcel L, Outlot A, Parcel I-1, Parcel A and
Parcel G on Exhibit F annexed hereto
(each an “Option Property” and together the “Option Properties”) (the owner of each Property is set forth
opposite the name of each Property LLLP on Exhibit G
annexed hereto and the ownership of each Option Property is set forth opposite
the name of each Option Property Owner on Exhibit H
annexed hereto);

 

WHEREAS,
prior to the Closing Date each GP Contributor shall endeavor to obtain the
requisite consent or approval of the partners of any Property LLLP in which
such GP Contributor is a partner to the conversion of such Property LLLP to a
limited liability company (the “Conversion”)
and the contribution of 100% of the membership and beneficial interests in and
to such limited liability company to MCRLP (each a “Transferred Interest,” and, collectively, the “Transferred Interests”), and, upon receipt
of such requisite consent or approval, each GP Contributor shall cause the
Conversion of the Property LLLP to a limited liability company;

 

WHEREAS,
on the Closing Date (as defined below) the Contributors desire to transfer the
Exchange Property (as hereinafter defined) to MCRLP and to grant an option to
MCRLP with respect to the Option Properties pursuant to the terms of the Option
Agreement (as defined below) in exchange for (i) MCRLP’s assumption of
those certain non-recourse first mortgage loans set forth on Exhibit I annexed hereto
(collectively, the “Assumed Debt”)
and each of which is evidenced and secured by those certain documents and
instruments described in Exhibit J-1
through Exhibit J-7 annexed hereto
(collectively, the “Existing Loan Documents”),
which Existing Loan Documents include, without limitation, non-recourse first
mortgages on each of the Properties, (ii) common operating partnership
units (“Units”) of MCRLP and (iii) cash,
or a combination cash and Units, on and subject to, the terms, covenants and
conditions set forth herein; and

 

WHEREAS, subject
to the terms and conditions of this Agreement, each Contributor and MCRLP
shall, at the Closing (as defined below), execute a separate Limited Agreement
of Indemnity (in the form attached hereto as Exhibit K)
or a separate Guaranty Agreement (in the form attached hereto as Exhibit S) pursuant to Article 21
hereof whereby such Contributor shall indemnify MCRLP and/or Mack-Cali Realty
Corporation (the “Company” and
together with MCRLP “Mack-Cali”),
MCRLP’s general partner, with respect to certain indebtedness of MCRLP and/or
the Company as described herein.

 

2

 

NOW, THEREFORE, in
consideration of the mutual promises hereinafter set forth herein and other
good and valuable consideration, the mutual receipt and legal sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound hereby, do hereby agree as follows:

 

1.                                      CONTRIBUTION
AND EXCHANGE; ALTERNATIVE STRUCTURE.

 

1.1.                              Provided
the GP Contributors have obtained the requisite consent or approval of the
partners of each Property LLLP authorizing the Conversion of such Property LLLP
to a limited liability company, upon, and subject to, the terms, covenants and
conditions of this Agreement, on the Closing Date (as defined below), each
Contributor shall contribute the Transferred Interest to MCRLP, and MCRLP shall
acquire the Transferred Interests.

 

1.2.                              Alternatively,
in the event that the GP Contributors are unable to obtain the requisite
consent or approval of the partners of any Property LLLP to the Conversion of
such Property LLLP to a limited liability company prior to the Closing, the GP
Contributor of such Property LLLP shall cause the Property LLLP to contribute
the Properties owned by such Property LLLP to MCRLP, or its designee, by deed
transfer at Closing. Notwithstanding the foregoing, each GP Contributor shall
endeavor prior to the Closing to obtain the requisite consent or approval of
the partners of any such Property LLLP in which such GP Contributor is a
partner to the Conversion of such Property LLLP to a limited liability company.
The Property conveyed by deed transfer pursuant to this Section 1.2 and/or
the Transferred Interests contributed by assignment by each Contributor
pursuant to Section 1.1 shall hereinafter be collectively referred to as
the “Exchange Property”.

 

2.                                      CONSIDERATION
AND DEPOSIT.

 

2.1.                              The
aggregate consideration (the “Consideration”)
for the Exchange Property shall be ONE HUNDRED SIXTY-ONE MILLION SEVEN HUNDRED
TWENTY EIGHT THOUSAND DOLLARS ($161,728,000), and shall be allocated among the
Properties as set forth on Schedule 2.1
(the “Allocated Property Values”) and payable
as follows:

 

(a)                                  By
MCRLP assuming the Assumed Debt as of the Closing Date (as defined below). The
parties hereto acknowledge and agree that, as of the date hereof, the Assumed
Debt has an approximate outstanding balance of SIXTY-THREE MILLION SEVEN HUNDRED EIGHTY-ONE THOUSAND EIGHT HUNDRED
TWENTY-FOUR DOLLARS ($63,781,824) (the outstanding balance of the
Assumed Debt shall hereinafter be referred to as the “Assumed Debt Amount”);

 

(b)                                 By
payment of an amount of cash, if any, (i) in respect of any Contributor
who elects to receive cash for part or all of its share of the Exchange
Property, (ii) in respect of any Contributor who has not demonstrated to
the reasonable satisfaction of MCRLP that it qualifies as an “accredited
investor” (as such term is defined in Rule 501(a) of Regulation D
under the Securities Act (as hereinafter defined)), (iii) in respect of
any Contributor for fractional Units as provided in Section 2.1(c) hereof
and (iv) in respect of any Property LLLP that elects to receive cash in
exchange for part or all of the applicable Property in the event any
Property is conveyed by Deed pursuant to Section 1.2 hereof. Each
Contributor and/or Property LLLP, as applicable,

 

3

 

that elects to
receive cash for all or part of its Exchange Property in accordance with
this Section 2.1(b), shall notify MCRLP of such election, in writing, as
soon as practicable following the date hereof and no later then fifteen (15)
days prior to Closing; and, thereafter, Schedule 2.1(b) annexed
hereto shall be completed and shall set forth the name of each Contributor and
the amount of cash paid to such Contributor pursuant to this Section 2.1(b).
Notwithstanding anything herein to the contrary, unless otherwise agreed upon
by MCRLP in its sole discretion, the cash portion of the Consideration, if any,
shall in no event exceed an amount equal to the Consideration, less the Assumed
Debt Amount and less the sum of a maximum amount of $70,000,000; and

 

(c)                                  By
the issuance of Units, in respect of the Contributors, having a value (the “Unit Value”) equal to the sum of the
Consideration less the amount of cash received pursuant to Section 2.1(b) above,
if any, and the Assumed Debt Amount as of the Closing Date. The aggregate number
of such Units (the “Contributor Units”)
to be issued shall be calculated by dividing the Unit Value by the average
closing price as reported on the New York Stock Exchange for the common stock,
par value $0.01 per share (the “Common Stock”),
of the Company over the twenty (20) consecutive trading days ending two (2) trading
days prior to the Closing Date (the “Base
Value”). No fractional Units shall be issued in respect of any
Contributor, and any Contributor who is entitled to receive a fractional Unit
shall instead receive cash with respect to such fractional Unit in an amount
equal to the fractional Unit multiplied by the Base Value. Notwithstanding
anything herein to the contrary, the Consideration shall be comprised of at
least SEVENTY MILLION DOLLARS
($70,000,000) of Contributor Units, the value of such Contributor Units to be
determined in accordance with this Section 2.1(c). If Contributors do not
elect or do not qualify to receive Contributor Units with a Unit Value equal to
at least SEVENTY MILLION DOLLARS ($70,000,000), MCRLP shall have the right, at
its sole option, to terminate this Agreement by delivering written notice to
Contributors’ counsel (as designated in Article 26 of this Agreement).

 

2.2.                              At
the Closing, each Contributor shall be admitted to MCRLP as a limited partner
with respect to the Contributor Units issued in respect of such Contributor as
set forth on Schedule 2.2-A annexed
hereto (which schedule shall be completed immediately prior to Closing),
with the initial capital account balance set forth opposite such Contributor’s
name on Schedule 2.2-B annexed
hereto (which schedule shall be completed immediately prior to Closing). Each
Contributor shall be issued a certificate (with respect to each Contributor,
the “Certificate”) in the form attached
hereto as Exhibit L, representing
the Contributor Units, which Certificate shall contain the legend set forth in Section 7.5
of this Agreement.

 

2.3.                              (a)                                  In
consideration for the execution of this Agreement and the mutual undertakings,
covenants and obligations contained herein, concurrent with its execution of
this Agreement, MCRLP shall deposit with Lawyers Title Insurance Corporation,
as escrow agent (the “Escrow Agent”),
TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000) (the “Refundable Deposit”), which deposit shall be unconditionally
refundable prior to the expiration of the Inspection Period (as defined below),
or otherwise pursuant to the terms of this Agreement and an additional TWO
MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000) deposit on or before the
expiration of the Inspection Period (together with the Refundable Deposit, the “Deposit”).

 

4

 

(b)                                 MCRLP
shall have the right to satisfy all or any portion of the Deposit with one or
more unconditional irrevocable letters of credit issued by a banking
institution reasonably satisfactory to the Contributors, having offices in the
District of Columbia, presentable and payable on sight, naming the Escrow Agent
as the beneficiary thereunder and naming MCRLP as the account party (the “Letter of Credit”). The Letter of Credit is
to have an expiration date of at least one (1) year from its issuance. In
the event that the Letter of Credit is not renewed by the date which is thirty
(30) days prior to its then stated expiration date (and this Agreement remains
in full force and effect) or in the event that the Contributors are entitled to
the Deposit as provided herein, Escrow Agent shall present the Letter of Credit
to the issuer at any time thereafter for payment and retain the proceeds
thereof. The cash proceeds of any presentment of the Letter of Credit shall be
held by the Escrow Agent in accordance with the terms of this Agreement.

 

(c)                                  If
MCRLP satisfied the Deposit by either a check or wire transfer of funds, then
so long as the Closing has occurred, the Escrow Agent shall return the Deposit
to MCRLP at Closing. In the event that the Deposit is a Letter of Credit, then
so long as the Closing has occurred, the Letter of Credit shall be returned to
MCRLP, along with an acknowledgment from the beneficiary of the Letter of
Credit, in a form reasonably acceptable to MCRLP, that said beneficiary
has no further claim or interest in said Letter of Credit. If the Closing does
not occur for any reason other than a default by any Contributor or a failure
of any condition precedent to Closing set forth in Article 14 hereof, the
Deposit shall be paid to, or the Letter of Credit may be drawn by, the
Contributors. If the Closing does not occur for any reason other than a default
by MCRLP or a failure of any condition precedent to Closing set forth in Article 14,
the Deposit shall be returned to MCRLP.

 

2.4.                              With
respect to the first Partnership Record Date (as defined in the OP Agreement)
on or after the Closing Date, each Contributor shall receive a pro-rata
distribution payable with respect to the Units held by such Contributor in
accordance with the terms of the OP Agreement, as from time to time amended and
in effect on the date hereof, on MCRLP’s next distribution payment date. Such
pro-rata distribution shall be equal to (a) the amount of such
distribution, multiplied by (b) a fraction, the numerator of which is
equal to the number of days from the Closing Date to and including the end date
of the period for which such distribution is being paid (the “Distribution Date”), and the denominator of which is equal
to the number of days from (but excluding) the previous Distribution Date to
and including the Distribution Date in question.

 

2.5.                              (a)                                  Subject
to the terms and conditions set forth in this Agreement and with the benefit of
all of the exculpatory provisions, if any, which are contained in the Existing
Loan Documents, MCRLP shall accept and, if required by the Assumed Debt
Lenders, expressly assume, as of the Closing Date all of the Assumed Debt,
MCRLP acknowledging that such Assumed Debt will not be repaid at Closing. It
shall be a condition to MCRLP’s obligation to assume any Assumed Debt, that the
GP Contributors shall have obtained or caused the Property LLLP in which such
GP Contributor is a partner to obtain the express written consent from each of
the Assumed Debt Lenders to the transaction contemplated herein, together with
an estoppel certificate from each of the Assumed Debt Lenders containing the
certifications and agreements set forth on Schedule 2.5(a) (“Lender’s Estoppel”). Each GP Contributor, Property LLLP and
MCRLP covenant to the other to use diligent and good faith efforts and take all
commercially

 

5

 

reasonable actions to obtain
the express written consent and Lender’s Estoppel to the transactions
contemplated herein from each of the Assumed Debt Lenders prior to the Closing
Date and to provide such information and/or documentation as the Assumed Debt
Lenders shall reasonably require in connection with such assumption. In the
event that any GP Contributor or any Property LLLP is unable to obtain the
requisite consent or approval from any Assumed Debt Lenders, MCRLP shall have
the right, at its sole option, to terminate this Agreement by delivering
written notice to Contributors’ counsel (as designated in Article 26 of
this Agreement) to such effect within twenty (20) days after its receipt of
written notification of any such occurrence; provided, however, in the event
that MCRLP elects to terminate, as aforesaid, the Property LLLPs shall
reimburse MCRLP for its reasonable attorney’s fees up to a maximum amount of
$150,000.

 

(b)                                 MCRLP
and the Property LLLPs agree to split on a 50/50 basis all costs and fees
associated with the assumption of the Assumed Debt and the Existing Loan
Documents including, without limitation, any and all assignment, transfer or
other fees, application or other costs and any and all costs and expenses incurred
by the applicable Assumed Debt Lender, including, without limitation, legal
fees and disbursements and costs and expenses related to updated title, survey,
environmental reports and/or other legal, due diligence or compliance matters
required by the applicable Assumed Debt Lender. Notwithstanding the foregoing,
each party shall pay for their respective legal fees in connection with such
assumption of the Assumed Debt.

 

(c)                                  MCRLP
and the GP Contributors agree that the GP Contributors and any guarantor and any
environmental indemnitor under any of the Existing Loan Documents shall only be
liable for obligations and liabilities with respect to matters first arising
prior to the Closing Date and it shall be a condition to the GP Contributor’s
obligation to Close hereunder that the Assumed Debt Lenders shall have released
the GP Contributors and any guarantor and any environmental indemnitor from any
and all obligations and liabilities first arising from and after the Closing
Date. MCRLP agrees to assume liability for so-called “carve-outs” to
non-recourse provisions and for any environmental indemnities contained in any
of the Existing Loan Documents, but only for obligations and liabilities first
arising from and after the Closing Date and not for any obligations or
liabilities relating to any periods prior to Closing Date. MCRLP and
Contributors agree to use commercially reasonable efforts to cause the Assumed
Debt Lenders to require MCRLP to assume obligations and liabilities under the
Existing Loan Documents only with respect to matters first arising from and
after the Closing Date.

 

3.                                      REDEMPTION.

 

3.1.                              The
Contributor Units received as Consideration for the transfer of the Exchange
Property shall be redeemable by the Contributors in accordance with the Second
Amended and Restated Agreement of Limited Partnership of MCRLP, as amended from
time to time (the “OP Agreement”),
at any time and from time to time subsequent to the first anniversary of the
Closing Date on the basis of one (1) Unit for either cash equal to the
fair market value of a share of Common Stock at the time of the redemption or,
at the option of MCRLP acting through the Company, one (1) share of Common
Stock (with such adjustments thereto as are provided in the OP Agreement).

 

6

 

4.                                      OPTION
TO PURCHASE.

 

4.1.                              For
the one (1) year period beginning on the Closing Date, MCRLP, or its
designee, shall have the option (the “Option”) to
notify the Option Contributors’ counsel (as designated in the Option Agreement
(as hereinafter defined)) that it elects to acquire either all of the ownership
and beneficial interests in and to each Option Property Owner or the fee
interest in each Option Property for a purchase price of THIRTEEN MILLION
DOLLARS ($13,000,000) (the “Option Purchase Price”),
which shall be payable Units or, at the election of the Option Contributors or
if an Option Contributor is not an “accredited investor” or as otherwise
provided in the Option Agreement, cash. At Closing, the Option Contributors and
MCRLP or its designee shall enter into an option agreement (the “Option Agreement”) in the form of Exhibit M
annexed hereto pursuant to which the respective rights and obligations of the
Option Contributors and MCRLP or its designee shall be set forth.

 

5.                                      INSPECTION
PERIOD; MCRLP’S RIGHT OF TERMINATION AND  REJECTION PRIOR TO CLOSING; AS
IS CONDITION.

 

5.1.                              Through
the period ending on the Execution Date, as it may be extended (the “Inspection Period”), MCRLP has performed, or cause to be
performed, tests, investigations and studies of or related to the Properties
including, but not limited to, soil tests and borings, ground water tests and
investigations, percolator tests, surveys, architectural, engineering,
subdivision, environmental, access, financial, market analysis, development and
economic feasibility studies and other tests, investigations or studies as
MCRLP, in its sole discretion, determined is necessary or desirable in
connection with the Properties and inspected the physical (including environmental)
and financial condition of the Properties, including but not limited to (i) all
leases and other agreements with respect to the use and occupancy of the
Properties, together with all amendments and modifications thereto and any
guaranties provided thereunder (individually, a “Lease”,
and collectively, the “Leases”), (ii) contracts
and agreements for the servicing, maintenance and/or operation of any Property
(the “Service Contracts”), (iii) engineering
and environmental reports, (iv) development approval agreements, (v) permits
and approvals, which inspection shall be satisfactory to MCRLP in its sole and
absolute discretion, (vi) all Books and Records (as defined below), (vii) Existing
Loan Documents, including, without limitation, the Existing Loan Documents, (viii) tenant
correspondence files and (ix) other documents and information relating to
the foregoing. MCRLP shall conduct any tests and studies in a manner which does
not unreasonably impede the day-to-day operations of any Property, and shall
repair and restore any portion of the surface of any Property disturbed by
MCRLP, its agents or contractors during the conduct of any tests and studies to
substantially the same condition as existed prior to such disturbance. Such
right of inspection and the exercise of such right shall not constitute a
waiver by MCRLP of the breach of any representation, warranty, covenant or
agreement of any Contributor which might, or should, have been disclosed by
such inspection. Each Contributor acknowledges that each of the Property LLLPs
and Mack-Cali Realty Acquisition Corporation, a Delaware corporation and
affiliate of MCRLP, have entered into that certain Access Agreement dated as of
July 14, 2005 (the “Access Agreement”),
with respect to MCRLP’s access to the Properties during the Inspection Period
and thereafter and certain other matters. In the event of any conflict or
inconsistency between the provisions of Sections 5.1 or 5.2 and any provision
of the Access Agreement, the Access Agreement shall control.

 

7

 

5.2.                              During
and after the Inspection Period and pursuant to the Access Agreement, MCRLP,
its agents and contractors, shall have access to the Properties subject to the
terms of the Access Agreement and other information pertaining thereto in the
possession or within the control of any Contributor or any Property LLLP for
the purpose of performing such studies, tests, borings, investigations and
inspections for the purposes described in this Article 5. Each GP
Contributor shall reasonably cooperate and shall cause each Property LLLP to
cooperate with MCRLP in facilitating its due diligence inquiry and will deliver
to MCRLP, promptly after request, true and complete copies of all test borings,
Environmental Documents (as defined below), surveys, title materials and
engineering and architectural data and the like relating to any Property that
are in any GP Contributor’s or any Property LLLP’s possession or under its/his
control. In the event that any additional materials or information come within
any GP Contributor’s or any Property LLLP’s possession or control after the
date of this Agreement, such GP Contributor shall promptly submit or cause any
Property LLLP to submit true and complete copies of the same to MCRLP. Each GP
Contributor shall notify MCRLP of any dangerous conditions on the Property of
which such GP Contributor has knowledge, including, without limitation,
conditions which due to the nature of the borings, studies, investigations,
inspections or testing to be performed by or on behalf of MCRLP may pose a
dangerous condition to MCRLP or MCRLP’s agents and contractors.

 

5.3.                              MCRLP
may terminate this Agreement for any reason or for no reason, by written
notice to the Contributors’ counsel (as designated in Article 26 of this
Agreement) delivered on or prior to the expiration of the Inspection Period. In
the event that MCRLP terminates this Agreement during the Inspection Period,
this Agreement shall be null and void and the parties hereto shall be relieved
of all further obligations hereunder except as otherwise provided herein. In
the event MCRLP does not send notice by the end of the Inspection Period
waiving its right to terminate this Agreement pursuant to this Section 5.3,
MCRLP shall be deemed to have elected to terminate this Agreement. Upon such
termination, the Refundable Deposit shall be returned to MCRLP.

 

5.4.                              EXCEPT
AS PROVIDED IN THE EXPRESS REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTORS
SET FORTH IN THIS AGREEMENT AND IN ANY CLOSING DOCUMENTS, INSTRUMENTS OR
AFFIDAVITS TO BE DELIVERED AT CLOSING (COLLECTIVELY, THE “EXPRESS
REPRESENTATIONS”), THE CONTRIBUTORS DO NOT, BY THE EXECUTION AND
DELIVERY OF THIS AGREEMENT, AND THE CONTRIBUTORS SHALL NOT, BY THE EXECUTION
AND DELIVERY OF ANY DOCUMENT OR INSTRUMENT EXECUTED AND DELIVERED IN CONNECTION
WITH CLOSING, MAKE ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF
ANY KIND OR NATURE WHATSOEVER, WITH RESPECT TO THE PROPERTIES, AND ALL SUCH
WARRANTIES ARE HEREBY DISCLAIMED.

 

5.5.                              NOTWITHSTANDING
ANYTHING TO THE CONTRARY SET FORTH IN THIS AGREEMENT, BUT SUBJECT TO THE
REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLE 7 (REPRESENTATIONS AND
WARRANTIES OF CONTRIBUTORS) AND COVENANTS OF THE CONTRIBUTORS SET FORTH IN ARTICLE 8
(COVENANTS OF THE CONTRIBUTORS), AND SUBJECT TO ARTICLES 17 (CASUALTY LOSS) AND
18 (CONDEMNATION), MCRLP SHALL ACCEPT THE

 

8

 

PROPERTIES, INCLUDING WITHOUT
LIMITATION THE ROOFS, ALL STRUCTURAL COMPONENTS, ALL HEATING, VENTILATING, AIR
CONDITIONING, MECHANICAL, PLUMBING, AND ELECTRICAL SYSTEMS, FIRE AND LIFE
SAFETY AND ALL OTHER PARTS OF THE BUILDINGS CONSTITUTING A PORTION OF THE
PROPERTIES IN THEIR “AS IS” “WHERE IS” CONDITION ON THE CLOSING DATE, “WITH ALL
FAULTS” AND “SUBJECT TO ALL DEFECTS.” 
MCRLP HEREBY ACKNOWLEDGES, REPRESENTS AND WARRANTS THAT IT IS NOT IN A
DISPARATE BARGAINING POSITION WITH RESPECT TO THE CONTRIBUTORS IN CONNECTION
WITH THE TRANSACTION CONTEMPLATED HEREBY, THAT MCRLP FREELY AND FAIRLY AGREED
TO THE WAIVERS AND CONDITIONS OF THIS SECTION 5.5 AS PART OF THE
NEGOTIATIONS OF THIS AGREEMENT, AND MCRLP HAS BEEN REPRESENTED BY COMPETENT
LEGAL COUNSEL IN CONNECTION HEREWITH AND HAS CONFERRED WITH SUCH LEGAL COUNSEL
CONCERNING THE WAIVERS AND OTHER CONDITIONS OF THIS SECTION 5.5.

 

5.6.                              Notwithstanding
the expiration of the Inspection Period, MCRLP shall continue to have the
rights to conduct further investigations of the Properties as set forth in this
Article 5.

 

6.                                      TITLE;
MATTERS TO WHICH THIS EXCHANGE IS SUBJECT.

 

6.1.                              The
Properties at Closing shall be subject to the following (collectively, the “Permitted Encumbrances”):

 

(a)                                  The
liens of real estate Taxes (as hereinafter defined), personal property Taxes,
water charges, and sewer charges provided same are not due and payable, but
subject to adjustment as provided herein;

 

(b)                                 The
rights of those parties listed on Schedule 7.1(b) occupying
space at any of the Properties or tenants under leases entered into after the
date hereof in accordance with the terms hereof (collectively, “Tenants”), as tenants only;

 

(c)                                  Any
and all laws, statutes, ordinances, codes, rules, regulations, requirements, or
executive mandates affecting the Properties including, without limitation,
those related to zoning and land use, as of the date hereof;

 

(d)                                 The
Service Contracts, except those Service Contracts which MCRLP elects not to
assume in accordance with Section 8.1(h);

 

(e)                                  Any
installment not yet due and payable of assessments imposed after the date
hereof and affecting the Properties (or any portion thereof);

 

(f)                                    The
lien of the mortgages on those Properties encumbered by Existing Loan Documents
as of the date hereof in respect of Assumed Debt (but subject to the terms and
conditions of this Agreement); and

 

(g)                                 Any
matters not objected to, approved or deemed approved by MCRLP pursuant to Section 6.2
below.

 

9

 

6.2.                              (a)                                  MCRLP
has, prior to the date hereof, directed Lawyers Title Insurance Corporation (“Lawyers Title”) to prepare title insurance searches and
commitments for owner’s title insurance policies for each of the Properties
(the “Title Commitments”). MCRLP shall direct
Lawyers Title, or such other or additional title insurance companies as may be
selected by MCRLP (collectively, the “Title Company”),
to deliver to the Contributors’ counsel (as designated in Article 26 of
this Agreement) copies of the Title Commitments and the documents describing
the title exceptions shown on the Title Commitments (collectively, the “Title Documents”) which are to be delivered to MCRLP and its
counsel.

 

(b)                                 MCRLP
has, prior to the date hereof, advised Contributors’ counsel (as designated in Article 26
of this Agreement) in writing (“MCRLP’s Title
Objection Letter”) of certain defects, objections or exceptions in
the title to the Properties that appear in the Title Commitments (other than
the Permitted Encumbrances) which MCRLP is not required to accept under the
terms of this Agreement and to which MCRLP objects. The GP Contributors may, at
their election (but shall have no obligation to), undertake to eliminate or
cause to be eliminated such unacceptable defects, objections or exceptions,
except that the GP Contributors shall be obligated to remove (i) judgments
against the Contributors or the Property LLLPs, (ii) mortgages or other
liens which can be satisfied by payment of a liquidated amount other than the
Assumed Debt, (iii) payments to the mortgagees which are currently
required pursuant to existing loan documents in order to cause the mortgagees
to consent to MCRLP taking subject to the mortgages. Except as provided in the
preceding sentence or below, the Contributors shall have no obligation to incur
any expense in connection with curing such defects, objections or exceptions. Subject
to the terms of this Section 6.2(b) and the GP Contributors’ right to
adjourn the Closing as set forth below, the GP Contributors agree to respond to
MCRLP’s Title Objection Letter (“Contributors’
Title Response”) within three (3) days of the Execution Date
indicating whether they intend to undertake to eliminate or cause to be
eliminated any objections, and, unless the GP Contributors elect to adjourn the
Closing, as set forth below, MCRLP agrees to respond to Contributors’ Title
Response prior to the expiration of the Inspection Period. The GP Contributors,
in their discretion, may adjourn the Closing for up to sixty (60) days in
the aggregate in order to eliminate unacceptable defects, objections or
exceptions. Other than the items described in (i) through (iii) above,
which the GP Contributors agree to cure or cause to be cured at their sole cost
and expense without regard to the cost thereof, if, after complying with the
foregoing requirements, the GP Contributors are unable to eliminate or cause to
be eliminated all unacceptable defects, objections or exceptions in accordance
with the terms of this Agreement on or before such adjourned date for the
Closing, MCRLP shall elect either (w) to terminate this Agreement by notice
given to the Contributors’ counsel (as designated in Article 26 of this
Agreement) in which event the provisions of Section 25.2 shall apply, or
(x) to accept title subject to such unacceptable defects, objections or
exceptions and receive no credit against or reduction of the consideration to
be given hereunder for any Property. Each GP Contributor agrees and covenants
that it shall not voluntarily place or consent or permit any encumbrances or
restrictions to title to any of the Properties from and after the date hereof,
and if any encumbrance or restrictions are placed of record by any Contributor
or Property LLLP against any of the Properties, the GP Contributors shall be
obligated to remove them at or prior to Closing.

 

6.3.                              It
shall be a condition to Closing that the Title Company be prepared to insure,
title to each Property conveyed through the contribution of the Exchange
Property, in the amount

 

10

 

of the Allocated Property Value
thereof (at a standard rate for such insurance) in the name of MCRLP or its
designees, after delivery of the deeds or assignments of the Contributed
Interests, by a standard 1992 ALTA Owners Policy, with such ALTA endorsements
(including without limitation a comprehensive owner’s endorsement and a non-imputation
endorsement, where available, for each Property) as are available in each
applicable state where the Properties are located and as required by MCRLP
attached, free and clear of all liens, encumbrances and other matters, other
than the Permitted Encumbrances (the “Title Policy”).
The Title Company shall provide affirmative insurance that any: (i) Permitted
Encumbrances have not been violated, and that any future violation thereof will
not result in a forfeiture or reversion of title; and (ii) the exceptions
for Taxes shall apply only to the Taxes not yet due and payable. Each
Contributor shall provide or cause to be provided such affidavits and
undertakings as the Title Company insuring title to the Properties may reasonably
require. The words “insurable title” and “insurable” as used in this Agreement
are hereby defined to mean title which is insurable at standard rates (without
special premium) by the Title Company without exception other than the
Permitted Encumbrances, and standard printed policy exceptions.

 

6.4.                              Any
unpaid Taxes, water charges, sewer rents and assessments, together with the
interest and penalties thereon to the Closing Date (in each case subject to any
applicable apportionment), and any mortgages or other liens created by or
permitted by any Contributor, which such Contributor is obligated to pay and
discharge pursuant to the terms of this Agreement, together with the cost of
recording or filing of any instruments necessary to discharge such liens and
such judgments, shall be paid at the Closing by such Contributor. The
Contributors shall deliver to MCRLP, on the Closing Date, instruments in
recordable form sufficient to discharge any such mortgages or other liens
that are required to be paid and discharged pursuant to the terms of this
Agreement.

 

6.5.                              If
the Title Commitments disclose judgments, bankruptcies or other returns against
other persons having names the same as or similar to that of any Contributor or
any Property LLLP, such Contributor, on request by MCRLP, shall deliver to the
Title Company affidavits showing that such judgments, bankruptcies or other
returns are not against any Contributors, any Property LLLP or any affiliates.
Upon request by MCRLP, each Contributor shall deliver any affidavits and
documentary evidence as are reasonably required by the Title Company to
eliminate the standard or general exceptions on the ALTA form Owner’s
Policy. Each Contributor further agrees to deliver to the Title Company
non-imputation indemnities or affidavits in the form attached hereto as Exhibit N necessary for the
Title Company to issue a non-imputation endorsement for each Property, where
available.

 

6.6.                              It
is recognized and acknowledged that the portion of the Property known as
Capital Office Park Buildings 5 and 6 and the Option Property described as
Parcel I-1 are burdened and benefited by the terms of that certain Declaration
of Easements dated January 7, 1986 and recorded among the Land Records of
Prince George’s County, Maryland in Liber 6277 at Folio 240 (the “Declaration”). Notwithstanding anything contained herein to
the contrary, Fourteenth LLLP, as declarant under the Declaration, shall be
authorized prior to Closing hereunder, to record a modification to the
Declaration in order to recognize and confirm that (i) the property
subject to the Declaration, formerly known as Parcel F, has been further
subdivided into Parcels H, I-1 and I-2, (ii) Capital Office Park Buildings
5 and 6 have been constructed on Parcels H and I-2, respectively, (iii) nothing
in the Declaration shall be

 

11

 

interpreted as precluding the
owner of Parcel I-1 from developing an office building on Parcel I-1, and (iv) Parcels
H, I-1 and I-2 shall continue to be benefited and burdened by the various
easements and rights-of-way provided under the Declaration. The form of
any such modification shall be submitted to MCRLP for review and approval not
less than fifteen (15) days prior to the Closing and MCRLP’s approval shall not
be arbitrarily withheld, delayed or conditioned.

 

7.                                      REPRESENTATIONS
AND WARRANTIES OF THE GP CONTRIBUTORS AND THE PROPERTY LLLPs.

 

7.1.                              In
order to induce MCRLP to perform as required hereunder, as of the date
hereof and as of the Closing Date, each Property LLLP hereby warrants and
represents, jointly and severally, all of the matters set forth in this Section 7.1.
Without limiting the foregoing, in order to further induce MCRLP to perform as
required hereunder, each GP Contributor agrees to, and shall, be liable for any
breach of any of the warranties and representations set forth in this Section 7.1,
subject in all respects to the limitations on (i) survival set forth in Section 7.4
hereof, (ii) knowledge set forth in Section 7.8 hereof, (iii) liability
set forth in Sections 25.3(b) hereof and (iv) security for any breach
set forth in Section 25.4 hereof. Anything contained herein to the
contrary notwithstanding, the GP Contributors shall have no personal liability
for any breach of any representation or warranty under this Section 7.1
and MCRLP’s sole remedy with respect to such breaches shall be to recover Units
from the Escrow Pool pursuant to Section 25.4 hereof.

 

(a)                                  There
are no actions, suits, labor disputes, litigation or proceedings currently
pending or, to the knowledge of any Property LLLP in which such GP Contributor
is a partner, threatened in writing against or related to such Property LLLP
with respect to the Property, the environmental condition thereof, or the
operation thereof, except as set forth on Schedule 7.1(a) annexed
hereto.

 

(b)                                 Annexed
hereto as Schedule 7.1(b) is
a true, complete and correct schedule of all of the Leases to which the
Properties are subject. The Leases are valid and bona fide obligations of the
landlord thereunder and are in full force and effect. To the knowledge of each
Property LLLP, no defaults remain uncured pursuant to notices of default sent
to any Tenants and no condition exists which, solely with the passage of time
or the giving of written notice or both, will become a default. Except as
disclosed in writing to MCRLP, no Property LLLP has received any written
notices of default by the applicable Tenant under any Lease which remain
uncured or which were cured within the last two (2) years. The Leases
constitute all of the Leases, tenancies or occupancies or rights to use and
occupancy affecting any Property on the date hereof (except as a result of any
subleases of portions of any Property), except as set forth on the Rent Roll,
all Tenants have commenced occupancy and there are no other rights with respect
to the use or occupancy of the Properties (except as a result of any subleases
of portions of any Property). Except as expressly set forth in the Leases, no
Tenant is entitled to now or in the future any concession, rebate, offset,
allowance or free rent for any period nor has any such claim been asserted by
any Tenant.

 

(c)                                  Annexed
hereto as Schedule 7.1(c) is
a listing (the “Rent Roll”) of the
following, as of the date hereof and as of the Closing Date, which is true,
complete and correct in all material respects for the Property and which lists,
among other things, the amount deposited or

 

12

 

posted as a
letter of credit (the “Security Deposit”)
under any Lease in the nature of security for the performance of the
obligations of the Tenant or user, if any.

 

(d)                                 All
undisputed bills and claims for labor performed and materials furnished to or
for the account of the applicable owner of any Property arising prior to the
Closing Date will be paid in full by such owner within customary time periods
but not later than the Closing Date. To the extent any bills and claims for
labor performed and materials furnished to or for the account of the applicable
owner of any Property prior to the Closing Date are disputed, the applicable
Property LLLP shall commence any actions related to such bills and claims
promptly, such commencement being no later than forty-five (45) days from the
receipt of an invoice by the applicable Property LLLP, and shall diligently
prosecute same to its conclusion. If such action results in (i) a lien on
any Property which lien remains unbonded for thirty (30) days, or (ii) any
vendor providing unique services or services at below market price refusing to
service any Property, the Property LLLP shall cause payment of same to be made
to remedy same within ten (10) days thereafter. To the knowledge of such
Property LLLP, the landlord under any Lease with respect thereto has performed
all of the obligations and observed all of the covenants required of the
landlord under the Leases. All work, alterations, improvements or installations
required to be made for or on behalf of all Tenants under the Leases have in
all respects been carried out, performed and completed and there is no
agreement with any Tenant for the performance of any work to be done in the
future, except as provided in any Lease.

 

(e)                                  No
Property LLLP has received any written notice and has no knowledge of (i) any
pending, threatened or contemplated annexation or condemnation proceedings, or
private purchase in lieu thereof, affecting or which may affect any
Property, or any part thereof, (ii) any proposed or pending
proceeding to change or redefine the zoning classification of all or any part of
any Property, (iii) any proposed or pending special assessments affecting
any Property or any portion thereof, (iv) any penalties or interest due
with respect to real estate taxes assessed against any Property and (v) any
proposed change(s) in any road or grades with respect to the roads providing a
means of ingress and egress to any Property.

 

(f)                                    No
Property LLLP has received any written notice and has no knowledge of any suits
or judgments relating to any violations (including, without limitation,
Environmental Laws (as defined herein)) of any laws, ordinances or regulations
affecting any Property, or any violations or conditions that may give rise
thereto, from any agency, board, bureau, commission, department or body of any
municipal, country, state or federal governmental unit, or any subdivision
thereof, having, asserting or acquiring jurisdiction over all or any part of
any Property or the management, operation, use or improvement thereof
(collectively, the “Governmental Authorities”),
and there are no outstanding orders, judgments, injunctions, decrees or writ of
any Governmental Authorities against or involving the Contributors in respect
of any Property.

 

(g)                                 No
Property LLLP has received any written notice of outstanding requirements or
recommendations by the holder of any mortgage encumbering any of any Property,
which require or recommend any repairs or work to be done on any Property of a
material nature.

 

(h)                                 There
are no Service Contracts, union contracts, employment agreements or other
agreements affecting any Property or the operation thereof, except the Service
Contracts. True,

 

13

 

accurate and
complete copies of all the Service Contracts have been made available for
review and are listed on Schedule 7.1(h) annexed
hereto. All sums presently due and payable by the Property LLLPs under the
Service Contracts which are due as of the Closing Date shall be fully paid on
the Closing Date.

 

(i)                                     No
Property LLLP has received any written notice that any of the permits and
licenses required in connection with the operation of the Properties are
subject to, or in jeopardy of, revocation or non-renewal.

 

(j)                                     There
are no employees working at or in connection with any Property, except as set
forth on Schedule 7.1(j). There
are no union agreements affecting any Property as of the date hereof, nor shall
any such agreements affect any Property as of the Closing Date.

 

(k)                                  Annexed
hereto as Schedule 7.1(k),
is a true, accurate and complete schedule of all leasing commission obligations
affecting any Property. The respective obligations of the Property LLLPs, the
GP Contributors and MCRLP with respect to said commissions are set forth in Article 9.

 

(l)                                     All
personal property, fixtures, equipment, inventory and fixtures (“Personal Property”) owned by any Property
LLLP and located on or at any Property, and used in connection with the
operation of any Property is now owned and will on the Closing Date be owned by
such Property LLLP free and clear of any conditional bills of sale, chattel
mortgages, security agreements or financing statements or other security
interests of any kind, except the lien of the Existing Loan Documents.

 

(m)                               To
the knowledge of the Property LLLPs, all pre-existing aboveground and
underground storage tanks and vessels, if any, at any Property have been
removed and their contents disposed of in accordance with and pursuant to all
applicable Environmental Laws or their continued use and operation is in
accordance with all applicable Environmental Laws.

 

(n)                                 No
Property LLLP has knowingly permitted, and shall not knowingly permit any
person or entity to engage in any activity on the Property, in violation of
Environmental Laws. The Property LLLPs have provided MCRLP with all
environmental site assessments, investigations, and documents related to
Contaminants and to prior operations set forth on Schedule 7.1(n) attached hereto.

 

(i)                                     “Environmental Laws” means each and every
applicable federal, state, county, or municipal statute, ordinance, rule,
regulation, order, code, directive or requirement of any Governmental Authority
in any way related to Contaminants.

 

(ii)                                  “Contaminants” shall include, without
limitation, any regulated substance, toxic substance, hazardous substance,
hazardous waste, pollution, pollutant or contaminant, as defined or referred to
in the Resource Conservation and Recovery Act, as amended, 42 U.S.C. §6901 et
seq.; the Comprehensive Environmental Response Compensation and
Liability Act, as amended, 42 U.S.C. §9601 et  seq.; (“CERCLA”); the Federal Water Pollution
Control Act, as amended, 33 U.S.C. §1251 et  seq.; together with
any amendments thereto, regulations promulgated thereunder and all
substitutions thereof, as well as words of similar purport or meaning referred
to in any other applicable

 

14

 

federal, state, county or
municipal environmental statute, ordinance, rule or regulation, including,
without limitation, asbestos, polychlorinated biphenyls, urea formaldehyde and
petroleum products and petroleum-based derivatives.

 

(iii)                               “Discharge” shall mean the releasing,
spilling, leaking, leaching, disposing, pumping, pouring, emitting, emptying,
treating or dumping of Contaminants at, into, onto or from the Properties, as
the case may be, regardless of whether the result of an intentional or
unintentional action or omission.

 

(iv)                              “Environmental Documents” shall mean all
environmental documentation in the possession or under the control of the GP
Contributors or the Property LLLPs concerning the Properties, as the case may be,
or their environs, including, without limitation, all sampling plans, cleanup
plans, preliminary assessment plans and reports, remedial action plans and
reports, or the equivalent, sampling results, sampling result reports, data, diagrams,
charts, maps, analysis, conclusions, quality assurance/quality control
documentation, correspondence to or from any Governmental Authority,
submissions to any Governmental Authority and directives, orders, approvals and
disapprovals from any Governmental Authority.

 

(v)                                 “Environmental Laws” means each and every
applicable federal, state, county or municipal statute, ordinance, rule,
regulation, order, code, directive or requirement of any Governmental Authority
in any way related to Contaminants.

 

(o)                                 The
current principal balance outstanding under the Assumed Debt as of the date
hereof, is SIXTY-THREE MILLION SEVEN
HUNDRED EIGHTY-ONE THOUSAND EIGHT HUNDRED TWENTY-FOUR DOLLARS
($63,781,824). All monetary payments due and payable under the Existing Loan
Documents on or before the date hereof by the Property LLLPs (or any successor
entity) have been paid and no written notice has been received by any of the
Property LLLPs and none of the Property LLLPs have any knowledge of any
monetary or non-monetary defaults on the part of any party to the Existing
Loan Documents as of the date hereof and no condition exists which with the
giving of notice or the passage of time, or both, would constitute a default
under the Existing Loan Documents. Except for any documents being entered into
by MCRLP, the Existing Loan Documents constitute all of the documents
evidencing, securing or otherwise dealing with the Assumed Debt.

 

(p)                                 No
notice has been received from the General Services Administration to the effect
that they have vacated or intend to vacate the first (1st) floor of
the office building located at 9200 Edmonston Road. The Property LLLPs have not
received any written notices from any of the Tenants at any of the Properties
exercising a right of early termination of the term of such Tenant’s Lease.

 

(q)                                 Annexed
hereto as Schedule 7.1(q)
is a true and complete list of all Property LLLP’s collective bargaining
agreements, employment and consulting agreements, non-competition agreements,
executive compensation plans, bonus plans, directors’ fee arrangements,
deferred compensation agreements, employee pension plans or retirement plans,
employee profit sharing plans, 401(k) savings plans, multiemployer plans,
employee stock purchase and stock option plans, employee welfare plans,
severance plans, group life insurance, hospitalization

 

15

 

insurance or
other similar plans or arrangements (either written or oral, but only to the
extent an oral plan provides material benefits) providing for benefits to any
employees of the Property LLLPs who are offered employment with Mack-Cali as of
the Closing Date and who accept the offer (“New
Employees”) or with respect to which a New Employee is a party.

 

(r)                                    The
Property LLLPs have complied and currently are in compliance in all material
respects, both as to form and operation, with the applicable provisions of
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and the Internal Revenue Code of
1986, as amended (the “Code”),
with respect to the 401(k) Savings Plan (the “Contributor
401(k) Plan”). With respect to the Contributor 401(k) Plan, the
Property LLLPs have supplied MCRLP with the most recent determination letter
issued by the Internal Revenue Service. With respect to collective bargaining
agreements which cover New Employees, the Property LLLPs have supplied MCRLP
with a true and complete copy of each collective bargaining agreement currently
in effect including all amendments thereto.

 

7.2.                              In
order to induce MCRLP to perform as required hereunder, as of the date
hereof and as of the Closing Date, each GP Contributor and each Property LLLP
hereby warrants and represents, jointly and severally, the following (it being
recognized and agreed, however, that the following representations shall be of
no force or effect in the event the transaction contemplated hereby is
structured as a transfer of all of the Properties by Deed in accordance with Section 1.2
hereof):

 

(a)                                  The
GP Contributor and any Property LLLP (including any predecessor entity thereto)
in which such GP Contributor is a partner have paid all Taxes (as defined
below) due and payable prior to Closing and timely filed all returns and
reports required to be filed prior to Closing with respect to the operation and
ownership of the Properties and for which MCRLP or such Property LLLP
(including any predecessor entity thereto) could be subject to a material Tax
liability or with respect to which a material claim in respect for Taxes could
be made against the Properties. Each such Tax return or report is complete and
accurate in all material respects. Each GP Contributor and the Property LLLP
(including any predecessor entity thereto) in which such GP Contributor is a
partner has paid or will pay, or has provided or will provide for a cash
reserve, for all Taxes due with respect to any Property or Property LLLP
related to any period ending on the Closing Date but that are required to be
paid after the Closing Date with respect to the ownership and operation of the
Properties and for which MCRLP or any Property LLLP (including any predecessor
entity thereto) could be subject to a material Tax liability or with respect to
which a material claim in respect for Taxes could be made against the
Properties. True and complete copies of all federal, state and local Tax
returns that have been filed by the Property LLLPs for 2001, 2002, 2003 and
2004 and all written communication with any taxing authority relating thereto
have or will be made available to MCRLP during the Inspection Period. To the
knowledge of each GP Contributor, no claim has been made by a taxing authority
in a jurisdiction in which any Property LLLP (including any predecessor entity
thereto) in which such GP Contributor is a partner has not filed Tax returns. Except
as set forth in Schedule 7.2(a),
there are no audits or other proceedings by any taxing authority pending or, to
the knowledge of such GP Contributor, threatened with respect to the Taxes
resulting from the ownership and operation of the Properties for which MCRLP or
any Property LLLP (including any predecessor entity thereto) could be subject
to a material Tax liability or with respect to which a material claim in
respect for Taxes could be made against the Properties and no

 

16

 

agreement
extending the period for assessment and collection has been executed with
respect thereto. To the knowledge of each GP Contributor, no assessment of
Taxes is proposed against the Property LLLPs (including any predecessor entity
thereto). There are no agreements or waivers extending the statute of
limitations applicable to any Tax return or report filed or required to be
filed by the GP Contributors or any Property LLLP (including any predecessor
entity thereto) in which such GP Contributor is a partner with respect to any
Taxes. Neither the GP Contributor nor any Property LLLP (including any
predecessor entity thereto) in which such GP Contributor is a partner is a
party to or has any liability under, any Tax indemnification, Tax allocation or
Tax sharing agreement.

 

(b)                                 Annexed
hereto as Schedule 7.2(b) is
a listing of the following, which, to the GP Contributor’s actual knowledge, is
true, complete and correct in all material respects for the assets that comprise
each Property:  (i) the adjusted
basis to the Property LLLP owning such Property for federal income tax purposes
as of October 27, 2005; (ii) the date placed in service by the
Property LLLP owning such property; (iii) the cost recovery method used by
the Property LLLP owning such Property; and (iv) the remaining useful life
for federal income tax purposes to the Property LLLP owning such Property.

 

(c)                                  To
the GP Contributor’s actual knowledge, the financial statements, including the
income and expense statements and the balance sheets of each Property LLLP
(including any predecessor entity thereto) excluding only those assets,
liabilities and operations not contemplated to be contributed pursuant to this
Agreement, relating to the ownership and operation of the Property and the
related audited, combined statement of income, partners’ capital and cash
flows, including the footnotes thereto (copies of which are attached hereto as Exhibit T) (the “Property Financials”) as of and for the
years ending December, 31, 2002, 2003 and 2004 which have been audited (or, in
the case of Tenth LLLP, reviewed) by Hariton, Mancuso & Jones, P.C. and for the period of January 1, 2005
through June 30, 2005 (or the most recent fiscal quarter ending date if
later), and reviewed by such accountants, fairly present the combined financial
position of the Property LLLPs, or any predecessor entities thereto, relating
to the Property in all material respects as of such dates and the combined
results of operations and combined cash flows of the Property LLLPs, or any
predecessor entities thereto, relating to the ownership and operation of the
Property for such respective periods, in each case in accordance with generally
accepted accounting practices for the operation of commercial real estate
consistently applied for the periods covered thereby. The Property Financials
from January 1, 2005 through June 30, 2005 (or the most recent fiscal
quarter ending date if later) are subject to the normal year-end adjustments. There
has been no material adverse change in the financial condition of any Property
between June 30, 2005 and the date hereof and the same shall be true and
correct as of the Closing Date.

 

(d)                                 The
GP Contributors have delivered or made available or caused to be delivered or made
available to MCRLP true, complete and correct copies of the operative
organizational documents of each of Property LLLP and any successor
organization to such Property LLLP (collectively, the “Seller Organizational Documents”). The
Seller Organizational Documents, as applicable, constitute all of the material
documents, agreements and instruments with respect to the governance,
management and organization of each of the Property LLLPs and any successor
organization to such Property LLLP. Except as shall be required to effect the
Conversion, the Seller Organizational Documents shall not have been amended,
modified,

 

17

 

supplemented,
terminated or otherwise changed in any manner as of the Closing Date. None of
the Property LLLPs owns, or any successor organization to such Property LLLP
shall own, directly or indirectly, any property or assets, other than the
Properties owned by such entity or any equity or voting interest in, or
otherwise control, any person or entity, except as may be expressly shown
on the Property Financials.

 

(e)                                  The
Contributors comprise all of the partners of the Property LLLPs or owners of
any successor organization to the Property LLLPs formed as a result of the
Conversion. There are no other partners of the Property LLLPs or owners of any
successor organizations the Property LLLPs formed as a result of the
Conversion.

 

(f)                                    Except
as set forth in the Property Financials, or except for accounts payable to
trade creditors in the ordinary course of business, none of the Property LLLPs,
or any predecessor entities thereto, has any liabilities of any nature
whatsoever, known or unknown, choate or inchoate, liquidated or unliquidated,
secured or unsecured, fixed or unfixed or contingent, including, without
limitation, any claim that is initiated after the Closing Date, but which claim
is based upon an event that occurred prior to the Closing Date and liabilities
evidenced by bonds, debentures, notes guarantees or similar instruments (“Undisclosed Liabilities”), with respect to
any Property, Property LLLP, or any predecessor entity thereto and,
notwithstanding anything to the contrary contained herein, the GP Contributors
agree to, and hereby do, indemnify and hold harmless MCRLP from and against any
such Undisclosed Liabilities arising at any time from and after the Closing.

 

7.3.                              In
order to induce MCRLP to perform as required hereunder, as of the date
hereof and as of the Closing Date, each GP Contributor represents and warrants
to MCRLP, severally as to itself and not jointly, as follows (it being
recognized and agreed, however, that the following representations shall be of
no force or effect in the event the transaction contemplated hereby is
structured as a transfer of all of the Properties by Deed in accordance with Section 1.2
hereof):

 

(a)                                  If
such GP Contributor is an individual, such GP Contributor has all requisite
power and authority to execute and deliver this Agreement and all other
documents and instruments to be executed and delivered by him hereunder, and to
perform all obligations hereunder and under such other documents and
instruments in order to contribute his or her respective Property Owner
Interest or cause the contribution of the Properties, as the case may be,
in accordance with the terms and conditions hereof.

 

(b)                                 If
such GP Contributor is an entity, such GP Contributor is a duly organized and
validly existing organization and in good standing organized under the laws of
its state of formation, has all requisite power and authority to execute and
deliver this Agreement and all other documents and instruments to be executed
and delivered by it hereunder, and to perform its obligations hereunder
and under such other documents and instruments in order to contribute the
Exchange Property in accordance with the terms and conditions hereof. All
necessary actions of owners of such GP Contributor to confer such power and
authority upon the persons executing this Agreement and all documents which are
contemplated by this Agreement on its behalf have been duly taken.

 

18

 

(c)                                  This
Agreement, when duly executed and delivered, will be the legal, valid and
binding obligation of such GP Contributor, enforceable in accordance with the
terms of this Agreement. The performance by such GP Contributor of its/his
duties and obligations under this Agreement and the documents and instruments
to be executed and delivered by it/him hereunder will not conflict with, or
result in a breach of, or default under, any provision of any of the
organizational documents of such GP Contributor, if applicable, or any
agreements, instruments, decrees, judgments, injunctions, orders, writs, laws, rules or
regulations, or any determination or award of any court or arbitrator, to which
such GP Contributor is a party or by which its/his assets are or may be
bound. Such GP Contributor has good and
marketable title to, is the exclusive legal and equitable owner of, and has the
unrestricted power and right to contribute, assign and deliver the Transferred
Interest free and clear of all encumbrances of any kind or nature other than
liens for Taxes that are not yet due and payable. No consent or approval
of any person, entity or Governmental Authority or agency is required with
respect to the execution and delivery of this Agreement by such Contributor or
the consummation by such Contributor of the transaction contemplated hereby or
the performance by such Contributor of its/his obligations hereunder. For
purposes of this Agreement, “Governmental
Authority” shall mean the federal, state, county or municipal
government, or any department, agency, bureau or other similar type body
obtaining authority therefrom, or created pursuant to any law.

 

(d)                                 Each
GP Contributor owns its respective interest in the Property LLLP and such
interest will, as of Closing, be owned by such Contributor free and clear of
all liens, encumbrances, claims and rights of others, except for liens for
Taxes not yet due and payable. None of the Contributors who has or has had an
ownership interest in a Property LLLP has heretofore assigned or encumbered any
of its interests in such Property LLLP.

 

(e)                                  None
of the Contributors nor any of its or their affiliates, nor any of their
respective partners, or to each Contributor’s knowledge, any of their members,
shareholders or other equity owners, and none of their respective employees,
officers, directors, representatives or agents, is a person or entity with whom
U.S. persons or entities are restricted from doing business under regulations
of the Office of Foreign Asset Control (“OFAC”)
of the Department of the Treasury (including, without limitation, those named
on OFAC’s Specially Designated and Blocked Persons List) or under any statute,
executive order (including the September 24, 2001, Executive Order
Blocking Property and Prohibiting Transactions with Persons Who Commit,
Threaten to Commit, or Support Terrorism), or other governmental action.

 

(f)                                    Each
GP Contributor hereby acknowledges its understanding that the issuance of the
Contributor Units is intended to be exempt from registration under the
Securities Act of 1933, as amended, and the rules and regulations in
effect thereunder (the “Securities Act”).

 

(g)                                 In
furtherance thereof, and in order to induce MCRLP to issue the Contributor
Units to each GP Contributor hereunder, each GP Contributor represents and
warrants to MCRLP, severally as to itself and not jointly, as follows:

 

(i)                                     Such
GP Contributor is acquiring the Contributor Units solely for its/his own account
for the purpose of investment and not as a nominee or agent for any other
person and not with a view to, or for offer or sale in connection with, any
distribution of any thereof. Such GP Contributor agrees and acknowledges that
it/he is

 

19

 

not permitted to offer,
transfer, sell, assign, pledge, hypothecate or otherwise dispose of (“Transfer”) any of the GP Contributor Units
except as provided in this Agreement and the OP Agreement.

 

(ii)                                  Such
GP Contributor is knowledgeable, sophisticated and experienced in business and
financial matters. Such Contributor fully understands the limitations on
transfer described in this Agreement and the OP Agreement. Such GP Contributor
is able to bear the economic risk of holding the Contributor Units for an
indefinite period and is able to afford the complete loss of its/his investment
in the Contributor Units. Such GP Contributor has received and reviewed the OP
Agreement and had the opportunity to review the documents filed by the Company
since its inception and MCRLP since 1998 under the Securities Exchange Act of
1934, as amended (the “Exchange Act”),
and all registration statements and related prospectuses and supplements filed
by the Company and declared effective under the Securities Act (collectively,
and in each case including all exhibits and schedules thereto and documents
incorporated by reference therein, the “SEC
Documents”) and has been given the opportunity to obtain any
additional information or documents and to ask questions and receive answers
about such documents, as well as the Company and MCRLP and the business and
prospects of the Company and MCRLP which such GP Contributor deems necessary to
evaluate the merits and risks related to its/his investment in the Contributor
Units.

 

(iii)                               Such
GP Contributor acknowledges that it/he has been advised that (i) the
Contributor Units must be held indefinitely, and such Contributor will continue
to bear the economic risk of the investment in the Contributor Units, unless
the Contributor Units are redeemed pursuant to the OP Agreement or are
subsequently Transferred or registered under the Securities Act or an exemption
from such registration is available, (ii) it is not anticipated that there
will be any public market for the Contributor Units at anytime, (iii) Rule 144
promulgated under the Securities Act may not be available with respect to
the sale of any securities of MCRLP (and that upon redemption of the
Contributor Units in MCRLP for shares of Common Stock a new holding period
under Rule 144 may commence), and MCRLP has made no covenant, and
makes no covenant, to make Rule 144 available with respect to the sale of
any securities of MCRLP, (iv) a restrictive legend as set forth in Section 7.5
below shall be placed on the certificates representing the Contributor Units,
and (v) a notation shall be made in the appropriate records of MCRLP
indicating that the Contributor Units are subject to restrictions on transfer.

 

(iv)                              Such
GP Contributor also acknowledges that:  (i) the
redemption of Contributor Units for, at the option of MCRLP acting through the
Company, shares of Common Stock is subject to certain restrictions contained in
the OP Agreement; and (ii) the shares of said Common Stock which may be
received upon such a redemption may, under certain circumstances, be restricted
securities and be subject to limitations as to transfer, and therefore subject
to the risks referred to in subsection (c) above. Notwithstanding
anything herein or in the OP Agreement to the contrary, Contributor hereby
acknowledges and agrees that it/he may not exercise the Redemption Rights
(as

 

20

 

defined in the OP Agreement)
until after the date which is one year from the Closing Date.

 

(v)                                 Such
GP Contributor is an “accredited investor” (as such term is defined in Rule 501(a) of
Regulation D under the Securities Act).

 

7.4.                              Except
as otherwise specifically stated in this Agreement, the representations,
warranties and agreements set forth in this Agreement or in any document,
agreement or estoppel delivered pursuant to this Agreement shall survive the
Closing Date for a period of twelve (12) months and thereafter shall be deemed
to be extinguished unless written notice of a breach of any such
representation, warranty or agreement is delivered to the other party within
such twelve (12) month period. If any such notice is delivered, the
representation, warranty or agreement upon which such claim or breach is based
shall survive for the applicable period of the statute of limitations. Notwithstanding
the foregoing, (i) the representations, warranties and agreements set
forth in Section 7.2 hereof shall survive the Closing Date until the later
of (x) two (2) years after the Closing Date, or (y) March 31, 2008, (ii) the
agreements set forth in Section 9.1 shall survive the Closing Date for a
period of three (3) years thereafter, and (iii) the representations,
warranties and agreements set forth in Sections 7.3, 11.1 and 13.2 shall
survive for the applicable period of the statute of limitations.

 

7.5.                              The
Contributors hereby acknowledge that each Certificate representing the
Contributor Units shall bear the following legend:

 

“THE UNITS REPRESENTED BY
THIS CERTIFICATE OR INSTRUMENT MAY NOT BE TRANSFERRED, SOLD, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE
PROVISIONS OF THE SECOND AMENDED AND RESTATED PARTNERSHIP AGREEMENT DATED AS OF
DECEMBER 11, 1997 (A COPY OF WHICH IS ON FILE WITH THE OPERATING
PARTNERSHIP), AS AMENDED, AND THAT CERTAIN CONTRIBUTION AND EXCHANGE AGREEMENT
BY AND BETWEEN THE PERSONS IDENTIFIED THEREIN AS CONTRIBUTORS AND THE OPERATING
PARTNERSHIP MADE                            ,
2005 (A COPY OF WHICH IS ON FILE WITH THE OPERATING PARTNERSHIP; THE “EXCHANGE
AGREEMENT”). EXCEPT AS OTHERWISE PROVIDED IN SUCH AGREEMENTS, NO TRANSFER,
SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE UNITS
REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”), OR (B) IF THE OPERATING PARTNERSHIP HAS BEEN FURNISHED WITH A
SATISFACTORY OPINION OF COUNSEL FOR THE HOLDER THAT SUCH TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE
PROVISIONS OF SECTION 5 OF THE ACT AND THE RULES AND REGULATIONS IN
EFFECT THEREUNDER. IN ADDITION, THE UNITS ARE SUBJECT TO THE PROVISIONS OF SECTION 19
OF THE EXCHANGE AGREEMENT.”

 

7.6.                              Each
GP Contributor and each Property LLLP acknowledges that it/he is not in a
significantly disparate bargaining position with respect to MCRLP in connection
with the

 

21

 

transactions contemplated by
this Agreement and that such GP Contributor and each Property LLLP was
represented by legal counsel in connection with these transactions.

 

7.7.                              If,
prior to the Closing, any of those individuals listed in Schedule 7.7
(“MCRLP Knowledge Persons”) obtain actual
knowledge, without an obligation to investigate and without being responsible
for the knowledge of any other person or any imputed knowledge, that is
inconsistent with any representation or warranty made by the GP Contributors or
the Property LLLPs in which any GP Contributor is a partner in this Article 7
or elsewhere in this Agreement, and MCRLP shall elect to proceed with the
Closing notwithstanding such knowledge, then MCRLP shall be deemed to have
waived any claim against the GP Contributors on account of such inconsistency;
provided, however, that if the GP Contributors or the Property LLLPs in which
any GP Contributor is a partner had actual knowledge of such inconsistent
information at the time the representation or warranty was made, and MCRLP
gives Contributors’ counsel (as designated in Article 26 of this
Agreement) written notice of such inconsistent information and the consequent
breach of such representation or warranty prior to the Closing, then the GP
Contributors shall remain liable to MCRLP following the Closing on account of
the breach of such representation or warranty.

 

7.8.                              As
used in this Agreement, knowledge (or words of similar import) of any Property
LLLP means the actual knowledge of the GP Contributor that is a general partner
of such Property LLLP, as contrasted with any concept of imputed or implied
knowledge and without any independent investigation and without assuming any
duty to conduct any such independent investigation, except that each GP
Contributor shall be deemed to have actual knowledge of any matter of which the
following individuals shall have actual knowledge:  Doug Erdman, President of CRC Commercial (“CRC”) Dennis Burke, Vice President of Leasing of CRC, and
Bill McClain, Vice President of Property Management of CRC.

 

7.9.                              No
representation or warranty made by such GP Contributor or any Property LLLP in
which such GP Contributor is a partner contained in this Agreement, and no
statement contained in any document, certificate, schedule or exhibit furnished
or to be furnished by or on behalf of such GP Contributor to MCRLP or any of
its designees or affiliates pursuant to this Agreement contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading
or necessary in order to fully and fairly provide the information required to
be provided in any such document, certificate, schedule or exhibit.

 

8.                                      COVENANTS
OF THE GP CONTRIBUTORS AND THE PROPERTY LLLPs.

 

8.1.                              Each
GP Contributor and any Property LLLP in which such GP Contributor is a partner,
covenants and agrees that between the date hereof and the Closing Date, it/he
shall perform or observe or cause to be performed or observed the
following:

 

(a)                                  The
GP Contributor and any Property LLLP in which such GP Contributor is a partner,
will operate and maintain or cause to operate or maintain the Properties in the
ordinary course of business and use commercially reasonable efforts to
reasonably preserve for MCRLP the relationships of the GP Contributors and the
Property LLLPs with Tenants, suppliers,

 

22

 

managers, employees,
service providers and others having on-going relationships with the Properties.
The GP Contributor and any Property LLLP in which such GP Contributor is a
partner will continue to perform or conduct any capital improvement or
capital expenditure program currently in process in the ordinary course of
business. Neither the GP Contributors nor the Property LLLPs will defer taking
any actions or spending any funds, or otherwise manage the Properties
differently, due to the pending sale of the Properties.

 

(b)                                 The
GP Contributors and the Property LLLPs, as landlord, will not enter into any
new Leases with respect to the Properties, or renew or modify any Lease,
without MCRLP’s prior written consent, which consent shall not be unreasonably
withheld or delayed prior to the expiration of the Inspection Period and,
thereafter, shall be granted or withheld in the sole and absolute discretion of
MCRLP. In the event the proposed new or modified Lease contemplates that the
landlord will perform tenant improvement work on a “turn-key” basis (a “Turn-Key Lease”) (i.e., that the
Landlord is to provide specified tenant improvements and renovations as opposed
to the Landlord granting an allowance to the tenant for such purpose), the
request for MCRLP’s consent, shall include, in addition to the proposed lease
and background information about the proposed tenant, a proposed preliminary
space plan and office layout and a preliminary cost estimate of the proposed
work to be provided by the Landlord. MCRLP shall have five (5) business
days from the receipt of both the written request from the Property LLLP and
all the required documentation and information regarding any new or modified
Lease to notify the Property LLLP whether or not to grant its consent to such
Lease. If it fails to respond within such five (5) business day period,
MCRLP’s consent shall be deemed granted. With respect to all Turn-Key Leases
executed after August 1, 2005, MCRLP shall be entitled to receive all of
the following in connection with such Leases, as and when same become
available: construction drawings and plans as revised from time to time; all
requisitions for payment submitted by contractors with respect to the “turn-key”
work; all change orders issued with respect to such work; and all budgets prepared
from time to time by the contractors and/or the managing agent with respect to
such work. As the work under any Turn-Key Lease executed after August 1,
2005 is performed, MCRLP shall have the right to approve, in its reasonable
discretion, all material changes to the drawings and plans for such work and
all material change orders that would increase the cost of such work. As used
herein, the term “material” as relates to change-orders or changes in drawings
and plans shall mean changes that increase the cost of the work to be performed
by the Landlord under the Turn-Key Lease by more than ten percent (10%). In
addition, the Property LLLP shall enter into a construction contract with the
contractor or contractors performing all work under any such Turn-Key Lease on
a form reasonably acceptable to MCRLP, and any material modifications of such
construction contract shall be subject to MCRLP’s prior approval, which shall
not be unreasonably withheld, delayed or conditioned and which shall be deemed
granted if MCRLP fails to respond to a request for consent within five (5) business
days after receipt of such request. If the work under any such Turn-Key Lease
has not been completed at the time of the Closing hereunder, if requested by
MCRLP, the GP Contributors shall arrange for CRC or any designated employee of
CRC to continue to be available for a reasonable period of time to supervise
and coordinate completion such work after the Closing at a compensation rate to
be agreed upon.

 

(c)                                  If
prior to the Closing Date the GP Contributor or any Property LLLP in which such
GP Contributor is a partner, shall have received from the holder of any
mortgage, any written notice requiring any repair work to be done on any
Property, the GP Contributor or any

 

23

 

Property LLLP
in which such GP Contributor is a partner, will promptly commence same and
thereafter diligently pursue such work at their own cost and expense until the
Closing Date and shall provide a credit against the Consideration for the
estimated cost of all work remaining uncompleted as of the Closing Date.

 

(d)                                 Neither
the GP Contributor nor the Property LLLPs shall:

 

(i)                                     Enter
into any agreement requiring the Contributors or the Property LLLPs to do work
for any Tenant after the Closing Date without first obtaining the prior written
consent of MCRLP, except for work under Leases approved or deemed approved by
MCRLP;

 

(ii)                                  Accept
the surrender of any Service Contract or Lease, or grant any concession,
rebate, allowance or free rent, without MCRLP’s prior written consent, which
consent shall not be unreasonably withheld or delayed prior to the expiration
of the Inspection Period and thereafter shall be provided at the sole and
absolute discretion of MCRLP;

 

(iii)                               Apply
any Security Deposits with respect to any Tenant in occupancy on the Closing
Date, without MCRLP’s prior written consent, which consent shall not be
unreasonably withheld or delayed prior to the expiration of the Inspection
Period and thereafter shall be provided at the sole and absolute discretion of
MCRLP;

 

(iv)                              Renew,
extend or modify any of the Service Contracts, without MCRLP’s prior written
consent, which consent shall not be unreasonably withheld or delayed prior to
the expiration of the Inspection Period and thereafter shall be provided at the
sole and absolute discretion of MCRLP;

 

(v)                                 Remove
any Personal Property located in or on the Properties, except as may be
required for repair and replacement. All repairs and replacements shall be free
and clear of liens and encumbrances (except for the lien of the Existing Loan
Documents) and shall be of quality at least equal to the repaired or replaced
items and shall be deemed included in this sale, without cost or expense to
MCRLP; or

 

(vi)                              Cause
or permit any Property (any portion of such property), or any interest therein,
to be alienated, mortgaged, licensed, encumbered or otherwise be transferred.

 

(e)                                  Upon
request of MCRLP at any time after the date hereof, each GP Contributor and any
Property LLLP in which such GP Contributor is a partner, shall assist MCRLP in
its preparation of audited financial statements, statements of income and expense, all at MCRLP’s sole cost
and expense and such other documentation as MCRLP may reasonably request,
covering the period of such Contributor’s ownership of any Property.

 

(f)                                    Until
Closing hereunder, each GP Contributor and any Property LLLP in which such GP
Contributor is a partner will make all required payments under any mortgage
affecting any Property within any applicable grace period, but without
reimbursement by MCRLP thereof. Each GP Contributor shall also comply with all
other terms, covenants, and conditions of any

 

24

 

mortgage on
any Property and the terms, covenants, and conditions of the Existing Loan
Documents, if applicable, in each case, which, if not complied with, shall
result in a default thereunder.

 

(g)                                 Up
to and including the Closing Date, each Property LLLP agrees to maintain and
keep or cause to be maintained and kept such hazard, liability and casualty
insurance policies in full force and effect in such amounts and covering such
risks as such Property LLLP has carried in the past in the ordinary course of
business and in accordance with the terms of the Existing Loan Documents, if
applicable.

 

(h)                                 Upon
written notice from MCRLP given and received at least thirty (30) days prior to
the Closing Date, the GP Contributor and any Property LLLP in which such GP
Contributor is a partner, shall promptly cancel or cause to be cancelled, at
their sole cost and expense, those Service Contracts which MCRLP elects not to
assume effective as of the Closing hereunder to the extent cancelable; it being
understood and agreed the Property LLLPs shall pay or cause to be paid any
penalties incurred as a result of any such termination. MCRLP has notified the
Property LLLPs that all existing cleaning contracts and management contracts
relating to the Property shall be cancelled as of the Closing hereunder, but
MCRLP acknowledges that the cleaning contract with Capital Building Maintenance
Corp. will not be cancelled as of the Closing because it provides for a 120-day
notice before the cancellation can become effective and that MCRLP shall
provide any notice of cancellation of such contract not earlier than the
Closing. It is further understood and agreed that MCRLP does not intend to
terminate the existing contracts with the vendors providing electricity to the
Properties prior to the Closing, but at any time thereafter, if requested in
writing by MCRLP, the GP Contributors will send a notice of termination of such
contracts to such vendors, provided the GP Contributors are held harmless from
any termination fees or costs associated with such termination.

 

(i)                                     Each
Property LLLP shall permit or cause to permit MCRLP and its authorized
representatives to inspect the Books and Records (as defined below) of the
Property LLLPs at all reasonable times. All Books and Records not conveyed to
MCRLP hereunder shall be maintained for MCRLP’s inspection at Community Realty
Company, Inc., 6305 Ivy Lane, Suite 202, Greenbelt, Maryland 20770.

 

(j)                                     All
violations of statutes, ordinances, rules, regulations, orders, codes,
directives or requirements affecting any Property, noted in the records of or
issued by any Governmental Authorities and of which the GP Contributors have
received written notice shall be complied with by Property LLLP prior to the
Closing and each Property shall be conveyed free of any such violations,
including, without limitation, violations of Environmental Laws.

 

(k)                                  Each
Property LLLP and each GP Contributor shall:

 

(i)                                     Promptly
notify MCRLP of, and promptly deliver to MCRLP, a certified true and complete
copy of any Notice that such GP Contributor or a Property LLLP may receive,
on or before the Closing Date from any Governmental Authority, concerning a
violation of Environmental Laws or Discharge of Contaminants;

 

25

 

(ii)                                  Contemporaneously
with the execution and delivery of this Agreement, and subsequently, promptly
upon receipt by such GP Contributor or its/his representative or Property LLLP,
deliver to MCRLP a certified true and complete copy of all Environmental
Documents in its possession or control; and

 

(iii)                               Promptly
notify MCRLP if such GP Contributor obtains actual knowledge that any of the
representations and warranties set forth in Article 7 of this Agreement
have become untrue in any respect or will be untrue on the Closing Date.

 

8.2.                              Each
GP Contributor represents on behalf of itself and each of the Property LLLPs
that set forth on Schedule 8.2
annexed hereto are the only proceedings now pending for a reduction in the
assessed valuation of the Property or the Option Property. The GP Contributors
agree to settle or withdraw all such proceedings prior to the Closing. Notwithstanding
the foregoing, the GP Contributor shall not litigate or settle or cause to be
litigated or settled any such matters without MCRLP’s prior written consent,
not to be unreasonably withheld, if such litigation or settlement shall affect
the current tax year or any future tax year. MCRLP, in MCRLP’s sole discretion,
is hereby authorized by each GP Contributor, and each GP Contributor represents
that it has authority from each Property LLLP to file any applicable proceeding
for any tax years following the last tax year set forth on Schedule 8.2.
The net refund of Taxes, if any, for any tax year for which the Property LLLPs
or MCRLP shall be entitled to share in the refund shall be divided between the
Property LLLPs and MCRLP in accordance with the apportionment of Taxes pursuant
to the provisions hereof. All expenses in connection therewith, including
counsel fees, shall be paid for by the party entitled to the benefits thereof,
with a pro-rata sharing between the Property LLLPs and MCRLP for
any tax year in which both parties are entitled to a portion of the refund. The
provisions of this Section shall survive the Closing Date.

 

8.3.                              To
the extent that any promotional material, marketing materials, brochures,
photographs are not in the possession of the Contributors or the Property
LLLPs, the Contributors shall cause the holders or owners of same to deliver
such materials to MCRLP, without cost or expense, which obligation shall survive
the Closing.

 

9.                                      LEASING
COMMISSIONS AND TENANT IMPROVEMENT OBLIGATIONS.

 

9.1.                              The
Property LLLPs shall be liable for (i) all leasing costs, including but
not limited to brokerage commissions, tenant improvement and refurbishment
obligations and allowances, any other Tenant inducements such as relocation
expenses and rental payments to third parties and attorneys’ fees and expenses,
payable in connection with all Leases in existence prior to August 1, 2005
(excluding leasing costs payable with respect to extension, expansion and
renewal options which have not been exercised, and extension, expansion and
renewal agreements which have not been entered into prior to August 1,
2005) and (ii) the Contributor’s “proportionate share,” as defined below,
of all leasing costs payable with respect to any new Lease executed and
delivered by the parties thereto between August 1, 2005 and the Closing
Date (including any extension, expansion and renewal options which have been
exercised, and extension, expansion and renewal agreements which have been
entered into, between August 1, 2005 and the Closing Date) pursuant to the
terms of this Agreement. The Contributor’s “proportionate share” of all leasing
costs payable with respect to any new Lease entered into

 

26

 

between August 1, 2005 and
the Closing Date shall be equal to the proportion that the number of days from
the commencement date of such Lease to the Closing Date bears to the total
number of days during the primary term of such new Lease, and MCRLP’s “proportionate
share” of all leasing costs payable with respect to any new Lease entered into
between August 1, 2005 and the Closing Date shall be equal to the
proportion that the number of days from the Closing Date to the termination
date of the primary term of such new Lease bears to the total number of days
during the primary term of such new Lease. For the avoidance of doubt, if the
commencement date of any new Lease entered into between August 1, 2005 and
the Closing Date occurs after the Closing Date, then the Contributor’s “proportionate
share” of all leasing costs payable with respect to such Lease shall be 0%, and
MCRLP’s “proportionate share” of all leasing costs payable with respect to such
Lease shall be 100%. Those leasing costs for which the Contributor’s will be
responsible under this Section 9.1 are hereinafter referred to as “Contributors’ Lease Costs”; and those leasing costs for
which MCRLP will be responsible pursuant to the terms of this Section 9.1
are hereinafter referred to as “MCRLP’s Lease Costs”.
Notwithstanding anything to the contrary contained herein, it is understood and
agreed that MCRLP’s Lease Costs shall include the leasing commissions listed in
Schedule 7.1(k) that may become
payable in the future if any of those Tenants listed in Schedule 7.1(k)
with early termination rights do not in fact exercise those rights
(notwithstanding that such Leases were in existence prior to August 1,
2005). Each of the Property LLLPs agrees to indemnify and hold MCRLP harmless
from and against, and agrees to reimburse MCRLP with respect to, any and all
claims, demands, causes of action, losses, damages, liabilities, costs and
expenses (including reasonable attorneys’ fees and court costs) suffered or
incurred by MCRLP and relating directly or indirectly to Contributors’ Lease
Costs. MCRLP agrees to indemnify and hold the Contributors harmless from and
against, and, agrees to reimburse the Contributors with respect to, any and all
claims, demands, causes of action, losses, damages, liabilities, costs and
expenses (including reasonable attorneys’ fees and court costs) suffered or
incurred by the Contributors and relating directly or indirectly to MCRLP’s
Lease Costs. The Property LLLPs shall have a right at Closing to direct, in
writing, that a portion of the Contributor Units otherwise distributable to the
Contributors be issued to CRC; provided, however: (i) CRC is an “accredited
investor” (as such term is defined in Rule 501(a) of Regulation D
under the Securities Act); (ii) CRC executes and delivers to MCRLP a
subscription agreement covering such matters as MCRLP may reasonably
request; (iii) CRC agrees to execute and/or deliver such other documents
instruments and/or information required by MCRLP in connection with its
issuance of Units; and (iv) such further agreements as may be
reasonably agreed upon by the parties hereto.

 

9.2.                              Notwithstanding
anything to the contrary set forth herein, in no event shall MCRLP have any
liability to pay any leasing or brokerage fees or commissions to Community
Realty Co., Inc., or any brokers or employees thereof, on account of any
leases whatsoever regardless when signed.

 

9.3.                              The
Lease with General Services Administration (“GSA”)
at 9200 Edmonston Road (the “GSA Edmonston Lease”)
provides that GSA shall be provided an allowance in the amount of $922,314 by
the landlord for the purpose of paying for tenant renovations at the leased
premises and relocation costs. Under the GSA Edmonston Lease, all of such
allowance has been paid to GSA. If as a result of an audit of such allowance by
GSA after the Closing it is determined that the landlord thereunder owes to GSA
any additional sums on account of such

 

27

 

allowance, the Property LLLP owning
9200 Edmonston Road shall remain liable to MCRLP for the amount of such
additional sum. The Property LLLP owning 9200 Edmonston Road agrees to deliver
to MCRLP at Closing all books and records relating to such allowance and the
renovations for which such allowance was granted.

 

9.4.                              It
is understood and agreed that from and after the Closing Date, all obligations
and liabilities of the Property LLLPs under Sections 9.1 and 9.3 hereof shall
be enforceable against the GP Contributors; provided, however, that the GP
Contributors shall have no personal liability for such obligations or
liabilities and MCRLP’s sole remedy with respect to such obligations and
liabilities shall be to recover from the Escrow Pool pursuant to Section 25.4
hereof, except as otherwise provided in the next sentence. Notwithstanding the
foregoing, the GP Contributors shall have personal liability for the brokerage
commissions for which the Property LLLPs are liable under clause (i) of Section 9.1
above (but not for any of the other leasing costs listed in said clause (i))
and such personal liability shall not be limited to recovery against the Escrow
Pool provided in Section 25.4 hereof, nor shall such personal liability be
subject to the limitations set forth in Section 25.6 hereof.

 

10.                               ESTOPPEL
CERTIFICATES.

 

10.1.                        On or
prior to the date hereof, each Property LLLP agrees to deliver or cause to be
delivered to each Tenant an estoppel certificate in the form annexed
hereto as Schedule 10.1 or in the form attached
as Exhibit O with respect to GSA
leases for Tenant’s execution, completed to reflect the Tenant’s particular
Lease status. Each Property LLLP agrees use commercially reasonable efforts to
obtain or cause to be obtained from all Tenants the estoppel certificates in
such form; provided, however, that if any Tenant shall refuse to
execute an estoppel letter in such form, such Property LLLP shall nevertheless
be obligated use commercially reasonable efforts to obtain estoppel
certificates in the form in which each Tenant is obligated to deliver same
as provided in its Lease. Each Property LLLP agrees to deliver or cause to be
delivered to MCRLP, promptly upon receipt, copies of all estoppel letters
received by Tenants, in the form received by such Contributor. The
estoppel certificates required to be obtained pursuant to this Section 10.1
are collectively referred to as the “Estoppel Certificates”.

 

10.2.                        As a
condition to Closing, the Property LLLPs may deliver or cause to be
delivered: (i) an Estoppel Certificate from each Tenant which leases space
at the Property in excess of 7,000 square feet or more in the aggregate (each a
“Major Tenant”); and (ii) Estoppel
Certificates from the remaining Tenants leasing at least seventy-five (75%)
percent of the aggregate remaining square footage of each Property. In the
event that the Property LLLPs are unable to obtain an Estoppel Certificate from
Tenants other than a Major Tenant, sufficient to satisfy the aforesaid 75% of
the aggregate square foot requirement, the Property LLLPs and GP Contributors may deliver
or cause to be delivered a so-called “Seller’s Estoppel
Certificate” for such Tenants as shall be required to satisfy such
requirement covering those matters that would have been covered had such Tenant
delivered an estoppel certificate in the form attached hereto, which
Sellers Estoppel Certificate may be limited to the Contributors’
knowledge, as appropriate. Notwithstanding the immediately preceding sentence,
MCRLP may in its sole and absolute discretion accept a Seller’s Estoppel Certificate
for a Major Tenant in lieu of the Estoppel Certificate described in (i) above.

 

28

 

10.3.                        In
addition to the requirements in Section 10.1 above, for an Estoppel
Certificate to be deemed acceptable for purposes of this Agreement, such
Estoppel Certificate (i) must not indicate any material defaults or
delinquent rent payment, (ii) must certify that the Tenant’s most recent
rental payment under its Lease was made not more than one (1) month prior
to the month in which the Closing occurs, (iii) otherwise be consistent
with the Rent Roll and the Contributor’s other representations and warranties
in Article 7 and (iv) not allege a default by landlord under the
Tenant’s Lease. Contributors shall deliver or cause to be delivered to MCRLP
all responses received from Tenants in connection with Contributors’ request
for such Estoppel Certificate.

 

11.                               REPRESENTATIONS
AND WARRANTIES OF MCRLP AND THE COMPANY.

 

11.1.                        In order
to induce each Contributor to perform as required hereunder or under the LP Contributors Joinder Agreement,
MCRLP and the Company hereby warrant and represent the following:

 

(a)                                  MCRLP
is a limited partnership duly organized and validly existing and in good
standing under the laws of the State of Delaware and the Company is a
corporation duly organized and validly existing and in good standing under the
laws of the State of Maryland. Each of the Company and MCRLP has all requisite
power and authority to execute this Agreement and execute and deliver all other
documents and instruments to be executed and delivered hereunder, and to perform its
obligations hereunder and under such other documents and instruments in order
to acquire the Exchange Property in accordance with the terms and conditions hereof.
All necessary actions of MCRLP and the Company to confer such power and
authority upon the persons performing on behalf of MCRLP and the Company have
been taken.

 

(b)                                 This
Agreement and the agreements and other documents to be executed and delivered
by MCRLP hereunder, when duly executed and delivered, will be the legal, valid
and binding obligation of MCRLP, enforceable in accordance with the terms of
this Agreement. The performance by MCRLP of its duties and obligations under
this Agreement and the documents and instruments to be executed and delivered
hereunder by MCRLP will not conflict with, or result in a breach of, or default
under, any provision of any of the organizational documents of MCRLP or the
Company or any material agreements or instruments, or any decrees, judgments,
injunctions, orders, writs, laws, rules or regulations, or any
determination or award of any court or arbitrator, to which MCRLP or the
Company is a party or by which the assets of MCRLP or the Company are or may be
bound.

 

(c)                                  The
Contributor Units to be issued to the Contributors and the Common Stock of the
Company to be issued to the Contributors upon redemption of the Contributor
Units are duly authorized and, when issued by MCRLP or the Company, as the case
may be, will be fully paid and non-assessable, free and clear of any
mortgage, pledge, lien, encumbrance, security interest, claim or right of
interest of any third party of any nature whatsoever.

 

(d)                                 MCRLP
has furnished to each Contributor a true and complete copy of the OP Agreement,
as amended to date and will provide the GP Contributors copies of any and all
amendments thereto from and after the date hereof until the Closing Date.

 

29

 

(e)                                  Neither
MCRLP nor the Company has made a general assignment for the benefit of
creditors, filed any voluntary petition in bankruptcy or suffered the filing of
any involuntary petition by its creditors, suffered the appointment of a
receiver to take possession of all, or substantially all, of its assets,
suffered the attachment or other judicial seizure of all, or substantially all,
of its assets, admitted in writing its inability to pay its debts as they come
due or made an offer of settlement, extension or composition to its creditors
generally.

 

(f)                                    The
Company has filed with the Securities and Exchange Commission the SEC Documents
required to date. As of their respective filing dates (or if amended, revised
or superseded by a subsequent filing with the Securities and Exchange Commission,
then on the date of such subsequent filing), the SEC Documents complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and none of the SEC Documents (including any and
all financial statements included therein) as of such dates contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.

 

(g)                                 The
Company, (i) beginning with first its taxable year ended December 31,
1995, and through the most recent taxable year ended December 31, 2004,
has been subject to taxation as a REIT within the meaning of the Code and has
satisfied all requirements to qualify as a REIT for such years, (ii) has
operated, and currently intends to continue to operate, in such a manner as to
qualify as a REIT for the taxable year ending December 31, 2005 and all
subsequent taxable years, and (iii) has not taken or omitted to take any
action which could reasonably be expected to result in a challenge to its
status as a REIT, and to the knowledge of the Company, no such challenge is
pending or threatened.

 

(h)                                 MCRLP
(i) beginning with its first taxable year ended December 31, 1995,
has qualified as a partnership for federal income tax purposes (and is not
classified as an association taxable as a corporation for federal income tax
purposes), (ii) has operated, and intends to continue to operate, in such
a manner as to qualify as a partnership and avoid taxation as a corporation and
(iii) has not taken or omitted to take any action which would reasonably
be expected to result in a challenge to its status as a partnership, and to the
knowledge of the Company, no such challenge is pending or threatened.

 

12.                               CLOSING.

 

12.1.                        (a) The
consummation of the transactions contemplated hereunder (the “Closing”) shall take place at the offices of Seyfarth Shaw
LLP, 815 Connecticut Avenue, N.W., Suite 500, Washington, D.C. 20006, or
such other place as shall be mutually agreed by the parties hereto, on or about
fifteen (15) days following the satisfactory completion by MCRLP of its due
diligence review and the approval of the assignment of the Assumed Debt Amount
by the lenders (the “Closing  Date”); provided, however, the parties agree that if the
consents of all of the Assumed Debt Lenders have not been obtained as required
herein, then the Closing Date may be extended by either party to a date
that is five (5) days after all of the consents of the Assumed Debt
Lenders have been obtained, which date shall, in no event be latter than ninety
(90) days from the date of this Agreement (the “Outside
Closing Date”).

 

30

 

(b)                                 If
the requisite consents or approvals for the Conversion have been obtained
pursuant to the terms hereof, then immediately prior to the Closing, the
applicable Contributors shall cause each of the applicable Property LLLPs to
delivery duly executed and acknowledged documents and instruments, each in form and
substance reasonably approved by the applicable Property LLLPs and MCRLP,
required or appropriate to cause the Conversion to be consummated pursuant to
the terms hereof.

 

12.2.                        On the
Closing Date each Contributor or Property LLLP, as applicable, at his or its
sole cost and expense, will deliver or cause to be delivered in escrow to the
Escrow Agent to be delivered to MCRLP or the entity otherwise provided below
upon satisfaction of all conditions to Closing set forth herein, the following
documents:

 

(a)                                  If
a Conversion has occurred, a duly executed assignment of the Transferred
Interest to MCRLP in the form annexed hereto as Exhibit P;

 

(b)                                 If
such Contributor is an entity, all organizational documents of such Contributor
including the partnership agreement or LLC agreement, as applicable, of such
Contributor, evidencing the power and authority of such Contributor to enter
into this Agreement and any documents to be delivered hereunder, and the enforceability
of same;

 

(c)                                  A
certificate indicating that the representations and warranties of such
Contributor made in this Agreement are true and correct as of the Closing Date;

 

(d)                                 A
certificate signed by such Contributor, or, if applicable, an officer or
partner of such Contributor in the form prescribed by Treasury Regulation Section 1445-2(b)(2) and
annexed hereto as Exhibit Q,
to the effect that such Contributor is not a “foreign person” as that term is
defined in Section 1445(f)(3) of Code, in order to avoid the
imposition of the withholding tax payment pursuant to Section 1445 of the
Code;

 

(e)                                  Each
Contributor’s Limited Agreement of Indemnity or Guaranty Agreement, duly
executed by such Contributor, if applicable;

 

(f)                                    All
original Leases and all other documents pertaining thereto, and certified
copies of such Leases or other documents where each Contributor, using its best
efforts, is unable to deliver originals of same;

 

(g)                                 All
other original documents or instruments referred to herein, including without
limitation the books, records, Tenant data, leasing material and forms,
original brokerage agreements, past and current rent rolls, files, statements,
tax returns, market studies, keys, access cards, codes, combinations, plans,
specifications, reports, tests and other materials of any kind owned by or in
the possession of any Contributor or any Property LLLP which are or may be
used by any Contributor or any Property LLLP in the use and operation of any
Property or Personal Property (collectively, “Books
and Records”), contracts and agreements for the servicing,
maintenance and operation of any Property, Licenses and Permits, and certified
copies of same where Contributors, using their best efforts, are unable to
deliver originals, provided however, for purposes of clarification, that Books
and Records shall not include the personal or other Tax returns of the
Contributors;

 

31

 

(h)                                 A
letter to Tenants advising the Tenants of the transactions hereunder and
directing that rent and other payments thereafter be sent to MCRLP or its
designee, as MCRLP shall so direct;

 

(i)                                     If
the Conversion has not been consummated pursuant to the terms hereof, then duly
executed and acknowledged documents and instruments, each in form and
substance reasonably approved by the applicable Property LLLPs and MCRLP,
required or appropriate to effectuate the transfer of the Property to MCRLP
pursuant to the terms hereof, including, without limitation, the following: (i) a
special warranty deed with respect to each Property, in proper form for
recording, conveying such Property from the applicable Property LLLP to MCRLP,
subject only to the Permitted Encumbrances; (ii) a bill of sale conveying
any and all personal property owned by each Property LLLP, which bill of sale
shall contain no warranties representations by such Property LLLP, except that
the Property LLLP is the owner of and has not previously sold, transferred or
encumbered (other than in connection with the Existing Loan Documents) such
personal property; (iii) an assignment and assumption of each Property
LLLP’s right, title and interest in, to and under all Leases, Rents, Security
Deposits (including, without limitation, any and all documents or instruments
required or appropriate to transfer all Security Deposits held in the form of
a letter of credit), equipment, service and other contracts and/or agreements; (iv) a
general assignment of each Property LLLP’s right, title and interest in, to and
under all warranties and guaranties, permits, licenses and approvals, utility
deposits, site plans, surveys, plans and specification relating to each
Property, catalogues, books, manuals, files, logs, records, correspondence,
tenant lists, histories, brochures and other advertising materials and
Intangible Property.

 

(j)                                     An
assumption of the Existing Loan Documents duly executed by the Contributors
and/or the Property LLLPs and consented to by the Assumed Debt Lenders,
together with all original Existing Loan Documents and all other documents
pertaining thereto, and certified copies of such Existing Loan Documents where
each Contributor, using its best efforts, is unable to deliver originals of the
same;

 

(k)                                  The
Option Agreement duly executed by the Option Contributors and the Option
Property Owners;

 

(l)                                     A
termination of the existing CRC Management Agreement and a release from CRC
Management of any amounts owed thereunder;

 

(m)                               Audited
Property Financials for all Property LLLPs (except Tenth LLLP) as of and for
the years ending December, 31, 2002, 2003 and 2004 and reviewed Property
Financials for Tenth LLLP as of and for the years ending December, 31, 2002,
2003 and 2004;

 

(n)                                 An
opinion of Contributors’ counsel reasonably satisfactory to MCRLP with respect
to the existence, organization and authority of each Property LLLP and of the
authority of persons executing documents on behalf of each Property LLLP;

 

(o)                                 A
statement from each Contributor of such Contributor’s Contributor Debt Amount
(as defined in Section 21.1); and

 

32

 

(p)                                 Such
other documents as may be reasonably required or appropriate to effectuate
the consummation of the transactions contemplated by this Agreement.

 

12.3.                        On the
Closing Date, MCRLP, at its sole cost and expense, will deliver or cause to be
delivered to each Contributor the following documents:

 

(a)                                  The
Certificate, duly executed by MCRLP;

 

(b)                                 An
agreement prepared by MCRLP and executed by the Company evidencing the
admission of such Contributor as a limited partner in MCRLP, and pursuant to
which such Contributor agrees to be bound by and assume all of the obligations
and to be entitled to all of the rights of a limited partner in MCRLP with
respect to the Contributor Units issued to such Contributor (the “Partnership Acknowledgment”);

 

(c)                                  Counterparts
of any applicable documents listed in Section 12.2(i) above;

 

(d)                                 An
assumption of the Existing Loan Documents duly executed by MCRLP;

 

(e)                                  The
Option Agreement duly executed by MCRLP;

 

(f)                                    The
Contributor’s Units and cash required to be paid as part of the
Consideration;

 

(g)                                 An
opinion from Seyfarth Shaw LLP to the effect that MCRLP has, since its taxable
year ended December 31, 1995, been treated as a partnership for all
federal income tax purposes and will continue so to qualify for its taxable
year ending December 31, 2005, and that, for taxable years thereafter,
based upon its current and proposed method of operation, MCRLP will be taxed as
a partnership and not as an association taxable as a corporation for all
federal income tax purposes;

 

(h)                                 An
opinion of MCRLP’s counsel reasonably satisfactory to the Contributors to the
effect that:

 

(i)                                     MCRLP
is a limited partnership duly organized, validly existing and in good standing
under the laws of the state of Delaware and the Company is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Maryland and that each of MCRLP and the Company have all the requisite power
and authority to enter into the Agreement and perform their respective
obligations thereunder;

 

(ii)                                  The
Agreement and agreements and other documents required to be executed by MCRLP
pursuant to the Agreement constitute legal, valid and binding obligations of
MCRLP and are enforceable in accordance with their terms; and

 

(iii)                               The
Contributor Units when issued to the Contributors and the Common Stock of the
Company to be issued to the Contributors upon redemption of the Contributor
Units will be duly authorized and, when issued by MCRLP or the Company, as the
case may be, will be fully paid and non-assessable, free and clear of any
mortgage,

 

33

 

pledge, lien, encumbrance,
security interest, claim or right of interest of any third party of any nature
whatsoever; and

 

(i)                                     Such
other documents as may be reasonably required or appropriate to effectuate
the consummation of the transactions contemplated by this Agreement.

 

12.4.                        Each party
shall be responsible for its own attorneys’ fees.

 

12.5.                        The
Property LLLPs shall be responsible for (i) one-half of the loan
assumption costs, if any, pertaining to the Assumed Debt Amount including legal
fees and application fees, (ii) all customary prorations and
apportionments, (iii) all fees and costs attributable to the transfer of
the Security Deposits, (iv) all fees and costs attributable to the
assignment of utility contracts and the transfer of warranties, (v) one-half
of all reasonable escrow fees and (v) one-half of any and all real estate
transfer and recordation taxes that arise from the transactions contemplated in
this Agreement.

 

12.6.                        MCRLP
shall be responsible for the costs of its due diligence investigations, all
customary prorations and apportionments and one-half of all reasonable escrow
fees and one-half of all real estate transfer and recordation taxes that arise
from the transactions contemplated in this Agreement. MCRLP shall be
responsible for all title insurance costs but only one-half of the costs
associated with the non-imputation endorsement.

 

13.                               ADJUSTMENTS.

 

13.1.                        The
following items with respect to the Properties are to be apportioned as of
midnight on the date immediately preceding the Closing:

 

(a)                                  All
paid rents, together with any other sums paid by tenants, under the Leases shall
be prorated as of the Closing Date. In the event that, at the time of Closing,
there are any past due or delinquent rents owing by any tenants of the
Properties, MCRLP shall use commercially reasonable efforts to collect such
delinquent rents and shall apply delinquent rents received after Closing (net
of any collection fees or expenses) first, to payment of current rent then due,
including for such purposes all rentals for the month in which the Closing Date
shall occur; second, to rents attributable to any period after the Closing
which are past due on the date of receipt; and thereafter, to delinquent rents
as of the Closing. The Contributors shall have the right, after Closing, to
proceed against tenants for rents allocable to the period of the Property LLLP’s
ownership of the Property but shall in no event seek to evict such tenants. In
the event that any sums paid by tenants under the Leases, including, without
limitation, any common area maintenance charges or shares of taxes or insurance
premiums, shall be based upon estimates of actual sums due and such sums cannot
be reconciled at Closing, the parties shall, on or before June 30, 2006,
make between themselves any adjustment required by reason of any difference
between such estimated amounts and the actual amounts of such sums. In the
event that any sums payable by tenants under the Leases, including, without
limitation, percentage rental, shall be payable after the Closing for periods
prior to Closing, the parties shall make between themselves at the time of
actual payment any adjustment (based upon their respective periods of
ownership) required by reason of the payment schedule. Further, in the event
that, subsequent to Closing, any Contributor receives any payments of rent or
other sums due from tenants under

 

34

 

Leases such
Contributor shall properly endorse such payments to MCRLP, and shall promptly
forward such payments to MCRLP. The Contributors and MCRLP agree that (i) any
Tenant under a GSA Lease pays its Basic Rent in monthly installments in
arrears, (ii) inasmuch as such payment is made in arrears, all Basic Rent
under the GSA Lease which is attributable to the portion of the month in which
the Closing Date occurs which is prior to the Closing Date shall be credited to
Seller as an addition to the Purchase Price at Closing, (iii) MCRLP shall
be entitled to all Basic Rent under the GSA Lease to the extent it is collected
after the Closing Date, and (iv) if any Contributor receives any Basic
Rent or other sums under the GSA Lease which has been previously credited to
the Contributors under clause (ii) of this sentence or which is otherwise
payable to MCRLP under clause (iii) then and in any of such events such
Contributor shall promptly deliver the amount of such Basic Rent or other sums
to MCRLP.

 

(b)                                 A
cashier’s check to the order of MCRLP in the amount of all cash Security
Deposits and any prepaid rents, together with interest required to be paid
thereon. At the election of the Property LLLPs, such amount may be allotted
to MCRLP as a credit against the balance of the Consideration.

 

(c)                                  Utility
charges payable by the Contributors, including, without limitation,
electricity, water charges and sewer charges. If there are meters on the
Properties, the Contributors will cause readings of all said meters to be
performed not more than five (5) days prior to the Closing Date.

 

(d)                                 Amounts
payable under the Service Contracts other than those Service Contracts which
MCRLP has elected not to assume.

 

(e)                                  Real
estate taxes due and payable for the calendar year. If the Closing Date, shall
occur before the tax rate is fixed, the apportionment of real estate taxes
shall be upon the basis of the tax rate for the preceding year applied to the
latest assessed valuation. If subsequent to the Closing Date, real estate taxes
(by reason of change in either assessment or rate or for any other reason) for
any Property should be determined to be higher or lower than those that are
apportioned, a new computation shall be made, and the Contributors agree to pay
MCRLP any increase shown by such recomputation and vice versa.

 

(f)                                    The
value of fuel stored at any of the Properties, at the Contributors’ most recent
cost, including any related excise Tax or similar Taxes, on the basis of a
reading made within ten (10) days prior to the Closing by the Contributors’
supplier.

 

(g)                                 Amounts
incurred or accrued prior to the Closing Date or payable to or with respect to
any New Employee or other personnel (i.e., independent contractors of
the Property LLLPs or an affiliate of the Property LLLPs) for services
performed or otherwise including, without limitation, costs related to accrued
vacation time.

 

13.2.                        Promptly
following request by MCRLP, the Contributors shall deliver to MCRLP a list
additional rent, however characterized, under each Lease, including without
limitation, real estate taxes, electrical charges, utility costs and operating
expenses (collectively, “Additional Rents”)
billed to Tenants for the calendar year in which the Closing occurs (both on a
monthly basis and in the aggregate), the basis for which the monthly amounts
are being billed and the

 

35

 

amounts incurred by the
Contributors on account of the components of Additional Rent for such calendar
year. Upon the reconciliation by MCRLP of the Additional Rents billed to
Tenants, and the amounts actually incurred for such calendar year, Contributors
and MCRLP shall be liable for overpayments of Additional Rents, and shall be
entitled to payments from Tenants, as the case may be, on a pro-rata basis
based upon each party’s period of ownership during such calendar year.

 

13.3.                        All
amounts due and owing under the Existing Loan Documents other than the
outstanding principal balance thereof, including by way of example accrued and
unpaid interest, deferred interest, late charges, default interest, prepayment
fees or penalties, and any and all other fees and charges, shall be paid by the
Contributors on or before the Closing. MCRLP shall reimburse the Contributors
for all escrows held by the Existing Lenders as of the Closing Date and
credited to the new borrower under the Assumed Debt.

 

13.4.                        If, on the
Closing Date, any Property or any part thereof shall be or shall have been
affected by an assessment or assessments which are or may become payable
in annual installments, all the unpaid installments of any such assessment due
and payable on or prior to the Closing Date shall be paid and discharged by the
Contributors on the Closing Date.

 

13.5.                        At the Closing,
the parties shall adjust for certain leasing costs in accordance with Section 9.1.

 

13.6.                        Except as
otherwise provided in this Agreement, the adjustments shall be made in
accordance with the customs and practice in respect of real estate closings in
the State of Maryland.

 

13.7.                        Any errors
in calculations or adjustments shall be corrected or adjusted as soon as
practicable after the Closing.

 

13.8.                        The
credits set forth in Sections 13.5 and 13.6 shall be made against the
Consideration. Any other amounts payable to the Contributors hereunder shall be
treated as distributions made to the Contributors from the relevant Property
LLLP immediately prior to the Closing.

 

13.9.                        At the
Closing, after payment of all obligations and payments required of the Property
LLLPs hereunder, all cash on hand in any accounts of any successor entity to
any Property LLLP shall be distributed to the Contributors.

 

14.                               CONDITIONS
PRECEDENT TO CLOSING.

 

14.1.                        The
obligations of each Contributor and/or Property LLLP, as applicable, to deliver
the Exchange Property and to perform the other covenants and obligations
to be performed by each Contributor on the Closing Date, shall be subject to
the following conditions (all or any of which may be waived, in whole or
in part, by such Contributor):

 

(a)                                  The
representations and warranties made by MCRLP herein shall be true and correct
in all material respects on the Closing Date with the same force and effect as
though such representations and warranties had been made on and as of the Closing
Date;

 

36

 

(b)                                 MCRLP
shall have produced all documents as may be reasonably required or
appropriate to effectuate the consummation of the transactions contemplated by
this Agreement; and

 

(c)                                  MCRLP
shall have executed and delivered or caused to be executed and delivered to
such Contributor all of the documents provided herein for said delivery.

 

14.2.                        The
obligations of MCRLP to accept the Exchange Property and to perform the
other covenants and obligations on the Closing Date shall be subject to the
following conditions (all or any of which may be waived, in whole or in
part, by MCRLP):

 

(a)                                  The
representations and warranties made by each Contributor herein shall be true
and correct in all material respects on the Closing Date with the same force
and effect as though such representations and warranties had been made on and
as of the Closing Date;

 

(b)                                 Each
Contributor shall have performed all covenants and obligations undertaken by
such Contributor herein in all respects and complied with all conditions
required by this Agreement to be complied with or performed by it on or before
the Closing Date;

 

(c)                                  Each
GP Contributor and the Property LLLP in which such GP Contributor is a partner
has delivered or caused to be delivered to each Tenant an Estoppel Certificate
in a form annexed hereto as Schedule 10.1
(See, Exhibit O for form GSA
Estoppel Certificate) and the provisions of Sections 10.2 and 10.3 shall be
met;

 

(d)                                 Each
Contributor and the other Contributors collectively shall assign and transfer
the Transferred Interests, if applicable, free from all encumbrances, security
interests and liens whatsoever, representing, in the aggregate, all of the
partnership interests in each Property LLLP;

 

(e)                                  As
of the Closing Date, the Properties shall be free from all encumbrances,
security interests and liens whatsoever, other than Assumed Debt and Permitted
Encumbrances;

 

(f)                                    The
Title Company shall have issued a standard ALTA non-imputation endorsement;

 

(g)                                 The
Contributors shall have produced all documents as may be reasonably
required or appropriate to effectuate the consummation of the transactions
contemplated by this Agreement;

 

(h)                                 The
Rent Roll delivered to MCRLP at Closing shall be substantially the same as the
Rent Roll delivered to MCRLP during the Inspection Period, other than changes
in the ordinary course;

 

(i)                                     Subject
to the rights of either party to extend the Closing Date pursuant to the terms
of Section 12.1 above, on or prior to the Closing Date, as the same may be
extended as aforesaid, the Contributors and MCRLP have obtained (i) the
consent of the Assumed Debt Lenders to MCRLP’s assumption of the Assumed Debt
and (ii) the release of any Guarantors for matters first arising from and
after the Closing Date; and

 

37

 

(j)                                     Each
Contributor shall have executed and delivered to MCRLP all of the documents provided for herein for said
delivery.

 

14.3.                        (a)                                  If
any condition precedent to Closing has not been satisfied on or before the
Closing Date, then the party whose conditions to Closing have not been
satisfied (the “Unsatisfied Party”)
shall give notice to the other party of the condition or conditions that the
Unsatisfied Party asserts are not satisfied. 
If the conditions specified in such notice are not satisfied within ten
(10) business days after receipt of such notice, then the party whose condition
precedent was not satisfied may terminate this Agreement, whereupon neither
party shall have any further rights or obligations hereunder (other than any
obligations of either party that expressly survive termination) and, unless the
failure was due to MCRLP’s default, the Deposit shall be returned to MCRLP.  Notwithstanding
anything contained herein to the contrary, if any of the conditions precedent
to MCRLP’s obligation to close, as set forth in Section 14.2, are not satisfied
within the ten (10) business day period specified above and the same are
reasonably susceptible of being cured, either party shall have the right to
extend such period in which to satisfy the unsatisfied condition for a period
of up to sixty (60) additional days, by giving notice thereof to MCRLP within
such ten (10) business day period. 
Further, either party shall have the right to waive the unsatisfied
condition or conditions, by notice to the other party within five (5) business
days after expiration of the applicable satisfaction period, without
satisfaction having occurred, in which event the Closing Date shall be the date
that is five (5) business days after receipt of such waiver notice.  If necessary, the Closing Date shall be
extended for the duration of any period of time required to satisfy the
condition, but in no event shall the Closing Date be extended beyond Outside
Closing Date.

 

(b)                                 If
the transactions contemplated by this Agreement close, the parties shall be
deemed to have waived any and all unmet or unsatisfied conditions, provided
that such waiver shall not be deemed a waiver of any breach by either party of
any of its covenants, representations and warranties hereunder.

 

15.                                 ASSIGNMENT.

 

15.1.                        This
Agreement may not be assigned by MCRLP to any other entity; provided, however,
that at Closing, MCRLP shall have the right to cause each Contributor to direct
the assignment of the Exchange Property and other closing instruments to any
entity in which MCRLP directly or indirectly owns one hundred percent (100%) of
the equity interests and which is treated for federal income tax purposes as
disregarded as an entity separate from MCRLP.

 

16.                                 BROKER.

 

16.1.                        Each
Property LLLP represents and warrants to MCRLP that the Property LLLPs have not
contacted or entered into any agreement with any real estate broker, agent,
finder, or any party in connection wit this transaction, except for Eastdil
Realty Company, LLC (“Contributor’s Broker”)
and that the Contributors have not taken any action which would result in any
real estate broker’s or finder’s fees or commissions being due and payable to
any party other than the Contributor’s Broker with respect to the Transaction
contemplated hereby.  The Contributors
will be solely responsible for the payment of the Contributor’s Broker’s

 

38

 

commission in accordance with the provisions
of a separate agreement.  MCRLP hereby
represents and warrants to the Contributors that MCRLP has not contracted or
entered into any agreement with any real estate broker, agent, finder, or any
party in connection with this transaction and that MCRLP has not taken any
action which would result in any real estate brokerage or finder’s fees or
commissions being due or payable to any party with respect to the transaction
contemplated hereby.

 

16.2.                        Each
Property LLLP and MCRLP hereby indemnifies and agrees to hold each other
harmless from any loss, liability, damage, cost, or expense (including, without
limitation, reasonable attorneys’ fees) paid or incurred by the other party by
reason of a breach of the representation and warranty made by such party under
this Article 16.  Notwithstanding
anything to the contrary contained in this Agreement, the indemnities set forth
in this Section 16 shall survive the Closing or earlier termination of this
Agreement for a period of two (2) years.

 

16.3.                        It
is understood and agreed that from and after the Closing Date, all obligations
and liabilities of the Property LLLPs under Sections 16.1 and 16.2 hereof shall
be enforceable against the GP Contributors. 
The GP Contributors shall be personally liable for such obligations and
liabilities and such personal liability shall not be limited to recovery
against the Escrow Pool provided in Section 25.4 hereof, nor shall such
personal liability be subject to the limitations set forth in Section 25.6
hereof.

 

17.                                 CASUALTY LOSS.

 

17.1.                        If,
prior to the Closing, all or any portion of any Property is damaged by fire or
any other cause whatsoever, the Contributors shall promptly give MCRLP written
notice of such damage.  Risk of loss for
damage to all or any part of the Property by fire or other casualty from the
date hereof through the Closing Date will be on the Contributors.

 

17.2.                        If
the cost for repairing such damage is less than TWO MILLION DOLLARS
($2,000,000) (as determined by the Contributors’ independent insurer), then
MCRLP shall have the right at Closing to receive the amount of the deductible
plus all insurance proceeds received by the Contributors as a result of such
loss, or an assignment of the Contributors’ rights to such insurance proceeds,
and this Agreement shall continue in full force and effect with no reduction in
the Consideration, and the Contributors shall have no further liability or
obligation to repair such damage or to replace the Property.  If the loss is uninsured, then MCRLP shall
receive a credit at Closing in the amount of the uninsured loss.

 

17.3.                        If
the cost for repairing such damage is greater than TWO MILLION DOLLARS
($2,000,000) (as determined by MCRLP’s independent insurer), then MCRLP shall
have the option, exercisable by written notice delivered to the Contributors
within five (5) business days after the Contributors’ notice of damage to
MCRLP, either (i) to receive the amount of the deductible plus all insurance
proceeds received by the Contributors as a result of such loss, or an
assignment of the Contributors’ rights to such insurance proceeds, and this
Agreement shall continue in full force and effect with no reduction in the
Consideration, and the Contributors shall have no further liability or
obligation to repair such damage or to replace the Property; or (ii) to
terminate this Agreement.  If MCRLP
elects to terminate this Agreement, MCRLP shall give notice thereof to the
Contributors and the Escrow Agent, the Deposit shall be promptly

 

39

 

returned to MCRLP, and thereafter neither
party will have any further rights or obligations hereunder, except for any
obligations that expressly survive termination. 
If MCRLP fails to notify the Contributors within such five (5) business
day period of MCRLP’s intention to terminate this Agreement, then MCRLP shall
be deemed to have elected option (i), and MCRLP and the Contributors shall
proceed to Closing in accordance with the terms and conditions of this
Agreement.

 

18.                                 CONDEMNATION.

 

In the event of a material taking (as defined in this Section 18),
MCRLP shall have the right, at its sole option, to either (a) terminate this
Agreement by giving the Contributors written notice to such effect within
twenty (20) days after its receipt of written notification of any such
occurrence, or (b) accept title to the remainder of the Properties without
reduction of any consideration given hereunder and eliminate the affected
property in its entirety from this transaction. 
Should MCRLP so terminate this Agreement in accordance with this
Section, neither party shall have any further liability or obligations to the
other.  In the event MCRLP shall accept
title to the remainder of the affected property, the Contributors shall,
subject to the rights of the holder of any existing mortgage, assign all
proceeds of such taking to MCRLP, and same shall be MCRLP’s sole property, and
MCRLP shall have the sole right to settle any claim in connection with any
Property.  The term “material taking”
shall be defined to mean the institution of any proceedings, judicial,
administrative or otherwise which would (a) reasonably be expected to reduce
the aggregate useable square footage of any portion of a any building or reduce
the aggregate size of any parcel of land by more than ten percent (10%), (b)
entitle a Tenant to terminate its Lease, (c) cause access to any Property to be
taken or materially diminished (i.e., such taking does not provide
access to a publicly dedicated street or is an impediment to traffic flow from
and to any Property), or (d) result in parking no longer being in compliance
with applicable zoning laws and the Contributors are unable to remedy such
noncompliance prior to Closing.

 

19.                                 TRANSFER RESTRICTIONS; RIGHT OF FIRST REFUSAL.

 

19.1.                        (a)                                  Except as explicitly set forth herein, each
Contributor agrees that the Contributor Units may not be sold, assigned,
transferred or in any manner disposed of (collectively, “Transferred”) or redeemed for shares of
Common Stock until after the first anniversary of the Closing Date (the “Anniversary”).

 

(b)                                 The Contributor Units may be pledged or encumbered at
any time but only upon thirty (30) days prior written notice to MCRLP, provided
that the secured party agrees to enter into such agreements with the
Contributor and MCRLP as MCRLP reasonably requests in connection with the
pledge or encumbrance.  Any foreclosure
or transfer by such a secured party shall be considered a Transfer, which may
not occur until the Anniversary and shall be subject to the provisions of
Sections 19.1(a) and 19.2 hereof. 
Thereafter, the Contributor Units and/or shares of Common Stock
underlying the Contributor Units (the “Underlying
Shares”) may only be Transferred (i) privately in accordance with
the terms of the OP Agreement and this Article 19, or (ii) in the form of
Underlying Shares only, publicly, including pursuant to Rule 144 under the
Securities Act, to the extent available (subject to the restrictions of the
Securities Act and the rules and regulations promulgated thereunder).

 

40

 

19.2.                        (a)                                  If
Contributor or any permitted transferee thereof (including any Transfer
pursuant to a foreclosure or transfer by a secured party as contemplated by
Section 19.1(b) above (a “Selling Contributor”)
receives a bona fide written offer to purchase part or all of its/his
Contributor Units or Underlying Shares in a privately negotiated transaction
which it/he desires to accept, such Contributor shall not sell, transfer, or
otherwise dispose of (the “Proposed Disposition”) such Units or Underlying
Shares (the “Disposition Securities”)
to a third party (the “Proposed Purchaser”),
unless, prior to such Proposed Disposition, such Contributor shall have
promptly reduced the terms and conditions, if any, of the Proposed Disposition
to a reasonably detailed writing and shall have delivered written notice (the “Disposition Notice”) of such Proposed
Disposition to MCRLP.  All offers to
purchase Contributor Units or Underlying Shares must be for cash.  The Disposition Notice shall contain an
irrevocable offer to sell all, but not less than all, the Disposition
Securities to the Proposed Purchaser upon the same terms (including price) and
subject to the same conditions, if any, as those contemplated by the Proposed
Disposition, and shall be accompanied by a true and correct copy of the
agreement embodying the terms and conditions, if any, of the Proposed
Disposition (which shall identify the Proposed Purchaser, the Disposition
Securities, the consideration and method of payment contemplated by the
Proposed Disposition and all other terms and conditions, if any, of the
Proposed Disposition).

 

(b)                                 Any
such Proposed Purchaser must be an “accredited investor” (as such term is
defined in Rule 501(a) of Regulation D under the Securities Act) at the time
that any Disposition Securities are transferred.

 

(c)                                  MCRLP
shall have the irrevocable right and option (the “Purchase Option”), to accept such irrevocable offer to
purchase the Disposition Securities which are subject to the Proposed
Disposition by delivering to the Selling Contributor written notice of the
exercise of its Purchase Option with respect to the Disposition Securities (an “Exercise Notice”) within five (5) business
days after receipt of the Disposition Notice (the “Notice Period”).

 

(d)                                 If
MCRLP shall have timely delivered its Exercise Notice with respect to the
Disposition Securities, all certificates for the Disposition Securities shall
be delivered to MCRLP at a closing to be held on the later of the date on which
the Proposed Disposition, if accepted, would close or five (5) business days
after such Exercise Notice is given, at the offices of Pryor Cashman Sherman
& Flynn LLP located at 410 Park Avenue, New York, New York 10022, Attn:
Blake Hornick.  At such closing, MCRLP
shall deliver to the Selling Contributor in immediately available funds the
amount of the purchase price set forth in the Disposition Notice due against
the simultaneous delivery of certificates representing the Disposition
Securities so disposed of, duly endorsed in blank or accompanied by a stock
power or powers duly endorsed in blank, and in proper form for transfer,
together with any necessary stock-transfer stamps, and such Disposition
Securities shall be delivered free and clear of all liens, security interests
and encumbrances whatsoever.

 

(e)                                  If
MCRLP (i) notifies the Selling Contributor that it is not exercising its
Purchase Option prior to the expiration of the Notice Period or (ii) does not
deliver an Exercise Notice prior to the expiration of the Notice Period, MCRLP
shall be deemed to have waived its Purchase Option in which event the Selling
Contributor may sell the Disposition Securities to the Proposed Purchaser for a
period of thirty (30) days after the expiration of the Notice Period (in

 

41

 

which event the transferee shall take free
and clear of the restrictions set forth in this Article 19); provided, however,
that such Disposition Securities are sold to the Proposed Purchaser at a price
not less than that contained in the Disposition Notice and on terms and
conditions, if any, not more favorable to the Proposed Purchaser than those
contained in the Disposition Notice.  If
Contributor wishes to sell all or any part of the Disposition Securities on
terms more favorable to the Proposed Purchaser than those set forth in the Disposition
Notice or does not sell such Disposition Securities on the terms and conditions
contained in the Disposition Notice within the aforementioned thirty (30) day
period, it/he shall again be obligated to make new offers to the Proposed
Purchaser, in accordance with this Section 19, before it/he shall be permitted
to consummate a Proposed Disposition of the Disposition Securities, or any part
thereof, in a privately negotiated transaction.

 

19.3.                        Notwithstanding any other limitations or requirements
included in this Section 19, each Contributor shall have the right to (i)
Transfer all or any portion of such Contributor’s Contributor Units to (A) a
spouse, sibling, parent or lineal descendant of such Contributor (each a “Family Member”) or (B) to a trust,
partnership, limited liability company or other entity for the benefit, or
directly or indirectly owned by, as the case may be, of the Contributor or any
Family Member, on a combination of the foregoing and (ii) pledge or encumber
its Contributor Units without complying with Section 19.2, as contemplated by
Section 19.1(b) hereof provided that:

 

(a)                                  any
lender shall subsequently comply with the provisions of Sections 19.1(a) and
19.2 in connection with any transfer or other disposition following a collateral
sale of such Contributor Units;

 

(b)                                 the
transferring or assigning Contributor shall notify MCRLP, in writing, thirty
(30) days in advance of such Transfer and provide such information as MCRLP
shall reasonably request;

 

(c)                                  the
transferee shall (i) execute such documents and instruments as MCRLP may
reasonably request as necessary or appropriate, including without limitation, a
joinder agreement whereby the transferee agrees to be bound by the terms and
conditions of this Agreement and the OP Agreement and (ii) provide MCRLP with
written assurances, in form and substance satisfactory to MCRLP and its
counsel, that such transferee is an “accredited investor” (as such term is
defined in Rule 501(a) of Regulation D under the Securities Act); and

 

(d)                                 any
transferee receiving Units shall be subject to the restrictions of Sections
19.1(a) and 19.2 hereof.

 

19.4.                        Notwithstanding
any other limitations or requirements included in this Section 19, in the
event that, pursuant to Section 1.2, one or more Properties is transferred
directly to MCRLP by a Property LLLP, any such Property LLLP shall be permitted
to distribute to its partners, in liquidation or otherwise any and all Units
received pursuant to such transfer.  Any
Units distributed to a partner pursuant to this Section 19.4 may
subsequently be transferred by such partner pursuant to Section 19.3.

 

42

 

20.                                 REGISTRATION RIGHTS.

 

20.1.                        On
or about one (1) year from the later of (i) the Closing Date or (ii) the Outside
Closing Date (the “Anniversary Date”),
the Company shall, at its expense, register with the Securities and Exchange
Commission, on a Registration Statement on Form S-3, at its election and in its
sole discretion either (i) the initial issuance of the shares of the Company’s
Common Stock into which the Units may be converted on or after the Anniversary
Date, as a primary offering on a shelf registration statement pursuant to Rule
415 under the Securities Act, or (ii) the public resale of the Company’s Common
Stock into which the Units may be converted on or after the Anniversary Date,
as a secondary offering on a resale shelf registration statement pursuant to
Rule 415 under the Securities Act.  If
the Company elects option (ii), it shall, at its expense, use its best efforts
to maintain the effectiveness of such shelf registration statement until the
earlier of (i) such time as when all of the shares of Common Stock into which
the Units may be converted have been disposed of or (ii) two (2) years after the
redemption of all of the Units into Common Stock.  Notwithstanding anything in this Section 20.1
to the contrary, if at the Anniversary Date, the Company determines, in the
good faith judgment of its Board of Directors, with the advice of counsel, that
the filing of either such shelf registration statement would require the
disclosure of non-public material information the disclosure of which would
have a material adverse effect on MCRLP or the Company, or would otherwise
adversely affect a material financing, acquisition, disposition, merger or
other significant transaction, the Company shall deliver a certificate to such
effect signed by its Chief Executive Officer and President, to the holders of
the Units, and the Company shall not be required to effect a registration
pursuant to this Section 20.1 until thirty (30) days after the date upon which
such material information is disclosed to the public or ceases to be material.

 

21.                                 DEBT MAINTENANCE.

 

21.1.                        The
following terms shall have the following meanings, as used in this Agreement:

 

“Accounting Firm” has the meaning set
forth in Section 22.7 below.

 

“Contributor Debt Amount” means,
for each Contributor, the amount set forth opposite such Contributor’s name on Schedule 21.1 annexed hereto (which
amount shall be determined immediately prior to Closing), and collectively,
with respect to all of the Contributors, an amount equal to the Assumed Debt
Amount.

 

“Contributor Guarantee” has the meaning
set forth in Section 21.2(a).

 

“Contributor Indemnity” means, with
respect to each Contributor, the guarantee of any Qualified Indebtedness or
indemnity of Second Tier Debt made by such Contributor hereunder, and “Contributor Indemnities”means, collectively, all such
guarantees or indemnities.

 

“Dissolution Proceeds” means
amounts received by creditors in respect of unsecured Partnership Debt upon
MCRLP’s dissolution and liquidation.

 

“First Tier Debt” means the “bottom
portion” of unsecured Partnership Debt, such that First Tier Debt will be (i)
the last portion of such Partnership Debt to be reduced or eliminated by

 

43

 

refinancings, pay downs or pay offs of Partnership
Debt in the ordinary course of business; and (ii) the first portion of the
Partnership Debt subject to Indemnities to be discharged by any Dissolution
Proceeds.

 

“First Tier Indemnity” or “First Tier Indemnities” means a guarantee or indemnity of
First Tier Debt.

 

“Indemnities” means, at any
time, collectively, all of the First Tier Indemnities, the Second Tier
Indemnities, and the Third Tier Indemnities then in effect.

 

“Make-Whole Payment” has the meaning set
forth in Section 22.4 below.

 

“Partnership Debt” means any
debt (within the meaning of Section 752 of the Code) that MCRLP and/or any of
its subsidiaries or affiliates have incurred, and may hereafter incur, which
may or may not be secured in whole or in part by property owned directly or
indirectly by MCRLP and which may or may not be guaranteed by MCRLP and/or any
subsidiary or affiliate of MCRLP that owns or becomes the owner of property.

 

“Qualified Indebtedness” means, with
respect to each real property asset, indebtedness provided by any lender and
secured by such real property asset of MCRLP or any of its subsidiaries or
affiliates that, at the time incurred, did not exceed seventy percent (70%) of
the fair market value of the real property asset at such time (as determined in
good faith by MCRLP).

 

“Refinanced Debt” has the meaning set
forth in Section 21.2(a).

 

“Representatives” means Albert H. Small,
Theodore N. Lerner, Ralph Ochsman, Richard Perkins, Gudelsky Brothers, a
general partnership, or any successors thereto. 
Any notice to the Representatives required under this Agreement shall be
delivered to such Representatives in accordance with the provisions of Article
26, and any notice so delivered shall be deemed notice to each
Contributor.  The Contributors’ counsel
(as designated in Article 26 of this Agreement) shall promptly provide written
notice to MCRLP of the name of any successor representative(s) and each such
successor representative’s notice address and telephone and facsimile numbers.

 

“Restricted Period” has the meaning set
forth in Section 22.1.

 

“Second Tier Debt” means the “middle”
portion of unsecured Partnership Debt, such that Second Tier Debt will be: (i)
the portion of such Partnership Debt that will be reduced or eliminated by
refinancings, pay downs or pay offs of Partnership Debt in the ordinary course
of business only after Third Tier Debt has been eliminated, but prior to any
reduction of First Tier Debt; and (ii) the portion of the Partnership Debt
subject to Indemnities that will be discharged by Dissolution Proceeds after
all First Tier Debt has been discharged by Dissolution Proceeds.

 

“Second Tier Indemnity” or “Second Tier Indemnities” means an indemnity or guarantee of
Second Tier Debt.  MCRLP and/or the
Company will be able to designate a guarantee or indemnity as a Second Tier
Indemnity if the guarantee or indemnity arises in

 

44

 

connection with a significant transaction (as
determined in accordance with MCRLP and/or the Company policy), or a
transaction involving more than one property.

 

“Third Tier Debt” means the “top”
portion of unsecured Partnership Debt, such that Third Tier Debt will be (i)
the first portion of such Partnership Debt to be reduced or eliminated by
refinancings, pay downs or pay offs of Partnership Debt in the ordinary course
of business; and (ii) the last portion of Partnership Debt that is a subject of
Indemnities to be discharged by any Dissolution Proceeds.

 

“Third Tier Indemnity” or “Third Tier Indemnities” means an indemnity or guarantee of
Third Tier Debt. The Contributor Indemnities constitute Third Tier Indemnities.

 

Solely for purposes of this Article 21 and Article 22, (i) a “Contributor” includes a Contributor as otherwise defined for
purposes of this Agreement, but also any Property LLLP which contributes a
Property to MCRLP pursuant to Section 1.2, and, subject to Section 21.5, any
person to whom a Contributor (as defined in this paragraph) may transfer a
Contributor Unit pursuant to Section 19.3 or Section 19.4, and (ii) for
purposes of Section 22, “Property”
includes any Exchange Property.

 

22.2.                        (a)                                  During
the Restricted Period (as hereinafter defined), MCRLP shall make available and
permit each Contributor to guarantee the “bottom portion” of the Assumed Debt
up to an amount equal to the Contributor’s Contributor Debt Amount.  If MCRLP shall refinance any Assumed Debt
guaranteed by the Contributors (“Refinanced
Debt” and together with Assumed Debt “Capital Office Debt”) and such Refinanced Debt shall be
Qualified Indebtedness, then, during the Restricted Period, MCRLP shall permit
each Contributor to guarantee the “bottom portion” of such Refinanced Debt up
to an amount equal to the Contributor’s Contributor Debt Amount.  In the event that Mack-Cali shall, in its
sole discretion, at any time repay, in whole or in part, any Capital Office
Debt or other Partnership Debt that one or more Contributors guaranteed or
indemnified and, immediately after such repayment, the amount of the remaining
outstanding balance of such debt, if any, would be less than the amount
guaranteed or indemnified or the debt remaining, if any, would not constitute
Qualified Indebtedness, then, during the Restricted Period, MCRLP shall at its
option and in its sole and absolute discretion permit each Contributor either
to: (i) guarantee the “bottom portion” of other secured Partnership Debt that
is Qualified Indebtedness up to an amount equal to the Contributor’s
Contributor Debt Amount; provided, however, that the aggregate amount
guaranteed by the Contributors with respect to such Partnership Debt does not
exceed one-third of the fair market value of the property securing such
Partnership Debt (as determined in good faith by MCRLP as of the time such
guarantee is entered into) (a “Contributor
Guarantee”); or (ii) so long as the condition in the next sentence
below is satisfied, provide a Second Tier Indemnity of MCRLP and/or the Company
for an amount of Second Tier Debt up to the Contributor’s Contributor Debt
Amount.  Notwithstanding anything herein
to the contrary, MCRLP may elect in accordance with this Section 21.2(a) or
Section 21.2(b) to permit a Contributor to provide a Second Tier Indemnity only
if at the time such Second Tier Indemnity is entered into, and at any
subsequent time any First or Second Tier Indemnity is entered into, (i) total
unsecured Partnership Debt shall not exceed seventy percent (70%) of the excess
of the aggregate fair market value of all of the assets of MCRLP (as determined
in good faith by MCRLP), over the aggregate amount of any Partnership Debt
secured by such assets, and (ii) the

 

45

 

aggregate of all First Tier Indemnities and
Second Tier Indemnities shall not exceed thirty percent (30%) of the excess of
the aggregate fair market value of the assets of MCRLP (as determined in good
faith by MCRLP), over the aggregate amount of any Partnership Debt secured by
such assets; and provided further that MCRLP may, in its sole discretion, (i)
require a Contributor which has provided a Contributor Guarantee or a Second
Tier Indemnity, as the case may be, to release all or a portion of such Contributor
Guarantee or Second Tier Indemnity, provided that MCRLP immediately permits
such Contributor to provide a Second Tier Indemnity meeting the requirements of
this Section 21.2(a) or Contributor Guarantee, respectively, in the same amount
of such Contributor Guarantee or Second Tier Indemnity being released.  In no event shall the aggregate amount of (i)
Partnership Debt permitted to be guaranteed by a Contributor pursuant to
Section 21.2(a) and (ii) the amount of any Second Tier Indemnity of such Contributor
exceed, at any single time, such Contributor’s Contributor Debt Amount.

 

(b)                                 Notwithstanding
anything herein to the contrary, the Contributors acknowledge and agree that
MCRLP may at any time and at its option elect to require that: (i) any guarantee
by a Contributor of any Capital Office Debt, upon repayment, in whole or in
part, of the Capitol Office Debt as described in Section 21.2(a), be
substituted for a Contributor Guarantee up to the Contributor’s Contributor
Debt Amount; (ii) any Contributor Guarantee be substituted (at MCRLP’s option)
for either (A) any other Contributor Guarantee up to the Contributor’s
Contributor Debt Amount or (B) a Second Tier Indemnity meeting the requirements
of Section 21.2(a) up to the Contributor’s Contributor Debt Amount; or (iii) a
Second Tier Indemnity meeting the requirements of Section 21.2(a) be
substituted for a Contributor Guarantee up to the Contributor’s Contributor
Debt Amount; provided, however, that

 

(i)                                     if
either (a) a Contributor guarantees Refinanced Debt or provides a Contributor
Guarantee, in either case pursuant to Section 21.2(a), or (b) MCRLP elects to
substitute either (A) a Contributor Guarantee or (B) Second Tier Indemnity,
with a Contributor Guarantee pursuant to this Section 21.2(b), MCRLP shall
provide the Representatives with a side letter in the form of Exhibit U;

 

(ii)                                  if
(a) a Contributor provides a Second Tier Indemnity pursuant to Section 21.2(a),
or (b) MCRLP elects to substitute a Contributor Guarantee with a Second Tier
Indemnity pursuant to this Section 21.2(b), MCRLP and the Company shall provide
the Representatives with a letter in the form of Exhibit V; or

 

(iii)                               if
any First or Second Tier Indemnity is entered into after the date of this
Agreement, MCRLP and the Company shall provide the Representatives with a
letter in the form of Exhibit W.  Any letter required to be provided pursuant
to this Section 21.2(b) shall be provided to the Representatives, and shall be
effective, on the date any such First or Second Tier Indemnity is entered into
or substituted.

 

(c)                                  If
a Contributor shall guarantee, or provide an indemnity with respect to,
Partnership Debt as described in this Section 21.2, MCRLP and/or the Company
shall permit such Contributor to execute a guaranty agreement substantially in
the form of the guaranty agreement that has been provided by Contributors’ tax
counsel (a copy of such form guaranty agreement is annexed hereto as Exhibit S), or MCRLP and/or the Company
and such Contributor agree to enter into an indemnification agreement
substantially in the form annexed

 

46

 

hereto as Exhibit K.  If, in
accordance with Sections 21.2(a) or 21.2(b), MCRLP intends to (i) refinance any
Assumed Debt that one or more Contributors has guaranteed with Refinanced Debt
or (ii) repay, in whole or in part, or substitute any Capital Office Debt or
other Partnership Debt that one or more Contributors has guaranteed or
indemnified and, immediately thereafter, the amount of the remaining outstanding
balance of such debt would be less than the amount guaranteed or indemnified or
would not constitute Qualified Indebtedness, then MCRLP shall provide written
notice to the Representatives, together with an opportunity for each such
Contributor to guarantee or indemnify other Partnership Debt in accordance with
Sections 21.2(a) and 21.2(b).  The notice
described in the immediately preceding sentence shall be deemed to have been
satisfied so long as MCRLP delivers such notice to the Representatives at least
thirty (30) calendar days prior to any such refinancing of Assumed Debt or
repayment, in whole or in part, of any Partnership Debt.  Such written notice shall be delivered by
MCRLP to the Representatives and shall describe the Capital Office Debt or
Partnership Debt which shall be subject to a guarantee, if applicable, and
shall contain the form of guarantee agreement or indemnification agreement, as
applicable, to be executed by the Contributors and returned to MCRLP within
such thirty (30) day period ending on the date of refinancing or repayment of
Capital Office Debt or Partnership Debt (the “Consent
Period”).  Any Contributor
that has received such notice and fails to execute and deliver such guarantee
or indemnity to MCRLP within the Consent Period (a “Contributor Default”) shall be deemed to have elected not to
execute such indemnity or guarantee and shall hold MCRLP harmless from any and
all damages resulting therefrom, including, without limitation, any taxable
income or gain that such Contributor shall be required to recognize as a result
of a reduction in liabilities that are allocated to such Contributor under
Section 752 of the Code and the Treasury Regulations thereunder.

 

(d)                                 In
connection with the guarantee of any Partnership Debt, MCRLP and/or the Company
and each Contributor agree that such guarantee agreement shall satisfy the
following conditions:  (i) the executed
guarantee agreement must be delivered to the lender and (ii) the execution of
the guarantee by the Contributors must be acknowledged by the lender as an
inducement to it to make a new loan, to continue an existing loan (which
continuation is not otherwise required), or the grant of a material consent
under an existing loan (which consent is not otherwise required to be granted)
or, alternatively, the guarantee must be with respect to a loan that, under the
terms thereof, (A) is governed by New York law and either the loan is secured
by property located in New York, the lender has a significant place of business
in New York (with any bona fide branch or office of the lender through which
the loan is made, negotiated, or administered being deemed a “significant place
of business” for the purposes hereof), or the lender obtained in connection
with such loan an opinion of counsel to the effect that such provisions
regarding New York law are enforceable, or (B) is governed by the laws of
another state that has a statutory provision or applicable controlling judicial
decisions that are comparable to Sections 5-1103 and 5-1401 of the New York
General Obligations Law and the conditions set forth in clause (A) with respect
to New York would be satisfied with respect to such other state.  Notwithstanding anything herein to the
contrary and provided that the conditions in the immediately preceding sentence
have been satisfied, the Contributors agree that if it is determined by any
court or Taxing authority that the guarantee shall not be respected neither
MCRLP nor the Company shall have any obligation (x) for any damages, including,
without limitation, any adverse tax consequences, incurred by any Contributor
or (y) to make a Make-Whole Payment.

 

47

 

(e)                                  Each
Contributor shall, if and to the extent reasonably requested by the Company
from time to time, establish to the reasonable satisfaction of the Company that
the guarantee of the “bottom portion” of the Assumed Debt, Refinanced Debt or
any other Partnership Debt or the indemnification of Second Tier Debt is
necessary to prevent such Contributor from recognizing any income or gain as a
result of a reduction in liabilities that are allocated to such Contributor
under Section 752 of the Code and the Treasury Regulations thereunder.

 

(f)                                      Except in the event of a Contributor Default,
if, at any time during the Restricted Period, MCRLP shall fail to make
available to or permit any Contributor to guarantee or indemnify any
Partnership Debt described in Section 21.2(a), MCRLP shall be liable to such
Contributor to the extent that such Contributor recognizes taxable income or
gain as a result of MCRLP’s breach of its obligations under Section 21.2 and
MCRLP shall pay to such Contributor an amount equal to the Make-Whole Payment
as determined in accordance with Section 22.4.

 

(g)                                   Upon the expiration of the Restricted Period,
and notwithstanding anything herein to the contrary, (x) the Contributors shall
have no right to guarantee or indemnify MCRLP and/or the Company for any
Partnership Debt and (y) none of MCRLP, the Company and/or any of their subsidiaries
or affiliates shall be under any obligation (either express or implied) to have
or maintain (or cause to have or maintain), at any such time, any Partnership
Debt available for Contributor Indemnities, and MCRLP and/or the Company
reserves the right at any such time and in their sole discretion to refinance,
pay off or pay down (or cause to be refinanced, paid off or paid down) any
portion of the Partnership Debt, even if such refinancing, pay off or pay down
results in the Contributor and/or Unit Holders being required to recognize
income or gain for tax purposes.

 

21.3.                        Each
Contributor hereby acknowledges and agrees as follows:

 

(a)                                  Subject
only to Section 21.2, MCRLP and/or the Company (in their sole discretion)
reserve the right, at any time in the future, to make additional commitments,
in connection with the issuance of additional Units in exchange for other
properties in tax deferred transactions, to permit guarantees or indemnities of
Partnership Debt which are designated by MCRLP and/or the Company (in their
sole discretion) as: (i) First Tier Indemnities, in which case such guarantees
or indemnities would be pari passu in all respects with any other then
outstanding First Tier Indemnities; (ii) Second Tier Indemnities, in which case
such guarantees or indemnities would be pari passu in all respects with any
other then outstanding Second Tier Indemnities; and (iii) Third Tier
Indemnities, in which case such guarantees or indemnities would be pari passu
in all respects with any other then outstanding Third Tier Indemnities
(including any then outstanding Contributor Indemnities).  Thus, subject only to its obligations under
Section 21.2, MCRLP and/or the Company may, at any time and in their sole
discretion permit new partners of MCRLP to guarantee a portion or portions of
Partnership Debt or indemnify MCRLP and/or the Company for a portion or
portions of the Partnership Debt, and to designate the portion or portions of
the Partnership Debt (e.g., First Tier Debt, Second Tier Debt, Third
Tier Debt) which will be guaranteed or for which MCRLP and/or the Company will
be indemnified, thereby making no Partnership Debt available for any
Contributor to guarantee or indemnify, or altering the priority or level of
then available Partnership Debt, in terms of risk and amount, that any
Contributor may guarantee or indemnify.

 

48

 

(b)                                 MCRLP
and/or the Company have prior and present commitments to permit other persons
to guarantee or indemnify MCRLP and/or the Company for portions of the
Partnership Debt including, but not limited to, First Tier Debt in the amount
of approximately $508,000,000 (which, subject to Section 21.2, may be increased
or decreased from time to time in the Company’s discretion for past, present
and future commitments).  The amount of
First Tier Debt, at any time, shall equal the amount of the outstanding First
Tier Indemnities at such time (which may be increased or decreased from time to
time in the Company’s discretion for past, present or future commitments).  The amount of Second Tier Debt, at any time,
shall equal the amount of the outstanding Second Tier Indemnities at such time,
(which may be increased or decreased from time to time in the Company’s
discretion for past, present and future commitments).  The amount of Third Tier Debt, at any time,
shall equal the amount of the outstanding Third Tier Indemnities at such time,
(which may be increased or decreased from time to time in the Company’s
discretion for past, present or future commitments).  The amount of First Tier Indemnities, Second
Tier Indemnities and Third Tier Indemnities (and thus the amount of First Tier
Debt, Second Tier Debt and Third Tier Debt), at any time, is, subject to Section
21.2, subject to change.

 

21.4.                        The
parties hereto hereby acknowledge that the provisions of this Article 21 are
intended to reflect the policy established by MCRLP and the Company regarding
guarantees and indemnities (and their relative priorities) with respect to
Partnership Debt.  In connection with
this policy, each Contributor hereby acknowledges and agrees as follows:

 

(a)                                  In
the event that MCRLP, the Company and/or any of their subsidiaries or
affiliates, in the ordinary course of business, refinances, pays down or pays
off any portion of unsecured Partnership Debt (which, subject to Section 21.2,
MCRLP, the Company and/or any of their subsidiaries or affiliates may do at any
time and in their sole discretion), such that the total outstanding unsecured
Partnership Debt is, at any time, less than the aggregate amount of the then
outstanding guarantees and indemnities, the then outstanding Second Tier
Indemnities (including the Contributor Indemnities) will be the second
guarantees and indemnities (i.e., after the Third Tier Indemnities and before
the First Tier Indemnities) to be reduced (and possibly eliminated), subject to
Section 21.2, pari passu.  At any time,
and subject to Section 21.2, only the amount of outstanding unsecured
Partnership Debt in excess of the sum of the then outstanding First Tier
Indemnities will be available for the Second Tier Indemnities. In the event
that there is a reduction (and possible elimination) of Second Tier Indemnities
(including the Contributor Indemnities) during the Restricted Period, then
unless MCRLP makes available to the affected Contributor the opportunity to
enter into a Contributor Guarantee meeting the requirements of Section 21.2(a)
and 21.2(b), MCRLP shall be in violation of Section 21.2.

 

(b)                                 Upon
the dissolution and liquidation of MCRLP, any Dissolution Proceeds will be
deemed to discharge, first, the First Tier Debt, second the Second Tier Debt,
and then the Third Tier Debt.  As a
result, the Second Tier Indemnities (including the Contributor Indemnities)
will be the second guarantees and indemnities (i.e., after the First
Tier Indemnities and before the Third Tier Indemnities) to be discharged upon
the realization by creditors of Dissolution Proceeds, such that, if, upon the
dissolution and liquidation of MCRLP, total Dissolution Proceeds are less than
the then total outstanding Partnership Debt subject to Indemnities, those
persons then having Second Tier Indemnity obligations (including the
Contributors, if the

 

49

 

Contributor Indemnities are then in effect)
will be required to pay out on such obligations prior to those persons then
having First Tier Indemnity obligations.

 

21.5.                        Notwithstanding
anything in this Article 21 to the contrary, upon the expiration of the
Restricted Period, except to the extent that Second Tier Debt is otherwise
available and MCRLP and/or the Company willfully precludes any Contributor from
exercising it/his rights under Section 21.2, it is hereby expressly understood
and agreed by the Contributors that the Contributors shall have no recourse
against either MCRLP, the Company or any of their subsidiaries or affiliates,
and neither MCRLP, the Company nor any of their subsidiaries or affiliates
shall incur any liability whatsoever to the Contributors by virtue of this Article
21; provided, however, that nothing in this Section 21.5 shall limit any
remedies of the Contributors for any breach by MCRLP or the Company of its
obligations under this Agreement.

 

21.6.                        In
the event and to the extent that any Contributor: (i) obtains a tax-free
step-up in the basis of any of its Contributor Units for federal income tax
purposes (e.g., in the event of death); (ii) sells, transfers or
otherwise disposes of any of its Contributor Units in a taxable transaction;
(iii) receives a Make-Whole Payment from MCRLP and/or the Company pursuant to
Section 22.4 hereof; or (iv) allocations are made pursuant to Section 704(c) of
the Code that reduces the amount of any Built-in-Gain (as defined in Section
22.4 hereof), then the Contributor Debt Amount shall be appropriately reduced.

 

21.7.                        The
provisions of this Article 21 shall survive the Closing for the applicable
period of the statute of limitations following the expiration of the Restricted
Period.

 

22.                                 SALE OF THE PROPERTY.

 

22.1.                        (a)                                  For
the period ending on the tenth (10th) anniversary of the Closing
Date, (the “Restricted Period”),
none of MCRLP, the Company or any of their subsidiaries or affiliates may
dispose of or transfer, in any manner, any Property except:  (i) in an entirely tax-free like-kind
exchange which satisfies the requirements of Code Section 1031 and the Treasury
Regulations promulgated thereunder; (ii) if a sale or disposition of such
Property would not result in recognition of all or any part of the Built-in
Gain (as hereinafter defined) by any Contributor; (iii) in accordance with
Section 22.2; or (iv) if MCRLP pays to each Contributor an amount which, after
the payment of all federal, state and local income Taxes payable with respect
to such amount, would be equal to the federal, state, and local income Taxes
payable by such Contributor resulting from the recognition of the Built-in Gain
triggered by such sale (as determined in accordance with Section 22.4).

 

(b)                                 If
any Property is transferred pursuant to clauses (i) through (iii) of Section
22.1(a) above in a transaction in which gain or loss is not required to be
recognized for federal income tax purposes in whole or in part, the direct and
indirect interest of MCRLP (adjusted, as appropriate, taking into account the
principles of Section 21.5) in such Property or any property received in
exchange thereof, as appropriate, thereafter shall also be considered a
Property subject to all of the restrictions of this Article 22 for the balance
of the Restricted Period (and if the acquiring entity’s disposition of the
Property would cause a Contributor to be required to recognize Built-in Gain as
a result thereof, the transferred Property shall continue to be

 

50

 

considered a Property for purposes of this
Article 22 (adjusted, as appropriate, taking into account the principles of
Section 21.5)).

 

22.2.                        Notwithstanding
Section 22.1 above, each Contributor agrees that during the Restricted Period,
the Property may be disposed of at any time (without any liability to MCRLP,
the Company or any of their subsidiaries or affiliates) in connection with
either of:

 

(a)                                  the
sale, transfer or disposition of all or substantially all of the properties
owned by MCRLP, which, in MCRLP’s sole judgment, is determined to be in the
best interests of the Company and its public stockholders; provided, however,
that MCRLP and the Company shall use commercially reasonable efforts to
structure any such transaction to (i) avoid or defer the recognition of any taxable
income or gain or (ii) minimize any adverse tax consequences, in either case to
the Contributors, provided that if and to the extent that such transaction is
structured to (i) avoid or defer the recognition of any taxable income or gain
or (ii) minimize any adverse tax consequences, in either case to any direct or
indirect partner or group of partners of MCRLP in connection with such
transaction, such transaction shall be structured to provide equivalent and
proportionate treatment to the Contributors (taken into account in the
aggregate and as a group); and provided  further that any failure
of the Company or MCRLP to treat the Contributors in the manner provided for in
this Section 22.2(a) shall be considered a breach of its obligations under
Section 22.1; and

 

(b)                                 a
sale (including without limitation a transfer to a secured lender in lieu of
foreclosure) which the Board of Directors of the Company, in its sole, good
faith judgment, determines is reasonably necessary (i) to satisfy any actual
material monetary default on any unsecured debt, judgment or liability of
MCRLP, the Company or any of their subsidiaries or affiliates when they become
due (at maturity or otherwise) or (ii) to cure or satisfy any actual material
monetary default on any mortgage secured by the Property; provided, however,
that no such sales shall be made under clause (b) unless MCRLP is unable to
settle or refinance any such debts, judgments or liabilities, or cure or
satisfy any such defaults, after making commercially reasonable efforts to do
so under then prevailing market conditions. 
In making any sale pursuant to this clause (b), MCRLP covenants and
agrees that it shall not unreasonably discriminate against the Properties (as
compared to any other properties held by MCRLP) and shall use commercially
reasonable efforts (i) to ensure that the Contributors as a group are treated
fairly, equitably, and, in any event, in a manner not less favorable than any
other direct or indirect partner or groups of partners of MCRLP, (ii) to ensure
that, to the extent reasonably practicable, any such disposition is effected in
such a manner as any other direct or indirect partner or groups of partners of
MCRLP, in the aggregate as a group recognize under Code Section 704(c) as a
result of such disposal the same portion of such income and gain that the
Contributors in the aggregate recognize as a result of such disposal, expressed
as a percentage of the aggregate income and gain that any other direct or
indirect partner or groups of partners of MCRLP (each taken into account in the
aggregate and as a group) or the Contributors in the aggregate, respectively,
would recognize under Code Section 704(c) as a result of a hypothetical, fully
taxable sale of all of the assets of MCRLP at the time of such disposal, and
(iii) to otherwise minimize any adverse tax consequences to the
Contributors.  In the case of any
disposition of any of the Properties pursuant to this Section 22.2(b), holders
of the Units may attempt to obtain title to the Property in question so long as
any equity in the Property is not lost or jeopardized.  Moreover, in the event of an anticipated
transfer of any of the Property to a secured lender in lieu

 

51

 

of foreclosure, or foreclosure, MCRLP shall
use commercially reasonable efforts to provide the Contributors with the right
to cure the underlying default including the right to loan MCRLP the funds
necessary to cure the default on an unsecured basis, as well as the right to
limit such funds to MCRLP and to receive security for any such loan from MCRLP
(or its appropriate subsidiary or affiliate) in the form of a second mortgage
secured solely by such Property (but only if the lender or lenders holding any
prior mortgage or mortgages on the Property expressly consent in writing to the
grant of the second mortgage, provided that neither such loan, whether secured
or unsecured by the such Contributors nor the granting of any such second
mortgage to such holders violates any covenant in any loan agreement of MCRLP,
the Company or any of their subsidiaries or affiliates).  The availability of the rights of the
Contributors set forth in the preceding sentence shall not in any event
mitigate the obligation of MCRLP and the Company to make the Make Whole Payment
otherwise required under Article 21 or Article 22, it being understood that no
Contributor shall be obligated to avail itself of the rights set forth in this
Section 22.2(b).

 

22.3.                        After
the expiration of the Restricted Period, the restrictions contemplated by this
Article 22 shall terminate in their entirety, and the Property may be sold,
transferred or otherwise disposed of at any time and in any manner that the fee
owner (whether MCRLP or some other person or entity) may so choose.

 

22.4.                        Any
event in Article 21 or this Article 22 that triggers the obligation of MCRLP to
make a Make-Whole Payment (as defined in the next sentence) is called a “Triggering Event”  MCRLP shall pay to each Contributor an amount
(the “Make-Whole Payment”) equal
to the aggregate federal, state and local income taxes, if any, incurred by the
Contributor as a result of a Triggering Event. 
Any such federal, state and local income taxes shall be deemed to be the
amount of Built-in Gain required to be recognized by any Contributor multiplied
by the then highest federal, state and/or local income tax rates applicable to
such Built-in Gain for the year in which such Built-in Gain is recognized,
grossed up to include any federal, state and local income taxes incurred by the
Contributor by reason of the receipt of the Make-Whole Payment.  No effect shall be given, in determining the
amount of the Make-Whole Payment, to a Contributor’s taxable income, tax
deductions, tax credits, tax carry forwards nor to any other of their tax
benefits or tax attributes (except that state and local Taxes paid on account
of the Make-Whole Payment shall be deducted in determining federal income Taxes
for purposes of determining the Make-Whole Payment).  For purposes of this Agreement, the term “Built-in Gain” shall mean the amount of
taxable income and gain that would have been recognized by each Contributor on
the Closing Date if the Exchange Property had been sold in a taxable
transaction for an amount equal to the value of the Consideration on the
Closing Date.

 

22.5.                        The
Make-Whole Payment shall be made within a reasonable period of time after the
Triggering Event, but in no event later than: (i) April 10 of the year in which
the Triggering Event occurs if the Triggering Event occurs prior to April 1 of
such year; (ii) June 10 of the year in which the Triggering Event occurs if the
Triggering Event occurs after March 31 but prior to June 1 of such year; (iii)
September 10 of the year in which the Triggering Event occurs if the Triggering
Event occurs after May 31 but prior to September 1 of such year; and (iv)
January 10 of the year immediately following the year in which the Triggering
Event occurs if the Triggering Event occurs after August 31 of such year.  In addition to any other rights available
under law or equity, in the event that MCRLP fails to pay any amounts owed
pursuant to Article

 

52

 

21 or this Article 22 when due, the
Contributor to whom such payment is owed shall be deemed to have loaned such
amount to MCRLP.  Any amounts payable to
a Contributor shall be increased by an amount equal to the greater of (x)
interest accrued on such amount at the Prime Rate from the date such amount is
due until such amount is paid in full and (y) actual interest and penalties
accrued by the relevant Taxing authorities with respect to such amounts plus
any penalties actually imposed thereon by the relevant Taxing authorities.  The Make-Whole Payment shall be in addition
to, and shall not in any manner reduce, the amounts distributable or payable to
the Contributors pursuant to the other provisions of this Agreement and the OP
Agreement (calculated as if there had been no Make-Whole Payment).

 

22.6.                        MCRLP
shall use the traditional method in the manner set forth in Treasury
Regulations Section 1.704-3(b) with respect to the contributions of the
Properties pursuant to this Agreement and in connection with any revaluation of
the same, except that a limited curative allocation pursuant to Treasury
Regulation Section 1.704-3(c) may be made by MCRLP;  provided, however,
that notwithstanding anything contained in this Agreement or elsewhere, for any
taxable year of MCRLP, no Contributor (or, to the extent that Section 1.2 is
implicated, no Property LLLP), may be allocated pursuant to this Section 22.6
any income if, and to the extent that, such Contributor or Property LLLP would
be allocated (either pursuant to this Section 22.6 or otherwise) an amount of
income of MCRLP with respect to each Unit held by such Contributor or Property
LLLP in excess of the return of capital component of the dividends paid by the
Company with respect to a share of common stock of the Company in respect of
such taxable year.

 

22.7.                        The
parties agree that the sole and exclusive rights and remedies to which the
Contributors may be entitled at law or in equity in connection with any
Triggering Event shall be for payment of the Make-Whole Payment pursuant to
Article 21 or Article 22 of this Agreement, and no Contributor shall be
entitled to enjoin or otherwise object to any transactions that would result in
a taxable event or pursue any other claim with respect to a Triggering
Event.  If any Contributor notifies MCRLP
of a claim that MCRLP owes a Make-Whole Payment, the Company, on behalf of
MCRLP, and the Contributor shall negotiate in good faith to resolve any
disagreements regarding any such Triggering Event.  If any such disagreement cannot be resolved
by the parties within thirty (30) days after the receipt by MCRLP of the notice
in accordance with the preceding sentence, the Company, on behalf of MCRLP, and
the Contributor shall jointly retain a nationally recognized independent public
accounting firm (an “Accounting Firm”)
to act as an arbitrator to resolve as expeditiously as possible all points of
any such disagreement (including, without limitation, whether a Triggering
Event has occurred and, if so, the amount of the applicable Make-Whole Payment
that the Contributor is entitled to as a result thereof, determined as set
forth in Section 21.2(a)).  If the
parties cannot agree on an Accounting Firm, each of the Company, on behalf of
MCRLP, and the Contributor shall retain an Accounting Firm, and the Accounting
Firms selected shall jointly retain a third Accounting Firm.  If the two Accounting Firms cannot agree upon
a third Accounting Firm within thirty (30) days, such matter shall be referred
to a court of competent jurisdiction to select the third Accounting Firm.  The Accounting Firms shall be instructed to
resolve as expeditiously as possible all points of any such disagreement
(including, without limitation, whether a Triggering Event has occurred and, if
so, the amount of the applicable Make-Whole Payment that the Contributor is
entitled to as a result thereof, determined as set forth in Section 22.5).  All determinations made by the Accounting
Firm or the Accounting Firms, as the case may be, with

 

53

 

respect to the resolution of whether a
Triggering Event has occurred shall be final, conclusive and binding on MCRLP
and the Contributor.  The fees and
expenses of any Accounting Firms incurred in connection with any such
determination shall be shared equally by MCRLP and the Contributor.

 

22.8.                        The
provisions of this Article 22 shall survive the Closing for the applicable
period of the statute of limitations following the expiration of the Restricted
Period.

 

22.9.                        Procedural
Matters.

 

(a)                                  Tax
Treatment of Transaction.  Each of
the parties hereby agrees (I) that, if and to the extent Section 1.2 is
implicated, the transactions contemplated by this Agreement are to be treated
for federal income tax purposes, as an “assets over form” merger, as prescribed
by Treasury Regulations Sections 1.708-1(c)(3)(i); 1.708-1(c)(4); and
1.708-1(c)(5), Example 4; (II) that such party will treat the transactions
contemplated by this Agreement as described in clause (I) for federal income
tax purposes, and will take no position inconsistent with such treatment; and
(III) that each such party will treat, for federal income tax purposes, the
contribution of any Transferred Interest to the MCRLP by each Contributor
receiving cash pursuant to Section 2.1(b) herein as a sale of the Transferred
Interest(s) contributed by such Contributor and will take no position inconsistent
with such treatment.  The parties agree
and acknowledge (and will not take any position inconsistent therewith) that no
consideration (whether actual consideration or deemed consideration under
Section 707(a) of the Code or otherwise) other than Contributor Units and
Assumed Debt has been or will be given by MCRLP or the Company to the
Contributors in connection with the Transaction, except and only to the extent
that a Contributor elects to or, pursuant to Section 2.1(c)(ii) of this
Agreement is required to, receive cash for a portion or all of the Exchange
Property being transferred to MCRLP.  The
parties agree to treat all liabilities of the Capitol Office Owners as “qualified
liabilities” within the meaning of Treasury Regulation Section 1.707-5(a)(6).  The Contributors represent to MCRLP for this
purpose that, to the best of their knowledge, all such liabilities of the
Capital Office Owners to be assumed by MCRLP at the time of the Closing
constitute “qualified liabilities” within the meaning of Treasury Regulation
Section 1.707-5(a)(6).  MCRLP and the
Company shall not, at any time during or with respect to the Restricted Period,
take any contrary or inconsistent position in any federal or state income tax
returns (including, without limitation, information returns, such as, for
instance, Schedules K-1 to IRS Form 1065, provided to partners in MCRLP and
returns of subsidiaries of MCRLP) or any dealings involving the Internal
Revenue Service (including, without limitation, any audit, administrative
appeal or any judicial proceeding involving the income tax returns of MCRLP or
the Tax treatment of any holder of a partnership interest of MCRLP).

 

(b)                                 Allocation
Methods to be Followed.  All Tax returns
prepared by MCRLP during the Restricted Period that allocate liabilities of
MCRLP for purposes of Section 752 and the Treasury Regulations thereunder shall
treat each Contributor as being allocated for federal income tax purposes an
amount of recourse debt (in addition to any nonrecourse debt otherwise
allocable to such Contributor in accordance with the OP Agreement and Treasury
Regulations Section 1.752-3 and any other recourse liabilities allocable to
such Contributor by reason of guarantees of indebtedness entered into pursuant
to other agreements with MCRLP) pursuant to Treasury Regulation Section 1.752-2
equal to such Contributor’s Contributor Debt Amount, as

 

54

 

set forth on Schedule 21.1, and as may be reduced pursuant to the terms
of this Agreement, and MCRLP and the Company shall not, during or with respect
to the Restricted Period, take any contrary or inconsistent position in any
federal or state income tax returns (including, without limitation, information
returns, such as, for instance, Schedules K-1 to IRS Form 1065, provided to
partners in MCRLP and returns of subsidiaries of MCRLP) or any dealings
involving the Internal Revenue Service (including, without limitation, any
audit, administrative appeal or any judicial proceeding involving the income
tax returns of MCRLP or the Tax treatment of any holder of partnership
interests in MCRLP).  All “excess”
nonrecourse liabilities of MCRLP secured by a Protected Property allocable
pursuant to Treasury Regulation Section 1.752-3(a)(3) shall be allocated first
to the Contributors in an amount equal to the amount by which their share of
the “built-in gain” (as determined under Section 704(c) of the Code) with
respect to such Protected Property exceeds the gain described in Treasury
Regulation Section 1.752-3(a)(2) with respect to such Protected Property.

 

(c)                                  Notice
of Tax Audits.  If any claim, demand,
assessment (including a notice of proposed assessment) or other assertion is
made with respect to Taxes against the Contributors or MCRLP the calculation of
which involves a specific matter covered in this Agreement (“Tax Claim”) or if the Company or MCRLP
receives any notice from any jurisdiction with respect to any current or future
audit, examination, investigation or other proceeding (“Proceeding”) involving the Contributors or
MCRLP or that otherwise involves a specific matter covered in this Agreement
that could directly or indirectly affect the Contributors (adversely or
otherwise), then the Company or MCRLP, as applicable shall promptly notify the
Representatives of such Tax Claim or Tax Proceeding.

 

(d)                                 Control of Tax Proceedings.  The
Company, as the general partner of MCRLP shall have the right to control the
defense, settlement or compromise of any Proceeding or Tax Claim; provided, however, that the Company shall not consent to the
entry of any judgment or enter into any settlement with respect to such Tax
Claim or Tax Proceeding without the prior written consent of at least one of
the Representatives, which shall not be unreasonably withheld (unless, and only
to the extent, that any Taxes required to be paid by the Contributors as a
result thereof would be required to be reimbursed by MCRLP and the Company
under Article 21 or Article 22 of this Agreement and MCRLP and the Company
agree in connection with such settlement or consent, to make such required
payments); provided further
that MCRLP shall keep the Representatives duly informed of the progress thereof
to the extent that such Proceeding or Tax Claim could directly or indirectly
affect (adversely or otherwise) the Contributors and that the Representatives
shall have the right to review and comment on any and all submissions made to
the IRS, a court, or other governmental body with respect to such Tax Claim or
Tax Proceeding and that MCRLP will consider such comments in good faith.  As a condition to withholding their consent
to a settlement pursuant to the preceding sentence, the Representatives (i)
must have a reasonable basis to believe that such settlement would have a
material adverse impact on one or more Contributors with respect to a matter
covered by this Agreement and that such impact would be different from the
impact that would result for other holders of MCRLP Units who are not
Contributors (which the Representatives, upon request from MCRLP, shall
describe in reasonable detail in writing), (ii) the Representatives must
believe, based upon the advice of Hogan & Hartson L.L.P. (or another
comparable law firm) or a nationally recognized accounting firm, that it is
more likely than not that the position asserted by the Representatives would
prevail if it were to be asserted in a judicial proceeding (and upon request of
MCRLP, the

 

55

 

Representatives shall provide to MCRLP a letter from such counsel or
accountants confirming such advice), and (iii) the Representatives shall offer
to assume the subsequent costs of defending and asserting the position asserted
by the Representatives and indemnify and hold harmless MCRLP and the Company from
any taxes and related interest and penalties to MCRLP or the Company resulting
from a subsequent judgment in excess of such amounts that would have been
imposed pursuant to the rejected settlement. 
(but not any other costs associated with such proceeding or any other
issues involved therein); provided that the foregoing shall not apply
with respect to, or otherwise restrict or limit in any matter, the exercise by
any of the Contributors of any rights or privileges provided for in Sections
6221-6234 of the Code and the Treasury Regulations thereunder or in the
Partnership Agreement in connection with any examination of federal or state
income tax matters related to the Contributors or MCRLP.

 

23.                                 PUBLICATION; CONFIDENTIALITY.

 

23.1.                        Upon the execution of this Agreement, MCRLP and
the Company shall have the right to make such public announcements or filings
as may be required by (i) the Securities Act, (ii) the Exchange Act, (iii) the
rules and listing standards of the New York Stock Exchange, Inc., (iv) any other
law of a jurisdiction to which MCRLP and the Company are subject, or (v) any
oral questions, interrogatories, requests for information, subpoena, civil
investigative demand, or similar process required by applicable rules, laws or
regulations by any court, law or administrative authority to which MCRLP and
the Company are subject. MCRLP and the Company also shall have the right to
make such public announcements or filings as they may deem reasonably prudent,
and shall be entitled to make such filings or announcements upon advice of
counsel as may be otherwise be deemed necessary.  In this connection, it should be noted that
the Company has determined that the entry into this Agreement will need to be
disclosed within four (4) business days of its execution on a Current Report on
Form 8-K under Item 1.01 thereof and that the Agreement will be filed as an
exhibit thereto or be filed as an exhibit to the Company’s next following
periodic report filed pursuant to the Exchange Act.

 

23.2.                        Except
as provided in Section 23.1 above, neither MCRLP nor the Contributors shall
disclose, and each shall direct its respective representatives, employees,
agents and consultants not to disclose, to any person or entity the fact that
MCRLP and the Contributors have entered into this Agreement nor any of the
terms, conditions or other facts with respect to this Agreement.  Notwithstanding the foregoing, either party
may disclose those terms and conditions which are required to be disclosed
pursuant to law or in order to comply with this Agreement; provided, however,
that the disclosing party shall use its best efforts to limit the disclosure to
the information necessary, shall advise any party to whom disclosure is made
that said terms and conditions are subject to a confidentiality requirement and
shall obtain the agreement of said party to keep any information disclosed to
it as confidential.  In the event of a
breach of the provisions of this Section 23.2, either party shall be entitled
to all of its rights and remedies at law or in equity.

 

23.3.                        Contributor
shall not disclose to any third party any information that is not public
information concerning the Company, MCRLP or any transaction or potential
transaction Contributor may become aware of involving the Company or MCRLP
without MCRLP’s prior written consent.

 

56

 

24.                                 TAX MATTERS.

 

24.1.                        Subject
to Section 24.2, the Contributors will pay or provide for payment of all Taxes
due and payable on or after the Closing with respect to each Property LLLP
and/or each Property.  The Contributors
will prepare and timely file all Tax returns and reports required to be filed
on or after the Closing with respect to Taxes for which they are liable under
Section 24.2.  If MCRLP or its designee
shall acquire one or more Property LLLPs, such Tax returns shall be prepared in
a manner consistent with the reporting of all items of income or loss on prior
returns of each such Property LLLP (and any predecessor thereof) and the
Contributors shall obtain MCRLP’s approval prior to filing such tax returns,
which approval shall not be unreasonably withheld, conditioned or delayed.  The Contributors will provide MCRLP with a
copy of such Tax returns or reports no later than ten (10) days after
filing.  MCRLP will file all Tax returns
or reports required to be filed with respect to the Properties and/or the
Property LLLPs after the Closing Date for all taxable periods beginning before
the Closing Date and ending after the Closing Date and such Taxes shall be
allocated between the Contributors and MCRLP in accordance with their
respective periods of ownership of the Properties and/or the Property
LLLPs.  Notwithstanding anything herein
to the contrary, the provisions of this Section 24.1 shall survive the Closing
Date, until the applicable period of any statute of limitation on assessments
of any of such Taxes has expired.

 

24.2.                        Except
as provided in this Section 24.2, the Contributors shall pay any and all Taxes
including, without limitation, Taxes imposed with respect to its business and
the ownership or operation of the Properties and/or the Property LLLPs for all
taxable periods (or portions thereof) ending on or prior to the Closing,
imposed upon MCRLP based, in whole or in part, upon the failure to comply with
the bulk sales laws, in any case other than Taxes for which a Property LLLP (or
any successor thereto) has established reserves or for which a Property LLLP
has otherwise made provision.  MCRLP
shall be liable and shall pay all Taxes with respect to its business and the
ownership or operation of the Properties or the Property LLLPs (or any
successor thereto) for all taxable periods (or portions thereof) ending after
the Closing; provided, however, that MCRLP will not be liable for Taxes with
respect to a Property LLLP (or any successor thereto) to the extent that
Section 1.2 is implicated with respect to such Property LLLP.  The Contributors or MCRLP, as the case may
be, shall be responsible for preparing and filing (with the cooperation of the
other) any and all Tax returns and reports for Taxes for which they are liable
pursuant to this Section 24.2.

 

24.3.                        MCRLP
is hereby authorized by the Contributors, in MCRLP’s sole discretion, to file
any applicable proceeding in respect of the property tax roll for the reduction
of the assessed valuation of any Property. 
The net refund of Taxes, if any, for any tax year for which the
Contributors or MCRLP shall be entitled to share in the refund shall be divided
between the Contributors and MCRLP in accordance with the apportionment of
Taxes pursuant to the provisions hereof; provided, however, that any amounts
for which MCRLP would have an obligation to refund such Taxes to a Tenant of
any Property shall be apportioned to MCRLP to meet such obligation to refund
such Taxes to any such Tenant.  All
expenses in connection therewith, including counsel fees, shall be borne by the
Contributors and MCRLP in proportion to their ownership period of the asset in
question.  The Contributors and MCRLP
each agree to grant to the other a limited power of attorney or other
authorization necessary to carry out the intention of this Section 24.3.

 

57

 

24.4.                        “Taxes” mean all federal, state, county,
local, foreign and other taxes of any kind whatsoever (including, without
limitation, income, profits, premium, estimated, excise, sales, use, occupancy,
gross receipts, franchise, ad valorem, severance, capital levy, production,
transfer, license, stamp, environmental, withholding, employment, unemployment
compensation, payroll related and property taxes, import duties and other
governmental charges or assessments), whether or not measured in whole or in
part by net income, and including deficiencies, interest, additions to tax or
interest, and penalties with respect thereto, and including expenses associated
with contesting any proposed adjustment related to any of the foregoing.

 

24.5.                        In
the event it is determined by the applicable Governmental Authority that,
notwithstanding the fact that the parties intend that the transactions
contemplated herein should be treated as a sale of Transferred Interests and
not as a sale of direct interests in real property, that applicable Maryland
state and/or county real property transfer or recordation taxes are payable in
connection with this transaction, then each of the parties shall have a right
to protest such determination, at their sole cost and expense and with the
reasonable cooperation of the other party(ies); provided, however, in the event
that a final determination is made that any such Taxes are payable, each of (i)
the Contributors and (ii) MCRLP shall bear fifty percent (50%) of the Taxes so
determined to be payable and, in any event, any real property transfer taxes
otherwise resulting from the transactions contemplated herein.  The terms of this Section 24.5 shall survive
the Closing for the applicable period of the statute of limitations.

 

25.                                 DEFAULT REMEDIES; INDEMNITY.

 

25.1.                        In
the event all conditions precedent have been satisfied but MCRLP fails to
perform on the Closing Date, MCRLP’s sole liability and Contributor’s sole
recourse shall be limited to the receipt and retention of the Deposit.  Contributor agrees that retention of the
Deposit constitutes fixed and liquidated damages resulting from MCRLP’s
default, and Contributor waives any other claim, at law or in equity, either
against MCRLP or against any person, known or unknown, disclosed or
undisclosed.

 

25.2.                        In
the event MCRLP defaults in the performance of any obligation or agreement to
be performed by it under this Agreement after the Closing Date, and such
default is not cured within thirty (30) days after written notice of default is
given by the GP Contributors, or any one of them, to MCRLP, the GP Contributors
shall be entitled to enforce against MCRLP any and all rights and remedies at
law or in equity; provided, however, MCRLP’s maximum aggregate
liability on account of a breach of any of its obligations hereunder other than
its obligations under Section 21 hereof shall not exceed the sum of THREE
MILLION DOLLARS ($3,000,000.00) provided, further, however, that the aforesaid
limit upon MCRLP’s liability shall not apply to any obligation of MCRLP under
Section 21 or Section 22 hereof.

 

25.3.                        (a)                                  In
the event of a breach any of the representations or warranties made by the GP
Contributors and the Property LLLPs under this Agreement or in any document,
agreement or estoppel executed and delivered by them pursuant to this
Agreement, or in the event the GP Contributors or the Property LLLPs default in
the performance of any obligation or agreement to be performed by them
hereunder, MCRLP shall be entitled to enforce against the Contributors any and
all rights and remedies available at law or in equity, including, without

 

58

 

limitation, an action seeking specific
performance, subject, however, to the provisions of Section 25.3(b) hereof.

 

(b)                                 The
following limitations shall apply with respect to the rights and remedies
available to MCRLP under this Agreement:

 

(i)                                     If
MCRLP discovers the breach of a representation or warranty by the Contributors
or the Property LLLPs, or any one of them, prior to the Closing Date, the
provisions of Section 7.7 hereof shall govern, to the extent applicable.

 

(ii)                                  With
respect to any breach of the representations and warranties set forth in
Section 7.1 hereof or with respect to any breach of the covenants set forth in
Section 8 hereof that are discovered by MCRLP after the Closing Date, the
maximum aggregate liability of all the Contributors shall not exceed the sum of
THREE MILLION DOLLARS ($3,000,000.00) and recourse for the recovery of damages
on account of any breach shall be limited to the Escrow Pool (as defined below)
established pursuant to Section 25.4 hereof.

 

(iii)                               It
is specifically understood and agreed that there shall be no limit on the
amount of damages that MCRLP shall be entitled to recover from the GP
Contributors on account of a breach of any of the representations, warranties
or indemnities set forth in Sections 7.2 or 7.3 hereof, except that the
liability of any GP Contributor on account of a breach of any of the
representations or warranties set forth in Section 7.3 shall be limited to the
value of the Units and the cash consideration received by such GP Contributor
in this transaction.  It is further
understood and agreed that in the event of a breach of any of the
representations, warranties or indemnities set forth in Sections 7.2 or 7.3, MCRLP
shall be entitled, at its option, to seek recourse for the damages resulting
from such breach from the Escrow Pool established pursuant to Section 25.4
hereof, but MCRLP shall be under no obligation to proceed against the Escrow
Pool for the satisfaction of such damages, nor shall the amount of damages
recoverable by MCRLP be limited to the amount of the Escrow Pool

 

(iv)                              MCRLP
shall not be entitled to seek any damages suffered by it on account of a breach
of any representation or warranty set forth herein unless the damages exceed
the sum of ONE HUNDRED THOUSAND DOLLARS ($100,000.00), but once this threshold
is reached, then MCRLP shall be entitled to seek recovery of all the damages,
subject to any other limitations otherwise provided herein.

 

25.4.                        As
security for the obligations of the Contributors hereunder, Units comprising a
part of the Consideration having a value of not less than THREE MILLION DOLLARS
($3,000,000.00) shall be deposited in escrow at the Closing with Goulston &
Storrs (“Escrow Holder”) (such
Units shall constitute the “Escrow Pool”)
to be held and applied in accordance with the terms of this Agreement and the
Escrow Agreement attached hereto as Exhibit
R.  In the event MCRLP
shall be entitled to recover damages from the Contributors on account of any
breach or default hereunder, MCRLP shall be entitled to receive and retain
Units having a value equal to the amount of such damages, subject to any
limitations set forth herein on the amount of such damages.  For purposes of this Section 25.4, the value
of the Units to be received and

 

59

 

retained by MCRLP shall be calculated with
reference to the average closing price as reported on the New York Stock
Exchange for the Company’s Common Stock over the twenty (20) consecutive trading
days ending two (2) trading days prior to the date on which MCRLP delivers
written notice to Contributors’ counsel (as designated in Article 26 of this
Agreement) of its claim to recover damages. 
It is understood and agreed that recourse to the Escrow Pool shall be
MCRLP’s sole remedy with respect to a breach or default of any of the
representations or warranties set forth in Section 7.1 hereof or any of the
agreements set forth in Section 8 hereof, but that recourse to the Escrow Pool
on account of a breach of any of the representations or warranties set forth in
Sections 7.2 or 7.3, or a breach of any other provisions of this Agreement, is
optional on the part of MCRLP.  The
Escrow Pool, to the extent not used to satisfy damages of MCRLP, shall be distributed
to the Distributors at such time all the representations and warranties set
forth in Section 7.1 shall cease to survive.

 

25.5.                        This
Article 25 shall survive the Closing for the applicable period of the statute
of limitations.

 

25.6.                        Notwithstanding
anything to the contrary contained herein, except to the extent otherwise
provided in Sections 9.4, 16.3 and 25.3 (b)(iii) hereof, no Contributor shall
have any personal liability for any indemnity obligation or for any breach of
any representation or warranty contained herein, it being understood that,
except as provided in Sections 9.4, 16.3 and 25.3(b)(iii), the liability of
each Contributor shall be limited to the value of the Units and cash
consideration received by such Contributor under this Agreement or, to the
extent Section 25.3(b)(ii) is applicable, to the Units deposited by such
Contributor into the Escrow Pool.

 

26.                                 NOTICE.

 

All notices, demands, requests, or other writings in this Agreement
provided to be given or made or sent, or which may be given or made or sent, by
either party hereto to the other, shall be in writing and shall be delivered by
depositing the same with any nationally recognized overnight delivery service,
or by telecopy or fax machine, in either event with all transmittal fees
prepaid, properly addressed, and sent to the following addresses:

 

	
  If to MCRLP:

  	
   

  	
  c/o
  Mack-Cali Realty Corporation

  
	
   

  	
   

  	
  11 Commerce
  Drive

  
	
   

  	
   

  	
  Cranford,
  New Jersey 07016

  
	
   

  	
   

  	
  with two (2)

  
	
   

  	
   

  	
  separate
  copies

  
	
   

  	
   

  	
  of the
  notice sent

  
	
   

  	
   

  	
  to the
  attention of:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Mitchell E.
  Hersh

  
	
   

  	
   

  	
  President
  and Chief Executive Officer

  
	
   

  	
   

  	
  (908)
  272-2009 (Tele)

  
	
   

  	
   

  	
  (908)
  272-0214 (Fax)

  
	
   

  	
   

  	
   

  	
  and

  
	
   

  	
   

  	
  Roger W.
  Thomas

  
	
   

  	
   

  	
  Executive
  Vice President and General Counsel

  

 

60

 

	 
	
   

  	
   

  	
  (908)
  272-2612 (Tele)

  	 

	 
	
   

  	
   

  	
  (908)
  272-0485 (Fax)

  	 

	 
	
   

  	
   

  	
   

  	 

	 
	
  with a copy
  to:

  	
   

  	
  Goulston
  & Storrs

  	 

	 
	
   

  	
   

  	
  2001 K
  Street, NW

  	 

	 
	
   

  	
   

  	
  Suite 1100

  	 

	 
	
   

  	
   

  	
  Washington,
  D.C. 20007

  	 

	 
	
   

  	
   

  	
  Attn:
  Sheldon J. Weisel

  	 

	 
	
   

  	
   

  	
  (202)
  721-1135 (Tele)

  	 

	 
	
   

  	
   

  	
  (202)
  263-0535 (Fax)

  	 

	 
	
   

  	
   

  	
   

  	 

	 
	
   

  	
   

  	
  Seyfarth
  Shaw LLP

  	 

	 
	
   

  	
   

  	
  1270 Avenue
  of the Americas

  	 

	 
	
   

  	
   

  	
  Suite 2500

  	 

	 
	
   

  	
   

  	
  New York,
  New York 10020

  	 

	 
	
   

  	
   

  	
  Attn: John
  P. Napoli

  	 

	 
	
   

  	
   

  	
  (212)
  218-5620 (Tele)

  	 

	 
	
   

  	
   

  	
  (212)
  218-5527 (Fax)

  	 

	 
	
   

  	
   

  	
   

  	 

	
  If to a
  Contributor:

  	
   

  	
  To the
  address for such Contributor set forth on Exhibit
  A annexed hereto.

  
	
   

  	
   

  	
   

  
	
  with a copy
  to:

  	
   

  	
  Grossberg,
  Yochelson, Fox & Beyda

  
	
   

  	
   

  	
  2000 L
  Street, NW

  
	
   

  	
   

  	
  Suite 675

  
	
   

  	
   

  	
  Washington,
  D.C. 20036

  
	
   

  	
   

  	
  Attn: C.
  Richard Beyda

  
	
   

  	
   

  	
  (202)
  296-9696 (Tele)

  
	
   

  	
   

  	
  (202)
  296-7777 (Fax)

  
						

 

	
  If to a

  Representative:

  	
   

  	
  To the address for such Contributor set forth on Exhibit
  A annexed hereto.

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Hogan & Hartson L.L.P.

  
	
   

  	
   

  	
  555 Thirteenth Street, N.W.

  
	
   

  	
   

  	
  Washington, D.C. 20004

  
	
   

  	
   

  	
  Attn: Prentiss E. Feagles

  
	
   

  	
   

  	
  (202) 637-5781 (Tele)

  
	
   

  	
   

  	
  (202) 637-5910 (Fax)

  

 

or to such other address as either party may from time to time designate
by written notice to the other.  Notices
given by (i) overnight delivery service as aforesaid shall be deemed received
and effective upon actual receipt provided a delivery receipt is obtained and
(ii) telecopy or fax

 

61

 

machine shall be deemed given at the time and on the date of machine
transmittal provided same is sent prior to 5:00 p.m. on a business day (if sent
later, then notice shall be deemed given on the next business day).  Notices may be given by counsel for the
parties described above, and such notices shall be deemed given by said party,
for all purposes hereunder.

 

27.                                 EMPLOYEE MATTERS.

 

27.1.                        With
respect to the Mack-Cali plans, programs and arrangements listed on Schedule 27.1 and any vacation, sick
time or other compensation policy of the Property LLLPs, which takes into
account an employee’s length of service, Mack-Cali shall grant all New
Employees on and after the Closing Date credit for all service with the
Property LLLPs and any affiliates thereof and their respective predecessors
prior to the Closing Date for purposes for which such service was recognized by
the Property LLLPs, and any affiliates thereof under the plans or programs
listed on Schedule 27.1,
including without limitation the Mack-Cali 401(k) Plan.  Mack-Cali shall have no liability to any
current or former employees of the Property LLLPs, or any affiliate thereof who
are not New Employees, including without limitation any liabilities which may
arise as a result of the consummation of the transactions contemplated by this
Agreement, under any plans or programs listed on Schedule 27.1, or arising under applicable federal or
state law including without limitation under the Worker Adjustment and
Retraining Notification Act (WARN) and Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA).  The
provisions of this Section 27.1 shall survive the Closing.

 

27.2.                        Upon
commencement of employment, New Employees shall be covered by the employee
welfare plans maintained by Mack-Cali, including without limitation, medical
and health plans as described in this Section. 
Upon commencement of participation by New Employees in the Mack-Cali
medical and health plans, Mack-Cali shall (i) credit all New Employees on and
after the Closing Date with any employee payments made under any medical or
health plans of any Property LLLP which have been paid in partial or full
satisfaction of deductible requirements under such medical or health plans for
purposes of satisfying deductible requirements under the corresponding
Mack-Cali medical and health plans, and (ii) waive any preexisting condition
exclusion and actively-at-work requirements (other than for New Employees not
actively-at-work due to a disability which is expected to last more than five
(5) days) under the Mack-Cali plans and programs set forth on Schedule 27.1.  The Property LLLPs shall provide Mack-Cali or
shall cause its insurance carrier to provide Mack-Cali with the applicable
payment information as soon as practicable following the Closing Date.  Mack-Cali may, at its option, for a period
which ends no later than the December 31 following the Closing Date continue to
provide to New Employees medical and health benefits substantially similar to
and on the same terms and conditions as some or all of such benefits previously
provided to New Employees prior to the Closing Date by their respective former
employers.

 

27.3.                        The
New Employees will be hired directly by Mack-Cali and their employment with any
Property LLLP or any affiliate thereof shall terminate and their employment
with Mack-Cali shall begin as of the Closing Date.  Mack-Cali shall not be liable to any
independent contractor of the Property LLLP or any affiliate thereof or to any
New Mack-Cali Employee or to any Property LLLP or any affiliate thereof for any
compensation, benefits or other liabilities related to any employment or
services performed, or otherwise, which were incurred or accrued prior to the
Closing Date, except for vacation time and any wages for which an adjustment

 

62

 

pursuant to Section 13.1(g) of this Agreement
is being made.  The Property LLLPs shall
not be liable to any New Employees or other personnel (i.e., independent
contractors of the Property LLLPs or any affiliate thereof) for vacation time
and wages pursuant to which MCRLP receives a credit under Section 13.1(g).

 

27.4.                        Mack-Cali
shall not be required to assume with respect to any New Mack-Cali Employee any
agreement related to employment, compensation or benefits.  Mack-Cali shall cause its 401(k) Plan to
accept transfers of account balances from the Mack 401(k) Plan by way of direct
rollover.  Except as otherwise provided
herein with respect to New Employees, all liabilities with respect to current
or former employees of the Property LLLPs or any affiliate thereof, whether
incurred under a plan or program listed on Schedule
27.1 or otherwise, are the sole responsibility of the Property
LLLPs or any affiliate thereof.  The
provisions of this Section 27.4 shall survive the Closing.

 

27.5.                        Mack-Cali
will credit New Employees with any unused vacation time as of the Closing Date.

 

28.                                 MISCELLANEOUS.

 

28.1.                        This
Agreement and the other Transaction Documents constitutes the entire agreement
between the parties and incorporates and supersedes all prior negotiations and
discussions between the parties with respect to the subject matter hereof.  This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and their successors and assigns,
and nothing in the Agreement express or implied, is intended to confer upon any
other person any rights or remedies of any nature whatsoever under or by reason
of this Agreement.

 

28.2.                        This
Agreement cannot be amended, waived or terminated orally, but only by an
agreement in writing signed by the party to be charged.

 

28.3.                        This
Agreement shall be interpreted and governed by the laws of the State of
Maryland and shall be binding upon the parties hereto and their respective
successors and assigns.  The parties
hereto hereby submit, and waive any objections, to the jurisdiction of the
courts of the State of Maryland and of the courts of The United States of
America situated in the State of Maryland.

 

28.4.                        The
caption headings in this Agreement are for convenience only and are not
intended to be part of this Agreement and shall not be construed to modify,
explain or alter any of the terms, covenants or conditions herein contained.

 

28.5.                        If
any term, covenant or condition of this Agreement is held to be invalid,
illegal or unenforceable in any respect, this Agreement shall be construed
without such provision.

 

28.6.                        Prior
to and after the Closing, each party shall, from time to time, execute,
acknowledge and deliver such further instruments, in recordable form, if
necessary, and perform such additional acts, as the other party may reasonably
request in order to effectuate the intent of this Agreement, within thirty (30)
days of the request.  Except with respect
to Contributors’ admission to MCRLP as limited partners as contemplated herein,
nothing contained in this Agreement shall be deemed to create any rights or
obligations of partnership, joint venture or

 

63

 

similar association between
Contributor and MCRLP  This Agreement
shall be given a fair and reasonable construction in accordance with the
intentions of the parties hereto, and without regard to or aid of canons
requiring construction against the Contributors, MCRLP or the party whose
counsel drafted this Agreement. The provisions of this Section shall survive
the Closing.

 

28.7.                        This
Agreement shall not be effective or binding until such time as it has been
executed and delivered by all parties hereto. 
This Agreement may be executed by the parties hereto in counterparts,
all of which together shall constitute a single Agreement.

 

28.8.                        All
references herein to any Section, Exhibit or Schedule shall be to the Sections
of this Agreement and to the Exhibits and Schedules annexed hereto unless the
context clearly dictates otherwise.  All
of the Exhibits annexed hereto are, by this reference, incorporated herein.

 

28.9.                        Whenever
used herein, the singular number shall include the plural, the plural shall
include the singular, and the use of any gender shall be applicable to all
genders.

 

28.10.                  In
the event of any litigation or alternative dispute resolution between MCRLP and
Contributors in connection with this Agreement or the transaction contemplated
herein, the non-prevailing party in such litigation or alternative dispute
resolution shall be responsible for payment of all expenses and reasonable
attorneys’ fess incurred by the prevailing party.  The provisions of this Section 28.10 shall
survive the Closing.

 

28.11.                  Upon
written request by MCRLP, the Contributors agree to engage an accounting firm
(the “Accounting Firm”) that is
registered with the Public Company Accounting Oversight Board and which
Accounting Firm is reasonably acceptable to MCRLP to prepare audited financial
statements for any Property LLLP and the Contributors that comply with
Regulation 210.3-14 (Instruction for Real Estate Operations to be Acquired) of
Regulation S-X (the “3-14 Financial
Statements”).  MCRLP hereby
agrees to pay for all reasonable third party fees and expenses incurred by the
Contributors in connection with the preparation of such 3-14 Financial
Statements.  MCRLP shall pay to the
Contributors any such fees and expenses within thirty (30) days of the
Contributors’ request for payment.  The
Contributors’ request for payment shall be accompanied by statements or
invoices evidencing the fees and expenses incurred in connection with the
preparation of the 3-14 Financial Statements. MCRLP’s obligations under this
Section 28.11 shall survive Closing. The Contributors agree to use their
commercially reasonable efforts to cause the Accounting Firm to deliver the
3-14 Financial Statements by March 15, 2006. The Contributors agree to advise
MCRLP within a reasonable period of time of the estimated cost for the
preparation of the 3-14 Financial Statements; provided, however, that such
estimate shall not be binding in any respect on the Contributors.

 

[BALANCE
OF PAGE INTENTIONALLY BLANK; SIGNATURE PAGES FOLLOW.]

 

64

 

IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the day and year first above written.

 

	
   

  	
  MACK-CALI REALTY, L.P., a Delaware limited partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Mack-Cali Realty
  Corporation, a Maryland

  	
   

  
	
   

  	
   

  	
   

  	
  corporation, its general
  partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ MITCHELL E. HERSH

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Mitchell E. Hersh

  
	
   

  	
   

  	
   

  	
   

  	
  President and Chief
  Executive Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TENTH SPRINGHILL LAKE
  ASSOCIATES L.L.L.P.,
  a

  Maryland limited liability limited partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ ALBERT H. SMALL

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Albert H. Small

  	
   

  
	
   

  	
   

  	
  Title:

  	
  General Partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ELEVENTH SPRINGHILL LAKE
  ASSOCIATES L.L.L.P.,
  a

  Maryland limited liability limited partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ ALBERT H. SMALL

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Albert H. Small

  	
   

  
	
   

  	
   

  	
  Title:

  	
  General Partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TWELFTH SPRINGHILL LAKE ASSOCIATES
  L.L.L.P., a

  Maryland limited liability limited partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ ALBERT H. SMALL

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Albert H. Small

  	
   

  
	
   

  	
   

  	
  Title:

  	
  General Partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  FOURTEENTH SPRINGHILL LAKE
  ASSOCIATES L.L.L.P.,
  a

  Maryland limited liability limited partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ ALBERT H. SMALL

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Albert H. Small

  	
   

  
	
   

  	
   

  	
  Title:

  	
  General Partner

  	
   

  
								

 

65

 

	
   

  	
  GREENBELT ASSOCIATES, a Maryland general partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ ALBERT H. SMALL

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Albert H. Small

  	
   

  
	
   

  	
   

  	
  Title:

  	
  General Partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SIXTEENTH SPRINGHILL LAKE
  ASSOCIATES L.L.L.P.,
  a

  Maryland limited liability limited partnership

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ ALBERT H. SMALL

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Albert H. Small

  	
   

  
	
   

  	
   

  	
  Title:

  	
  General Partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  GP CONTRIBUTORS:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ ALBERT H. SMALL

  	
   

  	
   

  
	
   

  	
   

  	
  Albert H. Small, as a GP Contributor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ THEODORE N. LERNER

  	
   

  	
   

  
	
   

  	
   

  	
  Theodore N. Lerner, as a GP Contributor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ RALPH OCHSMAN

  	
   

  	
   

  
	
   

  	
   

  	
  Ralph Ochsman, as a GP Contributor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ RICHARD PERKINS

  	
   

  	
   

  
	
   

  	
   

  	
  Richard Perkins, as a GP Contributor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  GUDELSKY BROTHERS, a general partnership, as a GP

  Contributor

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ JACK C. MERRIMAN

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Jack C. Merriman

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Partner

  	
   

  
											

 

66

 

IN WITNESS WHEREOF, the undersigned party has
executed this Agreement as of the day and year first above written solely with
regard to its rights and obligations under Section 20.1 of this Agreement.

	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MACK-CALI REALTY CORPORATION, a Maryland corporation

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ MITCHELL E. HERSH

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Mitchell E. Hersh

  	
   

  
	
   

  	
   

  	
   

  	
  President and Chief
  Executive Officer

  	
   

  
						

 

67

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  CONTRIBUTION
  AND EXCHANGE; ALTERNATIVE STRUCTURE

  	
  3

  
	
   

  	
   

  	
   

  
	
  2.

  	
  CONSIDERATION
  AND DEPOSIT

  	
  3

  
	
   

  	
   

  	
   

  
	
  3.

  	
  REDEMPTION

  	
  6

  
	
   

  	
   

  	
   

  
	
  4.

  	
  OPTION
  TO PURCHASE

  	
  7

  
	
   

  	
   

  	
   

  
	
  5.

  	
  INSPECTION
  PERIOD; MCRLP’S RIGHT OF TERMINATION AND REJECTION PRIOR TO CLOSING; AS IS
  CONDITION

  	
  7

  
	
   

  	
   

  	
   

  
	
  6.

  	
  TITLE;
  MATTERS TO WHICH THIS EXCHANGE IS SUBJECT

  	
  9

  
	
   

  	
   

  	
   

  
	
  7.

  	
  REPRESENTATIONS
  AND WARRANTIES OF THE GP CONTRIBUTORS AND THE PROPERTY LLLPs

  	
  12

  
	
   

  	
   

  	
   

  
	
  8.

  	
  COVENANTS
  OF THE GP CONTRIBUTORS AND THE PROPERTY LLLPs

  	
  22

  
	
   

  	
   

  	
   

  
	
  9.

  	
  LEASING
  COMMISSIONS AND TENANT IMPROVEMENT OBLIGATIONS

  	
  26

  
	
   

  	
   

  	
   

  
	
  10.

  	
  ESTOPPEL
  CERTIFICATES

  	
  28

  
	
   

  	
   

  	
   

  
	
  11.

  	
  REPRESENTATIONS
  AND WARRANTIES OF MCRLP AND THE COMPANY

  	
  29

  
	
   

  	
   

  	
   

  
	
  12.

  	
  CLOSING

  	
  30

  
	
   

  	
   

  	
   

  
	
  13.

  	
  ADJUSTMENTS

  	
  34

  
	
   

  	
   

  	
   

  
	
  14.

  	
  CONDITIONS
  PRECEDENT TO CLOSING

  	
  36

  
	
   

  	
   

  	
   

  
	
  15.

  	
  ASSIGNMENT

  	
  38

  
	
   

  	
   

  	
   

  
	
  16.

  	
  BROKER

  	
  38

  
	
   

  	
   

  	
   

  
	
  17.

  	
  CASUALTY
  LOSS

  	
  39

  
	
   

  	
   

  	
   

  
	
  18.

  	
  CONDEMNATION

  	
  40

  
	
   

  	
   

  	
   

  
	
  19.

  	
  TRANSFER
  RESTRICTIONS; RIGHT OF FIRST REFUSAL

  	
  40

  
	
   

  	
   

  	
   

  
	
  20.

  	
  REGISTRATION
  RIGHTS

  	
  43

  
	
   

  	
   

  	
   

  
	
  21.

  	
  DEBT
  MAINTENANCE

  	
  43

  
	
   

  	
   

  	
   

  
	
  22.

  	
  SALE
  OF THE PROPERTY

  	
  50

  
	
   

  	
   

  	
   

  
	
  23.

  	
  PUBLICATION;
  CONFIDENTIALITY

  	
  56

  
	
   

  	
   

  	
   

  
	
  24.

  	
  TAX
  MATTERS

  	
  57

  
	
   

  	
   

  	
   

  
	
  25.

  	
  DEFAULT
  REMEDIES; INDEMNITY

  	
  58

  
	
   

  	
   

  	
   

  
	
  26.

  	
  NOTICE

  	
  60

  
	
   

  	
   

  	
   

  
	
  27.

  	
  EMPLOYEE
  MATTERS

  	
  62

  
	
   

  	
   

  	
   

  
	
  28.

  	
  MISCELLANEOUS

  	
  63

  

 

 

TABLE OF
CONTENTS

 

	
  3

  	
   

  
	
   

  	
   

  
	
  3-14 Financial
  Statements

  	
  64

  
	
   

  	
   

  
	
  A

  	
   

  
	
   

  	
   

  
	
  Access Agreement

  	
  7

  
	
  Accounting Firm

  	
  53, 64

  
	
  Additional Rents

  	
  35

  
	
  Agreement

  	
  1

  
	
  Allocated
  Property Values

  	
  3

  
	
  Anniversary

  	
  40

  
	
  Anniversary Date

  	
  43

  
	
  Assumed Debt

  	
  2, 10

  
	
  Assumed Debt
  Amount

  	
  3

  
	
   

  	
   

  
	
  B

  	
   

  
	
   

  	
   

  
	
  Base Value

  	
  4

  
	
  Books and
  Records

  	
  31

  
	
  Built-in Gain

  	
  52

  
	
   

  	
   

  
	
  C

  	
   

  
	
   

  	
   

  
	
  Capital Office
  Debt

  	
  45

  
	
  Capital Office
  Owner

  	
  1

  
	
  Capital Office
  Owners

  	
  1

  
	
  CERCLA

  	
  14

  
	
  Certificate

  	
  4

  
	
  Closing

  	
  30

  
	
  Closing Date

  	
  30

  
	
  Code

  	
  16

  
	
  Common Stock

  	
  4

  
	
  Company

  	
  2

  
	
  Consent Period

  	
  47

  
	
  Consideration

  	
  3

  
	
  Contaminants

  	
  14

  
	
  Contributor
  401(k) Plan

  	
  16

  
	
  Contributor Debt
  Amount

  	
  43

  
	
  Contributor
  Default

  	
  47

  
	
  Contributor
  Guantee

  	
  45

  
	
  Contributor
  Indemnities

  	
  43

  
	
  Contributor
  Indemnity

  	
  43

  
	
  Contributor
  Units

  	
  4

  
	
  Contributor’s
  Broker

  	
  38

  
	
  Contributors

  	
  1

  
	
  Contributors’
  Lease Costs

  	
  27

  
	
  Contributors’
  Title Response

  	
  10

  
	
  Conversion

  	
  2

  
	
  CRC

  	
  22

  
	
   

  	
   

  
	
  D

  	
   

  
	
   

  	
   

  
	
  Declaration

  	
  11

  
	
  Deposit

  	
  4

  
	
  Discharge

  	
  15

  
	
  Disposition
  Notice

  	
  41

  
	
  Disposition
  Securities

  	
  41

  
	
  Dissolution
  Proceeds

  	
  43

  
	
  Distribution
  Date

  	
  5

  
	
   

  	
   

  
	
  E

  	
   

  
	
   

  	
   

  
	
  Eleventh LLLP

  	
  1

  
	
  Environmental
  Documents

  	
  15

  
	
  Environmental
  Laws

  	
  14, 15

  
	
  ERISA

  	
  16

  
	
  Escrow Agent

  	
  4

  
	
  Escrow Holder

  	
  59

  
	
  Escrow Pool

  	
  59

  
	
  Estoppel
  Certificates

  	
  28

  
	
  Exchange Act

  	
  20

  
	
  Exchange
  Property

  	
  3

  
	
  Execution Date

  	
  1

  
	
  Exercise Notice

  	
  41

  
	
  Existing Loan
  Documents

  	
  2

  
	
  Express
  Representations

  	
  8

  
	
   

  	
   

  
	
  F

  	
   

  
	
   

  	
   

  
	
  Family Member

  	
  42

  
	
  First Tier Debt

  	
  43

  
	
  First Tier
  Indemnities

  	
  44

  
	
  First Tier
  Indemnity

  	
  44

  
	
  Fourteenth LLLP

  	
  1

  
	
   

  	
   

  
	
  G

  	
   

  
	
   

  	
   

  
	
  Governmental
  Authorities

  	
  13

  
	
  Governmental
  Authority

  	
  19

  
	
  GP Contributor

  	
  1

  
	
  GP Contributors

  	
  1

  
	
  Greenbelt

  	
  1

  
	
  GSA

  	
  27

  
	
  GSA Edmonston
  Lease

  	
  27

  
	
   

  	
   

  
	
  I

  	
   

  
	
   

  	
   

  
	
  Indemnities

  	
  44

  
	
  Inspection
  Period

  	
  7

  
	
   

  	
   

  
	
  L

  	
   

  
	
   

  	
   

  
	
  Lawyers Title

  	
  10

  
	
  Lease

  	
  7

  
	
  Lender’s
  Estoppel

  	
  5

  
	
  Letter of Credit

  	
  5

  
	
  LP Contributors

  	
  1

  
	
   

  	
   

  
	
  M

  	
   

  
	
   

  	
   

  
	
  Mack-Cali

  	
  2

  
	
  Major Tenant

  	
  28

  
	
  Make Whole
  Payment

  	
  52

  
	
  MCRLP

  	
  1

  
	
  MCRLP Knowledge
  Persons

  	
  22

  
	
  MCRLP’s Lease
  Costs

  	
  27

  
	
  MCRLP’s Title
  Objection Letter

  	
  10

  

 

 

INDEX

 

	
  N

  	
   

  
	
   

  	
   

  
	
  New Employees

  	
  16

  
	
  Notice Period

  	
  41

  
	
   

  	
   

  
	
  O

  	
   

  
	
   

  	
   

  
	
  OFAC

  	
  19

  
	
  OP Agreement

  	
  6

  
	
  Option

  	
  7

  
	
  Option Agreement

  	
  7

  
	
  Option
  Contributor

  	
  2

  
	
  Option
  Properties

  	
  2

  
	
  Option Property

  	
  2

  
	
  Option Property
  Owner

  	
  1

  
	
  Option Property
  Owners

  	
  1

  
	
  Option Purchase
  Price

  	
  7

  
	
  Outside Closing
  Date

  	
  30, 38

  
	
   

  	
   

  
	
  P

  	
   

  
	
   

  	
   

  
	
  Partnership
  Acknowledgment

  	
  33

  
	
  Partnership Debt

  	
  44

  
	
  Permitted
  Encumbrances

  	
  9

  
	
  Personal
  Property

  	
  14

  
	
  Proceeding

  	
  55

  
	
  Properties

  	
  2

  
	
  Property

  	
  2

  
	
  Property
  Financials

  	
  17

  
	
  Property LLLP

  	
  1

  
	
  Property LLLPs

  	
  1

  
	
  Property Owner
  Interests

  	
  2

  
	
  Proposed
  Purchaser

  	
  41

  
	
  Purchase Option

  	
  41

  
	
   

  	
   

  
	
  Q

  	
   

  
	
   

  	
   

  
	
  Qualified
  Indebtedness

  	
  44

  
	
   

  	
   

  
	
  R

  	
   

  
	
   

  	
   

  
	
  Refinanced Debt

  	
  44, 45

  
	
  Refundable
  Deposit

  	
  4

  
	
  Rent Roll

  	
  12

  
	
  Representatives

  	
  44

  
	
  Restricted
  Period

  	
  50

  
	
   

  	
   

  
	
  S

  	
   

  
	
   

  	
   

  
	
  SEC Documents

  	
  20

  
	
  Second Tier Debt

  	
  44

  
	
  Second Tier
  Indemnities

  	
  44

  
	
  Second Tier
  Indemnity

  	
  44

  
	
  Securities Act

  	
  19

  
	
  Security Deposit

  	
  13

  
	
  Seller
  Organizational Documents

  	
  17

  
	
  Seller’s Estoppel
  Certificates

  	
  28

  
	
  Selling
  Contributor

  	
  41

  
	
  Service
  Contracts

  	
  7

  
	
  Sixteenth LLLP

  	
  1

  
	
   

  	
   

  
	
  T

  	
   

  
	
   

  	
   

  
	
  Tax Claim

  	
  55

  
	
  Taxes

  	
  58

  
	
  Tenants

  	
  9

  
	
  Tenth LLLP

  	
  1

  
	
  Third Tier Debt

  	
  45

  
	
  Third Tier
  Indemnities

  	
  45

  
	
  Third Tier
  Indemnity

  	
  45

  
	
  Title
  Commitments

  	
  10

  
	
  Title Company

  	
  10

  
	
  Title Documents

  	
  10

  
	
  Title Policy

  	
  11

  
	
  Transfer

  	
  20

  
	
  Transferred

  	
  40

  
	
  Transferred Interest

  	
  2

  
	
  Transferred Interests

  	
  2

  
	
  Triggering Event

  	
  52

  
	
  Turn-Key Lease

  	
  23

  
	
  Twelfth LLLP

  	
  1

  
	
   

  	
   

  
	
  U

  	
   

  
	
   

  	
   

  
	
  Underlying
  Shares

  	
  40

  
	
  Undisclosed
  Liabilities

  	
  18

  
	
  Unit Value

  	
  4

  
	
  Units

  	
  2

  
	
  Unsatisfied
  Party

  	
  38

  

 

ii

 

SCHEDULES AND EXHIBITS

 

	
  SCHEDULE 2.1
  Allocated Property Values

  
	
  SCHEDULE
  2.1(b) Cash Consideration

  
	
  SCHEDULE
  2.2-A Contributor Units

  
	
  SCHEDULE
  2.2-B Initial Capital Account Balances of Contributors

  
	
  SCHEDULE
  2.5(a) Certifications and Agreements to be Included in a Lender’s Estoppel

  
	
  SCHEDULE
  7.1(a) Proceedings

  
	
  SCHEDULE
  7.1(b) Schedule of Leases

  
	
  SCHEDULE
  7.1(c) Rent Roll

  
	
  SCHEDULE
  7.1(h) Service Contracts

  
	
  SCHEDULE
  7.1(j) Employees

  
	
  SCHEDULE
  7.1(k) Leasing Commission Obligations

  
	
  SCHEDULE
  7.1(n) Environmental Site Assessments, Investigations and Documents

  
	
  SCHEDULE
  7.1(q) Contributor and Property LLLP Employee Plans

  
	
  SCHEDULE
  7.2(a) Audits

  
	
  SCHEDULE
  7.2(b) Tax Attributes

  
	
  SCHEDULE 7.7
  MCRLP Knowledge Persons

  
	
  SCHEDULE 8.2
  Proceedings

  
	
  SCHEDULE
  10.1 Form Tenant Estoppel Certificate

  
	
  SCHEDULE
  21.1 Contributor Debt Amount

  
	
  SCHEDULE
  27.1 Mack-Cali Employee Plans and Programs

  
	
  EXHIBIT A GP
  Contributors

  
	
  EXHIBIT B LP
  Contributors

  
	
  EXHIBIT C
  Form of LP Contributors Joinder Agreement

  
	
  EXHIBIT D-1
  Greenbelt Associates Owner Interests

  
	
  EXHIBIT D-2
  Tenth Springhill Lake Owner Interests

  
	
  EXHIBIT D-3
  Eleventh Springhill Lake Owner Interests

  
	
  EXHIBIT D-4
  Twelfth Springhill Lake Owner Interests

  
	
  EXHIBIT D-5
  Fourteenth Springhill Lake Owner Interests

  
	
  EXHIBIT D-6
  Sixteenth Springhill Lake Owner Interests

  
	
  EXHIBIT E
  Description of Properties

  
	
  EXHIBIT F
  Description of Option Properties

  

 

i

 

	
  EXHIBIT G Ownership
  of Properties

  
	
  EXHIBIT H
  Ownership of Option Properties

  
	
  EXHIBIT I
  Assumed Debt (as of November 1, 2005)

  
	
  EXHIBIT J-1
  Existing Loan Documents

  
	
  EXHIBIT K
  Form of Limited Agreement of Indemnity

  
	
  EXHIBIT L
  Form of Certificate for Units

  
	
  EXHIBIT M
  Option Agreement

  
	
  EXHIBIT N
  Form of Non-Imputation Indemnities and Affidavits

  
	
  EXHIBIT O
  Form of Estoppel Certificate for GSA Leases

  
	
  EXHIBIT P
  Form of Assignment of Transferred Interest

  
	
  EXHIBIT Q
  Certificate of Non-Foreign Status

  
	
  EXHIBIT R
  Escrow Agreement

  
	
  EXHIBIT S
  Form of Guaranty

  
	
  EXHIBIT T
  Property Financials

  
	
  EXHIBIT U
  Form of Letter (Section 21.2(B)(I))

  
	
  EXHIBIT V
  Form of Letter (Section 21.2(B)(II))

  
	
  EXHIBIT W
  Form of Letter (Section 21.2(b)(III))

  

 

iiExhibit 10.1

 

 

 

ASSET PURCHASE
AGREEMENT

 

 

Among

 

NEWPAGE
CORPORATION,

 

CHILLICOTHE
PAPER INC.

 

and

 

P. H.
GLATFELTER COMPANY

 

Dated as of
February 21, 2006

 

 

TABLE OF
CONTENTS

 

	
   

  	
  Page

  
	
  ARTICLE I

  	
   

  
	
   

  	
   

  
	
  DEFINITIONS

  	
   

  
	
   

  	
   

  
	
  SECTION 1.01. Certain Defined
  Terms

  	
  1

  
	
  SECTION 1.02. Definitions

  	
  13

  
	
  SECTION 1.03. Interpretation
  and Rules of Construction

  	
  15

  
	
   

  	
   

  
	
  ARTICLE
  II

  	
   

  
	
   

  	
   

  
	
  PURCHASE
  AND SALE

  	
   

  
	
   

  	
   

  
	
  SECTION 2.01. Purchase and
  Sale of Purchased Assets

  	
  16

  
	
  SECTION 2.02. Assumption and
  Exclusion of Liabilities

  	
  19

  
	
  SECTION 2.03. Purchase Price;
  Allocation of Purchase Price

  	
  21

  
	
  SECTION 2.04. Closing

  	
  22

  
	
  SECTION 2.05. Closing
  Deliveries by the Seller

  	
  22

  
	
  SECTION 2.06. Closing
  Deliveries by the Purchaser

  	
  23

  
	
  SECTION 2.07. Adjustment of
  Purchase Price

  	
  23

  
	
   

  	
   

  
	
  ARTICLE
  III

  	
   

  
	
   

  	
   

  
	
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  
	
  OF THE
  SELLER AND PARENT

  	
   

  
	
   

  	
   

  
	
  SECTION 3.01. Organization,
  Authority and Qualification

  	
  26

  
	
  SECTION 3.02. No Conflict

  	
  27

  
	
  SECTION 3.03. Governmental
  Consents and Approvals

  	
  27

  
	
  SECTION 3.04. Financial
  Information; Books and Records

  	
  28

  
	
  SECTION 3.05. Absence of
  Undisclosed Liabilities

  	
  28

  
	
  SECTION 3.06. Receivables

  	
  28

  
	
  SECTION 3.07. Inventories

  	
  29

  
	
  SECTION 3.08. Conduct in the
  Ordinary Course; Absence of Certain Changes, Events and Conditions

  	
  29

  
	
  SECTION 3.09. Litigation

  	
  31

  
	
  SECTION 3.10. Compliance with
  Laws

  	
  31

  
	
  SECTION 3.11. Environmental
  Matters

  	
  32

  
	
  SECTION 3.12. Material
  Contracts

  	
  32

  
	
  SECTION 3.13. Intellectual
  Property

  	
  34

  
	
  SECTION 3.14. Real Property

  	
  35

  
	
  SECTION 3.15. Tangible
  Personal Property

  	
  37

  
	
  SECTION 3.16. Assets

  	
  37

  
	
  SECTION 3.17. Customers

  	
  38

  

 

i

 

	
  SECTION 3.18. Suppliers

  	
  38

  
	
  SECTION 3.19. Employee
  Benefit Matters

  	
  38

  
	
  SECTION 3.20. Labor Matters

  	
  40

  
	
  SECTION 3.21. Key Employees

  	
  41

  
	
  SECTION 3.22. Taxes

  	
  41

  
	
  SECTION 3.23. Insurance

  	
  42

  
	
  SECTION 3.24. Brokers

  	
  42

  
	
  SECTION 3.25. Licenses and
  Permits

  	
  42

  
	
   

  	
   

  
	
  ARTICLE
  IV

  	
   

  
	
   

  	
   

  
	
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  
	
  OF THE
  PURCHASER

  	
   

  
	
   

  	
   

  
	
  SECTION 4.01. Organization
  and Authority of the Purchaser

  	
  42

  
	
  SECTION 4.02. No Conflict

  	
  43

  
	
  SECTION 4.03. Governmental
  Consents and Approvals

  	
  43

  
	
  SECTION 4.04. Financing

  	
  43

  
	
  SECTION 4.05. Litigation

  	
  43

  
	
  SECTION 4.06. Brokers

  	
  44

  
	
  SECTION 4.07. Knowledge of
  Breach

  	
  44

  
	
  SECTION 4.08. Disclaimer of
  Warranties

  	
  44

  
	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
   

  	
   

  
	
  ADDITIONAL
  AGREEMENTS

  	
   

  
	
   

  	
   

  
	
  SECTION 5.01. Conduct of
  Business Prior to the Closing

  	
  44

  
	
  SECTION 5.02. Access to
  Information

  	
  45

  
	
  SECTION 5.03. Confidentiality

  	
  46

  
	
  SECTION 5.04. Regulatory and
  Other Authorizations; Notices and Consents

  	
  47

  
	
  SECTION 5.05. Notice of
  Developments

  	
  48

  
	
  SECTION 5.06. Non-Competition

  	
  48

  
	
  SECTION 5.07. Excluded
  Liabilities; Assumed Liabilities

  	
  50

  
	
  SECTION 5.08. Tax Cooperation
  and Exchange of Information; Other Tax Matters

  	
  50

  
	
  SECTION 5.09. Conveyance
  Taxes

  	
  51

  
	
  SECTION 5.10. Further Action

  	
  51

  
	
  SECTION 5.11. Risk of Loss

  	
  51

  
	
  SECTION 5.12. Proration;
  Certain Charges and Taxes

  	
  52

  
	
  SECTION 5.13. Compliance with
  Environmental Transfer Statutes

  	
  53

  
	
  SECTION 5.14. Historical
  Off-Site Environmental Liabilities Limitations

  	
  53

  
	
  SECTION 5.15. Environmental
  Reports

  	
  53

  
	
  SECTION 5.16. Provision of
  Business Records to the Purchaser

  	
  53

  
	
  SECTION 5.17. Use of
  Intellectual Property

  	
  54

  
	
  SECTION 5.18. Intracompany
  Arrangements

  	
  55

  
	
  SECTION 5.19. Preparation of
  Stand-Alone Financial Statements

  	
  55

  
	
  SECTION 5.20. Title
  Insurance; Objections

  	
  56

  

 

ii

 

	
  SECTION 5.21. Coated
  Converting Agreement

  	
  58

  
	
  SECTION 5.22. Letter of
  Credit

  	
  58

  
	
   

  	
   

  
	
  ARTICLE
  VI

  	
   

  
	
   

  	
   

  
	
  EMPLOYEE
  MATTERS

  	
   

  
	
   

  	
   

  
	
  SECTION 6.01. Offer of
  Employment

  	
  60

  
	
  SECTION 6.02. Post Closing
  Benefits

  	
  60

  
	
  SECTION 6.03. Transition to
  New Health Plans; Past Service Credit

  	
  60

  
	
  SECTION 6.04. Hourly Pension
  Plan

  	
  61

  
	
  SECTION 6.05. Certain Other
  Employee-Related Costs

  	
  63

  
	
  SECTION 6.06. Existing
  Welfare Benefit Plans; Retiree Medical Benefits

  	
  63

  
	
  SECTION 6.07. Collective Bargaining
  Agreements

  	
  63

  
	
  SECTION 6.08. Cooperation
  With Respect to Certain Pre-Closing Retained Liabilities

  	
  63

  
	
   

  	
   

  
	
  ARTICLE
  VII

  	
   

  
	
   

  	
   

  
	
  CONDITIONS
  TO CLOSING

  	
   

  
	
   

  	
   

  
	
  SECTION 7.01. Conditions to
  Obligations of the Seller and Parent

  	
  64

  
	
  SECTION 7.02. Conditions to Obligations
  of the Purchaser

  	
  64

  
	
   

  	
   

  
	
  ARTICLE
  VIII

  	
   

  
	
   

  	
   

  
	
  INDEMNIFICATION

  	
   

  
	
   

  	
   

  
	
  SECTION 8.01. Survival of
  Representations and Warranties

  	
  66

  
	
  SECTION 8.02. Indemnification
  by the Seller and Parent

  	
  67

  
	
  SECTION 8.03. Indemnification
  by the Purchaser

  	
  69

  
	
  SECTION 8.04. Limits on
  Indemnification

  	
  69

  
	
  SECTION 8.05. Notice of Loss;
  Third Party Claims

  	
  70

  
	
  SECTION 8.06. Tax Treatment

  	
  71

  
	
  SECTION 8.07. Limitations and
  Procedures Applicable to Indemnification for Historical Environmental
  Liabilities

  	
  71

  
	
  SECTION 8.08. Procedures for
  Allocation of Responsibility for Straddle Environmental Liabilities

  	
  73

  
	
  SECTION 8.09. Procedures
  Applicable to Indemnification by the Purchaser for Reserved Pre-Closing
  Environmental 

  	
   

  
	
   

  	
   Liabilities and Post-Closing Environmental
  Liabilities

  	
  76

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  IX

  	
   

  
	
   

  	
   

  
	
  TERMINATION

  	
   

  
	
   

  	
   

  
	
  SECTION 9.01. Termination

  	
  77

  
	
  SECTION 9.02. Effect of
  Termination

  	
  77

  

 

iii

 

	
  ARTICLE X

  	
   

  
	
   

  	
   

  
	
  GENERAL
  PROVISIONS

  	
   

  
	
   

  	
   

  
	
  SECTION 10.01. Expenses

  	
  77

  
	
  SECTION 10.02. Notices

  	
  78

  
	
  SECTION 10.03. Public
  Announcements

  	
  78

  
	
  SECTION 10.04. Severability

  	
  79

  
	
  SECTION 10.05. Entire
  Agreement

  	
  79

  
	
  SECTION 10.06. Assignment

  	
  79

  
	
  SECTION 10.07. Amendment

  	
  79

  
	
  SECTION 10.08. Waiver

  	
  79

  
	
  SECTION 10.09. Joint and
  Several Liability

  	
  80

  
	
  SECTION 10.10. No Third Party
  Beneficiaries

  	
  80

  
	
  SECTION 10.11. Specific
  Performance

  	
  80

  
	
  SECTION 10.12. Governing Law

  	
  80

  
	
  SECTION 10.13. Waiver of Jury
  Trial

  	
  80

  
	
  SECTION 10.14. Counterparts

  	
  81

  

 

iv

 

EXHIBITS

 

	
  1.01(a)(i)

  	
  Form of Assignment
  of Intellectual Property

  
	
  1.01(a)(ii)

  	
  Form of
  Assignment of Intellectual Property

  
	
  1.01(b)

  	
  Form of
  Assignment of Lease

  
	
  1.01(c)

  	
  Form of
  Assumption Agreement

  
	
  1.01(d)

  	
  Form of Bill
  of Sale and Assignment

  
	
  1.01(e)

  	
  Form of Deed

  
	
  1.01(f)

  	
  Form of
  Transition Services Agreement

  
	
  5.17(a)

  	
  Form of
  Temporary Trademark License Agreement

  
	
  5.17(b)

  	
  Form of
  Technology License Agreement

  
	
  5.17(c)

  	
  Form of
  Technology License-Back Agreement

  
	
  5.17(d)

  	
  Form of
  Technology Sub-License Agreement

  
	
  5.21

  	
  Term Sheet
  for Coated Converting Agreement

  
	
  5.22

  	
  Form of
  Letter of Credit

  
	
  6.01

  	
  Transferred
  Employees

  
	
  7.02(e)

  	
  Consents

  

 

v

 

DISCLOSURE
SCHEDULE

 

The Disclosure
Schedule shall include the following Sections:

 

	
  1.01(a)

  	
  Licensed-Back
  Intellectual Property

  
	
  1.01(b)

  	
  Licensed
  Business Intellectual Property

  
	
  1.01(c)

  	
  Licensed
  Carbonless Paper Business Intellectual Property

  
	
  1.01(d)

  	
  Mead
  Licensed Carbonless Paper Business Intellectual Property

  
	
  1.01(e)

  	
  Owned
  Business Intellectual Property

  
	
  1.01(f)

  	
  Owned
  Carbonless Paper Business Intellectual Property

  
	
  1.01(g)

  	
  Working
  Capital

  
	
  2.01(a)(xv)

  	
  Collective
  Bargaining Agreements

  
	
  2.01(b)(ix)

  	
  Excluded
  Intellectual Property

  
	
  2.01(b)(xii)

  	
  Excluded
  Intercompany Receivables and Payables

  
	
  3.02

  	
  No Conflict

  
	
  3.03

  	
  Governmental
  Consents and Approvals

  
	
  3.04(a)(i)

  	
  Unaudited
  Financial Statements

  
	
  3.05

  	
  Absence of
  Undisclosed Liabilities

  
	
  3.06

  	
  Receivables

  
	
  3.07(a)

  	
  Inventories

  
	
  3.07(b)

  	
  Inventories

  
	
  3.08(a)

  	
  Conduct in
  the Ordinary Course; Absence of Certain Changes, Events and Conditions

  
	
  3.08(b)

  	
  Conduct in
  the Ordinary Course; Absence of Certain Changes, Events and Conditions

  
	
  3.09

  	
  Litigation

  
	
  3.10(a)

  	
  Compliance
  with Laws

  
	
  3.10(b)

  	
  Governmental
  Orders

  
	
  3.11

  	
  Environmental
  Matters

  
	
  3.12(a)

  	
  Material
  Contracts

  
	
  3.12(a)(ii)

  	
  Material
  Purchase Orders

  
	
  3.12(b)

  	
  Material
  Contracts

  
	
  3.12(f)

  	
  Material
  Contracts

  
	
  3.12(g)

  	
  Material
  Contracts

  
	
  3.12(h)

  	
  Material
  Contracts

  
	
  3.12(i)

  	
  Material
  Contracts

  
	
  3.13(a)

  	
  Intellectual
  Property

  
	
  3.13(b)

  	
  Intellectual
  Property

  
	
  3.13(c)

  	
  Intellectual
  Property

  
	
  3.13(d)

  	
  Intellectual
  Property

  
	
  3.14(a)

  	
  Owned Real
  Property

  
	
  3.14(b)

  	
  Leased Real
  Property

  
	
  3.14(c)

  	
  Real
  Property

  
	
  3.14(d)

  	
  Real
  Property

  
	
  3.14(e)

  	
  Transferred
  Real Property

  
	
  3.15(b)

  	
  Tangible
  Personal Property

  
	
  3.16(a)

  	
  Assets

  

 

vi

 

	
  3.16(c)

  	
  Assets

  
	
  3.17

  	
  Customers

  
	
  3.18

  	
  Suppliers

  
	
  3.19(a)

  	
  Employee
  Benefit Matters

  
	
  3.20

  	
  Labor
  Matters

  
	
  3.21

  	
  Key
  Employees

  
	
  3.22(l)

  	
  Taxes

  
	
  3.22(m)

  	
  Taxes

  
	
  3.25

  	
  Licenses and
  Permits

  
	
  5.01(a)

  	
  Conduct of
  Business Prior to the Closing

  
	
  5.01(b)

  	
  Conduct of
  Business Prior to the Closing

  
	
  5.04(f)

  	
  Guarantees

  
	
  5.06(c)

  	
  Non-Competition
  with Non-Carbonless Paper Business Customers

  
	
  5.20(b)(viii)

  	
  Title
  Insurance

  
	
  6.04(d)

  	
  Assumptions
  and Methodologies for Calculation of Transfer Amount

  
	
  8.02(g)

  	
  Historical
  On-Site Environmental Liabilities

  
	
  8.02(i)

  	
  Straddle
  Environmental Liabilities

  
	
  8.08(g)

  	
  Straddle
  Environmental Liabilities

  

 

A copy of the
Schedules and Exhibits will be furnished supplementally to the Commission upon
request.

 

vii

 

ASSET PURCHASE AGREEMENT, dated as of February 21, 2006, among NewPage
Corporation, a Delaware corporation (“Parent”), Chillicothe Paper Inc.,
a Delaware corporation and a wholly-owned and direct subsidiary of Parent (the “Seller”),
and P. H. Glatfelter Company, a Pennsylvania corporation (the “Purchaser”).

 

WHEREAS, the Seller is engaged in the business of manufacturing,
marketing and distribution of carbonless papers at the Operating Sites and the
use or sale of products derived therefrom (the “Carbonless Paper Business”);

 

WHEREAS, the Seller is also engaged in the business of manufacturing,
marketing and distribution of coated and uncoated papers at the Operating Sites
and the use or sale of products derived therefrom, which Parent also engages in
at other sites (as conducted by the Seller at the Operating Sites, the “Non-Carbonless
Paper Business,” and together with the Carbonless Paper Business, the “Business”);
and

 

WHEREAS, the Seller wishes to sell to the Purchaser, and the Purchaser
wishes to purchase from the Seller, the Business, including all right, title
and interest of the Seller in and to the property and assets of the Business,
and in connection therewith the Purchaser is willing to assume certain
liabilities of the Seller relating thereto, all upon the terms and subject to
the conditions set forth herein;

 

NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, and intending to be legally
bound, the Seller, Parent and the Purchaser hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

SECTION
1.01.  Certain Defined Terms.  For purposes of this Agreement:

 

“Action” means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.

 

“Affiliate” means, with respect to any specified Person, any
other Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.

 

“Agreement” or “this Agreement” means this Asset Purchase
Agreement between the parties hereto (including the Exhibits hereto and the
Disclosure Schedule) and all amendments hereto made in accordance with the
provisions of Section 10.07.

 

“Ancillary Agreements” means the Bill of Sale, the Deeds, each
Assignment of Lease, the Assignments of Intellectual Property, the Technology
License Agreement, the Temporary Trademark License Agreement, the Technology
License-Back Agreement, the Technology Sub-License Agreement, the Transition
Services Agreement, the Coated Converting Agreement and the Assumption
Agreement.

 

 

“Assignments of Intellectual Property” means the Assignments of
Intellectual Property to be executed by the Seller and the Purchaser at the
Closing, substantially in the form of Exhibits 1.01(a)(i) and (ii).

 

“Assignment of Lease” means the Assignment of Lease to be
executed by the Seller and the Purchaser at the Closing with respect to each
parcel of Leased Real Property listed on Section 3.14(b) of the Disclosure
Schedule, substantially in the form of Exhibit 1.01(b).

 

“Assumption Agreement” means the Assumption Agreement to be
executed by the Seller and the Purchaser at the Closing, substantially in the
form of Exhibit 1.01(c).

 

“Bill of Sale” means the Bill of Sale and Assignment to be
executed by the Seller at the Closing, substantially in the form of Exhibit
1.01(d).

 

“Business Day” means any day that is not a Saturday, a Sunday or
other day on which banks are required or authorized by Law to be closed in The
City of New York.

 

“Business Intellectual Property” means the Owned Business
Intellectual Property and the Licensed Business Intellectual Property.

 

“CERCLA” means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. 9601 et seq.

 

“Carbonless Paper Business Intellectual Property” means the
Owned Carbonless Paper Business Intellectual Property and the Licensed
Carbonless Paper Business Intellectual Property.

 

“Carbonless Paper Business IP Agreements” means (a) licenses of
Licensed Carbonless Paper Business Intellectual Property (excluding licenses
pursuant to which the licensor is MeadWestvaco) and (b) the Laser License
Agreement.

 

“Chillicothe Services Agreement” means the Chillicothe Services
Agreement, effective as of April 30, 2005, between MW Custom Papers, LLC, a
Delaware limited liability company, and the Seller.

 

“Claims” means any and all administrative, regulatory or
judicial actions, suits, petitions, appeals, demands, demand letters, claims,
liens, notices of noncompliance or violation, investigations, proceedings,
consent orders or consent agreements.

 

“Closing Date” means the date on which the Closing occurs.

 

“Code” means the Internal Revenue Code of 1986, as amended
through the date hereof.

 

“Computer Software” means computer software programs, in source
code or object code form, including operating systems and specifications,
utilities, graphical user interfaces, software engines, platforms, and all
versions, updates, corrections, enhancements and modifications thereof, and all
related documentation.

 

2

 

“control” (including the terms “controlled by” and “under
common control with”), with respect to the relationship between or among
two or more Persons, means the possession, directly or indirectly or as
trustee, personal representative or executor, of the power to direct or cause
the direction of the affairs or management of a Person, whether through the
ownership of voting securities, as trustee, personal representative or
executor, by contract, credit arrangement or otherwise.

 

“Conveyance Taxes” means all sales, use, value added, transfer,
stamp, stock transfer, realty or real property transfer or gains and similar
Taxes, but does not include any Income Taxes.

 

“Deeds” means the deeds to be executed by the Seller at the
Closing, substantially in the form of Exhibit 1.01(e), in order to convey to
the Purchaser each parcel of Owned Real Property.

 

“Disclosure Schedule” means the Disclosure Schedule attached
hereto, dated as of the date hereof, delivered by the Seller to the Purchaser
in connection with this Agreement.

 

“Encumbrance” means any security interest, pledge, mortgage,
lien (statutory or otherwise), charge, lease, license, encumbrance, easement,
restrictive covenant, condition or any other restriction, which restriction is
set forth in recorded documents.

 

“Environment” means any surface water, groundwater, land
surface, subsurface strata, sediment, plant or animal life, natural resources,
air and soil.

 

“Environmental Annex” means the Environmental Annex, dated as of
May 2, 2005, by and between MW Custom Papers, LLC, a Delaware limited liability
company, and the Seller.

 

“Environmental Claims” refers to any complaint, summons,
citation, notice, directive, order, claim, litigation, investigation, notice of
violation, notice of liability, request for information sent pursuant to
Section 104(e) of CERCLA or any equivalent section of a state statute that is
analogous to CERCLA, judicial or administrative proceeding, judgment, letter or
other communication from any Governmental Authority or any Person involving (a)
violations of Environmental Laws, (b) exposure to Hazardous Materials, (c) the
handling of Hazardous Materials or (d) Releases of Hazardous Materials from, on
or under (i) any Real Property or other assets or properties used in the
Business, (ii) any adjoining properties or businesses or (iii) any facilities
which received Hazardous Materials generated or used by the Business.

 

“Environmental Conditions” means any condition, known or
unknown, foreseen or unforeseen, arising out of (a) the Release, threat of
Release, or exposure of Persons to Hazardous Materials, (b) any violation of
any Environmental Law, (c) the handling of Hazardous Materials or (d) any Environmental
Claim.

 

“Environmental Laws” includes CERCLA, as amended; the Resource
Conservation and Recovery Act, 42 U.S.C. 6901 et seq., as amended; the Clean
Air Act, 42 U.S.C. 7401 et seq., as amended; the Clean Water Act, 33 U.S.C.
1251 et seq., as amended; the Occupational Safety and Health Act, 29 U.S.C. 655
et seq., as amended; the Toxic Substances Control Act, 15 U.S.C. 2601 et seq.,
as amended; the Hazardous Materials Transportation Act, 49 

 

3

 

U.S.C.
5101 et seq., as amended; the Federal Insecticide, Fungicide, and Rodenticide
Act, 7 U.S.C. 136-136y et seq., as amended; the Emergency Planning and
Community Right-to-Know Act of 1986, 42 U.S.C. 11001 et seq., as amended; and
any other foreign, federal, state, local or municipal laws (including common
law), statutes, regulations, rules or ordinances relating to the protection of
the environment, health and safety, exposure to Hazardous Materials, or natural
resource damages.

 

“Environmental Liabilities” means any Losses, including costs of
investigation, Remedial Action or other response actions, known or unknown,
foreseen or unforeseen, arising out of: 
(a) Environmental Conditions, (b) any violation of or liability under
any Environmental Law, (c) the handling of Hazardous Materials or (d) any
Environmental Claim.  For the avoidance
of doubt, Environmental Liabilities shall not include Losses after the Closing
Date resulting from increases in operating expenses of the Business, including
depreciation, wages, administration of environmental programs, chemicals,
materials, sewer fees and permit fees.

 

“Environmental Permits” means any approvals, authorizations,
certificates, consents, licenses, or permits required under any Environmental
Law for the operation of the Business.

 

“Equity and Asset Purchase Agreement” means that certain Equity
and Asset Purchase Agreement, dated January 14, 2005, by and between Ultimate
Parent and MeadWestvaco.

 

“ERISA Affiliate” means any entity that is a member of a
controlled group for purposes of Section 4001(a)(14) of ERISA.

 

“Excluded
Taxes” means any and all (a) Income Taxes owed by Parent, the Seller, or
any of Parent’s other Affiliates for any period, (b) Taxes relating to the
Excluded Assets or Excluded Liabilities for any period, (c) Taxes relating to
the Purchased Assets, the Business or the Assumed Liabilities imposed with
respect to or otherwise attributable to any Pre-Closing Period except to the
extent an amount for any such Tax is set forth as an asset (if prepaid) or a
Liability on the Closing Date Working Capital Statement, including employment,
payroll and similar Taxes, (d) Taxes of Parent, the Seller or any of Parent’s
other Affiliates or any other Person by reason of being a member of a
consolidated, combined, unitary or affiliated group that includes the Seller or
any of its current or past Affiliates prior to the Closing, by reason of a tax
sharing, tax indemnity or similar agreement entered into by Parent, the Seller
or any of Parent’s current or past Affiliates with any Person prior to the
Closing (other than this Agreement) or by reason of transferee or successor
liability arising in respect of a transaction undertaken by Parent, the Seller
or any of their current or past Affiliates prior to the Closing, and (e)
Conveyance Taxes for which Parent, the Seller or any of Parent’s other
Affiliates are liable under Section 5.09.

 

“GAAP” means United States generally accepted accounting
principles and practices in effect from time to time applied consistently throughout
the periods involved.

 

“Governmental Authority” means any federal, national,
supranational, state, provincial, local, or similar government, governmental,
regulatory or administrative authority, agency or commission or any court,
tribunal, or judicial or arbitral body.

 

4

 

“Governmental Order” means any order, writ, judgment,
injunction, decree, stipulation, determination, ruling or award entered by or
with any Governmental Authority.

 

“Hazardous Materials” means any substance or material that has
been defined or otherwise listed as hazardous or toxic or as a pollutant,
contaminant or waste, or words of similar import, under any Environmental Law,
or any other substance or material that is regulated under any Environmental
Law, including petroleum and petroleum products, polychlorinated biphenyls,
asbestos-containing materials or toxic mold.

 

“Historical Environmental Liabilities” means any Historical On-Site
Environmental Liabilities or Historical Off-Site Environmental Liabilities.

 

“Historical Off-Site Environmental Liabilities” means any
Environmental Liabilities (other than Historical On-Site Environmental
Liabilities) that arise from operations, practices, the handling of Hazardous
Materials, transfers, disposals or other activities (or omissions) of or on
behalf of the Business, the Seller or any predecessor of the Seller, including
MeadWestvaco and Mead Corporation, prior to the Closing Date, including
Environmental Liabilities related to dioxin and furans, polychlorinated
biphenyls and chlorinated solvents and contamination related to the pre-Closing
removal of underground storage tanks (“USTs”) and including any
Environmental Liabilities relating to the Chillicothe Retained Properties as
that term is defined in the Chillicothe Services Agreement; provided, further,
that the term “Historical Off-Site Environmental Liabilities” shall not include
Straddle Environmental Liabilities.

 

“Historical On-Site Environmental Liabilities” means any
Environmental Liabilities arising from Environmental Conditions on or under the
Real Property existing prior to the Closing Date or that arise from operations,
practices, the handling of Hazardous Materials, transfers, disposals or other
activities (or omissions) of or on behalf of the Business, the Seller or any
predecessor of the Seller, including MeadWestvaco Corporation and Mead
Corporation, prior to the Closing Date, including Environmental Liabilities
related to dioxin and furans, polychlorinated biphenyls and chlorinated
solvents, and contamination related to the pre-Closing removal of USTs; provided,
however, that any Environmental Liabilities associated with subsurface
groundwater contaminated with Hazardous Materials that flows beneath a Real
Property, where such Hazardous Materials were not Released, or alleged to be
Released, from the Real Property or by the Business, is not considered a
Historical On-Site Environmental Liability; provided  further,
notwithstanding anything to the contrary in this Agreement, the Seller shall
have no liability for historical on-site asbestos-containing materials (other
than waste asbestos-containing material that is not in compliance with
Environmental Laws as of the Closing Date); provided  further that
the term “Historical On-Site Environmental Liabilities” shall not include
Straddle Environmental Liabilities.

 

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 and the rules and regulations promulgated thereunder.

 

“Income Statements” means the combined statements of operations
of the Business and its predecessor (reflecting only the Purchased Assets and
the Assumed Liabilities) for the four-month period ended April 30, 2005, and
for the eight-month period ended December 31, 2005, copies of which are set forth
in Section 3.04(a)(ii) of the Disclosure Schedule.

 

5

 

“Income
Taxes” means Taxes imposed on or measured by reference to gross or net
income or receipts, and franchise, net worth, capital or other doing business
Taxes, including the commercial activities Tax of the State of Ohio.

 

“Indebtedness” means, with respect to any Person, (a) all
indebtedness of such Person, whether or not contingent, for borrowed money, (b)
all obligations of such Person for the deferred purchase price of property or
services, (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (e) all obligations of
such Person as lessee under leases that have been or should be, in accordance
with GAAP, recorded as capital leases, (f) all obligations, contingent or
otherwise, of such Person under acceptance, letter of credit or similar
facilities, (g) all obligations of such Person to purchase, redeem, retire,
defease or otherwise acquire for value any capital stock of such Person or any
warrants, rights or options to acquire such capital stock, valued, in the case
of redeemable preferred stock, at the greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends and (h) all Indebtedness referred
to in clauses (a) through (g) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Encumbrance on property (including accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness.

 

“Indemnified Party” means a Purchaser Indemnified Party or a
Seller Indemnified Party, as the case may be.

 

“Indemnifying Party” means the Seller or Parent pursuant to
Section 8.02 or the Purchaser pursuant to Section 8.03, as the case may be.

 

“Intellectual Property” means: 
(i) patents, patent applications and statutory invention registrations;
(ii) trademarks, service marks, domain names, trade dress, logos, trade names,
corporate names and other identifiers of source or goodwill, including
registrations and applications for registration thereof and including the
goodwill of the business symbolized thereby or associated therewith; (iii)
copyrights, including copyrights in Computer Software and Internet Web content,
and registrations and applications for registration thereof; (iv) all other
proprietary information, including trade secrets, know-how and invention
rights, including records of invention; and (v) all rights to sue or recover
and retain damages and costs and attorneys’
fees for past, present and future infringement, dilution, misappropriation or
other violation of any of the foregoing.

 

“Inventories” means
all inventories and supplies of merchandise, works-in-process, finished
products, finished goods, raw materials, packaging materials, labels, supplies
and other personal property used by the Seller in the operation of the Business
or related to the Business and maintained, held or stored by or for the Seller
at the Closing, and any prepaid deposits for any of the same.

 

“IRS” means the
Internal Revenue Service of the United States.

 

6

 

“Knowledge”
means the actual knowledge of Matt Jesch, Doug Cooper, Jim Tyrone, John Kurila,
David Bonistall, Eric Johnson, Robert Campbell, Dan Clark, A. Keith Moore,
Linda Sheffield and Chuck Aardema after due inquiry.

 

“Laser License Agreement”
means that certain License Agreement effective as of the 30th day of April
2005, by and between MeadWestvaco and Parent, concerning methods and
applications for laser imaging.

 

“Law” means any
federal, national, supranational, state, provincial, local or similar statute,
law, ordinance, regulation, rule, code, order, requirement or rule of law
(including common law).

 

“Leased Real Property”
means the real property leased by Parent or any of its Affiliates, as tenant,
that is related to the Business, together with, to the extent leased by Parent
or any of its Affiliates (in connection with the Business), all buildings and
other structures, facilities or improvements currently or hereafter located
thereon, all fixtures of Parent or any of its Affiliates (related to the
Business) attached or appurtenant thereto and all easements, licenses, rights
and appurtenances relating to the foregoing.

 

“Liabilities” means
any and all debts, liabilities and obligations, whether accrued or fixed,
absolute or contingent, matured or unmatured or determined or determinable,
including those arising under any Law (including any Environmental Law), Action
or Governmental Order and those arising under any contract, agreement,
arrangement, commitment or undertaking.

 

“Licensed-Back
Intellectual Property” means Owned Carbonless Paper Business Intellectual
Property that is not used exclusively in connection with the Carbonless Paper
Business, including the Intellectual Property that is set forth on Section
1.01(a) of the Disclosure Schedule.

 

“Licensed Business
Intellectual Property” means Intellectual Property used in connection with
the Business as currently conducted that is licensed to Parent or any of its
Affiliates by any Person and that is not Licensed Carbonless Paper Business
Intellectual Property, including the Intellectual Property set forth on Section
1.01(b)(i) of the Disclosure Schedule; provided, however, with
respect to Computer Software, the term “Licensed Business Intellectual Property”
means only the Computer Software licensed to Parent or any of its Affiliates
that is set forth on Section 1.01(b)(ii) of the Disclosure Schedule.

 

“Licensed Carbonless Paper
Business Intellectual Property” means Intellectual Property used primarily
in connection with the Carbonless Paper Business as currently conducted that is
licensed to Parent or any of its Affiliates by any Person, including the
Intellectual Property set forth on Section 1.01(c)(i) of the Disclosure
Schedule; provided, however, with respect to Computer Software,
the term “Licensed Carbonless Paper Business Intellectual Property” means only
the Computer Software licensed to Parent or any of its Affiliates that is set
forth on Section 1.01(c)(ii) of the Disclosure Schedule.

 

“Material Adverse Effect”
means any circumstance, change in or effect on the Business or the Seller that,
individually or in the aggregate with all other circumstances, changes in or
effects on the Business or the Seller is, or is reasonably likely to be,
materially adverse to the 

 

7

 

business, results of operations or
financial condition of the Business; provided, however, that “Material
Adverse Effect” shall not include any circumstance, change in or effect on, the
Business or the Seller directly or indirectly arising out of or attributable to
(i) changes or effects that generally affect the industries in which the
Business operates to the extent they do not disproportionately affect the
Business, (ii) changes in general economic, regulatory or political conditions
that do not disproportionately affect the Business, (iii) changes in Laws
generally applicable to entities engaged in businesses similar to the Business,
(iv) changes or developments resulting from any actions taken by the Purchaser,
the Seller or Parent or any of their respective representatives in accordance
with the terms of this Agreement, or resulting from the Purchaser’s withholding
of consent to the Seller’s request to take any action prohibited by Section
5.01 (but only to the extent such consent is unreasonably withheld or delayed
on the part of the Purchaser), (v) changes in financial, currency or securities
markets or the economy in general, (vi) changes or developments resulting from
acts of terrorism or war (whether or not declared) except to the extent causing
damage to the physical facilities of the Business or the Transferred Employees,
or (vii) changes in the Business consistent in amount and timing with the
downward trend in the Business previously disclosed by Parent to the Purchaser.

 

“Mead License Agreement”
means that certain License Agreement (by Parent and the Seller to MeadWestvaco)
made and entered into as of April 30, 2005, by and between MeadWestvaco, Parent
and the Seller.

 

“Mead Licensed Carbonless
Paper Business Intellectual Property” means Intellectual Property that is
owned by Parent or any of its Affiliates and used primarily in connection with
the Carbonless Paper Business and that is licensed by Parent or its Affiliates
to MeadWestvaco pursuant to the Mead License Agreement, including the
Intellectual Property set forth in Section 1.01(d) of the Disclosure Schedule.

“MeadWestvaco” means
MeadWestvaco Corporation, a Delaware corporation.

 

“MeadWestvaco Trademark
License Agreement” means that certain Trademark License Agreement
(Transitional) made effective as of the 30th day of April, 2005, by
and between MeadWestvaco and the Seller.

 

“NewPage License Agreement”
means that certain License Agreement (by MeadWestvaco to Parent) made and
entered into as of April 30, 2005, by and between MeadWestvaco and Parent.

 

“Operating Sites”
means the list of properties set forth in Section 3.14(a) of the Disclosure
Schedule, which includes the following properties (addresses provided for
information only and do not constitute representations of any kind):

 

(a)           the Chillicothe mill, including the following real property,
buildings, and adjacent properties along 8th Street and Paint Street
in Chillicothe, Ohio:

 

(i)            the main mill located at 401
S. Paint Street, Chillicothe, Ohio 45601;

 

8

 

(ii)           the wood procurement building located at 327 S. Paint
Street, Chillicothe, Ohio 45601;

 

(iii)          the engineered products building located at 350 S. Paint
Street, Chillicothe, Ohio 45601;

 

(iv)          the offices on Paint Street located at 353 S. Paint Street,
Chillicothe, Ohio 45601;

 

(v)           the Chilpaco mill located at Corner Bridge and Eastern
Avenue, Chillicothe, Ohio 45601;

 

(vi)          the Fremont plant located at 2275 Commerce Drive, Fremont,
Ohio 43420;

 

(vii)         the research building located at 8th Street and
Hickory Street, Chillicothe, Ohio, 45601;

 

(viii)        the OPAS/annex building located at 1101 River Road,
Chillicothe, Ohio;

 

(b)           the two (2) woodyard areas in Ohio located at (i) 200
Schuster Road, Piketon, Ohio 45661 and (ii) Sternberger Road, Oak Hill, Ohio
45656; and

 

(c)           the three (3) woodyard areas in West Virginia located at (i)
100 Paper Drive, Washington, West Virginia 26181, (ii) Route 2 South, Millwood,
West Virginia 25262 and (iii) Old U.S. Route 21, Mineral Wells, West Virginia
26150.

 

“Owned Business
Intellectual Property” means Intellectual Property that is owned by Parent
or any of its Affiliates and used in connection with the Business as currently
conducted and that is not Owned Carbonless Paper Business Intellectual
Property, including the Intellectual Property set forth on Section 1.01(e) of
the Disclosure Schedule.

 

“Owned Carbonless Paper
Business Intellectual Property” means (a) Intellectual Property that is
owned by Parent or any of its Affiliates and used primarily in the Carbonless
Paper Business as currently conducted, including the Intellectual Property set
forth on Section 1.01(f) of the Disclosure Schedule, and (b) the Mead Licensed
Carbonless Paper Business Intellectual Property.

 

“Owned Real Property”
means the Operating Sites, together with all buildings and other structures,
facilities or improvements currently or hereafter located thereon, all fixtures
attached or appurtenant thereto and all easements, licenses, rights and
appurtenances relating to the foregoing.

 

“Permitted Encumbrances”
means such of the following as to which no enforcement, collection, execution,
levy or foreclosure proceeding shall have been commenced:  (a) liens for Taxes not yet due and payable
or which are being contested in good faith in proper proceedings; (b)
Encumbrances imposed by Law, such as materialmen’s, mechanics’, carriers’, 

 

9

 

workmen’s and repairmen’s liens and
other similar liens arising in the ordinary course of business securing
obligations that (i) are not overdue for a period of more than 30 days and (ii)
are not in excess of $50,000 in the case of a single property or $250,000 in
the aggregate at any time (which in no event shall include any Voluntary Seller
Encumbrances); (c) pledges or deposits to secure obligations under workers’
compensation laws or similar legislation or to secure public or statutory
obligations; and (d) all other Permitted Exceptions.

 

“Person” means any
individual, partnership, firm, corporation, limited liability company,
association, trust, unincorporated organization or other entity, as well as any
syndicate or group that would be deemed to be a person under Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended.

 

“Post-Closing
Environmental Liabilities” means any Environmental Liabilities relating to
the Business or the Real Property that relate to events, actions, conditions or
circumstances that occur or arise after the Closing Date.

 

“Post-Closing Period” means any
taxable period (or portion thereof) beginning after the Closing Date.

 

“Pre-Closing Period” means any taxable
period (or portion thereof) ending on or prior to the Closing Date.

 

“Prime Rate” means the rate publicly
quoted from time to time by The Wall Street Journal as the “prime rate”
(or, if The Wall Street Journal ceases quoting a prime rate, the highest
per annum rate of interest published by the Federal Reserve Board in Federal
Reserve statistical release H.15 (519) entitled “Selected Interest Rates” as
the Bank prime loan rate or its equivalent).

 

“Property Taxes” means real and
personal ad valorem property Taxes and any other Taxes (other than Income
Taxes) imposed on a periodic basis against property or in respect of property
and measured by the level of any item.

 

“Purchase Price Bank
Account” means a bank account in the United States to be designated by the
Seller in a written notice to the Purchaser at least five Business Days before
the Closing.

 

“Purchaser’s Accountants”
means Deloitte & Touche LLP, independent accountants of the Purchaser.

 

“Real Property” means
the Leased Real Property and the Owned Real Property, but shall not include the
Chillicothe Retained Properties, as the term is defined in the Chillicothe
Services Agreement.

 

“Receivables” means
any and all accounts receivable, notes and other amounts receivable from third
parties, including customers and employees, arising from the conduct of the
Business before the Closing, whether or not in the ordinary course, together
with any unpaid financing charges accrued thereon.

 

10

 

“Reference Balance Sheet”
means the combined balance sheet of the Business and its predecessor
(reflecting only the Purchased Assets and the Assumed Liabilities), dated as of
December 31, 2005, together with the notes thereto, a copy of which is set
forth in Section 3.04(a)(i) of the Disclosure Schedule.

 

“Regulations” means
the Treasury Regulations (including Temporary Regulations) promulgated by the
United States Department of the Treasury with respect to the Code or other
federal tax statutes.

 

“Release” means any
release, spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching, or migration at, into or onto the Environment,
including movement or migration through or in the air, soil, sediment, surface
water or groundwater, whether sudden or non-sudden and whether accidental or
non-accidental, or any release, emission or discharge as those terms are
defined in any applicable Environmental Law.

 

“Remedial Action”
means any response action, removal action, remedial action, corrective action,
monitoring program, sampling program, investigation or other actions taken to
(i) clean up, remove, remediate, treat, monitor, assess or evaluate Hazardous
Materials in the Environment, (ii) prevent or minimize a Release or threatened
Release of Hazardous Materials so that they do not migrate or endanger or
threaten to endanger public health or welfare or the Environment or (iii) perform
pre-remedial studies and investigations and post-remedial operation and
maintenance activities, or any other actions authorized by 42 U.S.C. § 9601.

 

“Reserved Pre-Closing
Environmental Liabilities” means any Environmental Liabilities (other than
Historical Off-Site Environmental Liabilities) relating to the Business or the
Real Property arising from any events, conditions or circumstances in existence
or occurring on or prior to the Closing Date, which Environmental Liabilities
are specifically identified and reserved for in the balance sheet, reserves,
capital expenditure budgets, accruals, transferred financial assurance
instruments, working capital statements or operating budget of the Business
disclosed to the Purchaser prior to the date hereof as set forth on Sections
8.02(g) or (i) of the Disclosure Schedule.

 

“Seller’s Accountants”
means PricewaterhouseCoopers LLP, independent accountants of the Seller.

 

“Shared Contracts”
means contracts or agreements in which (a) Parent or any of its Affiliates has
rights or Liabilities thereunder that relate to the Business (other than
contracts or agreements for the Computer Software set forth on Section
2.01(b)(ix)(2) of the Disclosure Schedule) including contracts and agreements
for Computer Software set forth on Section 1.01(b)(ii) of the Disclosure
Schedule, and (b) Parent or any of its Affiliates (other than the Seller) have
rights and Liabilities thereunder that do not relate to the Business.

 

“Straddle Environmental
Liabilities” means any Environmental Liabilities of the Business occurring
on any Real Property that arise from practices, activities, operating
procedures and courses of conduct that occurred prior to the Closing Date and
that the Purchaser continues or aggravates after the Closing Date.

 

11

 

“Straddle Environmental
Liability Claim Notice” means a claim submitted by a duly authorized
officer of the Purchaser or the Seller setting out with reasonable specificity
the basis for the claim with respect to an alleged Straddle Environmental
Liability, including, to the extent available, the following:  (a) the type, volume and concentration of any
Hazardous Material Released or otherwise involved with the subject Straddle
Environmental Liability; (b) the location, aerial extent, depth and media
impacted by any Release of Hazardous Materials associated with the subject
Straddle Environmental Liability; (c) the Environmental Laws violated or
otherwise giving rise to the subject Straddle Environmental Liability; (d) the
date and circumstances of discovery of the subject Straddle Environmental
Liability; (e) the name, address and other identifying information regarding
any third party or Governmental Authority involved with the subject Straddle
Environmental Liability; and (f) the anticipated cost of remedying the subject
Straddle Environmental Liability.  Either
party can dispute the adequacy hereunder of such a Straddle Environmental
Liability Claim Notice; provided that, any such written dispute shall
set forth in reasonable detail the basis for the dispute.  If after good faith efforts, the parties are
unable to resolve their dispute, they shall have the opportunity to present the
dispute to a committee consisting of one senior manager from each party with
authority to bind the Purchaser and the Seller, respectively, which committee
shall endeavor to resolve the dispute in good faith.  If these efforts are not successful, the
dispute shall be resolved by an independent arbitrator, selected by the
parties.  The independent arbitrator
shall be jointly retained and the Purchaser and the Seller will share equally
the arbitrator’s fees and expenses.  If
the Purchaser and the Seller are unable to agree on the selection of an
arbitrator within three months of the submittal of the subject Claim, either
party may pursue any and all rights and remedies, including any judicial
remedy, relating to such Claim.

 

“Straddle Period” means any taxable
period beginning on or prior to and ending after the Closing Date.

 

“Tangible Personal Property” means any
machinery, equipment, tools, supplies, furniture, fixtures, personalty,
vehicles, rolling stock, office equipment, computer hardware, Computer Software
and other tangible personal property of the Seller or its Affiliates that is used
primarily in the Carbonless Paper Business and solely in the Non-Carbonless
Paper Business (wherever located) or otherwise owned or held by the Seller or
its Affiliates at the Closing for use primarily in the conduct of the
Carbonless Paper Business and solely in the conduct of the Non-Carbonless Paper
Business, other than Inventory.

 

“Target Working Capital” means
$87,000,000.

 

“Tax Returns” means
any return, declaration, report, election, claim for refund or information
return or other statement or form filed or required to be filed with any
Governmental Authority relating to Taxes, including any schedule or attachment
thereto or any amendment thereof.

 

“Taxes” means Income
Taxes, Property Taxes, Conveyance Taxes and any and all other taxes, fees, levies,
duties, tariffs, imposts, and other charges of any kind (together with any and
all interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any Governmental Authority, including taxes or
other charges on or with respect to income, franchises, windfall or other
profits, gross receipts, property, sales, use, capital stock, 

 

12

 

payroll, employment, social
security, workers’ compensation, unemployment compensation, or net worth; taxes
or other charges in the nature of excise, withholding, ad valorem, stamp,
transfer, value added, or gains taxes; license, registration and documentation
fees; any transferee or secondary liability in respect of Taxes; and customs’
duties, tariffs, and similar charges.

 

“Transition Services
Agreement” means the transition services agreement pursuant to which the
Purchaser, on the one hand, and the Seller, Parent and certain of its
Affiliates, on the other hand, provide certain services to the other party or
parties, substantially in the form attached hereto as Exhibit 1.01(f).

 

“Unaudited Financial
Statements” means the Reference Balance Sheet, the Income Statements, the
statements of combined equity of the Business and its predecessors (reflecting
only the Purchased Assets and the Assumed Liabilities) at April 30, 2005, and at
December 31, 2005, and the combined statements of cash flows of the Business
and its predecessor (reflecting only the Purchased Assets and the Assumed
Liabilities) for the four-month period ended April 30, 2005, and the eight-month
period ended December 31, 2005, copies of which are set forth in Section
3.04(a)(i) of the Disclosure Schedule.

 

“Workers’ Compensation
Liabilities” means all Liabilities relating to workers’ compensation for
injuries or illness incurred at the Operating Sites by persons currently or
previously employed in the Business whether before or following the Closing.

 

“Working Capital”
means current assets less the sum of (a) current liabilities and (b) Workers’
Compensation Liabilities (without duplication of any Workers’ Compensation
Liabilities that are current liabilities) other than any such Liabilities that
are categorized as “incurred but not reported” in accordance with GAAP as
calculated consistent with Section 1.01(g) of the Disclosure Schedule, in each
case calculated in accordance with GAAP; provided that (i) such current
assets shall not include any cash or cash equivalents or Excluded Assets, (ii)
current liabilities shall not include any Excluded Indebtedness, any Excluded
Liabilities or any Liabilities in respect of the commercial activities Tax and
sales and use Taxes of the State of Ohio and (iii) any deferred Taxes (whether
liabilities or assets) established to reflect timing differences between book
and Tax income shall be excluded.

 

SECTION 1.02.  Definitions.  The following terms have the meanings set
forth in the Sections set forth below:

 

	
  Definition

  	
   

  	
  Location

  
	
   

  	
   

  	
   

  
	
  “Allocation”

  	
   

  	
  2.03(b)

  
	
  “Allocation
  Accounting Firm”

  	
   

  	
  2.03(b)

  
	
  “Assumed
  Liabilities”

  	
   

  	
  2.02(a)

  
	
  “Business”

  	
   

  	
  Recitals

  
	
  “Business Records”

  	
   

  	
  2.01(a)(vi)

  
	
  “Carbonless
  Paper Business”

  	
   

  	
  Recitals

  
	
  “Change”

  	
   

  	
  8.07(e)

  
	
  “Closing”

  	
   

  	
  2.04

  

 

13

 

	
  Definition

  	
   

  	
  Location

  
	
   

  	
   

  	
   

  
	
  “Closing
  Date Working Capital”

  	
   

  	
  2.07(c)

  
	
  “Closing
  Date Working Capital Statement”

  	
   

  	
  2.07(c)

  
	
  “Coated
  Converting Agreement”

  	
   

  	
  5.21

  
	
  “Confidentiality
  Agreement”

  	
   

  	
  5.03(b)

  
	
  “Continuation
  Report”

  	
   

  	
  5.20(c)

  
	
  “Controlling
  Party”

  	
   

  	
  8.08(c)

  
	
  “Employee
  Amounts”

  	
   

  	
  6.05

  
	
  “Enterprise Zone Agreement”

  	
   

  	
  3.22

  
	
  “ERISA”

  	
   

  	
  3.19(a)

  
	
  “Estimated
  Closing Date Working Capital”

  	
   

  	
  2.07(a)

  
	
  “Estimated
  Closing Date Working Capital Statement”

  	
   

  	
  2.07(a)

  
	
  “Excluded
  Assets”

  	
   

  	
  2.01(b)

  
	
  “Excluded
  Indebtedness”

  	
   

  	
  2.02(b)(v)

  
	
  “Excluded
  Intellectual Property”

  	
   

  	
  2.01(b)(ix)

  
	
  “Excluded
  Liabilities”

  	
   

  	
  2.02(b)

  
	
  “Final
  Closing Date Working Capital”

  	
   

  	
  2.07(e)(ii)

  
	
  “Final
  Term”

  	
   

  	
  5.22(a)

  
	
  “Guarantees”

  	
   

  	
  5.04(f)

  
	
  “Independent
  Accounting Firm”

  	
   

  	
  2.07(e)(ii)

  
	
  “Initial
  Term”

  	
   

  	
  5.22(a)

  
	
  “Initial
  Transfer Amount”

  	
   

  	
  6.04(e)

  
	
  “Initial
  Transfer Date”

  	
   

  	
  6.04(e)

  
	
  “Interest
  Rate”

  	
   

  	
  2.07(d)(iii)

  
	
  “lease”

  	
   

  	
  3.12(a)

  
	
  “Letter
  of Credit”

  	
   

  	
  5.22(a)

  
	
  “Licenses
  and Permits”

  	
   

  	
  2.01(a)(xiii)

  
	
  “LIFO”

  	
   

  	
  3.07

  
	
  “Loss”

  	
   

  	
  8.02

  
	
  “Lowest-Cost
  Commercially Reasonable Manner”

  	
   

  	
  8.07(e)

  
	
  “Market
  Risk Period”

  	
   

  	
  6.04(g)

  
	
  “Material
  Contracts”

  	
   

  	
  3.12(a)

  
	
  “Money
  Market Vehicle”

  	
   

  	
  6.04(g)

  
	
  “Multiemployer
  Plan”

  	
   

  	
  3.19(b)

  
	
  “Multiple
  Employer Plan”

  	
   

  	
  3.19(b)

  
	
  “Non-Carbonless
  Paper Business”

  	
   

  	
  Recitals

  
	
  “Non-Controlling
  Party”

  	
   

  	
  8.08(c)

  
	
  “NPDES”

  	
   

  	
  7.02(j)

  
	
  “OHEPA”

  	
   

  	
  7.02(j)

  
	
  “Parent”

  	
   

  	
  Preamble

  
	
  “Permitted
  Exceptions”

  	
   

  	
  5.20(b)(ix)

  
	
  “Plans”

  	
   

  	
  3.19(a)

  
	
  “Purchase
  Price”

  	
   

  	
  2.03(a)

  
	
  “Purchased
  Assets”

  	
   

  	
  2.01(a)

  
	
  “Purchaser”

  	
   

  	
  Preamble

  
	
  “Purchaser
  Indemnified Party”

  	
   

  	
  8.02

  

 

14

 

	
  Definition

  	
   

  	
  Location

  
	
   

  	
   

  	
   

  
	
  “Purchaser’s
  Actuary”

  	
   

  	
  6.04(d)

  
	
  “Purchaser’s
  Hourly Pension Plan”

  	
   

  	
  6.04(a)

  
	
  “Purchaser’s
  Title Policies”

  	
   

  	
  5.20(a)

  
	
  “Qualification Document”

  	
   

  	
  6.04(a)

  
	
  “Restricted
  Period”

  	
   

  	
  5.06(a)

  
	
  “Retained
  Names and Marks”

  	
   

  	
  5.17(a)

  
	
  “Section
  414(l) Amount”

  	
   

  	
  6.04(d)

  
	
  “Seller”

  	
   

  	
  Preamble

  
	
  “Seller
  Indemnified Party”

  	
   

  	
  8.03

  
	
  “Seller’s
  Actuary”

  	
   

  	
  6.04(d)

  
	
  “Seller’s
  Hourly Pension Plan”

  	
   

  	
  6.04(a)

  
	
  “Seller’s
  Title Policies”

  	
   

  	
  5.20(a)

  
	
  “Stand-Alone
  Financial Statements”

  	
   

  	
  5.19

  
	
  “Straddle
  Environmental Liability Reserves”

  	
   

  	
  8.02(i)

  
	
  “Technology
  License Agreement”

  	
   

  	
  5.17(b)

  
	
  “Technology
  License-Back Agreement”

  	
   

  	
  5.17(c)

  
	
  “Technology
  Sub-License Agreement”

  	
   

  	
  5.17(d)

  
	
  “Temporary
  Trademark License Agreement”

  	
   

  	
  5.17(a)

  
	
  “Third
  Party Claim”

  	
   

  	
  8.05(b)

  
	
  “Title
  Companies”

  	
   

  	
  5.20(a)

  
	
  “Title
  Defect”

  	
   

  	
  5.20(d)

  
	
  “Title
  Endorsements”

  	
   

  	
  5.20(a)

  
	
  “Transfer
  Amount”

  	
   

  	
  6.04(d)

  
	
  “Transferred
  Benefit Liabilities”

  	
   

  	
  6.04(b)

  
	
  “Transferred
  Employee”

  	
   

  	
  6.01

  
	
  “True-Up
  Amount”

  	
   

  	
  6.04(e)

  
	
  “True-Up
  Date”

  	
   

  	
  6.04(e)

  
	
  “Voluntary
  Seller Encumbrances”

  	
   

  	
  5.20(d)

  

 

SECTION 1.03.  Interpretation and Rules of Construction.  In this Agreement, except to the extent
otherwise provided or that the context otherwise requires:

 

(a)           when a reference is made in this Agreement to an Article,
Section or Exhibit, such reference is to an Article or Section of, or Exhibit
to, this Agreement unless otherwise indicated;

 

(b)           the table of contents and headings for this Agreement are
for reference purposes only and do not affect in any way the meaning or
interpretation of this Agreement;

 

(c)           whenever the words “include,” “includes” or “including” are
used in this Agreement, they are deemed to be followed by the words “without
limitation”;

 

15

 

(d)           the words “hereof,” “herein” and “hereunder” and words of
similar import, when used in this Agreement, refer to this Agreement as a whole
and not to any particular provision of this Agreement;

 

(e)           all terms defined in this Agreement have the defined
meanings when used in any certificate or other document made or delivered pursuant
hereto, unless otherwise defined therein;

 

(f)            the definitions contained in
this Agreement are applicable to the singular as well as the plural forms of
such terms;

 

(g)           any Law defined or referred to herein or in any agreement or
instrument that is referred to herein means such Law or statute as from time to
time amended, modified or supplemented, including by succession of comparable
successor Laws;

 

(h)           references to a Person are also to its successors and
permitted assigns; and

 

(i)            the use of “or” is not
intended to be exclusive unless expressly indicated otherwise.

 

ARTICLE II

 

PURCHASE AND SALE

 

SECTION 2.01.  Purchase and Sale of Purchased Assets.  (a) 
Upon the terms and subject to the conditions of this Agreement, at the
Closing, Parent shall, and shall cause the Seller and Parent’s other Affiliates
to, sell, assign, transfer, convey and deliver, or cause to be sold, assigned,
transferred, conveyed and delivered, to the Purchaser, and the Purchaser shall
purchase from such Persons, all of such Persons’ rights, title and interests in
and to the following assets (the “Purchased Assets”):

 

(i)            the Business as a going
concern, including all goodwill relating thereto;

 

(ii)           all the Owned Real Property and all rights in respect of the
Leased Real Property;

 

(iii)          all Tangible Personal Property;

 

(iv)          all Inventories at the Closing Date;

 

(v)           all Receivables at the Closing Date;

 

(vi)          to the extent permitted by applicable Law, all books of
account, general, financial, Tax (as provided under Section 2.01(a)(xiv)) and
personnel records, invoices, shipping records, supplier lists, correspondence
and other documents, records and files, including all management performance
records and historical, financial, sales, purchasing and operating data and
information related to the operation of the Business since January 1, 2003 (the
“Business Records”) owned, associated with or employed solely in the
conduct 

 

16

 

of the Business or
solely used in, or solely relating to, the Business at the Closing Date, unless
any of such documents are subject to confidentiality agreements limiting their
release and consent shall not have obtained to their release;

 

(vii)         all right, title and interest in, to and under the Owned
Carbonless Paper Business Intellectual Property and the Carbonless Paper
Business IP Agreements, subject, however, in the case of the Mead Licensed
Carbonless Paper Business Intellectual Property, to the Mead License Agreement;

 

(viii)        all claims, defenses, causes of action, choses in action,
rights of recovery, rights of reimbursement and rights of setoff of any kind
solely pertaining to or arising out of the Purchased Assets, the Assumed
Liabilities or the conduct of the Business following the Closing and inuring to
the benefit of Parent, the Seller or any of Parent’s other Affiliates;

 

(ix)           all sales and promotional literature, customer lists and
other sales-related materials owned, previously or currently used, associated
with or employed by Parent, the Seller or any of Parent’s other Affiliates at
the Closing Date for use solely in the conduct of the Carbonless Paper Business
(or copies thereof); provided, however, that Parent and its
Affiliates shall retain the right to use such lists in the conduct of its Non-Carbonless
Paper Business to the extent such use does not violate Section 5.06 of this
Agreement;

 

(x)            all rights under the Material
Contracts and under any other contracts or agreements that primarily relate to
the Carbonless Paper Business or that solely relate to the Non-Carbonless Paper
Business, including all contracts, purchase orders or other agreements relating
to the purchase of materials, equipment, services, supplies, warehousing and
transportation that primarily relate to the Carbonless Paper Business or that
solely relate to the Non-Carbonless Paper Business;

 

(xi)           all rights of the Seller under the (x) Chillicothe Services
Agreement and (y) Environmental Annex;

 

(xii)          rights under the Shared Contracts as set forth in Section
5.04(e);

 

(xiii)         all municipal, state and federal franchises, permits,
licenses, agreements, waivers and authorizations held or used in connection
with, or required for, the Business (the “Licenses and Permits”), to the
extent transferable;

 

(xiv)        copies of all Tax records (including Tax Returns and related
work papers) relating to the Purchased Assets or the Business, other than Tax
records relating to Income Taxes of Parent or any of its Affiliates;

 

(xv)         all rights of the Seller and Parent under the collective
bargaining agreements listed on Section 2.01(a)(xv) of the Disclosure Schedule;

 

(xvi)        all refunds, credits, rebates or similar payments of Taxes
for Post-Closing Periods and similar Tax items set forth as an asset on the
Closing Date Working Capital Statement;

 

17

 

(xvii)       to the extent assignable, any insurance policies or rights
to coverage thereunder, if any, related to any of the Purchased Assets acquired
by Parent or any of its Affiliates pursuant to the Equity and Purchase Asset
Agreement;

 

(xviii)      assets of any Plan required to be transferred in accordance
with Article VI; and

 

(xix)         all rights, title and interests of Parent, the Seller and
Parent’s other Affiliates on the Closing Date in, to and under all other assets,
rights and claims of every kind and nature used or intended to be used
primarily in the operation of the Carbonless Paper Business or solely in
connection with the Non-Carbonless Paper Business.

 

(b)           Excluded Assets.  Notwithstanding anything in Section 2.01(a)
to the contrary, none of the Seller, Parent or any of its Affiliates shall
sell, assign, transfer, convey or deliver, or cause to be sold, assigned,
transferred, conveyed or delivered, to the Purchaser, and the Purchaser shall
not purchase, and the Purchased Assets shall not include, any of the Seller’s,
Parent’s or any of its Affiliates’ rights, title and interests to the following
assets (the “Excluded Assets”):

 

(i)            all cash, cash equivalents,
bank deposits, investment accounts, certificates of deposit, securities or
similar cash items, and negotiable instruments of Parent, the Seller or any of
Parent’s other Affiliates on hand, in lock boxes, in financial institutions or
elsewhere;

 

(ii)           except as otherwise expressly included in the Purchased Assets,
all assets, business lines, properties, rights, contracts and claims of Parent
or any of its Affiliates not used or held for use primarily in the conduct of
the Carbonless Paper Business or solely in the conduct of the Non-Carbonless
Paper Business; provided that it is understood and agreed that this
Section 2.01(b)(ii) is not intended to and does not change or otherwise affect
assets to be conveyed to the Purchaser under Section 2.01(a)(i), (ii), (vii) or
(x);

 

(iii)          the Purchase Price Bank Account;

 

(iv)          all rights of Parent or any of its Affiliates under this
Agreement and the Ancillary Agreements;

 

(v)           Tax records of Parent, the Seller or any of Parent’s other
Affiliates (including Tax Returns and related work papers), other than those
relating to the Purchased Assets or the Business (except to the extent copies
have been provided to the Purchaser under Section 2.01(a)(xiv) or relating to
Income Taxes of Parent or any of its Affiliates);

 

(vi)          except as expressly provided in Article VI of this Agreement,
any assets of any Plan;

 

(vii)         all refunds, credits, rebates or similar payments of
Excluded Taxes (other than any similar Tax items set forth as an asset on the
Closing Date Working Capital Statement);

 

18

 

(viii)        any and all insurance policies, binders and claims of Parent
or any of its Affiliates and rights thereunder relating to, or otherwise in
respect of, the Excluded Assets or any Excluded Liability, including with respect to any insurance settlement
agreements, and the proceeds thereof and all prepaid
insurance premiums;

 

(ix)           except as provided in Section 5.17, all right, title and
interest in the “NewPage” mark, the “Sterling Ultra” mark and any name,
trademark, trade dress, internet address, trade name, service mark or logo, or
any derivation of any of the foregoing, together with all of the goodwill
represented thereby, or pertaining thereto listed on Section 2.01(b)(ix)(1) of
the Disclosure Schedule, all right, title and interest in and to the Business
Intellectual Property, and all right, title and interest in and to the
Intellectual Property set forth on Section 2.01(b)(ix)(2) of the Disclosure
Schedule (collectively, the “Excluded Intellectual Property”);

 

(x)            copies of any books, records and
other materials that Parent or any of its Affiliates is required by Law to
retain and all “NewPage” marked sales and promotional materials and brochures;

 

(xi)           all claims, defenses, causes of action, choses in action or
claims of any kind that are available to or being pursued by Parent or any of
its Affiliates whether as plaintiff, claimant, counterclaimant or otherwise, to
the extent relating to Excluded Assets or Excluded Liabilities; and

 

(xii)          except as set forth on Section 2.01(b)(xii) of the Disclosure
Schedule, all intercompany receivables, payables, loans and investments between
the Seller, on the one hand, and any of its Affiliates, on the other hand.

 

SECTION 2.02.  Assumption and Exclusion of Liabilities.  (a) 
Upon the terms and subject to the conditions of this Agreement, at the
Closing, the Purchaser shall assume and shall agree to pay, perform and
discharge the following Liabilities of Parent, the Seller and any of Parent’s
other Affiliates (the “Assumed Liabilities”):

 

(i)            all Liabilities reflected on
the Closing Date Working Capital Statement finally resolved in accordance with
Section 2.07(e)(ii), including Workers’ Compensation Liabilities;

 

(ii)           all Liabilities of Parent or its Affiliates arising under
the contracts and agreements assumed by the Purchaser pursuant to Sections
2.01(a)(x) and (xi) (other than Liabilities or obligations attributable to any
failure by Parent or its Affiliates to comply with the terms thereof prior to
the Closing Date);

 

(iii)          any liabilities relating to a Plan that are to be assumed
pursuant to the express terms of Article VI;

 

(iv)          solely to the extent provided in Article VIII, Post-Closing
Environmental Liabilities, Historical On-Site Environmental Liabilities, and
Straddle Environmental Liabilities;

 

19

 

(v)           all Liabilities assigned to the Purchaser under Article VI;

 

(vi)          all accounts and trade payables, in each case to the extent
such Liabilities are reflected, or are expressly reserved for, in the Closing Date
Working Capital Statement;

 

(vii)         all Liabilities that the Purchaser expressly has assumed or
agreed to pay, or be responsible for, pursuant to the terms hereof or of any
Ancillary Agreement;

 

(viii)        all Liabilities of the Seller arising from commitments (in
the form of accepted purchase orders), or outstanding quotations, proposals or
bids to (A) sell products or (B) purchase or acquire raw materials, components,
supplies or services (provided that, in each case, with respect to such
commitments, outstanding quotations, proposals or bids arising between the date
hereof and the Closing Date, such commitments, outstanding quotations,
proposals or bids have been made in accordance with Section 5.01 hereof);

 

(ix)           all Taxes for Post-Closing
Periods relating to the Purchased Assets or the Business and, without
duplication of any Taxes included under Section 2.02(a)(i), any Taxes relating to
the Purchased Assets or the Business for a Pre-Closing Period to the extent an
amount for any such Tax is set forth as a Liability on the Closing Date Working
Capital Statement, in each case, other than Excluded Taxes; and

 

(x)            all
Workers’ Compensation Liabilities.

 

(b)           Notwithstanding
subsection (a) above to the contrary, Parent, the Seller and Parent’s other Affiliates shall
retain, and shall be responsible for paying, performing and discharging when
due, and the Purchaser shall not assume or have any responsibility for, all
Liabilities as of the Closing other than the Assumed Liabilities (the “Excluded
Liabilities”), including:

 

(i)            all Liabilities relating to,
resulting from, caused by or arising out of, directly or indirectly, the
conduct of the Business or any Purchased Assets prior to the Closing Date,
except for any Liabilities expressly assumed under Section 2.02(a) and any
Liabilities related to the Employee Amounts;

 

(ii)           all Excluded Taxes;

 

(iii)          all Liabilities arising out of or relating to the Excluded
Assets;

 

(iv)          except to the extent such are Assumed Liabilities and
subject to the provisions set forth in Article VIII, all Environmental
Liabilities; provided, however, with respect to Historical
Off-Site Environmental Liabilities, such liabilities shall be subject to the
procedures set forth in Section 8.07;

 

(v)           any Indebtedness of the Business (the “Excluded
Indebtedness”);

 

(vi)          except for Workers’ Compensation Liabilities, any
Liabilities relating to any current or former employees, independent
contractors, officers or agents of the Seller other than the Transferred
Employees;

 

20

 

(vii)         except (A) as and to the extent expressly provided in
Article VI and (B) for Workers’ Compensation Liabilities, any Liabilities
relating to the Plans and any Liabilities relating to the Transferred Employees
incurred prior to the Closing Date;

 

(viii)        all Liabilities for which Parent or any of its Affiliates
expressly has retained or agreed to pay, or be responsible for, pursuant to the
terms hereof or of any Ancillary Agreement;

 

(ix)           all intercompany receivables, payables, loans and
investments related to the Business;

 

(x)            all Liabilities assigned to
or retained by the Seller under Article VI; and

 

(xi)           all Liabilities to the extent arising out of Actions
relating to the matters constituting Excluded Liabilities specified in the
foregoing clauses (i) – (x) of this Section 2.02(b).

 

SECTION 2.03.  Purchase Price; Allocation of Purchase
Price.  (a)  Subject to the adjustments set forth in
Section 2.07, the purchase price for the Purchased Assets shall be $80 million
(such amount less the Employee Amounts, the “Purchase Price”).  The Purchaser shall deduct $250,000 from the
Purchase Price in respect of the commercial activities Tax and sales and use
Taxes of the State of Ohio and such amount shall be remitted by the Purchaser
to the appropriate Governmental Authority on a timely basis or at the request
of the Seller, if permitted by applicable Law, paid over by the Purchaser to
the Seller upon delivery by the Seller to the Purchaser of an official receipt,
certification or other statement from the Governmental Authority that such
Taxes have been paid to the Governmental Authority on a timely basis or that no
such Taxes are due.

 

(b)           The sum of the Purchase Price and the Assumed Liabilities
and any other consideration payable by the Purchaser hereunder shall be
allocated among the Purchased Assets as of the Closing in accordance with
Section 1060 of the Code and the Regulations thereunder (the “Allocation”).  Within 30 Business Days after the
finalization of any Purchase Price adjustment pursuant to Section 2.07 but in
any event, no later than 90 calendar days after the Closing Date, the Purchaser
shall provide the Seller with a proposed Allocation for the Seller’s review and
comment.  If the Seller does not provide
any comments to the Purchaser in writing within 45 Business Days following
delivery by the Purchaser of the proposed Allocation, then the Allocation
proposed by the Purchaser shall be deemed to be final and binding absent
manifest error.  If, however the Seller
submits comments to the Purchaser within such 45-Business Day period, the
Purchaser and the Seller shall negotiate in good faith to resolve any
differences within 30 Business Days.  If
the Seller and the Purchaser are unable to reach a resolution within such 30-Business
Day period, then all remaining disputed items shall be submitted for resolution
by an internationally recognized, independent accounting firm mutually selected
by the Purchaser and the Seller (the “Allocation Accounting Firm”),
which shall make a final determination as to the disputed items within 30
Business Days after such submission, and such determination shall be final,
binding and conclusive on the Seller and the Purchaser absent manifest
error.  The fees and disbursements of the
Allocation Accounting Firm shall be shared equally between the Seller and the
Purchaser.  Any subsequent adjustments to
the sum of the Purchase Price and Assumed Liabilities and any other 

 

21

 

consideration payable by the Purchaser hereunder shall be reflected in
the Allocation in a manner consistent with Section 1060 of the Code and the
Regulations thereunder.  For all Tax
purposes, each of the Purchaser, Parent and the Seller agree that the
transactions contemplated in this Agreement shall be reported in a manner
consistent with the terms of this Agreement, including the Allocation, and that
none of them will take any position inconsistent therewith in any Tax Return,
in any refund claim, in any litigation, or otherwise.  Each of Parent, and the Seller, on the one
hand, and the Purchaser, on the other hand, agrees to cooperate with the other
in preparing IRS Form(s) 8594, and to furnish the other with a copy of such
Form(s) prepared in draft form within a reasonable period before its filing due
date, but in any event no later than 120 calendar days after the Closing Date.

 

SECTION 2.04.  Closing.  Subject to the terms and conditions of this
Agreement, the sale and purchase of the Purchased Assets and the assumption of
the Assumed Liabilities contemplated by this Agreement shall take place at a
closing (the “Closing”) to be held at the offices of Shearman &
Sterling LLP, 599 Lexington Avenue, New York, New York at 10:00 A.M. New York
time on the last Business Day of the calendar month in which all conditions to
the obligations of the parties set forth in Article VII shall have been waived
or satisfied or at such other place or at such other time or on such other date
as the Seller and the Purchaser may mutually agree upon in writing; provided
that if the Closing occurs on March 31, 2006, it shall be effective as of April
1, 2006.

 

SECTION 2.05.  Closing Deliveries by the Seller.  At the Closing, the Seller shall deliver or
cause to be delivered to the Purchaser:

 

(a)           the Bill of Sale, the Deeds with all required documentary
and Conveyance Tax stamps affixed or paid in connection with the Closing (or
the proper amounts delivered to the Title Companies to be paid) and such other
instruments, in form and substance reasonably satisfactory to the Purchaser, as
may be required to transfer the Purchased Assets to the Purchaser or evidence
such transfer on the public records;

 

(b)           counterparts of each Ancillary Agreement to which Parent,
the Seller or any of Parent’s other Affiliates is a party, duly executed by
Parent, the Seller or such Affiliate, as the case may be;

 

(c)           affidavits of title and such other affidavits in form
reasonably satisfactory to the parties as may be required by the Title Company
in connection with the conveyance of the Owned Real Property;

 

(d)           a receipt for the Purchase Price;

 

(e)           a true and complete copy, certified by the Secretary or an
Assistant Secretary of Parent, the Seller or any of Parent’s other Affiliates,
as the case may be, of the resolutions duly and validly adopted by the Board of
Directors of each of such Person and the stockholder of the Seller evidencing
their authorization of the execution and delivery of this Agreement or any of
the Ancillary Agreements, as applicable, and the consummation of the transactions
contemplated hereby and thereby;

 

22

 

(f)            a
certificate of the Secretary or an Assistant Secretary of each of Parent, the
Seller and any of Parent’s other Affiliates certifying the names and signatures
of the officers of such Person, as the case may be, authorized to sign this
Agreement or any of the Ancillary Agreements, as applicable, and the other
documents to be delivered hereunder and thereunder;

 

(g)           a certificate of a duly
authorized officer of each of the Seller and Parent certifying as to the
matters set forth in Section 7.02(a); and

 

(h)           a certificate of non-foreign
status for each of Parent, the Seller and any of Parent’s other Affiliates
transferring Purchased Assets (in a form reasonably acceptable to the
Purchaser) pursuant to Section 1.1445-2(b)(2) of the Regulations.

 

SECTION 2.06.  Closing
Deliveries by the Purchaser.  At the
Closing, the Purchaser shall deliver to the Seller:

 

(a)           the Purchase Price by wire
transfer in immediately available funds to the Purchase Price Bank Account;

 

(b)           counterparts of each
Ancillary Agreement to which the Purchaser is a party duly executed by the
Purchaser;

 

(c)           a true and complete copy,
certified by the Secretary or an Assistant Secretary of the Purchaser, of the
resolutions duly and validly adopted by the Board of Directors of the Purchaser
evidencing its authorization of the execution and delivery of this Agreement
and the Ancillary Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby;

 

(d)           a certificate of the
Secretary or an Assistant Secretary of the Purchaser certifying the names and
signatures of the officers of the Purchaser authorized to sign this Agreement
and the Ancillary Agreements and the other documents to be delivered hereunder
and thereunder; and

 

(e)           a certificate of a duly authorized
officer of the Purchaser certifying as to the matters set forth in Section
7.01(a).

 

SECTION 2.07.  Adjustment
of Purchase Price.  The Purchase
Price shall be subject to adjustment as specified in this Section 2.07:

 

(a)           Estimated
Closing Date Working Capital Statement.  At least five Business Days prior to the
Closing Date, Parent shall prepare, or cause to be prepared and delivered to
the Purchaser, a good faith estimated statement of Working Capital of the
Business as of the close of business on the Closing Date (the “Estimated
Closing Date Working Capital Statement”), setting forth a good faith
estimate of Working Capital as of the close of business on the Closing Date
(the “Estimated Closing Date Working Capital”), and the calculation
thereof.  The Estimated Closing Date
Working Capital Statement shall be prepared in a manner consistent with the
Reference Balance Sheet except as set forth in the definition of Working
Capital.

 

23

 

(b)           Closing
Date Purchase Price Adjustment. 
On the Closing Date, a Purchase Price adjustment shall be made as
follows:

 

(i)            in
the event that the Estimated Closing Date Working Capital reflected on the
Estimated Closing Date Working Capital Statement is less than the Target
Working Capital, then the Purchase Price shall be adjusted downward in an
amount equal to such difference; and

 

(ii)           in the event that the
Estimated Closing Date Working Capital reflected on the Estimated Closing Date
Working Capital Statement exceeds the Target Working Capital, then the Purchase
Price shall be adjusted upward in an amount equal to such excess.

 

(c)           Closing
Date Working Capital Statement. 
As promptly as practicable, but in any event within 60 calendar days
following the Closing, the Seller shall deliver to the Purchaser a statement of
Working Capital of the Business as of the close of business on the Closing Date
(as such may be adjusted following resolution of disputes in accordance with
Section 2.07(e), the “Closing Date Working Capital Statement”), setting
forth the Working Capital of the Business as of the close of business on the
Closing Date (the “Closing Date Working Capital”), and the calculation
thereof.  The Closing Date Working
Capital Statement shall be prepared in a manner consistent with the Reference
Balance Sheet except as set forth in the definition of Working Capital.  The Closing Date Working Capital Statement
shall be deemed final for the purposes of this Section 2.07 upon the earliest
of (x) the failure of the Purchaser to notify the Seller of a dispute within 60
calendar days of the Seller’s delivery of the Closing Date Working Capital
Statement to the Purchaser, (y) the written resolution of all disputes,
pursuant to Section 2.07(e)(ii), by the Seller and the Purchaser, and (z) the
written resolution of all disputes, pursuant to Section 2.07(e)(ii), by the
Independent Accounting Firm.

 

(d)           Post-Closing
Purchase Price Adjustment. 
Within three Business Days after the Closing Date Working Capital
Statement being deemed final, a Purchase Price adjustment shall be made as
follows:

 

(i)            in
the event that the Closing Date Working Capital reflected on the Closing Date
Working Capital Statement is less than the Estimated Working Capital, then the
Purchase Price shall be adjusted downward in an amount equal to such
difference;

 

(ii)           in the event that the Closing
Date Working Capital reflected on the Closing Date Working Capital Statement
exceeds the Estimated Closing Date Working Capital, then the Purchase Price
shall be adjusted upward in an amount equal to such excess;

 

(iii)          to the extent a net downward
adjustment is made to the Purchase Price, the Seller shall pay, within three
Business Days of such determination, the amount of such difference to the
Purchaser by wire transfer in immediately

 

24

 

available funds together with
interest thereon at a rate per annum equal to the sum of (A) the Prime Rate and
(B) 1% (the “Interest Rate”); and

 

(iv)          to the extent a net upward
adjustment is made to the Purchase Price, the Purchaser shall pay, within three
Business Days of such determination, the amount of such excess to the Seller by
wire transfer in immediately available funds together with interest thereon at
the Interest Rate.

 

(e)           Disputes.  (i) 
Subject to the Purchaser’s right to dispute the Closing Date Working
Capital Statement in accordance with clause (ii) of this Section 2.07(e), the
Closing Date Working Capital Statement delivered by the Seller to the Purchaser
shall be final, conclusive and binding on the parties hereto.

 

(ii)           The Purchaser may dispute
items reflected in the calculation of the Closing Date Working Capital, but
only on the basis that such amounts were not arrived at in a manner consistent
with the preparation of the Reference Balance Sheet, were arrived at based on
mathematical or clerical error or were otherwise not prepared in accordance
with this Agreement; provided, however, that the Purchaser shall
have notified the Seller and the Seller’s Accountants in writing of each
disputed item, specifying the estimated amount thereof in dispute and setting
forth, in reasonable detail, the basis for such dispute, within 45 calendar
days of the Seller’s delivery of the Closing Date Working Capital Statement to
the Purchaser.  In the event of such a
dispute, the Seller and the Purchaser shall attempt to reconcile their
differences, and any written resolution by them as to any disputed amounts
shall be final, conclusive and binding on the parties hereto.  If the Seller and the Purchaser are unable to
reach a resolution with such effect within 20 Business Days after the receipt
by the Seller and the Seller’s Accountants of the Purchaser’s written notice of
dispute and the items remaining in dispute are such that the Purchase Price
would be adjusted, the Seller’s Accountants and the Purchaser’s Accountants
shall submit the items remaining in dispute for resolution to KPMG (the “Independent
Accounting Firm”), which shall, within 30 calendar days after such
submission, determine and report to the Seller and the Purchaser upon such
remaining disputed items, and such report shall be final, conclusive and
binding on the Seller and the Purchaser, absent fraud or manifest error.  Any amounts payable pursuant to this Section
2.07 that are not in dispute shall be paid in accordance with paragraph (d) of
this Section 2.07.  The fees and
disbursements of the Independent Accounting Firm shall be allocated between the
Seller and the Purchaser in the same proportion that the aggregate amount of
such remaining disputed items so submitted to the Independent Accounting Firm
that is unsuccessfully disputed by each such party (as finally determined by
the Independent Accounting Firm) bears to the total amount of such remaining
disputed items so submitted.  The term “Final
Closing Date Working Capital” shall mean the definitive Closing Date
Working Capital agreed to (or deemed to be agreed to) by the Purchaser and the
Seller in accordance with the terms of this Section 2.07(e) or resulting from the
determinations made by the Independent Accounting Firm in accordance with this
Section 2.07(e) (in addition to those items theretofore agreed by the Purchaser
and the Seller).

 

25

 

(iii)          In acting under this
Agreement, the Seller’s Accountants, the Purchaser’s Accountants and the
Independent Accounting Firm shall be entitled to the privileges and immunities
of arbitrators.

 

(f)            Access.  From the date hereof until the Closing Date,
and thereafter in connection with the preparation of the Closing Date Working
Capital Statement, the Seller and Parent shall, and shall cause their
respective employees and advisors, including the Seller’s Accountants, to,
afford the Purchaser and its employees and advisors, including the Purchaser’s
Accountants, access upon reasonable notice and during normal business hours to
the Seller’s and Parent’s respective employees and advisors and to the books,
papers, records and other documents, including work papers of the Seller’s Accountants
(to the extent the Seller’s Accountants agree to provide such work papers),
relating to the preparation of the Reference Balance Sheet, the Estimated
Closing Date Working Capital Statement and the Closing Date Working Capital
Statement.

 

(g)           Following the Seller’s
delivery of the Closing Date Working Capital Statement to the Purchaser, the
Purchaser shall, and shall cause its respective employees and advisors,
including the Purchaser’s Accountants, to, afford the Seller and Parent and
their respective employees and advisors, including the Seller’s Accountants,
access upon reasonable notice and during normal business hours to the Purchaser’s
employees and advisors and to the books, papers, records and other documents,
including work papers of the Purchaser’s Accountants (to the extent the
Purchaser’s Accountants agree to provide such work papers), relating to the
preparation of disputed items.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES

OF THE SELLER AND PARENT

 

As an inducement to the Purchaser to enter into this
Agreement, each of the Seller and Parent hereby jointly and severally
represents and warrants to the Purchaser as follows:

 

SECTION 3.01.  Organization,
Authority and Qualification.  Each of
the Seller and Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all necessary
corporate power and authority to enter into this Agreement and the Ancillary
Agreements, to the extent applicable, to carry out its obligations hereunder
and thereunder, to the extent applicable, and to consummate the transactions
contemplated hereby and thereby, to the extent applicable.  Each of the Seller and Parent is duly
licensed or qualified to do business and is in good standing in each jurisdiction
which the properties owned or leased by it or the operation of its business
makes such licensing or qualification necessary, except to the extent that the
failure to be so licensed or qualified and in good standing would not adversely
affect (a) the ability of such Person to carry out its obligations under, and
to consummate the transactions contemplated by, this Agreement and the
Ancillary Agreements, to the extent applicable, and (b) the ability of the
Seller to conduct the Business.  The
execution and delivery of this Agreement and the Ancillary Agreements by the
Seller and Parent, to the extent applicable, the performance by each of the
Seller and Parent of its obligations hereunder and thereunder, to the extent
applicable, and the consummation by each of the Seller and Parent of the
transactions contemplated hereby

 

26

 

and thereby,
to the extent applicable, have been duly authorized by all requisite action on
the part of the Seller and Parent.  This
Agreement has been, and upon their execution the Ancillary Agreements shall
have been, duly executed and delivered by the Seller and Parent, to the extent
applicable, and (assuming due authorization, execution and delivery by the
Purchaser) this Agreement constitutes, and upon their execution the Ancillary
Agreements shall constitute, legal, valid and binding obligations of the Seller
and Parent, enforceable against the Seller and Parent in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar Laws
affecting the enforcement of creditors’ rights generally, and general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in Law or equity).

 

SECTION 3.02.  No
Conflict.  Assuming that all
consents, approvals, authorizations and other actions described in Section 3.03
have been obtained and all filings and notifications listed in Section 3.03 of
the Disclosure Schedule have been made and any applicable waiting period has
expired or been terminated, the execution, delivery and performance of this
Agreement and the Ancillary Agreements by the Seller and Parent do not and will
not (a) violate, conflict with or result in the breach of any provision of the
charter or by-laws or similar organizational documents of the Seller or Parent,
or (b) conflict with or violate any Law or Governmental Order applicable to the
Seller or Parent, or any of their respective assets, properties or businesses,
including the Business, or (c) except as set forth in Section 3.02 of the
Disclosure Schedule, conflict with, result in any breach of, constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, require any consent under, or give to others any
rights of termination, amendment, acceleration, suspension, revocation or
cancellation of or additional rights under, or result in the creation of any
Encumbrance on any of the Purchased Assets pursuant to, any Material Contract,
except, in the case of clause (b) or (c), as would not have a Material Adverse
Effect or prevent or materially delay the consummation by the Seller or Parent
of the transactions contemplated hereby.

 

SECTION 3.03.  Governmental
Consents and Approvals.  The
execution, delivery and performance of this Agreement and each Ancillary
Agreement by each of the Seller and Parent do not and will not require any
consent, approval, authorization or other order of, action by, filing with or
notification to, any Governmental Authority, except (a) as described in Section
3.03 of the Disclosure Schedule, (b) the pre-merger notification and waiting
period requirements of the HSR, (c) pursuant to the applicable rules of the
German Act against Restraints of Competition Act and (d) where failure to
obtain such consent, approval, authorization or action, or to make such filing
or notification, would not prevent or materially delay the consummation by the
Seller and Parent of the transactions contemplated by this Agreement or would
not have a Material Adverse Effect.  The
Seller and Parent filed a Notification and Report Form under the HSR Act with
respect to the transactions contemplated hereby on January 26, 2006.

 

SECTION 3.04.  Financial
Information; Books and Records.  (a)  (i) A true and complete copy of the Unaudited
Financial Statements has been delivered by the Seller to the Purchaser.  The Unaudited Financial Statements (A) have
been prepared in accordance with the books of account and other financial
records of the Seller, (B) present fairly in all material respects the
financial condition, results of operations and cash flows of the Business as of
the date thereof or for the period covered thereby, (C) have been prepared in
accordance with GAAP applied on a basis consistent with the past practices of
the Seller and its predecessors and (D) includes all

 

27

 

adjustments
(consisting only of normal recurring accruals) that are necessary for a fair
presentation of the financial condition, results of operations and cash flows of
the Business as of the date thereof or for the period covered thereby.

 

 

(ii)           The Stand-Alone Financial
Statements will (A) be prepared in accordance with the books of account and
other financial records of the Seller, (B) present fairly the financial
condition of the Business as of the date thereof or for the period covered
thereby, (C) be prepared in accordance with GAAP applied on a basis consistent
with the past practices of the Seller and its predecessors and (D) include all
adjustments (consisting only of normal recurring accruals) that are necessary
for a fair presentation of the financial condition of the Business as of the
date thereof or for the period covered thereby.

 

(b)            The books of account and
other financial records of the Business: 
(i) reflect all items of income and expense and all assets and
Liabilities required to be reflected therein in accordance with GAAP applied on
a basis consistent with the past practices of the Seller, (ii) are in all
material respects complete and correct, and do not contain or reflect any
material inaccuracies or discrepancies and (iii) have been maintained in
accordance with good business and accounting practices.

 

SECTION 3.05.  Absence
of Undisclosed Liabilities.  There
are no Liabilities of the Business that would be required to be disclosed on
the balance sheet of the Business or the notes thereto in accordance with GAAP,
other than Liabilities (a) reflected or reserved against on the Reference
Balance Sheet, (b) set forth in Section 3.05 of the Disclosure Schedule, (c)
incurred since December 31, 2005, in the ordinary course of business consistent
with past practice, of the Seller and which do not have a Material Adverse
Effect or (d) solely relating to the Excluded Assets or the Excluded
Liabilities.  The true and accurate
amounts of the Liabilities are reflected on the Reference Balance Sheet, other
than Liabilities relating to the Excluded Assets and Excluded Liabilities, and
such amounts have been established on a basis consistent with the past
practices of the Seller and in accordance with GAAP.

 

SECTION 3.06.  Receivables.  Section 3.06 of the Disclosure Schedule
contains an aged list of the Receivables as of December 31, 2005, showing
separately those Receivables that as of such date had been outstanding for (a)
29 days or less, (b) 30 to 59 days, (c) 60 to 89 days, (d) 90 to 119 days and
(e) more than 119 days.  Except to the
extent, if any, reserved for on the Reference Balance Sheet, all Receivables
reflected on the Reference Balance Sheet arose from, and the Receivables
existing as of the Closing will have arisen from, the sale of Inventory or
services to third parties, including customers and employees, and in the
ordinary course of business consistent with past practice and, except as
reserved against on the Reference Balance Sheet, constitute or will constitute,
as the case may be, only valid, undisputed claims of the Seller not subject to
valid claims of setoff or other defenses or counterclaims other than normal
cash discounts accrued in the ordinary course of business consistent with past
practice.

 

SECTION 3.07.  Inventories.  Subject to amounts reserved therefor on the
Reference Balance Sheet, the values at which all Inventories are carried on the
Reference Balance Sheet reflect the historical inventory valuation policy of
the Seller of stating such Inventories at the lower of cost or market.  Cost is determined using the last-in, first
out (“LIFO”) method for substantially all raw materials, finished goods
and production materials.  The base LIFO
layer was

 

28

 

established
at the date of acquisition from MeadWestvaco Corporation utilizing the forward
linked chain method.  Cost of other
inventories, mainly stores and supplies inventories, is determined by the
average cost method.  Except as set forth
in Section 3.07(a) of the Disclosure Schedule, the Seller has good and
marketable title to the Inventories free and clear of all Encumbrances.  Except as set forth in Section 3.07(a) of the
Disclosure Schedule, the Inventories do not consist of any items held on
consignment.  The Seller is not under any
obligation or liability with respect to accepting returns of Inventory in the
possession of its customers other than in the ordinary course of business
consistent with past practice.  No
clearance or extraordinary sale of the Inventories has been conducted since
December 31, 2005.  Since May 2, 2005,
the Seller has not acquired or committed to acquire or manufacture Inventory
for sale which is not of a quality and quantity usable in the ordinary course
of business within a reasonable period of time and consistent with past
practice.  Section 3.07(b) of the
Disclosure Schedule contains a complete list of the addresses of all warehouses
and other facilities in which the Inventories are located.  In all material respects, the Inventories are
in good and merchantable condition and are suitable and usable for the purposes
for which they are intended and are in a condition such that they can be sold
in the ordinary course of the Business consistent with past practice.

 

SECTION 3.08.  Conduct
in the Ordinary Course; Absence of Certain Changes, Events and Conditions.  (a) 
Since December 31, 2005, except as set forth in Section 3.08(a) of the
Disclosure Schedule, (i) the Business has been conducted in all material
respects in the ordinary course of business consistent with past practice and
(ii) there has been no Material Adverse Effect.

 

(b)           As amplification and not
limitation of the foregoing, except as set forth in Section 3.08(b) of the
Disclosure Schedule, since December 31, 2005, none of Parent or any of its
Affiliates have:

 

(i)            permitted
or allowed any of the Purchased Assets (whether tangible or intangible) to be
subjected to any Encumbrance, other than Permitted Encumbrances and
Encumbrances that will be released at or prior to the Closing;

 

(ii)           except in the ordinary course
of business consistent with past practice, paid or otherwise discharged any
Liability related to the Business, other than current liabilities reflected on
the Reference Balance Sheet and current liabilities incurred in the ordinary
course of business consistent with past practice since December 31, 2005;

 

(iii)         written down or written up
(or failed to write down or write up in accordance with GAAP consistent with
past practice) the value of any Inventories or Receivables or revalued any of
the Purchased Assets other than in the ordinary course of business consistent
with past practice and in accordance with GAAP;

 

(iv)          made any change in any method
of accounting or accounting practice or policy used by the Seller, other than
such changes required by GAAP;

 

(v)           amended, terminated,
cancelled or compromised any material claims of Parent or any of its Affiliates
(related to the Business) or waived any other rights of substantial value to
such Persons (related to the Business);

 

29

 

(vi)          sold, transferred, leased,
subleased, licensed or otherwise disposed of any properties or assets, real,
personal or mixed (including leasehold interests and intangible property) of
Parent or any of its Affiliates (related to the Business), other than the sale
of Inventories in the ordinary course of business consistent with past
practice;

 

(vii)         merged with, entered into a
consolidation with or acquired an interest of 5% or more in any Person engaged
in the Carbonless Paper Business or acquired a substantial portion of the
assets or business of any Person engaged in the Carbonless Paper Business or
any division or line of business engaged in the Carbonless Paper Business, or
otherwise acquired any material assets for the Business other than in the
ordinary course of business consistent with past practice;

 

(viii)        made any capital expenditure
or commitment for any capital expenditure, in each case relating to the
Business, in excess of $50,000 individually or $250,000 in the aggregate;

 

(ix)           except for Shared Contracts
and renewals of existing contracts or the entering into of similar renewal or
replacement contracts with different suppliers and customers on substantially
the same terms (disregarding reasonable cost or similar increases), entered
into any Material Contract which is for a term of two years or more and
involves the annual payment of more than $250,000;

 

(x)            made
any material change in the customary methods of operations of the Business,
including practices and policies relating to manufacturing, purchasing,
Inventories, marketing, selling and pricing (other than in response to changes
in market conditions in the ordinary course of business consistent with past
practice);

 

(xi)           except with respect to U.S.
federal or state income or franchise Taxes, made, revoked or changed any Tax
election or method of Tax accounting, or settled or compromised any liability
with respect to Taxes, in each case, relating to the Purchased Assets or the
Business in a material amount;

 

(xii)          made any loan to any Person
in connection with the Business;

 

(xiii)         failed to pay any creditor
any material amount owed to such creditor when due (other than amounts being
disputed in good faith);

 

(xiv)        (A) granted any increase, or
announced any increase, in the wages, salaries, compensation, bonuses, incentives,
pension or other benefits payable by the Seller to any of its employees to whom
offers of employment will be made pursuant to Section 6.01, including any
increase or change pursuant to any Plan, or (B) established or increased or
promised to increase any benefits under any Plan, in either case except (x) as
required by Law, any Plan or any collective bargaining agreement or (y)
involving ordinary increases consistent with the past practices of the Seller;

 

(xv)         entered into any agreement,
arrangement or transaction relating to the Business with any of its directors,
officers or employees (or with any relative, beneficiary, spouse or Affiliate
of such Persons);

 

30

 

(xvi)        terminated, discontinued,
closed or disposed of any Operating Site, or laid off any employees employed in
connection with the Business (other than layoffs of less than 50 employees in
any six-month period in the ordinary course of business consistent with past
practice) or implemented any early retirement, separation or program providing
early retirement window benefits within the meaning of Section 1.401(a)-4 of
the Regulations or announced or planned any such action or program for the
future;

 

(xvii)       disclosed (other than
pursuant to customary confidentiality agreements) to any third party any secret
or confidential Intellectual Property relating to the Carbonless Paper Business
(except by way of issuance of a patent) or permitted to lapse or become
abandoned any registered Owned Carbonless Paper Business Intellectual Property
or registered Mead Licensed Intellectual Property;

 

(xviii)      allowed any insurance policy,
Permit or Environmental Permit required in connection with the Business to
lapse or terminate;

 

(xix)         suffered any casualty loss or
damage with respect to any of the Purchased Assets which in the aggregate have
a replacement cost of more than $250,000, whether or not such loss or damage
shall have been covered by insurance;

 

(xx)          amended, modified, renewed,
cancelled or consented to the termination of any Material Contract or Parent’s
or any of its Affiliates’ rights thereunder except in the ordinary course of
business consistent with past practice; or

 

(xxi)         agreed, whether in writing or
otherwise, to take any of the actions specified in this Section 3.08(b), except
as expressly contemplated by this Agreement and the Ancillary Agreements.

 

SECTION 3.09.  Litigation.  Except as set forth in Section 3.09 of the
Disclosure Schedule, there are no Actions by or pending or, to the Knowledge of
the Seller, threatened against Parent or any of its Affiliates thereof and
relating to, or arising out of, the Business or affecting any of the Purchased
Assets or the Business that would have a Material Adverse Effect.

 

SECTION 3.10.  Compliance
with Laws.  (a)  Except as set forth in Section 3.10(a) of the
Disclosure Schedule, (i) the Business has been conducted and continues to be
conducted in material compliance with all Laws and Governmental Orders
applicable to the Purchased Assets and the Business, and (ii) none of Parent or
any of its Affiliates is in violation of any such Law or Governmental Order.

 

(b)           Section 3.10(b) of the
Disclosure Schedule sets forth a brief description of each material
Governmental Order applicable to Parent or any of its Affiliates (related to
the Business), any of their properties or assets (relating to the Business),
including the Purchased Assets, or the Business, and no such Governmental Order
has or has had a Material Adverse Effect or could affect the legality, validity
or enforceability of this Agreement, any Ancillary Agreement or the
consummation of the transactions contemplated hereby or thereby.

 

SECTION 3.11.  Environmental
Matters.  Except as set forth in
Section 3.11 of the Disclosure Schedule or as would not reasonably be expected
to have a Material Adverse Effect:  (a)

 

31

 

to the
Knowledge of the Seller, the Business as currently operated is being conducted
by Parent and its Affiliates in compliance with all applicable Environmental
Laws; (b) to the Knowledge of the Seller, the Business as currently operated is
in possession of and in compliance with all necessary Environmental Permits;
(c) there have been no Releases of Hazardous Materials that require any
Remedial Action under, or in violation of, Environmental Laws at, on or under
the Real Properties; (d) to the Knowledge of the Seller, there are no
violations of Environmental Law or any Releases of Hazardous Materials at any
of the woodyards used in the Business on the Closing Date which are reasonably
likely to result in Environmental Liabilities; (e) no Environmental Claims have
been asserted or threatened in writing against Parent or any of its Affiliates
in connection with the Business and, to the Knowledge of the Seller and Parent,
no Environmental Claims have been asserted in writing against facilities that
received Hazardous Materials generated or used by the Business; (f) since May
2, 2005, none of Parent or any of its Affiliates has received a written notice
or otherwise has Knowledge that any Governmental Authority intends to cancel or
terminate any Environmental Permit required to carry on the Business as
currently conducted and (g) Parent and the Seller have provided to the
Purchaser all environmental assessments, audits and studies of the Real
Property or the Business that are in the possession or control of Parent or the
Seller.

 

SECTION 3.12.  Material
Contracts.  (a)  Section 3.12(a) of the Disclosure Schedule
lists each of the following contracts and agreements (including oral
agreements) to which Parent or any of its Affiliates is a party that relate to
the Business (such contracts and agreements, together with all contracts,
agreements, leases and subleases concerning the use, occupancy, management or
operation of any Real Property (including all contracts, agreements, leases and
subleases listed or otherwise set forth in Section 3.14(a) of the Disclosure
Schedule), all Carbonless Paper Business IP Agreements, including those listed
or otherwise set forth in Section 3.13(a) of the Disclosure Schedule, the
purchase orders with the parties listed in Section 3.12(a)(ii) of the
Disclosure Schedule and all contracts, agreements, leases and subleases
relating to Tangible Personal Property listed or otherwise set forth in Section
3.15(b) of the Disclosure Schedule, being “Material Contracts”):

 

(i)            each
contract, agreement, invoice and other arrangement, for the sale or purchase of
Inventory, spare parts, other materials or personal property, with any supplier
or for the furnishing of services to Parent or any of its Affiliates relating
primarily to the Carbonless Paper Business and solely to the Non-Carbonless
Paper Business, under the terms of which such Person:  (A) is likely to receive or pay or otherwise
give consideration of more than $250,000 in the aggregate during the calendar
year ended December 31, 2006 or (B) is likely to receive or pay or otherwise
give consideration of more than $1,000,000 in the aggregate over the remaining
term of such contract;

 

(ii)           all broker, distributor,
dealer, manufacturer’s representative, franchise, agency, sales promotion,
market research, marketing, consulting and advertising contracts and agreements
to which Parent or any of its Affiliates is a party in excess of $100,000 and
which relate primarily to the Carbonless Paper Business or solely to the
Non-Carbonless Paper Business;

 

(iii)          all management contracts and
contracts with independent contractors or consultants (or similar arrangements)
relating primarily to the Carbonless Paper Business

 

32

 

or solely to the Non-Carbonless
Paper Business to which Parent or any of its Affiliates is a party and which
cannot be cancelled by such Person without penalty or further payment and
without more than 30 days’ notice;

 

(iv)          all contracts and agreements
with any Governmental Authority relating primarily to the Carbonless Paper
Business or solely to the Non-Carbonless Paper Business to which Parent or any
of its Affiliates is a party;

 

(v)           all contracts and agreements
that limit or purport to limit the ability of Parent or any of its Affiliates
(relating to the Business) to compete in any line of business or with any
Person or in any geographic area or during any period of time;

 

(vi)          all contracts and agreements
between or among Parent or any of its Affiliates (relating to the Business), on
the one hand, and one or more Affiliates of Parent, on the other hand;

 

(vii)         all contracts and agreements
providing for benefits under any Plan; and

 

(viii)        all other contracts and
agreements, whether or not made in the ordinary course of business, the absence
of which would have a Material Adverse Effect.

 

For
purposes of this Section 3.12 and Sections 3.14, 3.15 and 3.16, the term “lease”
shall include any and all leases, subleases, sale/leaseback agreements or
similar arrangements.

 

(b)           Except as set forth in
Section 3.12(b) of the Disclosure Schedule, each Material Contract:  (i) is valid and binding on the parties
thereto and is in full force and effect, (ii) is freely and fully assignable to
the Purchaser without penalty or other adverse consequences and (iii) upon
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements, except to the extent that any consents set forth in
Section 3.03 of the Disclosure Schedule are not obtained, shall continue in
full force and effect without penalty or other adverse consequence.  Except as set forth in Section 3.12(b) of the
Disclosure Schedule, the Seller is not in breach of, or default under, any
Material Contract.

 

(c)           The Seller has made available
to the Purchaser true and complete copies of all Material Contracts.

 

(d)           There is no contract,
agreement or other arrangement granting any Person any preferential right to
purchase any of the Purchased Assets.

 

(e)           Article XI of the Equity and
Asset Purchase Agreement is valid and binding on the parties thereto and is in
full force and effect, and is enforceable by Ultimate Parent, Parent, the
Seller and their respective subsidiaries and Affiliates.

 

(f)            Except
as set forth in Section 3.12(f) of the Disclosure Schedule or under supply
contracts entered into in the ordinary course of business consistent with past
practice or under the Equity and Asset Purchase Agreement, none of Parent or
any of its Affiliates is currently obligated to indemnify any other Person for
an amount exceeding $1,000,000 that relates to the Business.

 

33

 

(g)           Except as set forth in
Section 3.12(g) of the Disclosure Schedule, none of Parent or any of its
Affiliates is party to any sales contract relating primarily to the Carbonless
Paper Business or solely to the Non-Carbonless Paper Business for the sale of
goods or services in an amount, individually or in the aggregate, in excess of
$250,000, containing a provision of the type commonly referred to as a “most
favored nation” provision.

 

(h)           Except in respect of Shared
Contracts or as set forth in Section 3.12(h) of the Disclosure Schedule, none
of Parent or any of its Affiliates is party to any contract for the purchase of
any product or service in an amount, individually or in the aggregate, in
excess of $250,000, under which any Person has the right to be the exclusive
provider of any product or service to the Business or to supply a fixed
percentage of the requirements of any product or service of the Business.

 

(i)            Except
as set forth in Section 3.12(i) of the Disclosure Schedule, none of Parent or
any of its Affiliates is party to any contract (relating to the Business) for
the sale of goods or services in an amount, individually or in the aggregate,
in excess of $250,000, under which any Person has the right to be the exclusive
or a preferred recipient of any product or service of the Business.

 

SECTION 3.13.  Intellectual
Property.  (a)  Section 3.13(a) of the Disclosure Schedule
sets forth a true and complete list of (i) all patents and pending patent
applications, registered trademarks and pending trademark applications,
registered copyrights and pending copyright applications, and domain names, in
each case that is Owned Carbonless Paper Business Intellectual Property and
Owned Business Intellectual Property, (ii) all Carbonless Paper Business IP
Agreements and (iii) all other Intellectual Property material to the Business.

 

(b)           Except for the licenses set
forth on Section 3.13(b) of the Disclosure Schedule, the Seller is the
exclusive owner of the entire right, title and interest in and to the Owned
Carbonless Paper Business Intellectual Property and the Owned Business
Intellectual Property, free of all Encumbrances, and has a valid license to use
the Licensed Carbonless Paper Business Intellectual Property and all the
Licensed Business Intellectual Property in the continued operation of the Business
without limitation.  The Owned Carbonless
Paper Business Intellectual Property, the Owned Business Intellectual Property
and, to the Knowledge of the Seller, the Licensed Carbonless Paper Business
Intellectual Property and the Licensed Business Intellectual Property have not
been adjudged invalid or unenforceable in whole or in part.  To the Knowledge of the Seller, the Owned
Carbonless Paper Business Intellectual Property and the Owned Business
Intellectual Property are valid and enforceable.

 

(c)           To the Knowledge of the
Seller, the conduct of the Business does not infringe or misappropriate or
otherwise violate the Intellectual Property of any third party, and, except as
disclosed in Section 3.13(c) of the Disclosure Schedule, no Action alleging any
of the foregoing is pending, and no unresolved, written Claim has been
threatened or asserted against Parent or any of its Affiliates alleging any of
the foregoing.  To the Knowledge of the
Seller, no Person is engaging in any activity that infringes or misappropriates
the Owned Carbonless Paper Business Intellectual Property or the Owned Business
Intellectual Property.

 

34

 

(d)           Except as disclosed in
Section 3.13(d) of the Disclosure Schedule, no Owned Carbonless Paper Business
Intellectual Property, no Owned Business Intellectual Property, and, to the
Knowledge of the Seller, no Licensed Carbonless Paper Business Intellectual
Property and no Licensed Business Intellectual Property is subject to any
outstanding decree, settlement, consent, order, injunction, judgment or ruling
restricting the use of all such Intellectual Property or that would impair the
validity or enforceability of all such Intellectual Property.

 

(e)           Parent and its Affiliates
have taken reasonable steps in accordance with normal industry practice to
maintain the confidentiality of the trade secrets that are material to the
Business.  To the Knowledge of the
Seller, no unauthorized disclosure of any such trade secrets has been made.

 

(f)            To
the Knowledge of the Seller, the Computer Software used in and material to the
Business is free of all viruses, worms, Trojan horses, and other material known
contaminants and does not contain any bugs, errors, or problems of a material
nature that would disrupt the operation of the Business.

 

(g)           All Intellectual Property
owned by or licensed to Parent, the Seller or any of Parent’s other Affiliates
that is necessary for the conduct of the Business as contemplated by the “Carbonless
Systems Business Overview” presented to the Purchaser by Parent on October 3,
2005, is included in the Intellectual Property being assigned, licensed or sub-licensed
to the Purchaser in connection with the transactions contemplated by this
Agreement and in accordance with the terms hereof.

 

SECTION 3.14.  Real
Property.  (a)  Section 3.14(a) of the Disclosure Schedule
lists:  (i) each parcel of Owned Real
Property, (ii) the current owner of each parcel of Owned Real Property, and
(iii) the numbers of the Seller’s Title Policies corresponding to each parcel.

 

(b)           Section 3.14(b) of the
Disclosure Schedule lists:  (i) each
parcel of Leased Real Property and (ii) the identity of the lessor, lessee and
current occupant (if different from lessee) of each such parcel of Leased Real
Property.

 

(c)           Except as described in
Section 3.14(c) of the Disclosure Schedule, to the Knowledge of the Seller and
Parent there is no violation of any Law (including any building, planning or
zoning law) relating to any of the Real Property.  The Seller has made available to the
Purchaser true and complete copies of each deed for each parcel of Owned Real
Property and, to the extent in the possession of Parent or any of its
Affiliates, for each parcel of Leased Real Property, and of each lease, title
insurance policy, title report, survey, certificate of occupancy and appraisal
relating to or otherwise affecting the Real Property or the operations of
Parent and its Affiliates (as they relate to the Business) thereon.  All existing water, sewer, steam, gas, electricity,
telephone, cable, fiber optic cable, Internet access and other utilities
required for the construction, use, occupancy, operation and maintenance of the
Real Property are adequate for the conduct of the Business as it currently is
conducted.  Except as set forth in
Section 3.14(c) of the Disclosure Schedule, none of Parent or any of its
Affiliates has leased any parcel or any portion of any parcel of Real Property
to any other Person and none of Parent or any of its Affiliates has granted to
any Person any license or other occupancy agreement relating to the Real
Property, nor has Parent or

 

35

 

any
of its Affiliates assigned its interest under any lease listed in Section
3.14(b) of the Disclosure Schedule to any third party.

 

(d)           Section 3.14(d) of the
Disclosure Schedule sets forth a true and complete list of all leases relating
to the Real Property and any and all amendments, modifications, supplements,
exhibits, schedules, addenda and restatements thereto and thereof.  All such leases are in full force and effect,
and with respect to each of such leases (i) there are no existing monetary
defaults or material non-monetary defaults by Parent or any of its Affiliates
or by the lessor thereof and (ii) no event has occurred which (with notice,
lapse of time or both) would constitute an uncured monetary default or material
non-monetary default by Parent or any of its Affiliates.  With respect to each of such leases, except
as otherwise set forth in Section 3.14(b) of the Disclosure Schedule, none of
Parent or any of its Affiliates has exercised or given any notice of exercise
of, nor has any lessor or landlord exercised or received any notice of exercise
by a lessor or landlord of, any option, right of first offer or right of first
refusal contained in any such lease or sublease, including any such option or
right pertaining to purchase, expansion, renewal, extension or relocation.

 

(e)           Except as set forth in
Section 3.14(e) of the Disclosure Schedule, the interests of the Seller in the
Owned Real Property and Parent and its Affiliates in the Leased Real Property
to be transferred pursuant to this Agreement are sufficient for the continued
conduct of the Business after the Closing in substantially the same manner as
conducted prior to the Closing.

 

(f)            There
are no condemnation proceedings or eminent domain proceedings of any kind
pending or, to the Knowledge of the Seller and Parent, threatened in writing
against the Real Property.

 

(g)           To the Knowledge of the Seller
and Parent no improvements on the Real Property and none of the current uses
and conditions thereof violate any Encumbrance, applicable deed restrictions or
other applicable covenants, restrictions and agreements in any material way.

 

(h)           Neither the Seller nor Parent
has received any written notice that any improvement on any Real Property is
not wholly within the lot limits of such Real Property or encroaches on any
adjoining premises or Encumbrance benefiting such Real Property, and neither
the Seller nor Parent has any Knowledge of any encroachments on any Real
Property or any easement or property right or benefit appurtenant thereto by
any improvements located on any adjoining premises that materially and
adversely affect the Business currently operated thereon.

 

(i)            The
Seller has good and valid fee title to each parcel of Owned Real Property, free
and clear of all liens except for Permitted Encumbrances.  Parent and its Affiliates have valid
leasehold or subleasehold interests in all Leased Real Property, in each case
free and clear of all liens except for Permitted Encumbrances and rights of the
landlord under the applicable lease and applicable Law.

 

SECTION 3.15.  Tangible
Personal Property.  (a)  The Tangible Personal Property currently used
in the Business is reflected in all material respects on the Reference Balance
Sheet.

 

(b)           Section 3.15(b) of the
Disclosure Schedule sets forth a true and complete list of all leases for
Tangible Personal Property and any and all material ancillary documents

 

36

 

pertaining
thereto (including all amendments and consents) providing for payments in
excess of $250,000.

 

SECTION 3.16.  Assets.  (a) 
Except as set forth in Section 3.16(a) of the Disclosure Schedule,
Parent and its Affiliates own, lease or have the legal right to use all the
properties and assets, including the Carbonless Paper Business Intellectual
Property, the Carbonless Paper Business IP Agreements, the Business
Intellectual Property, the Real Property and the Tangible Personal Property,
used in the conduct of the Business as currently conducted and, with respect to
contract rights, is a party to and enjoys the right to the benefits of all
contracts, agreements and other arrangements used by Parent and its Affiliates
(as such relate to the Business) or in or relating to the Business, all of
which properties, assets and rights are included in the Purchased Assets.

 

(b)           Except for those assets and
services to be provided pursuant to the Transition Services Agreement and
except for the Excluded Intellectual Property, the Purchased Assets, the
Intellectual Property to be licensed under the Technology License Agreement and
the Technology Sub-License Agreement and the rights to be provided to the Purchaser
in respect of Shared Contracts constitute all the properties, assets and rights
forming a part of, used, held or intended to be used in, and all such
properties, assets and rights as are necessary in the conduct of, the Business.  At all times since December 31, 2005, Parent
and its Affiliates have caused the Purchased Assets to be maintained in
accordance with good business practice consistent with past practice, and all
the Purchased Assets are in all material respects in good operating condition
and repair, wear and tear excepted, and are suitable in all material respects
for the purposes for which they are currently used.

 

(c)           Except as set forth in
Sections 3.12(b), 3.14(c), 3.16(a) and 3.16(c) of the Disclosure Schedule and
subject to the receipt of the consents listed on Sections 3.02 and 3.03 of the
Disclosure Schedule, Parent and its Affiliates have, or immediately prior to
Closing will have, the complete and unrestricted power and unqualified right to
sell, assign, transfer, convey and deliver the Purchased Assets to the
Purchaser without penalty or other adverse consequences.  Following the consummation of the
transactions contemplated by this Agreement and the execution of the
instruments of transfer contemplated by this Agreement, the Purchaser will own,
with good, valid and marketable title, or lease, under valid and subsisting
leases, or otherwise acquire the interests of Parent and its Affiliates in, the
Purchased Assets, free and clear of any Encumbrances, other than Permitted
Encumbrances, and without incurring any penalty or other adverse consequence,
including any increase in rentals, royalties, or license or other fees imposed
as a result of, or arising from, the consummation of the transactions
contemplated by this Agreement.

 

SECTION 3.17.  Customers.  Listed in Section 3.17 of the Disclosure
Schedule are the names of the ten most significant customers of the Business,
on the basis of revenues generated, for the twelve-month period ended December
31, 2005, and the amount for which each such customer was invoiced during such
period.  Except as set forth in Section
3.17 of the Disclosure Schedule, as of the date hereof, none of Parent or any
of its Affiliates has received any written notice and, to the Knowledge of the
Seller and Parent, has no reason to believe that any such customer has ceased,
or will cease, to purchase the products or goods manufactured by the Seller in

 

37

 

connection
with the Business, or has substantially reduced, or will substantially reduce,
the purchase of such products or goods at any time.

 

SECTION 3.18.  Suppliers.  Listed in Section 3.18 of the Disclosure
Schedule are the names and addresses of each of the ten most significant
suppliers of raw materials, supplies, merchandise and other goods for the
Business, on the basis of expenditures, for the twelve-month period ended
December 31, 2005 and the amount for which each such supplier invoiced Parent
or any of its Affiliates during such period. 
Except as set forth in Section 3.18 of the Disclosure Schedule, as of
the date hereof, none of Parent or any of its Affiliates has received any
written notice and, to the Knowledge of the Seller or Parent, has no reason to
believe that any such supplier will not sell raw materials, supplies,
merchandise and other goods to the Purchaser at any time after the Closing on
terms and conditions substantially similar to those used in its current sales
to the Business, subject only to general and customary price increases.  Except as set forth on Section 3.18 of the
Disclosure Schedule, all of the raw materials, supplies, merchandise and other
goods supplied to the Business necessary to operate the Business are generally
available in the market from more than one source.

 

SECTION 3.19.  Employee
Benefit Matters.  (a)  Plans and Material Documents.  Section 3.19(a) of the Disclosure Schedule
lists (i) all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”))
and all material bonus, stock option, stock purchase, restricted stock,
incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance or other benefit plans, programs or
arrangements, and all employment, termination, severance or other contracts or
agreements to which the Seller is a party, with respect to which the Seller has
any obligation or which are maintained, contributed to or sponsored by the
Seller for the benefit of any current or former employee, officer or director
of the Seller who performs or performed services with the Business, (ii) any
material plan in respect of which the Seller could incur liability under
Section 4212(c) of ERISA, and (iii) any contracts, arrangements or
understandings between the Seller or any of its Affiliates and any employee of
the Seller, including any contracts, arrangements or understandings relating to
the sale of the Purchased Assets (collectively, the “Plans”).  Each Plan is in writing and, with respect to
each Plan in which persons employed in the Business currently participate, the
Seller has furnished to the Purchaser a complete and accurate copy of each Plan
and, with respect to the Seller’s Hourly Pension Plan, a complete and accurate
copy of each material document prepared in connection with each such Plan,
including a copy of (I) each trust or other funding arrangement, (II) each
summary plan description and summary of material modifications, (III) the most
recently filed IRS Form 5500, (IV) the most recently received IRS determination
letter for each such Plan, and (V) the most recently prepared actuarial report
and financial statement in connection with each such Plan.  With respect to employees covered by a
collective bargaining agreement, the Seller has no express or implied
commitment, whether legally enforceable or not, (1) to create, incur liability
with respect to, or cause to exist, any other employee benefit plan, program or
arrangement that would be a Plan if it were established, (2) to enter into any
contract or agreement to provide compensation or benefits to any individual who
performed or performs services with the Business, or (3) to modify, change or
terminate any Plan, other than with respect to a modification, change or
termination required by ERISA or the Code.

 

38

 

(b)           Absence
of Certain Types of Plans. 
None of the Plans is a multiemployer plan (within the meaning of Section
3(37) or 4001(a)(3) of ERISA) (a “Multiemployer Plan”) or a single
employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) for
which the Seller or any ERISA Affiliate could incur liability under Section
4063 or 4064 of ERISA (a “Multiple Employer Plan”).  None of the Plans obligates the Seller to pay
separation, severance, termination or similar benefits to any such person
solely as a result of any transaction contemplated by this Agreement.  Each of the Plans is subject only to the Laws
of the United States or a political subdivision thereof.

 

(c)           Compliance
with Applicable Law. 
Each Plan is now and, during any period for which the applicable statute
of limitation has not expired, has been operated in all material respects in
accordance with the requirements of all applicable Law, including ERISA and the
Code.  The Seller has performed all
material obligations required to be performed by it under, is not in any
respect in material default under or in material violation of, and has no
knowledge of any default or violation by any party to, the Seller’s Hourly
Pension Plan (as defined in Section 6.04). 
No Action is pending or, to the Knowledge of the Seller, threatened with
respect to the Seller’s Hourly Pension Plan (other than claims for benefits in
the ordinary course) and no fact or event exists that could give rise to any
such Action.

 

(d)           Qualification
of Certain Plans.  Each Plan that is
intended to be qualified under Section 401(a) of the Code or Section 401(k) of
the Code has received a favorable determination letter from the IRS that it is
so qualified, and each trust established in connection with any Plan that is
intended to be exempt from federal income taxation under Section 501(a) of the
Code has received a determination letter from the IRS that it is so exempt, and
no fact or event has occurred since the date of such determination letter from
the IRS to adversely affect the qualified status of any such Plan or the exempt
status of any such trust.  Each trust
maintained or contributed to by the Seller or any of its ERISA Affiliates that
is intended to be qualified as a voluntary employees’ beneficiary association
and that is intended to be exempt from federal income taxation under Section
501(c)(9) of the Code has received a favorable determination letter from the
IRS that it is so qualified and so exempt, and no fact or event has occurred
since the date of such determination by the IRS to adversely affect such
qualified or exempt status.

 

(e)           Absence
of Certain Liabilities and Events.  There has been no prohibited transaction
(within the meaning of Section 406 of ERISA or Section 4975 of the Code) with
respect to the Seller’s Hourly Pension Plan. 
Neither the Seller nor any of its ERISA Affiliates has incurred any
liability under, arising out of or by operation of Title IV of ERISA (other
than liability for premiums to the Pension Benefit Guaranty Corporation arising
in the ordinary course), including any liability in connection with (i) the
termination or reorganization of any employee benefit plan subject to Title IV
of ERISA or (ii) the withdrawal from any Multiemployer Plan or Multiple
Employer Plan, and no fact or event exists or is contemplated (including the
transactions contemplated by this Agreement) that could reasonably be expected
to give rise to any such liability.  No
complete or partial termination has occurred within the five years preceding
the date hereof with respect to any Plan. 
None of the assets of the Seller or any of its ERISA Affiliates is the
subject of any lien arising under Section 302(f) of ERISA or Section 412(n) of
the Code; neither the Seller nor any Affiliate has been required to post any
security under Section 307 of ERISA or Section 401(a)(29) of the Code; and no
fact or event exists which could give rise to any such lien or requirement to
post any such security.

 

39

 

SECTION 3.20.  Labor
Matters.  Except as set forth in
Section 3.20 of the Disclosure Schedule, (a) the Seller is not a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by the Seller in connection with the Business, and currently
there are no organizational campaigns, petitions or other unionization
activities seeking recognition of a collective bargaining unit which could
affect the Business, (b) there are no controversies, strikes, slowdowns or work
stoppages pending or, to the Knowledge of the Seller, threatened between the
Seller and any of its employees employed in connection with the Business, and
the Seller has not experienced any such controversy, strike, slowdown or work
stoppage within the past three years, (c) the Seller has not breached or
otherwise failed to comply in any material respect with the provisions of any
collective bargaining or union contract applicable to employees employed in
connection with the Business, and there are no grievances outstanding against
the Seller under any such agreement or contract which could result in any
material liability, (d) there are no unfair labor practice complaints pending
against the Seller before the National Labor Relations Board or any other
Governmental Authority which could result in any material liability, (e) the
Seller is currently in compliance in all material respects with all applicable
Laws relating to the employment of labor with respect to the Business, including
those related to wages, hours, collective bargaining and the payment and
withholding of taxes and other sums as required by the appropriate Governmental
Authority and has withheld and paid to the appropriate Governmental Authority
or is holding for payment not yet due to such Governmental Authority all
amounts required to be withheld from current and former employees of the Seller
employed in connection with the Business and is not liable for any arrears of
wages, Taxes, penalties or other sums for failure to comply with any of the
foregoing, (f) the Seller has paid in full to all of the current and former
employees of the Seller employed in connection with the Business or adequately
accrued for in accordance with GAAP all wages, salaries, commissions, bonuses,
benefits and other compensation due to or on behalf of such employees, (g)
there is no material claim with respect to payment of wages, salary or overtime
pay that has been asserted or is now pending or, to the Knowledge of the
Seller, threatened against the Seller before any Governmental Authority with
respect to any Persons currently or formerly employed by the Seller in
connection with the Business, (h) the Seller is not a party to, or otherwise
bound by, any consent decree with, or citation by, any Governmental Authority
relating to employees or employment practices relating to the Business, (i)
there is no charge or proceeding with respect to a material violation of any
occupational safety or health standard that has been asserted or is now pending
or, to the Knowledge of the Seller, threatened with respect to the Seller
relating to the Business and (j) there is no charge of discrimination in
employment or employment practices, for any reason, including age, gender,
race, religion or other legally protected category, which has been asserted or
is now pending or, to the Knowledge of the Seller, threatened before the United
States Equal Employment Opportunity Commission, or any other Governmental
Authority in any jurisdiction in which the Seller has employed or currently
employs any Person in connection with the Business.

 

SECTION 3.21.  Key
Employees.  A letter provided by
Parent and the Seller to the Purchaser prior to the date hereof lists the name,
place of employment, current annual salary rates, bonuses and accrued vacation
during the period from May 2, 2005 through December 31, 2005, and in 2006, the
date of employment and position of each current salaried employee, officer,
director or consultant of the Seller who is employed or retained in connection
with the Business and whose annual compensation exceeded (or, in 2006, is
expected to exceed) $100,000.

 

40

 

SECTION 3.22.  Taxes.  (a) 
All Tax Returns required to be filed by or with respect to the Seller,
the Purchased Assets or the Business (including any consolidated, combined or
unitary Tax Return that includes the Seller) have been timely filed (taking
into account any validly obtained extensions), (b) all Taxes required to be
shown on such Tax Returns or otherwise due by or with respect to the Seller,
the Purchased Assets or the Business have been timely paid, (c) all such Tax
Returns (insofar as they relate to the Seller, the Purchased Assets or the
Business) are true, correct and complete in all material respects, (d) no
adjustment relating to such Tax Returns has been proposed in writing by any
Governmental Authority (insofar as either relates to the Seller, the Purchased
Assets or the Business), (e) there are no pending or, to the best Knowledge of
the Seller or Parent after due inquiry, overtly threatened Actions for the
assessment or collection of Taxes against the Seller, the Purchased Assets or
the Business or any Person that was included in the filing of a Tax Return with
the Seller on a consolidated, combined or unitary basis, in each case, relating
to the Purchased Assets or the Business, (f) there are no Tax liens on any of
the Purchased Assets except for Taxes not yet due and payable, (g) there are no
written requests for information outstanding from a Tax authority in respect of
Taxes that could affect the Taxes relating to the Business, (h) neither the
Seller nor Parent has received any notice or inquiry from any jurisdiction
where the Seller or Parent does not currently file Tax Returns to the effect
that such filings may be required with respect to the Business or that the
Business may otherwise be subject to taxation by such jurisdiction, (i) Parent,
the Seller and Parent’s other Affiliates have properly and timely withheld, collected
or deposited all amounts required to be withheld, collected or deposited in
respect of Taxes relating to the Purchased Assets or the Business, (j) except as disclosed in Section 3.22(j)
of the Disclosure Schedule, there are no Tax claims or
audits by any Tax authority in progress or pending relating to the Purchased
Assets or the Business, nor has the Seller or Parent received any written
notice indicating that a Governmental Authority intends to conduct or assert
such a claim, audit, other investigation or inquiry, (k) no Assumed Liabilities
consist of any tax sharing or tax indemnity agreements pursuant to which the
Purchaser will have an obligation to make a payment to any Person after the
Closing, (l) (A) the Seller is entitled to the reduced rates of Tax or other
Tax benefits under the Enterprise Zone Agreement entered into between the Board
of Commissioners of Ross County and MW Custom Papers, LLC on October 15, 2003 (the “Enterprise
Zone Agreement”) and (B) except as disclosed in Section 3.22(l) of the
Disclosure Schedule none of Parent, Seller or any of Parent’s other Affiliates,
are a party to, or otherwise entitled to the benefits of, any similar agreement
relating to the Purchased Assets or the Business, (m) Section 3.22(m) of the
Disclosure Schedule lists all state and local jurisdictions in which the Seller
has made estimated or other Tax payments of sales Taxes, use Taxes or Income
Taxes, and (n) any unpaid liability of the Seller for the commercial activities
Tax and sales Taxes of the State of Ohio that have accrued but that are not yet
due and payable does not exceed $10,000 in the aggregate.

 

SECTION 3.23.  Insurance.  All material assets, properties and risks of
Parent, the Seller and Parent’s other Affiliates (relating
to the Business) are, and since May 2, 2005, have been, covered by valid and,
except for insurance policies that have expired under their terms in the
ordinary course, currently effective insurance policies or binders of insurance
(including general liability insurance, property insurance and workers’
compensation insurance) issued in favor of Parent, the Seller and Parent’s
other Affiliates with responsible insurance companies, in such types and
amounts and covering such risks as are consistent with customary practices and
standards of companies engaged in businesses and operations similar to those of
Parent, the Seller and Parent’s other Affiliates.

 

41

 

SECTION 3.24.  Brokers.  There is no brokerage, finder’s or other fee
or commission in connection with the transactions contemplated by this
Agreement.

 

SECTION 3.25.  Licenses
and Permits.  Except as set forth in
Section 3.25 of the Disclosure Schedule, Parent, the Seller and Parent’s other
Affiliates have all governmental licenses, permits and authorizations necessary
to conduct the Business, except for such governmental licenses, permits and
authorizations the absence of which would not have a Material Adverse Effect; provided,
however, that this Section 3.25 shall not cover the Seller’s possession
of Environmental Permits necessary to conduct the Business.  Since May 2, 2005, none of Parent, the Seller
or any of Parent’s other Affiliates has received a written notice or otherwise
has Knowledge that any Governmental Authority intends to cancel or terminate
any material license, permit, certificate or other authorization required to
carry on the Business as currently conducted.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES

OF THE PURCHASER

 

As an inducement to Parent and the Seller to enter into this
Agreement, the Purchaser hereby represents and warrants to Parent and the
Seller as follows:

 

SECTION 4.01.  Organization
and Authority of the Purchaser.  The
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has all necessary
corporate power and authority to enter into this Agreement and the Ancillary
Agreements to which it is a party, to carry out its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and
thereby.  The execution and delivery by
the Purchaser of this Agreement and the Ancillary Agreements to which it is a
party, the performance by the Purchaser of its obligations hereunder and
thereunder and the consummation by the Purchaser of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
corporate action on the part of the Purchaser. 
This Agreement has been, and upon their execution the Ancillary
Agreements to which the Purchaser is a party shall have been, duly executed and
delivered by the Purchaser, and (assuming due authorization, execution and
delivery by Parent and the Seller) this Agreement constitutes, and upon their
execution the Ancillary Agreements to which the Purchaser is a party shall
constitute, legal, valid and binding obligations of the Purchaser, enforceable
against the Purchaser in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar Laws affecting the enforcement of
creditors’ rights generally, and general principles of equity (regardless of
whether such enforceability is considered in a proceeding in Law or equity).

 

SECTION 4.02.  No
Conflict.  Assuming the termination
or expiration of the waiting periods under the HSR Act and the making and
obtaining of all filings, notifications, consents, approvals, authorizations
and other actions referred to in Section 4.03, the execution, delivery and
performance by the Purchaser of this Agreement and the Ancillary Agreements to
which it is a party do not and will not (a) violate, conflict with or result in
the breach of any provision of the certificate of incorporation or by-laws of
the Purchaser, (b) conflict with or violate any Law or Governmental Order
applicable to the Purchaser, or (c) conflict with, or result in any

 

42

 

breach of,
constitute a default (or event which with the giving of notice or lapse of
time, or both, would become a default) under, require any consent under, or
give to others any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, any note, bond, mortgage or indenture, contract,
agreement, lease, sublease, license, permit, franchise or other instrument or
arrangement to which the Purchaser is a party, which would, in the case of
clause (b) or (c), prevent or materially delay the ability of the Purchaser to
carry out its obligations under, or the consummation of the transactions
contemplated by, this Agreement or the Ancillary Agreements.

 

SECTION 4.03.  Governmental
Consents and Approvals.  The
execution, delivery and performance by the Purchaser of this Agreement and each
Ancillary Agreement to which the Purchaser is a party do not and will not
require any consent, approval, authorization or other order of, action by,
filing with, or notification to any Governmental Authority, except (a) the
pre-merger notification and waiting period requirements of the HSR Act, and (b)
pursuant to the applicable rules of the German Act against Restraints of
Competition.  The Purchaser filed a
Notification and Report Form under the HSR Act with respect to the transactions
contemplated hereby on January 26, 2006.

 

SECTION 4.04.  Financing.  The Purchaser has or will have all funds
necessary to consummate the transactions contemplated by this Agreement.

 

SECTION 4.05.  Litigation.  No Action by or against the Purchaser is
pending or, to the knowledge of the Purchaser after due inquiry, threatened,
which could affect the legality, validity or enforceability of this Agreement,
any Ancillary Agreement or the consummation of the transactions contemplated
hereby or thereby or the ability of the Purchaser to consummate the
transactions contemplated hereby or thereby.

 

SECTION 4.06.  Brokers.  Except for Credit Suisse First Boston, no
broker, finder or investment banker is entitled to any brokerage, finder’s or
other fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the
Purchaser.  The Purchaser shall be solely
responsible for payment of the fees and expenses of Credit Suisse First Boston.

 

SECTION 4.07.  Knowledge
of Breach.  As of the date hereof,
none of the executive officers of the Purchaser has actual knowledge of any
breach of any representation or warranty contained in Article III.

 

SECTION 4.08.  Disclaimer
of Warranties.  THE PURCHASER ACKNOWLEDGES THAT, EXCEPT AS OTHERWISE
SPECIFICALLY STATED IN THIS AGREEMENT, IT IS PURCHASING THE PURCHASED ASSETS
AND ASSUMING THE ASSUMED LIABILITIES IN THEIR PRESENT CONDITION, “AS IS, WHERE
IS,” AND THAT NEITHER THE SELLER NOR PARENT HAS MADE OR IS MAKING ANY WARRANTY
OR REPRESENTATION WHATSOEVER, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, CONCERNING
THE PURCHASED ASSETS OR THE ASSUMED LIABILITIES, WHETHER AS TO CONDITION OR

 

43

 

VALUE OR OTHERWISE, OTHER THAN AS
SPECIFICALLY STATED IN THIS AGREEMENT.

 

ARTICLE V

 

ADDITIONAL AGREEMENTS

 

SECTION 5.01.  Conduct
of Business Prior to the Closing.  (a)  Parent and the Seller covenant and agree
that, with respect to the Business and the Purchased Assets, except as
described in Section 5.01(a) of the Disclosure Schedule, between the date
hereof and the time of the Closing, the Seller shall not, and Parent shall not
permit the Seller to, conduct the Business other than in the ordinary course
and consistent with the Seller’s prior practice.  Without limiting the generality of the
foregoing, except as described in Section 5.01(a) of the Disclosure Schedule,
Parent and its Affiliates shall (as it relates to the Business) (i) continue
their advertising and promotional activities, and pricing and purchasing
policies, in accordance with past practice, (ii) maintain the customary payment
cycles for any payables or receivables incurred in connection with the Business
consistent with past practice in all material respects, (iii) use their
reasonable best efforts to (A) preserve intact the business organization of the
Business, (B) keep available the services of the employees of the Seller, (C)
continue in full force and effect without material modification all existing
policies or binders of insurance currently maintained in respect of the
Business, and (D) preserve their current relationships with the customers and
vendors of the Business and other Persons with which they have had significant
business relationships relating to the Business, (iv) exercise, but only after
notice to the Purchaser and receipt of the Purchaser’s prior written approval,
any rights of renewal pursuant to the terms of any of the leases or subleases
set forth in Section 3.14(b) of the Disclosure Schedule that by their terms
would otherwise expire, (v) except for this Agreement, any Ancillary Agreement
or any contract or agreement entered into in the ordinary course of business
consistent with past practice that are on terms no less favorable to the
Business than those that would be obtained in similar transactions with
unaffiliated Persons, not enter into any contract or agreement with any
Affiliate that will be an Assumed Liability and (vi) not enter into any
retention or similar arrangement with employees of the Seller to whom offers of
employment are to be made pursuant to Section 6.01 without the prior written
consent of the Purchaser.

 

(b)           Except as described in
Section 5.01(b) of the Disclosure Schedule, the Seller covenants and agrees
that, between the date hereof and the time of the Closing, without the prior
written consent of the Purchaser (which consent shall not be unreasonably
withheld or delayed or conditioned), the Seller will not do any of the things
specified in Section 3.08(b) (other than Section 3.08(b)(xix)).

 

SECTION 5.02.  Access
to Information.  (a)  From the date hereof until the Closing, upon
reasonable notice and subject to such limitations as may be required by
applicable Law, each of Parent, the Seller and Parent’s other Affiliates shall
cause its officers, directors, employees, agents, representatives, accountants
and counsel to:  (i) afford the officers,
employees, agents, accountants, counsel, financing sources and representatives
of the Purchaser reasonable access, during normal business hours, to the
offices, properties, plants, other facilities, books and records of Parent, the
Seller and Parent’s other Affiliates (relating to the Business), including
access to enter upon such properties, plants and facilities to conduct an ASTM
1527-00 Phase I

 

44

 

Environmental Site Assessment, provided that as part
of the Phase I Environmental Site Assessment the Purchaser and its agents
cannot contact any Governmental Authority to discuss any environmental matters
involving or in any way associated with the Seller, MeadWestvaco or the
Operating Sites without the express written consent of the Seller explicitly
approving such communication, and to those officers, directors, employees,
agents, accountants and counsel of the Seller who have any Knowledge relating
to the Business and (ii) furnish to the officers, employees, agents,
accountants, counsel, financing sources and representatives of the Purchaser
such additional financial and operating data and other information regarding
the assets, properties, liabilities and goodwill of the Business (or legible
copies thereof) as the Purchaser may from time to time reasonably request; provided,
however, that the Purchaser, its agents and consultants shall not meet
and confer with any Governmental Authority or have access to enter upon such
properties, plants and facilities to investigate and collect air, surface
water, groundwater and soil samples or to conduct any other type of testing
without the prior written consent of the Seller explicitly approving such
prohibited activity.

 

(b)           In order to facilitate the
resolution of any claims made against or incurred by the Seller prior to the
Closing, for a period of seven years after the Closing, the Purchaser shall (i)
retain the books and records relating to the Business relating to periods prior
to the Closing in a manner reasonably consistent with the prior practice of the
Seller and (ii) upon reasonable notice, afford the officers, employees, agents
and representatives of the Seller reasonable access (including the right to
make, at the Seller’s expense, photocopies), during normal business hours, to
such books and records.

 

(c)           In order to facilitate the
resolution of any claims made by or against or incurred by the Purchaser after
the Closing or for any other reasonable purpose, for a period of seven years
following the Closing, Parent, the Seller and Parent’s other Affiliates shall
(i) retain the books and records of such Person which relate to the Business
and its operations for periods prior to the Closing and which shall not
otherwise have been delivered to the Purchaser and (ii) upon reasonable notice,
afford the officers, employees, agents and representatives of the Purchaser
reasonable access (including the right to make photocopies, at the Purchaser’s
expense), during normal business hours, to such books and records.

 

SECTION 5.03.  Confidentiality.  (a) 
The Seller and Parent agree to, and Parent shall cause its agents, representatives,
Affiliates, employees, officers and directors to:  (i) treat and hold as confidential (and not
disclose or provide access to any Person to) all information relating to trade
secrets, processes, patent applications, product development, price, customer
and supplier lists, pricing and marketing plans, policies and strategies,
details of client and consultant contracts, operations methods, product
development techniques, business acquisition plans, new personnel acquisition
plans and all other confidential or proprietary information with respect to the
Business, (ii) in the event that Parent, the Seller or any such agent,
representative, Affiliate, employee, officer or director of either of them
becomes legally compelled to disclose any such information, provide the
Purchaser with prompt written notice of such requirement so that the Purchaser
may seek a protective order or other remedy or waive compliance with this
Section 5.03, (iii) in the event that such protective order or other remedy is
not obtained, or the Purchaser waives compliance with this Section 5.03,
furnish only that portion of such confidential information which is legally
required to be provided and exercise its best efforts to obtain assurances that
confidential treatment will be accorded such information, and (iv) promptly
furnish (prior to, at, or

 

45

 

as soon as
practicable following, the Closing) to the Purchaser any and all copies (in
whatever form or medium) of all such confidential information then in the
possession of Parent, the Seller or any of their respective agents,
representatives, Affiliates, employees, officers or directors and, except as
otherwise required by Section 5.02(c), destroy any and all additional copies then
in the possession of Parent, the Seller or any of their respective agents,
representatives, Affiliates, employees, officers or directors of such
information and of any analyses, compilations, studies or other documents
prepared, in whole or in part, on the basis thereof; provided, however,
that this sentence shall not apply to any information that, at the time of
disclosure, is available publicly and was not disclosed in breach of this
Agreement by Parent, the Seller, or any of their respective agents, representatives,
Affiliates, employees, officers or directors; and provided  further
that, with respect to Intellectual Property, specific information shall not be
deemed to be within the foregoing exception merely because it is embraced in
general disclosures in the public domain. 
The provisions of this Section 5.03(a) shall not apply to the coated and
uncoated paper business operated by Parent and its Affiliates other than the
Seller, or to the Seller’s Non-Carbonless Paper Business except with respect to
any of the Purchased Assets and the Assumed Liabilities that solely relate to
the Seller’s Non-Carbonless Paper Business. 
In addition, with respect to Intellectual Property, any combination of
features shall not be deemed to be within the foregoing exception merely
because the individual features are in the public domain unless the combination
itself and its principle of operation are in the public domain.  In addition, nothing in this Section 5.03(a)
shall require Parent or the Seller to disclose any information that such Person
is required to keep confidential by Law or pursuant to agreements or contracts
with third parties.

 

(b)           The Purchaser acknowledges
that the information being provided to it in connection with the transactions
contemplated by this Agreement is subject to the terms of a confidentiality
agreement among the Purchaser, the Seller and Parent (the “Confidentiality
Agreement”), the terms of which are incorporated herein by reference.  Effective upon, and only upon, the Closing,
the Confidentiality Agreement shall terminate as to confidentiality with
respect to information relating to the Business; provided, however,
that the Purchaser acknowledges that any and all other terms and conditions of
the Confidentiality Agreement (including relating to the confidentiality of
information relating to Parent and its Affiliates other than information
relating to the Business) shall survive the Closing Date in accordance with the
terms of the Confidentiality Agreement.

 

SECTION 5.04.  Regulatory
and Other Authorizations; Notices and Consents.  (a) 
Each of the Purchaser, Parent and the Seller shall use its reasonable
best efforts to obtain all authorizations, consents, orders and approvals of
all Governmental Authorities that may be or become necessary for its execution
and delivery of, and the performance of its obligations pursuant to, this
Agreement and the Ancillary Agreements and will cooperate fully with each other
party in promptly seeking to obtain all such authorizations, consents, orders
and approvals, including pursuant to the applicable rules of the German Act
against Restraints of Competition.  Each
party hereto agrees to, if necessary, supply as promptly as practicable to the
appropriate Governmental Authorities any additional information and documentary
material that may be requested pursuant to the HSR Act and the applicable rules
of the German Act against Restraints of Competition.

 

(b)           The Seller and Parent shall
give promptly such notices to third parties and use their reasonable best efforts
to obtain such third party consents and estoppel certificates as the Purchaser
may reasonably require in connection with the transactions contemplated by this

 

46

 

Agreement
and the Ancillary Agreements; provided, however, that neither the
Seller nor Parent shall have any obligation to give any guarantee or other
consideration in connection with any such notice, consent or estoppel
certificate or to consent to any change in the terms of any agreement or arrangement
which the Seller or Parent may reasonably determine to be adverse to their
interests.

 

(c)           The Purchaser shall cooperate
and use all reasonable efforts to assist the Seller and Parent in giving such
notices and obtaining such consents and estoppel certificates; provided,
however, that, except as required pursuant to Section 5.04(f), the
Purchaser shall have no obligation to give any guarantee or other consideration
of any nature in connection with any such notice, consent or estoppel
certificate or to consent to any change in the terms of any agreement or
arrangement which the Purchaser may reasonably determine to be adverse to the
interests of the Purchaser or the Business.

 

(d)           The Seller, Parent and the
Purchaser agree that, in the event that any consent, approval or authorization
necessary or desirable to preserve for the Business any right or benefit under
any lease, license, contract, commitment or other agreement or arrangement to
which Parent or any of its Affiliates is a party is not obtained prior to the
Closing, the Seller and Parent will, subsequent to the Closing, cooperate with
the Purchaser in attempting to obtain such consent, approval or authorization
as promptly thereafter as practicable. 
If such consent, approval or authorization cannot be obtained, the
Seller and Parent shall use their reasonable best efforts to provide the
Purchaser with the rights and benefits of the affected lease, license,
contract, commitment or other agreement or arrangement for the term of such
lease, license, contract or other agreement or arrangement, and, if the Seller
and Parent provide such rights and benefits, the Purchaser, as the case may be,
shall assume the obligations and burdens thereunder.

 

(e)           The Seller, Parent and the
Purchaser agree to use their reasonable best efforts to provide the Purchaser
with the rights and benefits under any lease, license, contract, commitment or
other agreement or arrangement to which Parent or any of its Affiliates is a
party pursuant to a Shared Contract for the term of such Shared Contracts; provided
that, for contracts or agreements for the purchase of Inventory, other
materials or personal property from any supplier, the term of rights and
benefits to be provided by the Seller and Parent pursuant to this Section 5.04(e)
shall be through December 31, 2006, and, if the Seller and Parent provide such
rights and benefits, the Purchaser, as the case may be, shall assume the
obligations and burdens thereunder; provided, however, that, in
connection with providing the Purchaser with rights and benefits pursuant to
Shared Contracts, neither the Seller nor Parent shall have any obligation to
give any guarantee or other consideration or to consent to any change in the
terms of any agreement or arrangement which the Seller or Parent may reasonably
determine to be adverse to their interests.

 

(f)            The
Purchaser shall use its reasonable best efforts to cause itself to be
substituted for Parent or any of its Affiliates, effective as of the Closing
Date or as promptly thereafter as reasonably practicable, in respect of all
obligations of Parent and any of its Affiliates under each of the guarantees
and other financial assurance arrangements or commitments obtained or entered
into by Parent or any of its Affiliates for the benefit of the Business set
forth in Section 5.04(f) of the Disclosure Schedule (the “Guarantees”).  To the extent such substitution contemplated
by the first sentence of this Section 5.04(f) has been effected, Parent and its
Affiliates shall from and after the Closing cease to have any obligation
whatsoever arising from or in connection with the Guarantees.  To the extent such substitution contemplated
by the first

 

47

 

sentence
of this Section 5.04(f) has not been effected, the Purchaser shall (i) use its
reasonable best efforts to effect such substitution as soon as practicable and
(ii) indemnify Parent and its Affiliates with respect to any such Guarantees in
accordance with Article VIII.

 

SECTION 5.05.  Notice
of Developments.  Prior to the
Closing, each of the Seller and Parent, on the one hand, and the Purchaser, on
the other hand, shall promptly notify the other party in writing of all events,
circumstances, facts and occurrences arising subsequent to the date of this
Agreement which could result in any breach of a representation or warranty or
covenant of such party in this Agreement or which could have the effect of
making any representation or warranty of such party in this Agreement untrue or
incorrect in any respect to the extent that any such breach would reasonably be
expected to cause the conditions to the obligations of the Seller, Parent or
the Purchaser to consummate the transactions contemplated hereby not to be
satisfied.

 

SECTION 5.06.  Non-Competition.  (a) 
None of Parent or any of its Affiliates shall, for a period of three
years after the Closing (the “Restricted Period”), engage, directly or
indirectly, in any business anywhere that manufactures, produces, distributes
or supplies products or services of the kind manufactured, produced,
distributed or supplied by the Carbonless Paper Business on the Closing Date or
as contemplated by the “Carbonless Systems Business Overview” presented by
Parent on October 3, 2005, to be manufactured, produced, distributed or
supplied or, without the prior written consent of the Purchaser, directly or
indirectly, own an interest in, manage, operate, join, control or participate
in or be connected with, as an officer, employee, partner, stockholder or
consultant, any Person anywhere that manufactures, produces, distributes or
supplies products or services of the kind manufactured, produced, distributed
or supplied by the Carbonless Paper Business on the Closing Date or as
contemplated by the “Carbonless Systems Business Overview” presented by Parent
on October 3, 2005, to be manufactured, produced, distributed or supplied.  Except as expressly set forth in Section
5.06(c), nothing in Section 5.06(c) shall be deemed to restrict in any manner the
conduct by Parent or any of its Affiliates of the coated and uncoated paper
business.

 

(b)           As a separate and independent
covenant, Parent agrees with the Purchaser that, during the Restricted Period,
none of Parent or any of its Affiliates will in any way, directly or
indirectly, for the purpose of engaging in any business that manufactures,
produces, distributes or supplies products or services of the kind
manufactured, produced, distributed or supplied by the Carbonless Paper
Business on the Closing Date or as contemplated by the “Carbonless Systems
Business Overview” presented by Parent on October 3, 2005, to be manufactured,
produced, distributed or supplied, do any business with, or solicit any
customers of, the Carbonless Paper Business with whom the Carbonless Paper
Business or Parent or any of its Affiliates had any dealings in connection with
the Carbonless Paper Business during the period of time in which the Carbonless
Paper Business was owned by Parent and its Affiliates, or induce or attempt to
induce any of the officers or employees of the Carbonless Paper Business or the
Purchaser to leave the employ of the Purchaser or to violate the terms of their
employment contracts, or any employment arrangements, with the Purchaser; provided,
however, that the foregoing will not prohibit a general solicitation to
the public through general advertising.

 

(c)           As a separate and independent
covenant, Parent agrees with the Purchaser that, during the Restricted Period,
none of Parent or any of its Affiliates will solicit any customer

 

48

 

listed
in Section 5.06(c) of the Disclosure Schedule for the purchase of any of the
products listed opposite such customer’s name on Section 5.06(c) of the
Disclosure Schedule.

 

(d)           Notwithstanding anything to
the contrary contained in Section 5.06(a):

 

(i)            Parent
or any of its Affiliates may directly or indirectly hold interests or
securities of any Person who is engaged in the manufacture, production,
distribution and supply of products and services of the kind manufactured,
produced, distributed or supplied by the Carbonless Paper Business on the
Closing Date or as contemplated by the “Carbonless Systems Business Overview”
presented by Parent on October 3, 2005, to be manufactured, produced,
distributed or supplied and whose securities are listed on any national
securities exchange, to the extent that such investment does not directly or
indirectly confer on Parent or any of its Affiliates more than 5% of the
outstanding voting power of such Person, as long as the Person owning such
securities has no other connection or relationship with such competitor; and

 

(ii)           Parent or any of its
Affiliates may acquire a business, assets and/or more than 50% of the
outstanding capital stock or other equity interests in any Person that derived
less than 10% of its total annual revenues in its most recent fiscal year from
the manufacture, production, distribution and supply of products and services
of the kind manufactured, produced, distributed or supplied by the Carbonless
Paper Business on the Closing Date or as contemplated by the “Carbonless
Systems Business Overview” presented by Parent on October 3, 2005, to be
conducted.

 

(e)           Except for the persons listed
in the letter provided by the Purchaser to Parent on the date hereof, as a
separate and independent covenant, the Purchaser agrees with Parent that,
during the Restricted Period, the Purchaser will not, in any way, directly or
indirectly, induce or attempt to induce any of the officers or employees of
Parent or any of its Affiliates (other than the officers or employees listed on
Exhibit 6.01) to leave the employ of Parent or its Affiliates or to violate the
terms of their employment contracts, or any employment arrangements, with
Parent or its Affiliates; provided, however, that the foregoing
will not prohibit a general solicitation to the public through general
advertising.

 

(f)            Each
of the Seller, Parent and the Purchaser acknowledge that the covenants of the
Seller, Parent and the Purchaser set forth in this Section 5.06 are an
essential element of this Agreement and that, but for the agreement of the
Seller, Parent and the Purchaser to comply with these covenants, the other
party or parties would not have entered into this Agreement.  Each of the Seller, Parent and the Purchaser
acknowledge that this Section 5.06 constitutes an independent covenant that
shall not be affected by performance or nonperformance of any other provision
of this Agreement by the Seller, Parent or the Purchaser.  Each of the Seller, Parent and the Purchaser
has independently consulted with its counsel and after such consultation agrees
that the covenants set forth in this Section 5.06 are reasonable and proper.

 

SECTION 5.07.  Excluded
Liabilities; Assumed Liabilities. 
Parent or the Seller shall pay and discharge the Excluded Liabilities as
and when the same become due and payable. 
The Purchaser shall pay and discharge the Assumed Liabilities as and
when the same become due and payable.

 

49

 

SECTION 5.08.  Tax
Cooperation and Exchange of Information; Other Tax Matters.  (a)  In
addition to the terms set forth in Section 5.02 of this Agreement, Parent, the
Seller and Parent’s other Affiliates, on the one hand, and the Purchaser, on
the other hand, shall provide each other with such cooperation and information
as either of them reasonably may request of the other in (i) filing any Tax
Return, amended Tax Return or claim for refund, (ii) determining a liability
for Taxes or a right to a refund of Taxes or (iii) participating in or
conducting any audit or other proceeding in respect of Taxes.  Such cooperation and information shall
include providing copies of relevant Tax Returns or portions thereof, together
with accompanying schedules, related work papers and documents in their
possession relating to rulings or other determinations by Tax authorities.  Parent, the Seller and Parent’s other
Affiliates, on the one hand, and the Purchaser, on the other hand, shall make
themselves (and their respective employees) available on a basis mutually
convenient to both parties to provide explanations of any documents or
information provided under this Section 5.08. 
Each of Parent and the Purchaser shall retain all Tax Returns, schedules
and work papers, records and other documents in its possession (or in the
possession of its Affiliates) relating to Tax matters relevant to the Purchased
Assets or the Business for the first taxable period ending after the Closing
and for all prior taxable periods until the later of (i) the expiration of the
statute of limitations of the taxable periods to which such Tax Returns and
other documents relate, without regard to extensions except to the extent
notified by the other party in writing of such extensions for the respective
Tax periods and (ii) six years following the due date (without extension) for
such Tax Returns.  After such time,
before Parent or the Purchaser shall dispose of any such documents in its
possession (or in the possession of its Affiliates), the other party shall be
given the opportunity, after 90 days’ prior written notice, to remove and
retain all or any part of such documents as such other party may select (at
such other party’s expense).  Any
information obtained under this Section 5.08 shall be kept confidential in
accordance with Section 5.03, except as may be otherwise necessary in
connection with the filing of Tax Returns or claims for refund or in conducting
an audit or other proceeding.

 

(b)           Parent
agrees to (and shall cause its Affiliates to) assist and otherwise cooperate
with the Purchaser in obtaining the transfer to the Purchaser of the employer
rate of the Seller in respect of unemployment Taxes in Ohio and any other jurisdiction that the Purchaser may
identify or in which the Purchased Assets are located or the Business is
conducted, including joining the Purchaser in the timely and proper filing of
any elections required under applicable law to effect the foregoing or filing
any such election on behalf of the Purchaser.

 

(c)           Parent agrees to (and shall cause its
Affiliates to) assist and otherwise cooperate with the Purchaser in obtaining
the transfer to the Purchaser of the reduced rates of Tax and other Tax
benefits to which Parent, the Seller or any of Parent’s other Affiliates are
entitled to under the Enterprise Zone Agreement and the agreements listed in
Section 3.22(l) of the Disclosure Schedule to the extent relating to the
Purchased Assets or the Business, including, requesting, filing and executing
any elections, agreements and any other necessary documents required for the
transfer or assignment of such agreements to the Purchaser from the appropriate
Governmental Authority or any other counterparty to such agreements.

 

SECTION 5.09.  Conveyance Taxes.  Each of Parent and the Purchaser shall be
liable for one-half of the Conveyance Taxes up to an aggregate amount equal to
$40,000 (or $20,000 each) which become payable in connection with the
transactions contemplated by this Agreement. 
Parent shall be liable for and shall hold the Purchaser harmless against
any

 

50

 

Conveyance Taxes in
excess of $40,000 which become payable in connection with the transactions
contemplated by this Agreement.  Parent
or the Seller, after the review and consent by the Purchaser, shall file such
applications and documents as shall permit any such Conveyance Tax to be
assessed and paid on or prior to the Closing in accordance with any available
pre-sale filing procedure.  The Purchaser
shall execute and deliver all instruments and certificates necessary to enable
Parent and the Seller to comply with the foregoing.  The Purchaser shall complete and execute a
resale or other exemption certificate with respect to the inventory items sold
hereunder, and shall provide Parent with an executed copy thereof.

 

SECTION 5.10.  Further Action.  Each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things necessary, proper or advisable under applicable
Law, and to execute and deliver such documents and other papers, as may be
required to carry out the provisions of this Agreement and the Ancillary
Agreements to which it is a party and consummate and make effective the
transactions contemplated hereby and thereby.

 

SECTION 5.11.  Risk of Loss.  (a) 
The risk of loss or damage by fire or other casualty to any Owned Real
Property, Leased Real Property or Tangible Personal Property before the Closing
is assumed by Parent.  In the event that
any Owned Real Property, Leased Real Property or Tangible Personal Property
shall suffer any fire or casualty or any injury before the Closing, Parent
agrees to (i) repair the damage at its sole cost and expense before the date
set for delivery of the deed or assignment, as applicable, hereunder, or (ii)
make an appropriate reduction in the Purchase Price based on a reasonable
approximation of the cost of such repair as agreed by the parties, or (iii)
assign to the Purchaser the proceeds of any insurances covering such fire,
casualty or injury.  The risk of loss or
damage by fire or other casualty to any Owned Real Property, Leased Real
Property or Tangible Personal Property after the Closing is assumed by the
Purchaser.

 

(b)           The risk of loss or damage to the Owned Real Property or the Leased
Real Property by condemnation before delivery of the applicable deed or
assignment is assumed by Parent or the Seller, as applicable.  In the event any condemnation proceeding is
commenced after the date hereof, Parent or the Seller shall assign to the
Purchaser at the Closing all of the Seller’s right, title and interest
in and to all awards made in respect of such condemnation and shall pay over to
the Purchaser all amounts theretofore received by the Seller in connection with
such condemnation.  The risk of loss or
damage to any Owned Real Property or the Leased Real Property by condemnation
after the Closing is assumed by the Purchaser.

 

SECTION 5.12.  Proration;
Certain Charges and Taxes.  (a)  Except as provided in Section 5.09 or
otherwise under this Agreement, all Property Taxes levied with respect to the
Purchased Assets or the Business for the Straddle Period, whether imposed or
assessed before or after the Closing Date, shall be prorated between the Seller
and Parent, on the one hand, and the Purchaser, on the other hand, as of 12:01
A.M. on the day after the Closing.  If
any Taxes subject to proration are paid by the Purchaser, on the one hand, or
the Seller or Parent, on the other hand, the proportionate amount of such Taxes
paid (or in the event a refund of any portion of such Taxes previously paid is
received, such refund) shall be paid promptly by (or to) the other after the
payment of such Taxes (or promptly following the receipt of any such refund)
and a request is made for such amount. 
All Taxes (other than Property Taxes) with respect to the Purchased
Assets

 

51

 

or the
Business for the Straddle Period shall be computed as if such taxable period
ended as of the close of business on the Closing Date.

 

(b)           Except as otherwise provided
in this Agreement, all installments of special assessments or other charges on
or with respect to the Purchased Assets payable by the Seller for any period in
which the Closing shall occur (including base rent, common area maintenance,
royalties, all municipal, utility or authority charges for water, sewer,
electric or gas charges, garbage or waste removal, and cost of fuel) shall be
apportioned as of the Closing and each party shall pay its proportionate share
promptly upon the receipt of any bill, statement or other charge with respect
thereto.  If such charges or rates are
assessed either based upon time or for a specified period, such charges or
rates shall be prorated as of 12:01 A.M. on the day after the Closing.  If such charges or rates are assessed based
upon usage of utility or similar services, such charges shall be prorated based
upon meter readings taken on the Closing Date.

 

(c)           All refunds, reimbursements,
installments of base rent, additional rent, license fees or other use related
revenue receivable by any party to the extent attributable to the operation of
the Business for any period in which the Closing shall occur shall be prorated
so that the Seller shall not be entitled to that portion of any such
installment applicable to any period from and after the Closing Date, and if
the Purchaser or the Seller, as the case may be, shall receive any such
payments after the Closing Date, it shall promptly remit to such other party
its share of such payments.

 

(d)           The prorations pursuant to
this Section 5.12 may be calculated after the Closing, as each item to be
prorated (including any such Tax, obligation, assessment, charge, refund,
reimbursement, rent installment, fee or revenue) accrues or comes due; provided
that, in any event, any such proration shall be calculated not later than
thirty (30) days after the party requesting the proration of any item obtains
the information required to calculate such proration.

 

SECTION 5.13.  Compliance
with Environmental Transfer Statutes. 
The Seller shall, at its own cost and expense, be responsible for
complying with the notice requirements of any Environmental Laws regarding the
sale or transfer of the Operating Sites. 
Such notice requirements shall be satisfied, to the extent possible,
prior to the Closing Date.

 

SECTION 5.14.  Historical
Off-Site Environmental Liabilities Limitations.  The Purchaser agrees that, with regard to
Historical Off-Site Environmental Liabilities, neither the Purchaser nor any of
its Affiliates shall undertake any non-subsurface sampling or analysis,
subsurface investigation, or any communication with any Governmental Authority
by or on behalf of the Purchaser or its Affiliates after the Closing Date
unless such sampling, analysis, investigation, or communication is (1) required
by any Environmental Law; (2) in response to a request of a Governmental
Authority; or (3) during the normal course of business arising out of repairs,
modifications, maintenance, or construction activities that are conducted
consistent with normal industrial practices (provided, however,
any such sampling or analysis, subsurface investigation, or communication with
a Governmental Authority shall not be considered “required by Environmental Law”
if such sampling, analysis, investigation or communication occurs as a result
of:  (a) a Change at an Operating Site;
or (b) due diligence conducted by a future purchaser or financing source).  Subject to the limitations set forth in
Section 8.07, the Seller shall have the right to recover for Losses from the
Purchaser for a breach of this provision, notwithstanding the

 

52

 

status of
Historical Off-Site Environmental Liabilities as Excluded Liabilities, if and
solely to the extent that the action taken constituting the breach of this
provision was taken by an employee of the Purchaser who, at the time of such
action, was (i) a managerial employee, (ii) a person whose principal
responsibility is environmental compliance, (iii) an officer of the Purchaser,
or (iv) any Person acting at the request, or with the authorization, of any of
the foregoing.  In the event of a sale of
the Business or change in control involving the Business, the foregoing
limitation shall apply to a comparable employee or agent of any successor
entity or its Affiliates.  For the
avoidance of doubt, the Seller’s right to pursue a contractual claim to recover
any Losses from the Purchaser caused by a breach of this provision by the
Purchaser shall in no way affect Parent’s, the Seller’s and the Purchaser’s
rights or obligations under Article VIII with respect to Historical Off-Site
Environmental Liabilities, and any amount paid by the Purchaser as damages
resulting from such a breach shall not be considered a Loss that is subject to
indemnification by Parent or the Seller under Section 8.02.

 

SECTION 5.15.  Environmental
Reports.  The Seller agrees to
transfer with the Business copies of all material environmental reports,
studies, investigations and correspondence regarding Environmental Liabilities
of the Business in the possession of Parent, any Affiliate of Parent, including
the Seller, or any of their counsel or environmental consultants on the Closing
Date or, on request, within a reasonable period thereafter.

 

SECTION 5.16.  Provision
of Business Records to the Purchaser. 
Notwithstanding the provisions of Section 2.01(a)(vii), the Seller shall
provide to the Purchaser on the Closing Date copies of all of the material
Business Records and copies of all other material business records (including
customer lists) to the extent related to the Business.  Thereafter, at any reasonable time upon
reasonable prior notice and from time to time, the Seller shall provide to the
Purchaser such access to and copies of such materials as the Purchaser may from
time to time reasonably request.

 

SECTION 5.17.  Use
of Intellectual Property.  (a)  Except as expressly set forth in this
Agreement or the Ancillary Agreements, no interest in or right to use the name “NewPage”,
“Sterling Ultra” or any logo (with or without the word “NewPage”), trademark or
trade name or any derivation thereof of “NewPage” or any of the Seller’s Affiliates
with respect to, or associated with, the foregoing (collectively, the “Retained
Names and Marks”) is being transferred to the Purchaser pursuant to the
transactions contemplated hereby.  Except
as set forth herein or expressly provided in the temporary trademark license
agreement to be executed pursuant to this Section 5.17(a), the use of any
Retained Names and Marks in connection with the Business by the Purchaser shall
cease as of the Closing Date.  At the Closing,
Parent shall grant to the Purchaser a temporary trademark license to use the
Retained Names and Marks for a period of twelve months from the Closing Date
solely in connection with (i) the Carbonless Paper Business and (ii) the
Non-Carbonless Paper Business, but only in connection with finished and
packaged coated paper in Inventory as of the Closing Date, in each case,
pursuant to a license agreement (the “Temporary Trademark License Agreement”),
substantially in the form attached hereto as Exhibit 5.17(a).  Except as expressly authorized in the
Temporary Trademark License Agreement or otherwise provided in this Section
5.17(a), the Purchaser, promptly following the Closing Date and, in any event,
within twelve months thereafter, will remove or obliterate all the Retained
Names and Marks from its signs, purchase orders, invoices, sales orders,
labels, letterheads, and shipping documents, and not put into use after the
Closing Date any such items and materials not in existence on the Closing Date
that bear any Retained Name or Mark or any name, mark or logo

 

53

 

confusingly
similar thereto; provided that, after such twelve month period, the
Purchaser may continue to sell goods that have been packaged prior to such time
using materials bearing any of the Retained Names and Marks.  Except as expressly provided herein or in any
other Ancillary Agreement, the Purchaser agrees that none of Parent or any of
its Affiliates shall have any responsibility for claims by third parties
arising out of, or relating to, the use after the Closing Date by the Purchaser
or any Affiliate thereof of any Retained Name or Mark.  Notwithstanding anything to the contrary in
this Agreement, the Purchaser shall have the right to:  (i) keep records and other historical or
archived documents containing or referencing the Retained Names and Marks and
(ii) refer to the historical fact that the Business was previously conducted
under the Retained Names and Marks; provided that with respect to any
such reference, the Purchaser shall not use the Retained Names or Marks to
promote any of the products of the Business and the Purchaser shall make
explicit that the Business is no longer affiliated with the Seller, Parent or
MeadWestvaco.

 

(b)           Except as expressly provided
in the Technology License Agreement, substantially in the form attached hereto
as Exhibit 5.17(b) (the “Technology License Agreement”), pursuant to
which, at the Closing, Parent, the Seller and Parent’s other Affiliates shall
grant to the Purchaser a world wide, non-exclusive, perpetual, fully paid
royalty-free license to use all Owned Business Intellectual Property, no
ownership interest in, or right to use, any Owned Business Intellectual
Property is being transferred to the Purchaser pursuant to the transactions contemplated
hereby.  Except as expressly provided in
the Technology License Agreement, neither the Purchaser nor any of its
Affiliates shall use any of the Owned Business Intellectual Property.

 

(c)           At the Closing, Parent and
the Purchaser shall enter into a Technology License-Back Agreement in the form
attached as Exhibit 5.17(c) hereto (the “Technology  License-Back
Agreement”), pursuant to which the Purchaser shall grant to Parent and its
Affiliates a worldwide, non-exclusive, perpetual, fully paid royalty-free
license to use the Licensed-Back Intellectual Property.

 

(d)           No ownership interest in or
right to use the Licensed Business Intellectual Property is being transferred
to the Purchaser pursuant to the transactions contemplated hereby, except as
provided in the Technology Sub-License Agreement, substantially in the form
attached hereto as Exhibit 5.17(d) (the “Technology Sub-License Agreement”),
whereby, at the Closing, the Seller and/or Parent shall grant to the Purchaser
a perpetual, royalty-free, fully-paid, non-exclusive sublicense to use,
practice, lease, license, reproduce, modify and make derivative works of, and
to make, sell and distribute goods and services utilizing or incorporating, the
Licensed Business Intellectual Property (excluding Computer Software), in
accordance with and subject to, to the extent applicable, the rights and
obligations of Parent and its Affiliates pursuant to the NewPage License
Agreement.  Except as expressly provided
in the Technology Sub-License Agreement, none of the Purchaser or any of its
Affiliates shall use any of the Licensed Business Intellectual Property
(excluding Computer Software).

 

(e)           The Seller agrees to transfer
all of its rights and obligations under the MeadWestvaco Trademark License
Agreement to the Purchaser and promptly following the date hereof, and in any
event prior to the Closing, to provide MeadWestvaco with prior written notice

 

54

 

of
such transfer in accordance with the terms and conditions of the MeadWestvaco
Trademark License Agreement.

 

(f)            Prior
to the Closing, Parent will take all actions necessary pursuant to Section 12.3
of the “SAP America, Inc. R/3 Software End-User Value License Agreement”
between SAP America, Inc. and Parent, dated as of May 12, 2005, including
execution of any necessary agreements, to effectuate the transfer of 550 user
licenses to the Purchaser, all at the Purchaser’s sole cost and expense.

 

SECTION 5.18.  Intracompany
Arrangements.  Notwithstanding any
other provision of this Agreement to the contrary (other than pursuant to any
Ancillary Agreement or Shared Contract), as of the Closing, all services,
commitments, agreements or other arrangements that existed prior to the Closing
between the Seller and Parent or any other Affiliate of Parent with respect to
the Business shall cease or be terminated. 
Any such cessation or termination shall be without penalty to, and shall
not require any action by, the Purchaser or any of its Affiliates.

 

SECTION 5.19.  Preparation
of Stand-Alone Financial Statements. 
(a)  On or before seven calendar
days prior to the Closing Date, the Seller shall deliver to the Purchaser
audited stand-alone financial statements of the Business (reflecting only the
Purchased Assets and the Assumed Liabilities) including the balance sheet,
statement of income, statement of cash flows and associated notes to the
foregoing financial statements required under GAAP and Rule 3-05 of Regulation
S-X, as of, or for the twelve-month period ended, December 31, 2005, prepared
by the Seller and with the opinion of the Seller’s Accountants attached (the “Stand-Alone
Financial Statements”).

 

(b)           Between the date hereof and
Closing, and thereafter in accordance with Section 2.07, the Seller and Parent
shall, and shall cause their respective employees and advisors, including the
Seller’s Accountants, to afford the Purchaser and its employees and advisors,
including the Purchaser’s Accountants, access upon reasonable notice and during
normal business hours to the Seller’s and Parent’s respective employees and
advisors and to the books, papers, records and other documents, including work
papers of the Seller’s Accountants (even though such work papers may be “in
process” and not final and to the extent the Seller’s Accountants agree to
provide such work papers), relating to the preparation of the Stand-Alone
Financial Statements.

 

SECTION 5.20.  Title
Insurance; Objections.  (a)  The Purchaser acknowledges that the Seller
has provided to the Purchaser copies of the Seller’s title policies relating to
the Owned Real Property listed in Section 3.14(a) of the Disclosure Schedule (“Seller’s
Title Policies”), together with copies of all Encumbrances and exceptions
described therein, prior to the date hereof, and that the Seller, upon the
execution of this Agreement, shall, on behalf of the Purchaser, order from
First American Title Insurance Company (attention: Phillip Salomon) and
Fidelity National Title Insurance Company of New York (attention: Neil Clark)
(collectively the “Title Companies”) updated title commitments for title
insurance policies to be issued at the Closing insuring the Purchaser’s title
to the Owned Real Property (“Purchaser’s Title Policies”).  The Purchaser hereby acknowledges and agrees
that it has no objection to any exceptions listed in the Seller’s Title
Policies previously delivered to the Purchaser (except for mortgages,
assignments of leases and rents, UCC filings and other exceptions or matters
relating to existing

 

55

 

financing
(inclusive of Voluntary Seller Encumbrances) and excluded from the definition
of Permitted Exception pursuant to Section 5.20(b)(ix)), and that all such
exceptions set forth therein shall be deemed “Permitted Exceptions” as
described below.  The Purchaser agrees to purchase
Purchaser’s Title Policies from the Title Companies at the Closing, in an
aggregate amount equal to the Purchase Price, on a 50-50 co-insurance
basis.  Subject to the Permitted
Exceptions and subject to the following provisions of this Section 5.20,
Purchaser’s Title Policies shall be in substantially the same form as Seller’s
Title Policies and shall include all affirmative coverages and endorsements
contained in Seller’s Title Policies (collectively, the “Title Endorsements”)
except for the so-called “subsequent purchase endorsement”, together with such
additional endorsements and/or affirmative coverages as the Purchaser may
reasonably request from the Title Companies.

 

(b)           The Purchaser shall not
object to and shall accept the following matters, which shall be deemed to be
Permitted Exceptions, as to each parcel of Owned Real Property:

 

(i)            liens
for taxes or assessments, general or special, or other governmental charges
which are not yet due and payable as of the Closing;

 

(ii)           all land use, building and
zoning laws, regulations, codes and ordinances affecting such parcel and other
laws, ordinances, regulations, rules, orders, licenses or determinations of any
Governmental Authority heretofore, now or hereafter enacted, made or issued by
any such authority which do not materially adversely affect the current use and
operation of the Owned Real Property;

 

(iii)          any rights of the United
States of America, the State in which such parcel is located or others in the use
and continuous flow of any brooks, streams or other natural water courses or
water bodies within, crossing or abutting such parcel, or title to the
submerged lands including, riparian rights and navigational servitudes;

 

(iv)          title to that portion of such
parcel, if any, lying below the mean high water mark of abutting tidal waters;

 

(v)           all existing public and
private roads and streets and all railroad and utility lines, pipelines,
service lines and facilities which would be disclosed by an accurate survey of
such parcel which do not materially adversely affect the current use and
operation of the Owned Real Property;

 

(vi)          all encroachments, overlaps,
boundary line disputes, shortages in area, persons in possession, cemeteries
and burial grounds and other matters not of record which would be disclosed by
an accurate survey of such parcel which do not materially adversely affect the
current use and operation of the Owned Real Property;

 

(vii)         any loss or claim due to lack
of access to any portion of such parcel, which portion is not the subject of
affirmative insurance regarding access contained in Seller’s Title Policies; provided
that such lack of access does not materially adversely affect the current use
and operation of the Owned Real Property; provided, however, that
receipt of an access endorsement in the form contained in Seller’s Title
Policies shall constitute the cure of any such lack of access;

 

56

 

(viii)        the matters set forth in
Section 5.20(b)(viii) of the Disclosure Schedule; and

 

(ix)           all title exceptions and
other matters, except for any mortgages, assignments of leases and rents, UCC
filings or any other exceptions or matters relating to any existing financing,
described in Seller’s Title Policies previously delivered to the Purchaser
(together with the items listed above, the “Permitted Exceptions”).

 

(c)           For purposes of this
Agreement, a “Continuation Report” shall mean a so-called “continuation
search” report identifying with specificity (and providing copies of) any
exceptions appearing of record as of the effective date of such Continuation
Report which are not set forth in, and which first arose of record after the
date of, Seller’s Title Policies and, which the Title Companies propose to
include in Purchaser’s Title Policies at the Closing.  In the event that any of such additional
exceptions are not Permitted Exceptions, then the provisions of Section 5.20(d)
shall control and be governing in respect thereof.

 

(d)           With regard to any matter
contained in any Purchaser’s Title Policy or Continuation Report or in any new
or additional title matter hereafter raised by the Title Companies not less
than ten days prior to the Closing which is not a Permitted Exception and to
which the Purchaser objects in writing within ten days of the Purchaser’s
receipt thereof (a “Title Defect”), the Seller may, but shall have no
obligation to, attempt to cure and remove such Title Defects; provided, however,
that Seller shall be required to remove (or cause to be removed), by payment,
bonding or otherwise the following (“Voluntary Seller Encumbrances”):
(i) title exceptions corresponding to documents securing (x) that certain
$575,000,000 loan made by Bank of New York to NewPage Corporation, NewPage
Holding Corporation and certain subsidiaries of NewPage Corporation, on May 2,
2005, as collateral trustee for the parity lien claimholders, and (y) that
certain $750,000,000 loan made by Bank of New York to NewPage Corporation,
NewPage Holding Corporation and certain subsidiaries of NewPage Corporation, on
May 2, 2005, as collateral trustee for the lenders, and (ii) Title Defects
securing the payment of Indebtedness that have been voluntarily recorded or
otherwise authorized by Seller (or Parent) to be recorded against any of the
Owned Real Property on or following the date hereof..  The Seller shall be deemed to have cured a
Title Defect if (i) the Title Companies are willing to insure over such Title
Defect (without additional cost to the Purchaser or if the Seller elects to pay
for any such additional cost on the Purchaser’s behalf); (ii) the Title
Companies are willing to provide affirmative insurance against such Title
Defect whether through the Title Endorsements or otherwise (without additional
cost to the Purchaser or if the Seller elects to pay for any such additional
cost on the Purchaser’s behalf); (iii) such Title Defect will be extinguished
or removed upon the transfer of the property to the Purchaser at Closing; or
(iv) the Seller extinguishes or removes such Title Defect of record.  If the Seller is unwilling to or fails to
cure or remove any Title Defects, then within five Business Days of the Seller
notifying the Purchaser in writing that it will not cure such Title Defect, the
Purchaser may (i) by written notice to the Seller waive its objection and
proceed with Closing and receive no credit against, or reduction of, the
Purchase Price on account of the Title Defects or (ii) notify the Seller in
writing that Purchaser is unwilling to close the transactions contemplated by
this Agreement pursuant to Section 7.02(g) unless the Title Defect is
cured.  If the Purchaser fails to timely
object in writing to any Title Defect as described in the first sentence of
this subsection (d), such Title Defect shall be deemed a Permitted Exception; provided,
however, that Purchaser’s failure to timely object in writing to any
Voluntary Seller Encumbrance shall not result in any such Voluntary Seller
Encumbrance being deemed to be a Permitted Exception and Seller shall be

 

57

 

required
to remove any such Voluntary Seller Encumbrance notwithstanding any such
failure of Purchaser to timely object thereto.

 

SECTION 5.21.  Coated
Converting Agreement.  Between the
date hereof and prior to the Closing, the Seller, Parent and the Purchaser
shall negotiate in good faith to execute the Coated Converting Agreement
(having substantially the terms set forth in the term sheet attached hereto as
Exhibit 5.21, the “Coated Converting Agreement”), which shall be
effective as of the Closing Date, substantially in accordance with the terms
set forth in the term sheet attached hereto.

 

SECTION 5.22.  Letter of Credit.  (a)  On
or prior to the Closing Date, to secure the indemnification obligations of
Parent and the Seller pursuant to Article VIII, Parent shall obtain one or more
letters of credit in an aggregate amount of $10 million (the “Letter of
Credit”) from JP Morgan Chase Bank, N.A., or another financial institution
reasonably acceptable to the Purchaser, which Letter of Credit shall be
substantially in the form of Exhibit 5.22 hereto.  During the five-year period following the
Closing Date (the “Initial Term”), Parent shall maintain, or caused to
be maintained, for the benefit of the Purchaser, the Letters of Credit in an
aggregate amount of $10,000,000, and for the two-year period following the
Initial Term (the “Final Term”), Parent shall maintain, or caused to be
maintained, for the benefit of the Purchaser, the Letters of Credit in an aggregate
amount of at least $5,000,000.

 

(b)           The Purchaser shall have the
right to draw upon the Letter of Credit at any time during the Initial Term or
the Final Term, for an amount determined as specified below, if each of the
following conditions have been satisfied:

 

(i)            the
Purchaser has given the Parent or the Seller notice in accordance with Section
8.05 of a matter that could give rise to indemnification by Parent or Seller
pursuant to Section 8.02;

 

(ii)           Parent shall not have
objected to the amount claimed for indemnification with respect to such
indemnifiable Loss in accordance with the procedures set forth in Article VIII,
or Parent shall have delivered notice of its disagreement as to the amount of
the indemnification requested and either (A) Parent and the Purchaser shall
have, subsequent to the giving of such notice, mutually agreed that Parent or
the Seller is obligated for the indemnification for a specified amount or (B) a
final nonappealable judgment shall have been rendered by the court having
jurisdiction over the matters relating to such claim that provides for an award
against Parent or Seller of an amount in respect of such claim;

 

(iii)          in the case of a Third-Party
Claim, the liability for such Third-Party Claim shall have been finally determined
in accordance with Article VIII or clause (ii) of this Section 5.22(b); and

 

(iv)          Parent or the Seller shall
have failed to pay the amount so determined to be due within five days of the
due date of such amount, or if the amount so determined to be due does not have
a due date, within five days of written demand by the Purchaser to Parent
therefor.

 

58

 

(c)           If at any time during the
Initial Term or the Final Term, either the Purchaser reasonably ascertains, or
the issuer notifies the Purchaser, that a Letter of Credit will not be renewed
or will otherwise expire by its terms, and Parent does not cause to be issued
for the Purchaser’s benefit at least 30 days prior to the expiration of such
Letter of Credit, a replacement Letter of Credit substantially in the form of
Exhibit 5.22 and issued by a financial institution reasonably acceptable to the
Purchaser, then the Purchaser may draw the full available amount under the
Letter of Credit that is about to expire. 
The Purchaser shall hold the proceeds thereof as cash collateral for the
indemnification obligations of Parent and the Seller under Article VIII until
the end of the Final Term or until a replacement Letter of Credit satisfying
the requirements of this Section 5.22 is issued to the Purchaser; provided
that, at any time during the Initial Term or the Final Term, the Purchaser
shall have the right to withdraw from such cash collateral the amount
determined in accordance with Section 5.22(b) to be payable to the
Purchaser.  If such a draw upon an
expiring Letter of Credit is made during the Initial Term in an amount in
excess of $5,000,000, then at the expiration of the Initial Term, the Purchaser
shall return to Parent any amount in excess of $5,000,000 that the Purchaser
continues to hold as cash collateral at such time.

 

(d)           The Purchaser may assign its
rights in respect of the Letter of Credit to one or more of its Affiliates and
may pledge its rights in respect of the Letter of Credit to one or more financial
institutions to secure the obligations of the Purchaser or any of its
Affiliates in respect of a secured loan or other financing.

 

ARTICLE VI

 

EMPLOYEE MATTERS

 

SECTION 6.01.  Offer
of Employment.  As of the Closing,
the Purchaser shall offer employment to each of the then-current employees of
the Sellers and Parent listed on Exhibit 6.01 (including those employees on
such Exhibit that are on vacation, short-term disability, vacation or leave of
absence with a definite return date).  As
used herein, “Transferred Employee” shall mean each employee who accepts
such offer.

 

SECTION 6.02.  Post Closing Benefits.  The Purchaser shall, for the period
immediately following the Closing through and including December 31, 2006,
provide Transferred Employees who are not members of a collective bargaining
unit with salaries, wages and employee benefits that are in the aggregate
comparable to the current salaries, wages and employee benefits provided to
such Transferred Employees by the Seller immediately prior to the Closing.  Nothing herein shall be deemed to be a
guarantee of employment for any Transferred Employee.  The Purchaser shall, for the period
immediately following the Closing through and including the first anniversary
of the Closing, provide each Transferred Employee who is not a member of a
collectively bargained unit with participation in a severance plan or
arrangement that provides for a severance benefit upon a qualifying termination
of employment that is no less favorable than the severance benefit that would
be payable to similarly situated employees of the Purchaser.

 

SECTION 6.03.  Transition
to New Health Plans; Past Service Credit. 
To the extent that, after the Closing, the Transferred Employees
participate in welfare benefit plans of the Purchaser, the Purchaser shall (a)
waive all limitations as to preexisting and at-work conditions, if

 

59

 

any, with respect to participation and coverage requirements
applicable to each Transferred Employee to the same extent such limitations had
been waived under the corresponding plans of the Seller and (b) with respect to
the plan year in which the change was made, provide a credit to each
Transferred Employee for any co-payments, deductibles and out-of-pocket
expenses paid by such Transferred Employee under the corresponding plans of the
Seller during the relevant plan year, up to and including the Closing.  The Purchaser shall give Transferred
Employees full credit for purposes of eligibility and vesting and benefit
accrual (including service for benefit accruals and eligibility for forms of
benefits or subsidies under the Purchaser’s Hourly Pension Plan pursuant to
Section 6.04 below but excluding benefit accrual under any other defined
benefit pension plan or otherwise where duplication of benefits would occur)
under the employee benefit plans or arrangements maintained by the Purchaser or
its Affiliates in which such Transferred Employees participate for such
Transferred Employees’ service with the Seller or its affiliates or
predecessors to the same extent recognized by the Seller immediately prior to
the Closing Date.

 

SECTION 6.04.  Hourly
Pension Plan.  (a)  Effective as of the Closing Date, the
Transferred Employees shall no longer be eligible to participate in the
Retirement Plan for Chillicothe Bargained Hourly Employees of Pace 731 and 988
of OPEIU 422 (the “Seller’s Hourly Pension Plan”), and the Seller shall
take all action prior to the Closing Date as may be required to achieve this
result.  The Purchaser agrees to
establish or maintain a defined benefit plan (the “Purchaser’s Hourly
Pension Plan”) which is intended to be qualified under Section 401(a) of
the Code and a related trust that is intended to be exempt from taxation under
Section 501(a) of the Code for the benefit of the Transferred Employees who
participated in the Seller’s Hourly Pension Plan and which shall credit such
Transferred Employees for their service with the Seller prior to the Closing
Date for all purposes, but solely to the extent such service was recognized
under the Seller’s Hourly Pension Plan. 
The Purchaser agrees that the Purchaser’s Hourly Pension Plan and its
related trust shall be operative in all respects effective as of the Closing
Date, and the Purchaser shall deliver to the Seller an officer’s certificate, a
favorable determination letter or an opinion of counsel reasonably satisfactory
to the Seller (a “Qualification Document”) to the effect that the
Purchaser’s Hourly Pension Plan substantially complies by its terms with the
requirements for qualification under Section 401(a) of the Code.

 

(b)           As soon as practicable after
the Closing Date, the Seller shall cause to be transferred from the Seller’s
Hourly Pension Plan to the Purchaser’s Hourly Pension Plan (i) liability for
all benefits accrued by the Transferred Employees under the Seller’s Hourly
Pension Plan as of the Closing Date and other liabilities of the Seller’s
Hourly Pension Plan relating to the Transferred Employees (the “Transferred
Benefit Liabilities”), and (ii) an asset amount equal to the Transfer
Amount (as defined in Section 6.04(d)). 
Following completion of the transfer of assets and liabilities from the
Seller’s Hourly Pension Plan, the Seller shall have no further liability
whatsoever with respect to the Transferred Employees for benefits under the
Seller’s Hourly Pension Plan.

 

(c)           As a condition of making the
transfer of assets and liabilities described below in this section, the
Purchaser shall be entitled to receive the following:  a copy of the most recent favorable
determination from the Internal Revenue Service to the effect that the Seller’s
Hourly Pension Plan meet the requirements for qualification under Section
401(a) of the Code and an officer’s certificate or an opinion of counsel that
nothing has occurred since the date of such letter which would cause the loss
of such qualification.

 

60

 

(d)           The Seller shall cause an
actuarial firm designated by the Seller (the “Seller’s Actuary”) to
determine the amount of assets required by Section 414(l) of the Code for the
Transferred Benefit Liabilities based on allocating assets by priority
categories described in Section 4044(a) of ERISA (the “Section 414(l) Amount”).  Subject to compliance with Section 414(l) of
ERISA and Section 4044 of ERISA, the Seller’s Hourly Pension Plan shall
transfer to the Purchaser’s Hourly Pension Plan an amount equal to the greater
of $80.4 million and the Section 414(l) Amount (the “Transfer Amount”).  The actuarial calculations of the Section 414
Amount and other calculations by Seller’s Actuary shall be reviewed, verified
and agreed by an actuarial firm designated by the Purchaser (the “Purchaser’s
Actuary”).  The Section 414(l) Amount
shall be determined as of the Closing Date on the basis of the assumptions and
methodologies set forth in Section 6.04(d) of the Disclosure Schedule.  The Seller hereby represents that, to the
extent that a transfer of assets and liabilities of the accrued benefits of the
Transferred Employees under the Seller’s Hourly Pension Plan occurred as of
January 1, 2006, the Seller’s Hourly Pension Plan would be permitted, pursuant
to Section 414(l) of ERISA, to transfer assets at least equal to $80.4 million,
based on (x) allocating assets by priority categories described in Section 4044
of ERISA and (y) the assumptions and the methodologies set forth on Section
6.04(d) of the Disclosure Schedule.  The
foregoing representation shall not be subject to the limits on indemnification
contained in Section 8.04.

 

(e)           As soon as practicable after
the Closing Date, but in no event later than 30 days from the Closing Date, the
Seller shall prepare and file Form 5310A with respect to the transfer required
by this section, and 30 days following the filing of the Form 5310A (the “Initial
Transfer Date”), the Seller shall subject to receipt of a Qualification
Document, cause to be transferred from the trust for the Seller’s Hourly
Pension Plan to the trust established or maintained with respect to the Purchaser’s
Hourly Pension Plan an amount, in cash and marketable securities determined by
the trustee of the Seller’s Hourly Pension Plan and reasonably acceptable to
the Purchaser, equal to 85% of the estimated Transfer Amount (the “Initial
Transfer Amount”).  As soon as
practicable after the final determination of the Transfer Amount, calculated as
of the Closing, but in no event later than 60 days from the Initial Transfer
Date (the “True-Up Date”), the Seller shall cause a second transfer to
be made to the Purchaser’s Hourly Pension Plan (or the Purchaser shall cause a
transfer to be made to the Seller’s Hourly Pension Plan, as applicable), in
cash and marketable securities determined by the trustee of the Seller’s Hourly
Pension Plan and reasonably acceptable to the Purchaser, of the True-Up
Amount.  The “True-Up Amount”
means an amount equal to the Transfer Amount (i) minus the sum of (A) the
Initial Transfer Amount and (B) distributions, if any, made directly from
Seller’s Hourly Pension Plan with respect to Transferred Employees from the
Closing Date through the True-Up Date, and (ii) plus earnings in the Money
Market Vehicle (as defined in Section 6.04(g)). 
Such True-Up Amount shall be determined by the Seller’s Actuary, after
verification and approval by the Purchaser’s Actuary.  Once the Seller’s Actuary and the Purchaser’s
Actuary shall reach agreement, the Seller’s Actuary shall verify that the
completed transfers comply with the requirements of Section 414(l) of the
Code.  Nothing in this Section 6.04 shall
prevent the Seller from filing the Form 5310A in its discretion prior to the
Closing Date.

 

(f)            The
Seller’s Actuary shall provide the Purchaser’s Actuary with the results of the
calculations made under the foregoing paragraphs and with records and other
information in support of such calculations as required by the Purchaser’s
Actuary to verify and approve such calculations.  The Seller and the Purchaser will cause their
respective actuaries to work together in

 

61

 

good
faith to promptly resolve any differences between them with respect to such
calculations.  The expenses of the Seller’s
Actuary shall be borne by the Seller, and the expenses of the Purchaser’s
Actuary shall be borne by the Purchaser. 
In the event such differences cannot be resolved, the two actuaries
shall appoint a third actuary to resolve such differences, and the cost of such
third actuary shall be borne equally by the Seller and the Purchaser.  The decision of such third actuary shall be
final and binding on the Seller and the Purchaser.

 

(g)           Notwithstanding any
provisions to the contrary in this Section 6.04, it is the intention of the
parties that the Seller shall attempt to minimize the market risk from the
Closing Date to the True-Up Date (the “Market Risk Period”) by placing
125% of the Initial Transfer Amount into a money market account or other fixed
income investment vehicle offered by the trustee of the Seller’s Hourly Pension
Plan on the Closing Date (the “Money Market Vehicle”), and it is agreed
that the return on such Transfer Amount during the Market Risk Period shall be
paid to the Purchaser’s Hourly Pension Plan on the True-Up Date.  The Initial Transfer Amount shall be paid
from the Money Market Vehicle.

 

SECTION 6.05.  Certain
Other Employee-Related Costs.  Five
Business Days prior to the Closing, the Seller shall provide the Purchaser with
a complete and accurate statement of any amounts expected to be payable by the
Purchaser following the Closing that relate to any service by any Transferred
Employee with the Seller through the Closing, including any salary or wages,
any accrued vacation, sick or personal days or any bonuses, except to the
extent that such amounts will be reflected as Liabilities on the Estimated Date
Working Capital Statement (the “Employee Amounts”).  In the event that the amounts payable by the
Purchaser following the Closing that relate to service by any Transferred
Employee with the Seller through the Closing exceed the Employee Amounts, the
Seller shall indemnify the Purchaser for such excess pursuant to Section 8.02.

 

SECTION 6.06.  Existing
Welfare Benefit Plans; Retiree Medical Benefits.  The Seller shall retain responsibility for
and continue to pay all medical, life insurance, disability and other welfare
plan expenses and benefits for each Transferred Employee with respect to claims
incurred by such Transferred Employees or their covered dependents prior to the
Closing Date.  Expenses and benefits with
respect to claims incurred by Transferred Employees or their covered dependents
on or after the Closing Date shall be the responsibility of the Purchaser.  For purposes of this paragraph, a claim is
deemed incurred when the services that are the subject of the claim are
performed; in the case of life insurance, when the death occurs; in the case of
long-term disability benefits, when the disability occurs; and, in the case of
a hospital stay, when the employee first enters the hospital.  Following the Closing Date, the Purchaser
shall (x) assume all liabilities, obligations and responsibilities of the
Seller to provide post-retirement medical, health and life insurance benefits
for union Transferred Employees and former union employees of the Business who
separated from service after May 2, 2005, pursuant to the terms of any Plan
that provides such benefits and (y) hold harmless the Seller from any claim for
such benefits.

 

SECTION 6.07.  Collective
Bargaining Agreements.  The Purchaser
agrees to recognize the unions representing the employees of the Business and
shall assume all obligations and liabilities under each collective bargaining
agreement set forth on Section 2.01(a)(xv) of the Disclosure Schedule.

 

62

 

SECTION 6.08.  Cooperation
With Respect to Certain Pre-Closing Retained Liabilities. 
Without affecting the status of such grievances or claims as Excluded
Liabilities under Section 2.02(b), the Purchaser shall cooperate with, and
provide all reasonable assistance to, the Seller in connection with the
response by the Seller to or the resolution of (a) any grievances under the
collective bargaining agreements assumed by the Purchaser pursuant to Section
6.07 or (b) any equal employment opportunity or other discrimination or
employment law claims relating to persons currently or formerly employed in the
Business, in each case arising prior to the Closing.  With respect to Transferred Employees such
reasonable assistance may include the Purchaser providing for reasonable
nonmonetary remedies.

 

ARTICLE VII

 

CONDITIONS TO CLOSING

 

SECTION 7.01.  Conditions to Obligations of the Seller
and Parent.  The obligations of the
Seller and Parent to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment or written waiver, at or prior to the
Closing, of each of the following conditions:

 

(a)           Representations, Warranties and Covenants.  (i)
The representations and warranties of the Purchaser contained in this Agreement
(x) that are not qualified by “materiality” (including the word “material”)
shall have been true and correct in all material respects when made and shall
be true and correct in all material respects as of the Closing, except to the
extent such representations and warranties are as of another date, in which case,
such representations and warranties shall be so true and correct as of that
date, and (y) that are qualified by “materiality” (including the word “material”)
shall have been true and correct when made and shall be true and correct as of
the Closing, except to the extent such representations and warranties are as of
another date, in which case, such representations and warranties shall be so
true and correct as of that date, (ii) the covenants and agreements contained
in this Agreement to be complied with by the Purchaser on or before the Closing
shall have been complied with in all material respects and (iii) the Seller and
Parent shall have received a certificate from the Purchaser certifying as to
clauses (i) and (ii) above signed by a duly authorized officer thereof;

 

(b)           HSR Act.  Any waiting period (and any
extension thereof) under the HSR Act applicable to the purchase of the
Purchased Assets contemplated by this Agreement shall have expired or shall
have been terminated;

 

(c)           No Governmental Order.  No
Governmental Order restraining, enjoining or prohibiting the consummation of
the transactions contemplated by this Agreement shall be in effect; and

 

(d)           Ancillary Agreements.  The
Purchaser shall have delivered to Parent counterparts of each of the Technology
License-Back Agreement, the Converting Services Agreement and the Transition
Services Agreement duly executed by the Purchaser.

 

63

 

SECTION 7.02.  Conditions to Obligations of the Purchaser.  The obligations of the Purchaser to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment or written waiver, at or prior to the Closing, of each of the
following conditions:

 

(a)           Representations, Warranties and Covenants. 
(i)  The representations and
warranties of the Seller and Parent contained in this Agreement shall have been
true and correct (in each case, disregarding materiality qualifications
contained therein, including “Material Adverse Effect”) when made and shall be
true and correct as of the Closing, except to the extent such representations
and warranties are as of another date, in which case, such representations and
warranties shall be so true and correct as of that date, except for any such
failure to have been true or correct that would not have a Material Adverse
Effect, (ii) the covenants and agreements contained in this Agreement to be
complied with by the Seller and/or Parent on or before the Closing shall have
been complied with in all material respects, and (iii) the Purchaser shall have
received a certificate from each of the Seller and Parent certifying as to
clauses (i) and (ii) above signed by a duly authorized officer thereof;

 

(b)           HSR Act; German Act Against Restraints on
Competition.  Any waiting period (and any extension
thereof) under the HSR Act applicable to the purchase of the Purchased Assets
contemplated by this Agreement shall have expired or shall have been
terminated, and all applicable approvals and waiting periods pursuant to the applicable
rules of the German Act against Restraints of Competition shall have been
obtained or expired;

 

(c)           No Proceeding or Litigation.  No
Action shall have been commenced or threatened by or before any Governmental
Authority against any of Parent, the Seller or the Purchaser, seeking to
restrain or materially and adversely alter the transactions contemplated by
this Agreement;

 

(d)           No Governmental Order.  No
Governmental Order restraining, enjoining or prohibiting the consummation of
the transactions contemplated by this Agreement shall be in effect;

 

(e)           Consents and Approvals. 
Parent and its Affiliates shall have obtained, each in form and
substance reasonably satisfactory to the Purchaser, (i) the third party written
consents required under the agreements set forth on Exhibit 7.02(e), and (ii)
such other written consents, the failure of which to obtain would have Material
Adverse Effect;

 

(f)            No Material Adverse Effect.  No
event or events shall have occurred which, have, or would reasonably be expected
to have, a Material Adverse Effect;

 

(g)           Title Insurance for Owned Real Property.  The
Purchaser shall receive from the Title Companies an owner’s
policy of title insurance, or irrevocable and unconditional binder to issue the
same, dated, or updated to, the Closing Date, insuring, or committing to insure
the Purchaser’s title in fee simple to each parcel of Owned Real Property
listed in Section 3.14(a) of the Disclosure Schedule, subject only to the
Permitted Encumbrances.  Each of Parent
and the Purchaser shall pay one-half of the basic title insurance premiums

 

64

 

(i.e., premiums exclusive of the
cost for endorsements) charged by the Title Companies for such owner’s policy
of title insurance (or binder), up to an aggregate amount of $40,000, and the
Purchaser shall pay all title insurance premiums charged in excess of such
aggregate amount, as well as the costs for all endorsements and all other
charges which are payable to the Title Companies (including, without
limitation, all search and update fees) in respect of the title insurance
policies issued in connection with the transactions contemplated by this
Agreement;

 

(h)           Ancillary
Agreements.  Parent, the Seller
and each of Parent’s other Affiliates shall have delivered to the Purchaser
counterparts of each Ancillary Agreement duly executed by Parent, the Seller or
any of Parent’s other Affiliates, as applicable;

 

(i)            Stand-Alone
Financial Statements. 
The Purchaser shall have received from the Seller the Stand-Alone
Financial Statements, which shall be, in all material respects, consistent with
the Unaudited Financial Statements of the Business provided to the Purchaser by
the Seller prior to the date hereof;

 

(j)            NPDES
Permits.  The Purchaser shall
have received no written notification from the Ohio Environmental Protection
Agency (“OHEPA”) that OHEPA will not approve the transfer of any
National Pollutant Discharge Elimination System (“NPDES”) permit
(including the NPDES permits numbered 0IA0002*HD and OHR000003) from the Seller
to the Purchaser; and

 

(k)           Letters
of Credit.  The Purchaser shall
have received the Letters of Credit in an aggregate amount of $10 million.

 

ARTICLE VIII

 

INDEMNIFICATION

 

SECTION 8.01.  Survival
of Representations and Warranties.  (a)  The representations and warranties of the
Seller and Parent contained in this Agreement shall survive the Closing for a
period of eighteen months following the Closing Date; provided, however,
that (i) the representations and warranties made pursuant to Sections 3.01,
3.16 and 3.24 shall survive indefinitely, (ii) the representations and
warranties dealing with Tax matters shall survive until 60 days after the
expiration of the relevant statute of limitations for the Tax liabilities in
question, (iii) insofar as any claim is made by the Purchaser for the breach of
any representation or warranty of the Seller or Parent contained herein, which
claim arises out of allegations of personal injury or property damage suffered
by any third party on or prior to the Closing or attributable to products or
Inventory sold or shipped, or activities or omissions that occur, on or prior
to the Closing, such representations and warranties shall, for purposes of such
claim by the Purchaser, survive until thirty calendar days after the expiration
of the applicable statute of limitations governing such claims, (iv) the
representations and warranties made pursuant to Section 3.11 shall not survive
the Closing and (v) the representations and warranties made pursuant to Section
3.14 with respect to title to the Owned Real Property and Leased Real Property
shall terminate as of the Closing Date

 

65

 

with respect to such properties for which the Purchaser
obtained a Purchaser’s Title Policy pursuant to Section 5.20 hereof, and
neither the Seller nor Parent shall have any Liability whatsoever with respect
to such representations or warranties after each such date as applicable.  Neither the period of survival nor the
liability of the Seller or Parent with respect to the Seller’s or Parent’s
representations and warranties shall be reduced by any investigation made at
any time by or on behalf of the Purchaser. 
If written notice of a claim has been given prior to the expiration of
the applicable representations and warranties by the Purchaser to the Seller or
Parent, then the relevant representations and warranties shall survive as to
such claim, until such claim has been finally resolved.

 

(b)           The representations and
warranties of the Purchaser contained in this Agreement shall survive the
Closing for a period of eighteen months following the Closing Date, and the
Purchaser shall have no Liability whatsoever with respect to the Purchaser’s
representations and warranties after such date; provided, however,
that the representations and warranties made pursuant to Sections 4.01 and 4.06
shall survive indefinitely.  If written
notice of a claim has been given prior to the expiration of the applicable
representations and warranties by the Seller to the Purchaser, then the
relevant representations and warranties shall survive as to such claim, until
such claim has been finally resolved.

 

(c)           Notwithstanding anything
herein to the contrary, no party shall be liable to any Indemnified Party for special,
incidental or consequential damages that are not reasonably foreseeable by the
Indemnifying Party nor for any punitive or exemplary Losses.

 

(d)           The Purchaser, the Seller and
Parent acknowledge and agree that, in the absence of fraud or willful misconduct
on the part of any party hereto, following the Closing the indemnification
provisions of this Article VIII shall be the sole and exclusive remedies of any
Purchaser Indemnified Party or any Seller Indemnified Party for any matter that
is the subject of Section 8.02 or 8.03, as applicable.

 

(e)           In calculating any amount of
Losses recoverable pursuant to this Article VIII, the amount of such Losses
shall be reduced by (i) any insurance proceeds actually received from any
unaffiliated insurance carrier offsetting the amount of such Loss, net of any
expenses incurred by the Indemnified Party in obtaining such insurance proceeds
(provided that the
Indemnified Party shall be obligated to reasonably seek any such proceeds to
which it may be entitled) and (ii) any recoveries from third parties pursuant
to indemnification (or otherwise) with respect thereto, net of any expenses
incurred by the Indemnified Party in obtaining such third party payment.  If any Losses for which indemnification is
provided hereunder are subsequently reduced by any insurance payment or other
recovery from a third party, the Indemnified Party shall promptly remit the
amount of such reduction to the Indemnifying Party.

 

SECTION 8.02.  Indemnification
by the Seller and Parent.  From and
after the Closing, the Purchaser and its Affiliates, officers, directors,
employees, agents, successors and assigns (each, a “Purchaser Indemnified
Party”) shall be indemnified and held harmless by the Seller and Parent,
jointly and severally, for and against any and all Liabilities, losses,
damages, claims, costs and expenses, interest, awards, judgments and penalties
(including attorneys’ and consultants’ fees and expenses) actually suffered or
incurred by them (including any Action

 

66

 

brought or otherwise initiated by any of them) (hereinafter
a “Loss”), arising out of or resulting from:

 

(a)           the breach of any
representation or warranty made by the Seller or Parent in this Agreement (it
being understood that such representations and warranties shall be interpreted
without giving effect to any limitations or qualifications as to “materiality”
(including the word “material” or “Material Adverse Effect” set forth therein)
except for the limitations set forth in Section 3.04 and Section 3.08(a)(ii)); provided,
however, that in the case of the representations and warranties
contained in Section 3.11 (Environmental Matters) all indemnity obligations of
the Seller and Parent will be governed exclusively by Sections 8.02(g),
8.02(h), 8.02(i), 8.07 and 8.08;

 

(b)           the breach of any covenant or
agreement by the Seller or Parent in this Agreement;

 

(c)           any and all Losses suffered
or incurred by the Purchaser by reason of or in connection with any claim or
cause of action of any third party to the extent arising out of any action,
inaction, event, condition, liability or obligation of the Seller occurring or
existing prior to the Closing;

 

(d)           the excess of the amounts
payable by the Purchaser following the Closing that relate to service by any
Transferred Employee with the Seller through the Closing over the Employee
Amounts;

 

(e)           Liabilities arising from or
related to any failure to comply with laws relating to bulk transfers or bulk
sales with respect to the transactions contemplated by this Agreement;

 

(f)            the
Excluded Liabilities;

 

(g)           Historical On-Site
Environmental Liabilities in excess of any amounts designated to cover
Historical On-Site Environmental Liabilities specifically identified and
reserved for in the balance sheet, reserves, capital expenditure budgets,
accruals, transferred financial assurance instruments, working capital
statements or operating budgets of the Business disclosed to the Purchaser
prior to the date hereof as set forth on Section 8.02(g) of the Disclosure
Schedule in accordance with and subject to the limitations and procedures set
out in Section 8.07;

 

(h)           Historical Off-Site
Environmental Liabilities in accordance with and subject to the procedures set
out below in Section 8.07; and

 

(i)            The
Seller’s share of Losses arising from Straddle Environmental Liabilities
allocated to the Seller pursuant to Section 8.08, in accordance with and
subject to the limitations and procedures set out below in Section 8.08 and in
excess of any amounts designated to cover Straddle Environmental Liabilities
identified and reserved for in the balance sheet, reserves, capital expenditure
budgets, accruals, transferred financial assurance instruments, working capital
statements or operating budgets of the Business

 

67

 

disclosed to the Purchaser prior to
the date hereof as set forth on Section 8.02(i) of the Disclosure Schedule (“Straddle
Environmental Liability Reserves”).

 

To
the extent that either the Seller’s or Parent’s undertakings set forth in this
Section 8.02 may be unenforceable, the Seller or Parent (subject to the
limitations set forth in Section 8.04) shall contribute the maximum amount that
it is permitted to contribute under applicable Law to the payment and
satisfaction of all Losses incurred by the Purchaser Indemnified Parties.

 

Notwithstanding
anything in this Agreement to the contrary, the Seller shall have no
indemnification obligations under Sections 8.02(g) (subject to the limitations
set forth in Section 8.07) and 8.02(i) (subject to the limitations set forth in
Section 8.08) for any Losses resulting from changes in any Environmental Law
occurring after the Closing Date, provided that any Remedial Action of
Straddle Environmental Liabilities or Historical On-Site Environmental
Liabilities may be governed by applicable post-Closing requirements for
conducting Remedial Actions, so long as any Remedial Action is conducted in a
Lowest-Cost Commercially Reasonable Manner.

 

SECTION 8.03.  Indemnification
by the Purchaser.  From and after the
Closing, the Seller and its Affiliates, officers, directors, employees, agents,
successors and assigns (each a “Seller Indemnified Party”) shall be
indemnified and held harmless by the Purchaser for and against any and all
Losses, arising out of or resulting from:

 

(a)           the breach of any
representation or warranty made by the Purchaser in this Agreement (it being
understood that any representation and warranty made by the Purchaser in this
Agreement shall be interpreted without giving effect to any limitations or
qualifications as to “materiality” (including the word “material” set forth
therein));

 

(b)           the breach of any covenant or
agreement by the Purchaser in this Agreement;

 

(c)           the Purchaser’s ownership or
operation of the Business or the Purchased Assets from and after the Closing
Date (excluding Excluded Liabilities or Liabilities for which the Seller has
agreed to indemnify the Purchaser hereunder);

 

(d)           the Assumed Liabilities;

 

(e)           Reserved Pre-Closing Environmental
Liabilities;

 

(f)            Post-Closing
Environmental Liabilities;

 

(g)           the Purchaser’s
responsibility for Losses arising from Straddle Environmental Liabilities
allocated to the Purchaser pursuant to Section 8.08;

 

(h)           any Guarantee that is set
forth in Section 5.04(f) of the Disclosure Schedule for which the Purchaser has
not been substituted for Parent or its Affiliates or for which Parent or its
Affiliates have not otherwise been released effective as of the Closing Date.

 

To
the extent that the Purchaser’s undertakings set forth in this Section 8.03 may
be unenforceable, the Purchaser shall contribute the maximum amount that it is
permitted to contribute under

 

68

 

applicable
Law to the payment and satisfaction of all Losses incurred by the Seller
Indemnified Parties.

 

SECTION 8.04.  Limits
on Indemnification.  Notwithstanding
anything to the contrary contained in this Agreement, except with respect to
claims relating to Taxes or claims for breach of the representation contained
in Section 6.04(d):  (a) an Indemnifying
Party shall not be liable for any claim for indemnification pursuant to Section
8.02(a), 8.02(g), 8.02(i) or 8.03(a), unless and until the aggregate amount of
indemnifiable Losses which may be recovered from the Indemnifying Party equals
or exceeds $800,000, after which the Indemnifying Party shall be liable for all
Losses (excluding such amount), subject to subparagraph (c) below; (b) no
Losses may be claimed under Section 8.02(a) or 8.03(a) by an Indemnified Party
or shall be reimbursable by an Indemnifying Party or shall be included in
calculating the aggregate Losses set forth in clause (a) above other than
Losses in excess of $25,000 resulting from any single or aggregated claims
arising out of the same facts, events or circumstances; and (c) the maximum
amount of indemnifiable Losses that may be recovered from an Indemnified Party
arising out of or resulting from the causes set forth in Section 8.02(a),
8.02(g), 8.02(i) or 8.03(a), as the case may be, shall be an amount equal to
$16,000,000.

 

SECTION 8.05.  Notice
of Loss; Third Party Claims.  (a)  An Indemnified Party shall give the
Indemnifying Party notice of any matter that an Indemnified Party has
determined has given or could give rise to a right of indemnification under
this Agreement, within 60 days of such determination, stating the amount of the
Loss, if known, and method of computation thereof, and containing a reference
to the provisions of this Agreement in respect of which such right of
indemnification is claimed or arises.

 

(b)           If an Indemnified Party shall
receive notice of any Action, audit, demand or assessment (each, a “Third
Party Claim”) against it which may give rise to a claim for a Loss under
this Article VIII, within 30 days of the receipt of such notice, the
Indemnified Party shall give the Indemnifying Party notice of such Third Party
Claim; provided, however, that the failure to provide such notice
shall not release the Indemnifying Party from any of its obligations under this
Article VIII except to the extent that the Indemnifying Party is materially
prejudiced by such failure and shall not relieve the Indemnifying Party from
any other obligation or Liability that it may have to any Indemnified Party
otherwise than under this Article VIII. 
If the Indemnifying Party acknowledges in writing its obligation to
indemnify the Indemnified Party hereunder against any Losses that may result
from such Third Party Claim, then the Indemnifying Party shall be entitled to
assume and control the defense of such Third Party Claim at its expense and
through counsel of its choice if it gives notice of its intention to do so to
the Indemnified Party within five days of the receipt of notice from the
Indemnified Party of such Third Party Claim; provided, however,
that if there exists or is reasonably likely to exist a conflict of interest
that would make it inappropriate in the judgment of the Indemnified Party in
its sole and absolute discretion for the same counsel to represent both the Indemnified
Party and the Indemnifying Party, then the Indemnified Party shall be entitled
to retain its own counsel in each jurisdiction for which the Indemnified Party
determines counsel is required, at the expense of the Indemnifying Party; and provided
further that in the event of a third party claim relating to Taxes, the
Indemnified Party shall have the right to retain control to the extent that the
third party claim involves matters in excess of $100,000 that are not
indemnified hereunder and which cannot be separately contested or increase the
Tax liability for a Post-Closing Period by more than $100,000.  In the event that the

 

69

 

Indemnifying
Party exercises the right to undertake any such defense against any such Third
Party Claim as provided above, the Indemnified Party shall cooperate with the
Indemnifying Party in such defense and make available to the Indemnifying
Party, at the Indemnifying Party’s expense, all witnesses, pertinent records,
materials and information in the Indemnified Party’s possession or under the
Indemnified Party’s control relating thereto as is reasonably required by the
Indemnifying Party.  Similarly, in the
event the Indemnified Party is, directly or indirectly, conducting the defense
against any such Third Party Claim, the Indemnifying Party shall cooperate with
the Indemnified Party in such defense and make available to the Indemnified
Party, at the Indemnifying Party’s expense, all such witnesses, records,
materials and information in the Indemnifying Party’s possession or under the
Indemnifying Party’s control relating thereto as is reasonably required by the
Indemnified Party.  No such Third Party
Claim may be settled by the Indemnifying Party without the prior written consent
of the Indemnified Party.

 

SECTION 8.06.  Tax
Treatment.  Parent, the Seller and
Parent’s other Affiliates, on the one hand, and the Purchaser, on the other
hand, agree that all payments made by either of them to or for the benefit of
the other under this Article VIII, under other indemnity provisions of this
Agreement and for any misrepresentations or breaches of warranties or covenants
shall be treated as adjustments to the Purchase Price for Tax purposes and that
such treatment shall govern for purposes hereof except to the extent that the
Laws of a particular jurisdiction provide otherwise, in which case such
payments shall be made in an amount sufficient to indemnify the relevant party
on an after-Tax basis.  The amount of any Loss indemnified under this
Agreement shall be adjusted to take account of any Tax cost and any Tax benefit
reasonably realizable by the Indemnified Party arising in connection with the
receipt of indemnity payments under this Agreement or from the incurrence or
payment of any such Loss (including the net present value of any Tax cost and
any Tax benefit reasonably realizable in subsequent taxable years, calculated
using a discount rate of 5% and assuming the highest applicable combined
statutory rate of Tax then in effect).

 

SECTION 8.07.  Limitations and Procedures Applicable to
Indemnification for Historical Environmental Liabilities.  (a) 
Subject to the terms of this Section 8.07, whenever a claim shall arise
for indemnification under Section 8.02(g) or (h), the claim shall be submitted
by the Indemnified Party to the Indemnifying Party in accordance with Section
8.05.

 

(b)           In the event that the Purchaser submits a claim for indemnification
under Section 8.02(h) relating to an Historical Off-Site Environmental
Liability, the Seller may, at its sole cost and expense, assume the defense
and/or resolution (including undertaking Remedial Action) by written notice to
the Purchaser given within 20 Business Days of receipt of the Purchaser’s
written notice of claim.  If the Seller assumes
the defense and/or resolution of any Historical Off-Site Environmental
Liability, the Seller shall be entitled to take all steps necessary in the
defense and/or resolution thereof.  Where
Remedial Action is required, the Seller agrees to use commercially reasonable
efforts to avoid (i) unreasonable interference with the operations of any Real
Property provided there is no Change after the Closing Date or (ii)
unreasonably restrict the ability to use any Real Property for the use it was
employed on the Closing Date or for substantially similar uses, without the
consent of the Purchaser, which consent shall not be unreasonably withheld,
conditioned or delayed.  The Purchaser
may, at its own expense, monitor any proceeding with counsel of its choice without
any right of control thereof.  If the
Seller does not assume the defense and/or resolution of any Environmental Claim
relating to any Historical

 

70

 

Off-Site Environmental Liability, then the Purchaser may defend and/or
resolve such liability in a commercially reasonable manner, including settling
claims or litigation (after giving prior notice of the same to the Seller and
obtaining the prior written consent of the Seller which consent shall not be
unreasonably withheld, conditioned or delayed).

 

(c)           In the event that the Purchaser submits a claim for
indemnification under Section 8.02(g) relating to an Historical On-Site
Environmental Liability, the Seller shall assume the defense and/or resolution
(including undertaking Remedial Action) thereof.  The Seller shall be entitled to take all
steps necessary in the defense and/or resolution thereof, including the
settlement thereof (which settlement shall require the consent of the
Purchaser, such consent not to be unreasonably withheld, delayed or
conditioned); provided, however, that (i) the Purchaser may, at
its expense, monitor any proceeding with counsel of its choice without any
right of control thereof, and (ii) the Seller shall consult with the Purchaser
regarding the defense and resolution thereof, allowing the Purchaser reasonable
participation therein.  “Reasonable
participation” shall be broadly construed and shall include, by way of example
and not limitation, being given reasonable advanced notice for conduct of
investigations and an opportunity to participate in significant meetings or
communications with any Governmental Authority. 
The Seller shall afford the Purchaser or its designees with the
opportunity to review draft documents prepared in connection with such matters
and shall reasonably consider the Purchaser’s comments.  The Seller shall provide all plans, reports,
pleadings and other documents in draft form to the Purchaser in a reasonable
time prior to delivering such documents to a governmental entity or claimant,
and the Seller shall reasonably consider the Purchaser’s comments thereon.  Where an onsite Remedial Action is required,
the Seller agrees to use commercially reasonable efforts to avoid (i)
unreasonable interference with the operations of any Real Property provided
there is no Change after the Closing Date or (ii) unreasonably restricting the
ability to use any Real Property for the use it was employed on the Closing
Date or for substantially similar uses, without the consent of the Purchaser,
which consent shall not be unreasonably withheld, conditioned or delayed.

 

(d)           The Seller and the Purchaser shall cooperate fully in all
aspects of any investigation, defense, pre-trial activities, trial, compromise,
settlement, discharge or Remedial Action arising in connection with any claim
in respect of which indemnity is sought, including, but not limited to, by
providing the other party with reasonable access to:  (i) employees and officers (including as
witnesses); (ii) other relevant information; and (iii) facilities; provided
that in each case, such access shall be given at reasonable times and upon
reasonable notice and without undue interruption to such party’s business or
personnel.  So long as the Seller is in
good faith defending and/or resolving a Historical Environmental Liability
under this Section, the Purchaser shall not compromise, settle or in any manner
interfere with the defense or resolution of such Historical Environmental
Liability.  If the Seller does not assume
the defense and/or resolution of any such Historical Environmental Liability
claim or litigation in accordance with the terms hereof, the Purchaser may
defend and/or resolve Historical Environmental Liability in a commercially
reasonable manner, including settling claims or litigation (after giving prior
written notice of the same to the Seller and obtaining the prior written
consent of the Seller which consent shall not be unreasonably withheld,
conditioned or delayed).

 

(e)           In connection with any Remedial Action covered by the
indemnities in Sections 8.02(g) and 8.02(h), the Seller shall only be required
to undertake or reimburse Losses incurred in the course of Remedial Action
conducted in a “Lowest-Cost Commercially Reasonable 

 

71

 

Manner,” which shall mean, the lowest cost methods permitted by
applicable Environmental Law determined from the perspective of a reasonable
business person acting without regard to the availability of indemnification
hereunder to achieve compliance with Environmental Law (taking all relevant
circumstances into consideration, including the lowest-cost method that would
minimize exposure to additional Losses that would be subject to indemnification
hereunder).  Such Lowest-Cost Commercially
Reasonable Manner shall include, where appropriate, the use of risk-based
remedies, institutional or engineering controls, or deed restrictions, provided
such remedies, controls, or restrictions do not:  (i) unreasonably interfere with the operations
of any Real Properties provided there is no Change to such properties after the
Closing Date, or (ii) unreasonably restrict the ability to use any Real
Property for the use it was employed on the Closing Date or for substantially
similar uses, without the consent of the Purchaser, which consent shall not be
unreasonably withheld, conditioned or delayed. 
The Seller shall have no indemnification obligations under Section
8.02(g) to the extent Losses result from any Change after the Closing Date
caused by the Purchaser or any subsequent owner or operator of the Real
Property.  For purposes of this Article
VIII, “Change” means a material change in the use of a Real Property
after the Closing Date, provided that a material change in use does not
include a cessation in operations other than a voluntary decommissioning or
demolition (or involuntary decommissioning or demolition that is not required
by Environmental Law) of all or substantially all of a Real Property or the
operations conducted thereon.

 

(f)            The Seller or Parent shall
have no indemnification obligations under Section 8.02(g) for Losses arising
from any non-subsurface sampling or analysis, subsurface investigation, or any
communication with any Governmental Authority by or on behalf of the Purchaser
after the Closing Date unless (and only to the extent) such sampling, analysis,
investigation or communication is:  (i)
required by any Environmental Law; (ii) in response to a request of a
Governmental Authority; or (iii) during the normal course of business arising
out of repairs, modifications or maintenance activities, or demolition,
construction or physical expansion activities that are conducted consistent
with normal industrial practices; (provided, however, that any
such sampling, analysis, investigation or communication with a Governmental
Authority shall not be considered “required by Environmental Law” for purposes
of this Article VIII if such sampling, analysis, investigation or communication
occurs as a result of:  (1) a Change at a
Real Property; or (2) due diligence conducted by a future purchaser or
financing source).

 

(g)           The Seller or Parent, shall have no indemnification
obligations under Section 8.02(g) to the extent that, as a result of any
negligence or willful misconduct of the Purchaser, the amount of Losses subject
to indemnification by the Seller or Parent is exacerbated.

 

(h)           The Purchaser or its designees agree to make commercially
reasonable efforts to provide the Seller with advance notice of repairs,
modifications, maintenance or construction activities that might cause Losses
related to items disclosed in Section 3.11 of the Disclosure Schedule (to the
extent that the location of the environmental matter is reasonably identified
therein) for purposes of consultation with the Seller.  The Purchaser and the Seller agree that any
communications between the parties during such consultation are made without
prejudice and shall be treated as confidential settlement discussions not to be
used in evidence in any dispute.

 

72

 

SECTION 8.08.  Procedures for Allocation of
Responsibility for Straddle Environmental Liabilities.  (a)  A party seeking to have responsibility for
that Straddle Environmental Liability allocated pursuant to this Section 8.08
shall promptly notify the other party in writing of the matter and the facts
constituting the basis for the notifying party’s belief that the matter
qualifies as a Straddle Environmental Liability.

 

(b)           For purposes of Section 8.02(i) and 8.03(g), responsibility
for Losses arising from Straddle Environmental Liabilities will be allocated as
follows:

 

(i)            Responsibility for Losses
that are the subject of a Straddle Environmental Liability Claim Notice
delivered by one party to another on or before the first anniversary of the
Closing Date shall be allocated 70% to the Seller and 30% to the Purchaser.

 

(ii)           Responsibility for Losses that are the subject of a Straddle
Environmental Liability Claim Notice delivered by one party to another after
the first anniversary of the Closing Date and on or before the second
anniversary of the Closing Date shall be allocated 60% to the Seller and 40% to
the Purchaser.

 

(iii)          Responsibility for Losses that are the subject of a Straddle
Environmental Liability Claim Notice delivered by one party to another after
the second anniversary of the Closing Date and on or before the fifth
anniversary of the Closing Date shall be allocated 50% to the Seller and 50% to
the Purchaser.

 

(iv)          Responsibility for Losses that are the subject of a Straddle
Environmental Liability Claim Notice delivered by one party to another after
the fifth anniversary of the Closing Date and on or before the sixth
anniversary of the Closing Date shall be allocated 40% to the Seller and 60% to
the Purchaser.

 

(v)           Responsibility for Losses that are the subject of a Straddle
Environmental Liability Claim Notice delivered by one party to another after
the sixth anniversary of the Closing Date and on or before the seventh
anniversary of the Closing Date shall be allocated 30% to the Seller and 70% to
the Purchaser.

 

(vi)          Responsibility for any and all Losses arising from Straddle
Environmental Liabilities incurred after the seventh anniversary of the Closing
Date shall reside with the Purchaser.

 

(c)           The Seller shall have the right to control the defense
and/or resolution of any Straddle Environmental Liabilities covered by the
allocation ratios set out in Sections 8.08(b)(i) and (b)(ii).  The Purchaser shall have the right to control
the defense and/or resolution of any Straddle Environmental Liabilities covered
by the allocation ratios set out in Sections 8.08(b)(iii), (b)(iv), (b)(v) and
(b)(vi).  The party controlling defense
and/or resolution of a Straddle Environmental Liability under either of the two
immediately preceding sentences (the “Controlling Party”) shall be
entitled to take all steps necessary in the defense and/or resolution thereof
including the settlement of any matter without the consent of the other party
(the “Non-Controlling Party”) (so long as such settlement obtains for
the Non-Controlling Party a complete release of future liability in connection
with the subject matter); provided, however, that the
Non-Controlling Party may, at its own expense, monitor any proceeding with the
counsel of its 

 

73

 

choice without any right of control thereof.  If the Controlling Party elects to control
the defense and/or resolution of any Straddle Environmental Liabilities with
respect to which it has such election right, the Controlling Party alone shall
control all Remedial Action or other actions (including all communications with
Governmental Authorities) undertaken in connection with the defense or
resolution of the Straddle Environmental Liabilities for which it is
responsible; provided, however, that any Remedial Action
responsibility for which is allocated under this Section 8.08 shall be
conducted in a Lowest-Cost Commercially Reasonable Manner; provided, further,
that where any Remedial Action is required, the Seller agrees to use
commercially reasonable efforts to avoid (i) unreasonable interference with the
operations of any Real Properties provided there is no Change after the Closing
Date or (ii) unreasonably restricting the ability to use any Real Property for
the use it was employed on the Closing Date or for substantially similar uses,
without the consent of the Purchaser, which consent shall not be unreasonably
withheld, conditioned or delayed. The Controlling Party shall afford the
Non-Controlling Party or its designees with the opportunity to review draft
documents prepared in connection with such matters and shall reasonably
consider such other party’s comments. 
The Controlling Party to shall provide all plans, reports, pleadings and
other documents in draft form to the Non-Controlling Party in a reasonable time
prior to delivering such documents to a governmental entity or claimant, and
the Non-Controlling Party and the Controlling Party shall each use its
reasonable best efforts not to delay the filing or submission of such
documents.

 

(d)           The Seller or Parent shall have no obligation under Section
8.02(i) to contribute its allocated share of Losses arising from any Straddle
Environmental Liability to the extent such Losses result from:  (i) any Change after the Closing Date caused
by the Purchaser or any subsequent owner or operator of the Real Properties;
(ii) any Remedial Action not conducted in a Lowest-Cost Commercially Reasonable
Manner; (iii) any gross negligence or willful misconduct of the Purchaser after
the Closing Date; or (iv) any non-subsurface sampling or analysis, or any
subsurface investigation, or any communication with any Governmental Authority
by or on behalf of the Purchaser after the Closing Date related thereto, unless
(and only to the extent) such sampling, analysis, subsurface investigation or
communication is:  (x) required by any
Environmental Law; (y) in response to a request of a Governmental Authority; or
(z) during the normal course of business arising out of repairs, modifications
or maintenance activities, or demolition, construction or physical expansion
activities that are conducted consistent with normal industrial practices; provided,
further, that any sampling or analysis, subsurface investigation, or communication
with a Governmental Authority shall not be considered “required by
Environmental Law” for purposes of this Article VIII if such sampling,
analysis, investigation or communication occurs as a result of:  (1) a Change at an Operating Site; or (2) due
diligence conducted by a future purchaser or financing source.

 

(e)           The Purchaser or its designees agree to make commercially
reasonable efforts to provide the Seller with advance notice of repairs,
modifications, maintenance or construction activities that might cause Losses
related to items disclosed in Section 3.11 of the Disclosure Schedule for
purposes of consultation with the Seller. 
The Purchaser and the Seller agree that any communications between the
parties during such consultation are made without prejudice and shall be
treated as confidential settlement discussions not to be used in evidence in
any dispute.

 

74

 

(f)            The Seller and the Purchaser
shall cooperate fully in all aspects of any investigation, defense, pre-trial
activities, trial, compromise, settlement, discharge or Remedial Action arising
in connection with any claim covered by this Section 8.08.  So long as the Controlling Party is in good
faith defending and/or resolving a Straddle Environmental Liability under this
Section, the Non-Controlling Party shall not compromise, settle or in any
manner interfere with the defense or resolution of such Straddle Environmental
Liability.  If the Controlling Party does
not assume the defense and/or resolution of any such Straddle Environmental
Liability claim or litigation in accordance with the terms hereof, the
Non-Controlling Party may defend and/or resolve such Straddle Environmental
Liability in such manner as it may deem appropriate, including settling claims
or litigation (after giving prior written notice of the same to the Controlling
Party and obtaining the prior written consent of the Controlling Party, which
consent shall not be unreasonably withheld, conditioned or delayed) on such terms
as the Non-Controlling Party may reasonably deem appropriate, and the
Controlling Party will promptly indemnify the Non-Controlling Party in
accordance with the provisions of this Article VIII.

 

(g)           Section 8.08(g) of the Disclosure Schedule includes identified
items that the parties agree meet the definition of “Straddle Environmental
Liability”.  The inclusion of any matter
on Section 8.08(g) of the Disclosure Schedule shall not in any way be construed
as an admission of the existence of any liability with respect to or breach of
a representation or warranty.

 

SECTION 8.09.  Procedures Applicable to Indemnification
by the Purchaser for Reserved Pre-Closing Environmental Liabilities and
Post-Closing Environmental Liabilities. 
(a)  In the event that the Seller
submits a claim for indemnification under Section 8.03(e) or (f), the Purchaser
may, at its sole cost and expense, assume the defense and/or resolution
(including undertaking Remedial Action) thereof by written notice to the Seller
within 20 Business Days of receipt of the Seller’s written notice of
claim.  If the Purchaser assumes the
defense and/or resolution of any Reserved Pre-Closing Environmental Liabilities
or Post-Closing Environmental Liability, the Purchaser shall be entitled to
take all steps necessary in the defense and/or resolution thereof including the
settlement of any matter without the consent of the Seller (so long as such
settlement obtains for the Seller a complete release of future liability in
connection with the subject matter); provided, however, that the
Seller may, at its own expense, monitor any proceeding with the counsel of its
choice without any right of control thereof. 
If the Purchaser elects to assume the defense and/or resolution of any
Reserved Pre-Closing Environmental Liability or Post-Closing Environmental
Liability, the Purchaser alone shall control all Remedial Action or other
actions (including all communications with Governmental Authorities) undertaken
pursuant to the indemnity in Section 8.03(e) or 8.03(f); provided, however,
that such Remedial Action and other actions shall be conducted in a Lowest-Cost
Commercially Reasonable Manner.

 

(b)           The Seller and the Purchaser shall cooperate fully in all
aspects of any investigation, defense, pre-trial activities, trial, compromise,
settlement, discharge or Remedial Action arising in connection with any claim
in respect of which indemnity is sought, including, but not limited to, by
providing the other party with reasonable access to:  (1) employees and officers (including as
witnesses); (2) other relevant information; and (3) facilities; provided
that in each case, such access shall be given at reasonable times and upon
reasonable notice and without undue interruption to such party’s business or
personnel.  So long as the Purchaser is
in good faith defending and/or resolving a Reserved Pre-Closing Environmental
Liability or Post-Closing 

 

75

 

Environmental Liability under this Section, the Seller shall not
compromise, settle or in any manner interfere with the defense or resolution of
such Reserved Pre-Closing Environmental Liability or Post-Closing Environmental
Liability.  If the Purchaser does not
assume the defense and/or resolution of any such Reserved Pre-Closing Environmental
Liability or Post-Closing Environmental Liability in accordance with the terms
hereof, the Seller may defend and/or resolve such Reserved Pre-Closing
Environmental Liability or Post-Closing Environmental Liability in a
commercially reasonable manner, including settling claims or litigation (after
giving prior written notice of the same to the Purchaser and obtaining the
prior written consent of the Purchaser, which consent shall not be unreasonably
withheld, conditioned or delayed).

 

ARTICLE IX

 

TERMINATION

 

SECTION 9.01.  Termination.  This Agreement may be terminated at any time
prior to the Closing:

 

(a)           by the Purchaser if any of the conditions set forth in
Section 7.02 shall have become incapable of fulfillment, and shall not have
been waived by the Purchaser;

 

(b)           by the Seller if any of the conditions set forth in Section
7.01 shall have become incapable of fulfillment, and shall not have been waived
by the Seller;

 

(c)           by either the Purchaser or the Seller if the Closing shall
not have occurred by June 30, 2006; provided, however, that the
right to terminate this Agreement under this Section 9.01(c) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement shall have been the cause of, or shall have resulted in, the failure
of the Closing to occur on or prior to such date;

 

(d)           by either the Purchaser or the Seller in the event that any
Governmental Order restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement shall have become final and
nonappealable; or

 

(e)           by the mutual written consent of the parties hereto.

 

SECTION 9.02.  Effect of Termination.  In the event of
termination of this Agreement as provided in Section 9.01, this Agreement shall
forthwith become void and there shall be no liability on the part of either
party hereto except (a) as set forth in Section 5.03(b) and Article X and (b)
that nothing herein shall relieve either party from liability for any breach of
this Agreement.

 

ARTICLE X

 

GENERAL PROVISIONS

 

SECTION 10.01.  Expenses.  Except as otherwise specified in this
Agreement, all costs and expenses, including fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with this Agreement
and the transactions contemplated by this 

 

76

 

Agreement shall be paid by the party
incurring such costs and expenses, whether or not the Closing shall have
occurred.

 

SECTION 10.02.  Notices.  All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by an internationally recognized overnight courier service, by
facsimile or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties hereto at the following addresses (or at
such other address for a party as shall be specified in a notice given in
accordance with this Section 10.02):

 

	
  (a)

  	
   

  	
  if to the Seller
  and Parent:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  NewPage
  Corporation

  
	
   

  	
   

  	
  Courthouse Plaza
  NE

  
	
   

  	
   

  	
  Dayton, OH 45463

  
	
   

  	
   

  	
  Facsimile: (937)
  242-9459

  
	
   

  	
   

  	
  Attention: General
  Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Schulte Roth &
  Zabel LLP

  
	
   

  	
   

  	
  919 Third Avenue

  
	
   

  	
   

  	
  New York, NY 10022

  
	
   

  	
   

  	
  Facsimile: (212)
  756-2000

  
	
   

  	
   

  	
  Attention: Stuart
  D. Freedman

  
	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  if to the
  Purchaser:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  P. H. Glatfelter
  Company

  
	
   

  	
   

  	
  96 South George
  Street, Suite 500

  
	
   

  	
   

  	
  York, PA 17401

  
	
   

  	
   

  	
  Facsimile: (717)
  846-2419

  
	
   

  	
   

  	
  Attention:
  General Counsel

  

 

77

 

	
   

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Shearman &
  Sterling LLP

  
	
   

  	
   

  	
  599 Lexington
  Avenue

  
	
   

  	
   

  	
  New York, NY
  10022-6069

  
	
   

  	
   

  	
  Facsimile: (212)
  848-7179

  
	
   

  	
   

  	
  Attention: Clare
  O’Brien

  

 

SECTION 10.03.  Public Announcements.  The initial press
release relating to this Agreement and the transactions contemplated hereby
shall be a joint press release the text of which has been agreed to by Parent
and the Purchaser.  Thereafter, the
parties hereto shall consult with each other before issuing, and give each
other the opportunity to review and comment upon, any press release or other
communication with any news media in respect of this Agreement or the
transactions contemplated hereby, and shall not make any such press release
prior to such consultation, except as such party may reasonably conclude may be
required by applicable Law, court process or by obligations pursuant to any
listing agreement with any national securities exchange or national securities
quotation system.

 

SECTION 10.04.  Severability.  If any term or
other provision of this Agreement is invalid, illegal or incapable of being
enforced by any Law or public policy, all other terms and provisions of this
Agreement shall nevertheless remain in full force and effect for so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any of the parties hereto.  Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.

 

SECTION 10.05.  Entire Agreement.  This Agreement, the
Confidentiality Agreement and the Ancillary Agreements constitute the entire
agreement of the parties hereto with respect to the subject matter hereof and
thereof and supersede all prior agreements and undertakings, both written and
oral, among the Seller, Parent and the Purchaser with respect to the subject
matter hereof and thereof.

 

SECTION 10.06.  Assignment.  This Agreement may not be assigned by
operation of law or otherwise without the express written consent of the
parties hereto (which consent may be granted or withheld in the sole discretion
of the parties hereto) and any such assignment or attempted assignment without
such consent shall be void; provided, however, that the Purchaser
may assign this Agreement or any of its rights and obligations hereunder to one
or more Affiliates of the Purchaser upon notice to the Seller and Parent but
without the consent of the Seller or Parent, so long as any such assignment (a)
does not relieve the Purchaser of its obligations hereunder to the extent any
such Affiliate does not satisfy its obligations hereunder and (b) is not likely
to delay 

 

78

 

the Closing.  If Parent sells all or substantially all of
the assets of Parent, then Parent shall cause the purchaser of such assets to
assume all of Parent’s obligations under Article VIII hereof.

 

SECTION 10.07.  Amendment.  This Agreement may not be amended or modified
except (a) by an instrument in writing signed by, or on behalf of, the parties
hereto or (b) by a waiver in accordance with Section 10.08.

 

SECTION 10.08.  Waiver.  The parties to this Agreement may (a) extend
the time for the performance of any of the obligations or other acts of the
other party, (b) waive any inaccuracies in the representations and warranties
of the other party contained herein or in any document delivered by the other
party pursuant hereto, or (c) waive compliance with any of the agreements of the
other party or conditions to such party’s obligations contained herein.  Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party to be bound
thereby.  Any waiver of any term or
condition shall not be construed as a waiver of any subsequent breach or a
subsequent waiver of the same term or condition, or a waiver of any other term
or condition of this Agreement.  The
failure of any of the parties hereto to assert any of their rights hereunder
shall not constitute a waiver of any of such rights.  All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.

 

SECTION 10.09.  Joint and Several Liability.  Parent shall be
jointly and severally liable with the Seller for all of the Seller’s
obligations under this Agreement.

 

SECTION 10.10.  No Third Party Beneficiaries.  Except for the
provisions of Article VIII relating to indemnified parties, this Agreement
shall be binding upon and inure solely to the benefit of the parties hereto and
their respective successors and permitted assigns and nothing herein, express
or implied, is intended to or shall confer upon any other Person, including any
union or any employee or former employee of the Seller or Parent, any legal or
equitable right, benefit or remedy of any nature whatsoever, including any
rights of employment for any specified period, under or by reason of this
Agreement.

 

SECTION 10.11.  Specific Performance.  Each of the Seller and Parent acknowledges
and agrees that the Purchaser would be irreparably damaged if any of the
provisions of this Agreement are not performed in accordance with their
specific terms and that any breach of this Agreement by the Seller or Parent
could not be adequately compensated in all cases by monetary damages
alone.  Accordingly, in addition to any
other right or remedy to which the Purchaser may be entitled, at law or in
equity, it shall be entitled to enforce any provision of this Agreement by a
decree of specific performance and to temporary, preliminary and permanent
injunctive relief to prevent breaches or threatened breaches of any of the
provisions of this Agreement, without posting any bond or other undertaking.

 

SECTION 10.12.  Governing Law.  This Agreement
shall be governed by, and construed in accordance with, the laws of the State
of New York applicable to contracts executed in and to be performed in that
State.  All Actions arising out of or
relating to this Agreement shall be heard and determined exclusively in any New
York federal court sitting in the Borough of Manhattan of The City of New York;
provided, however, that if such federal court does not have
jurisdiction over such Action, such Action shall be heard and determined
exclusively in any New 

 

79

 

York state court sitting in the
Borough of Manhattan of The City of New York. 
Consistent with the preceding sentence, the parties hereto hereby (a)
submit to the exclusive jurisdiction of any federal or state court sitting in
the Borough of Manhattan of The City of New York for the purpose of any Action
arising out of or relating to this Agreement brought by any party hereto and
(b) irrevocably waive, and agree not to assert by way of motion, defense, or
otherwise, in any such Action, any claim that it is not subject personally to
the jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that the Action is brought in an
inconvenient forum, that the venue of the Action is improper, or that this
Agreement or the transactions contemplated by this Agreement may not be
enforced in or by any of the above-named courts.

 

SECTION 10.13.  Waiver of Jury Trial.  Each of the parties
hereto hereby waives to the fullest extent permitted by applicable Law any
right it may have to a trial by jury with respect to any litigation directly or
indirectly arising out of, under or in connection with this Agreement or the
transactions contemplated by this Agreement. 
Each of the parties hereto hereby (a) certifies that no representative,
agent or attorney of the other party has represented, expressly or otherwise,
that such other party would not, in the event of litigation, seek to enforce
the foregoing waiver and (b) acknowledges that it has been induced to enter
into this Agreement and the transactions contemplated by this Agreement, as
applicable, by, among other things, the mutual waivers and certifications in
this Section 10.13.

 

SECTION 10.14.  Counterparts.  This Agreement may
be executed and delivered (including by facsimile transmission) in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement.

 

80

 

IN WITNESS WHEREOF, each of
the Seller, Parent and the Purchaser have caused this Agreement to be executed
as of the date first written above by their respective officers thereunto duly
authorized.

 

	
   

  	
  CHILLICOTHE PAPER INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Matthew Jesch

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Matthew Jesch

  
	
   

  	
   

  	
  Title:

  	
  Vice President and Chief 

  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  NEWPAGE CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Matthew Jesch

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Matthew Jesch

  
	
   

  	
   

  	
  Title:

  	
  Vice President and Chief 

  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  P. H. GLATFELTER COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ George H. Glatfelter II

  	
   

  
	
   

  	
   

  	
  Name:

  	
  George H. Glatfelter II

  
	
   

  	
   

  	
  Title:

  	
  Chairman and Chief Executive 

  Officer

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