<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------- --------
Commission File Number 1 - 3506
---------------
GEORGIA-PACIFIC CORPORATION
(Exact Name of Registrant as Specified in its Charter)
GEORGIA 93-0432081
(State of Incorporation) (IRS Employer Id. Number)
133 PEACHTREE STREET, N.E., ATLANTA, GEORGIA 30303
(Address of Principal Executive Offices)
(404) 652 - 4000
(Telephone Number of Registrant)
---------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
----- -----
As of the close of business on November 9, 1995, Georgia-Pacific Corporation
had 91,817,223 shares of Common Stock outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
STATEMENTS OF INCOME (Unaudited)
Georgia-Pacific Corporation and Subsidiaries
<TABLE>
<CAPTION>
Three months Nine months
ended Sept. 30, ended Sept. 30,
--------------- ---------------
(Millions, except per share amounts) 1995 1994 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 3,705 $ 3,267 $10,882 $ 9,396
- --------------------------------------------------------------------------------
Costs and expenses
Cost of sales 2,518 2,496 7,576 7,365
Selling, general and
administrative 359 324 1,072 906
Depreciation and depletion 194 186 566 556
Interest 94 110 299 344
Other income - - - (57)
- --------------------------------------------------------------------------------
Total costs and expenses 3,165 3,116 9,513 9,114
- --------------------------------------------------------------------------------
Income before income taxes,
extraordinary item and
accounting change 540 151 1,369 282
Provision for income taxes 216 64 548 125
- --------------------------------------------------------------------------------
Income before extraordinary item
and accounting change 324 87 821 157
Extraordinary item - loss from
early retirement of debt,
net of taxes - - - (11)
Cumulative effect of accounting
change, net of taxes - - - (5)
- --------------------------------------------------------------------------------
Net income $ 324 $ 87 $ 821 $ 141
================================================================================
Per share:
Income before extraordinary item
and accounting change $ 3.57 $ .98 $ 9.12 $ 1.77
Extraordinary item - loss from early
retirement of debt, net of taxes - - - (.12)
Cumulative effect of accounting
change, net of taxes - - - (.06)
- --------------------------------------------------------------------------------
Net income $ 3.57 $ .98 $ 9.12 $ 1.59
================================================================================
Average number of shares outstanding 90.7 89.2 90.0 88.9
================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 3
STATEMENTS OF CASH FLOWS
Georgia-Pacific Corporation and Subsidiaries
(Unaudited)
<TABLE>
<CAPTION>
Nine months
ended Sept. 30,
---------------
(Millions) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Cash provided by (used for) operations
Net income $ 821 $ 141
Adjustments to reconcile net income to cash
provided by operations:
Depreciation 526 518
Depletion 40 38
Amortization of goodwill 44 44
Stock compensation programs 43 14
Gain on sales of assets (7) (3)
Other income - (57)
Cumulative effect of accounting change - 5
(Increase) in receivables (180) (244)
(Decrease) in accounts receivable sale program (200) -
(Increase) in inventories (187) (11)
Change in other working capital 70 9
Change in deferred income tax liabilities (13) (65)
Increase (decrease) in taxes payable 49 (10)
Change in other assets and other
long-term liabilities 62 10
- --------------------------------------------------------------------------------
Cash provided by operations 1,068 389
- --------------------------------------------------------------------------------
Cash provided by (used for) investing activities
Capital expenditures
Property, plant and equipment (827) (568)
Timber and timberlands (60) (30)
- --------------------------------------------------------------------------------
Total capital expenditures (887) (598)
Proceeds from sales of assets 25 225
Other - 1
- --------------------------------------------------------------------------------
Cash (used for) investing activities (862) (372)
- --------------------------------------------------------------------------------
Cash provided by (used for) financing activities
Repayments of long-term debt (223) (261)
Additions to long-term debt 528 12
Fees paid to issue debt (6) -
Increase in bank overdrafts 12 13
Increase (decrease) in commercial paper and
other short-term notes (93) 307
Proceeds from option plan exercises 26 -
Cash dividends paid (128) (109)
- --------------------------------------------------------------------------------
Cash provided by (used for) financing activities 116 (38)
- --------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 322 (21)
Balance at beginning of period 53 41
- --------------------------------------------------------------------------------
Balance at end of period $ 375 $ 20
================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
BALANCE SHEETS
Georgia-Pacific Corporation and Subsidiaries
<TABLE>
<CAPTION>
September 30, December 31,
(Millions, except shares and per share amounts) 1995 1994
- --------------------------------------------------------------------------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 375 $ 53
Receivables, less allowances of $31 and $28 983 566
Inventories 1,396 1,209
Deferred income tax assets 136 136
Other current assets 60 34
- --------------------------------------------------------------------------------
Total current assets 2,950 1,998
- --------------------------------------------------------------------------------
Timber and timberlands, net 1,381 1,363
- --------------------------------------------------------------------------------
Property, plant and equipment
Land, buildings, machinery and equipment, at cost 12,214 11,500
Accumulated depreciation (6,441) (6,012)
- --------------------------------------------------------------------------------
Property, plant and equipment, net 5,773 5,488
- --------------------------------------------------------------------------------
Goodwill 1,729 1,773
- --------------------------------------------------------------------------------
Other assets 544 242
- --------------------------------------------------------------------------------
Total assets $12,377 $10,864
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank overdrafts, net $ 224 $ 212
Commercial paper and other short-term notes 775 868
Current portion of long-term debt 13 37
Accounts payable 619 603
Accrued compensation 198 182
Other current liabilities 479 423
- --------------------------------------------------------------------------------
Total current liabilities 2,308 2,325
- --------------------------------------------------------------------------------
Long-term debt, excluding current portion 4,268 3,904
- --------------------------------------------------------------------------------
Other long-term liabilities 1,180 825
- --------------------------------------------------------------------------------
Deferred income tax liabilities 1,180 1,190
- --------------------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity
Common stock, par value $.80; 150,000,000
shares authorized; 91,920,000 and 90,466,000
shares issued 73 72
Additional paid-in capital 1,338 1,220
Retained earnings 2,075 1,382
Long-term incentive plan deferred compensation (35) (39)
Other (10) (15)
- --------------------------------------------------------------------------------
Total shareholders' equity 3,441 2,620
- --------------------------------------------------------------------------------
Total liabilities and shareholders' equity $12,377 $10,864
================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
NOTES TO FINANCIAL STATEMENTS (Unaudited)
GEORGIA-PACIFIC CORPORATION
SEPTEMBER 30, 1995
1. PRINCIPLES OF PRESENTATION. The interim financial information
included herein is unaudited; however, such information reflects all
adjustments which are, in the opinion of management, necessary for a
fair presentation of the Corporation's financial position, results
of operations and cash flows for the interim periods. All such
adjustments are of a normal, recurring nature. Certain 1994 amounts
have been reclassified to conform with the 1995 presentation.
2. CASH AND CASH EQUIVALENTS. At September 30, 1995, the Corporation
had invested approximately $366 million in marketable securities.
When the securities matured on October 5, 1995, the proceeds were
used to reduce short-term borrowings.
3. INCOME (LOSS) PER SHARE. Income (loss) per share is computed based
on net income (loss) and the weighted average number of common
shares outstanding, net of restricted shares. The effects of
assuming issuance of common shares under long-term incentive, stock
option and stock purchase plans were either insignificant or
antidilutive.
4. ACCOUNTING CHANGE. Effective January 1, 1994, the Corporation
adopted Financial Accounting Standard Number 112 (FAS 112),
"Employers' Accounting for Postemployment Benefits." FAS 112
requires accrual-basis recognition of benefits provided by an
employer to former or inactive employees after employment but before
retirement. The adoption of FAS 112 resulted in a one-time, after-
tax charge of $5 million (6 cents per share) in the 1994 first
quarter.
5. OTHER INCOME. In the 1994 first quarter, the Corporation recorded
other pretax income of $57 million ($34 million after taxes),
primarily resulting from the sales of its roofing manufacturing and
envelope businesses.
6. EXTRAORDINARY ITEM. The Corporation called for redemption
approximately $204 million of its outstanding debt during the 1994
first quarter. As a result, an after-tax extraordinary loss of $11
million (12 cents per share) was recognized.
7. SUPPLEMENTAL DISCLOSURES - STATEMENTS OF CASH FLOWS. The cash
impact of interest and income taxes is reflected in the table below.
The effect of foreign currency exchange rate changes on cash was not
material in either period.
<TABLE>
<CAPTION>
Nine months
ended September 30,
-------------------
(Millions) 1995 1994
-----------------------------------------------------------
<S> <C> <C>
Total interest costs $ 322 $ 349
Interest capitalized (23) (5)
-----------------------------------------------------------
Interest expense $ 299 $ 344
===========================================================
Interest paid $ 307 $ 358
===========================================================
Income taxes paid,
net of refunds $ 511 $ 202
===========================================================
</TABLE>
<PAGE> 6
8. INVENTORY VALUATION. Inventories include costs of material, labor
and plant overhead. The Corporation uses the dollar value pool
method for computing LIFO inventories. The major components of
inventories were as follows:
<TABLE>
<CAPTION>
September 30, December 31,
(Millions) 1995 1994
-----------------------------------------------------------
<S> <C> <C>
Raw materials $ 480 $ 390
Finished goods 917 809
Supplies 283 275
LIFO reserve (284) (265)
-----------------------------------------------------------
Total inventories $1,396 $1,209
===========================================================
</TABLE>
9. PROVISION FOR INCOME TAXES. The Corporation reported pretax income
of $540 million and an income tax provision of $216 million for the
three months ended September 30, 1995. The Corporation reported
pretax income of $151 million and an income tax provision of $64
million for the three months ended September 30, 1994. The
Corporation reported pretax income of $1.4 billion and an income tax
provision of $548 million for the nine months ended September 30,
1995. Excluding asset sales, the Corporation reported pretax income
before extraordinary item and accounting change of $225 million and
an income tax provision of $102 million for the nine months ended
September 30, 1994. The actual effective rate for these periods was
different than the federal statutory tax rate primarily because of
nondeductible goodwill amortization expense.
10. COMMITMENTS AND CONTINGENCIES. The Corporation is a party to
various legal proceedings incidental to its business and is subject
to a variety of environmental and pollution control laws and
regulations in all jurisdictions in which it operates. As is the
case with other companies in similar industries, the Corporation
faces exposure from actual or potential claims and legal proceedings
involving environmental matters. The Corporation is self-insured
for general liability claims up to $5 million per occurrence.
Liability insurance in effect during the last several years provides
coverage for environmental matters only to a limited extent.
The Corporation is involved in environmental remediation activities
at numerous sites where it has been notified that it is or may be a
potentially responsible party under the Comprehensive Environmental
Response, Compensation and Liability Act or similar state
"superfund" laws and at certain of its own properties. Of the
known sites in which it is involved, the Corporation estimates that
approximately 45 percent are being investigated, approximately 40
percent are being remediated and approximately 15 percent are being
monitored (an activity which occurs after either site investigation
or remediation has been completed). The ultimate costs to the
Corporation for the remediation of many of these sites cannot be
predicted with certainty due to the often unknown magnitude of the
pollution or the necessary cleanup, the varying costs of alternative
cleanup methods, the amount of time necessary to accomplish such
cleanups, the evolving nature of cleanup technologies and government
regulations and the inability to determine the Corporation's share
of multi-party cleanups or the extent to which contribution will be
available from other parties. The Corporation has established
reserves for environmental remediation costs for these sites in
amounts which it believes are probable and reasonably estimable.
<PAGE> 7
Based on analysis of currently available information and
previous experience with respect to the cleanup of hazardous
substances, the Corporation believes that it is reasonably possible
that costs associated with these sites may exceed current reserves by
amounts that may prove insignificant or that could range, in the
aggregate, up to approximately $ 81 million. This estimate of the
range of reasonably possible additional costs is less certain than
the estimates upon which reserves are based, and in order to
establish the upper limit of such range, assumptions least favorable
to the Corporation among the range of reasonably possible outcomes
were used. In estimating both its current reserve for environmental
remediation and the possible range of additional costs, the
Corporation has not assumed it will bear the entire cost of
remediation of every site to the exclusion of other known potentially
responsible parties who may be jointly and severally liable. The
ability of other potentially responsible parties to participate has
been taken into account, based generally on the parties' financial
condition and probable contribution on a per site basis.
In the fourth quarter of 1992, the Corporation filed suit in the
State of Washington against numerous insurance carriers for coverage
under comprehensive general liability insurance policies issued by
those carriers. The Corporation sought a declaratory judgment to
the effect that past and future environmental remediation and other
related costs with respect to certain of the sites are covered by
such policies. The Corporation has now dismissed or settled its
claims against all but one of those carriers for a total of
approximately $54 million. Approximately $32 million of this amount
has been received ($28 million of which was recorded as pretax
income in 1995) and the remainder is payable, subject to certain
contingencies, over approximately the next ten years. No amounts
have been recorded for contingent payments.
The Corporation has received and responded to three comprehensive
information requests from the Environmental Protection Agency (EPA)
concerning air emissions at approximately 30 of the Corporation's
facilities which manufacture oriented strand board, medium-density
fiberboard, plywood and particleboard. On August 5, 1994, the EPA
issued a Notice of Violation (NOV) with respect to alleged
violations of certain requirements of the Clean Air Act at these
facilities relating to, among other things, alleged emissions of
volatile organic compounds from sources constructed or modified
since 1980. The Corporation is in the process of negotiating a
resolution of the allegations contained in the NOV with the EPA and
the state environmental agencies involved. Any settlements would
entail the payment of fines and agreement by the Corporation to
install air emission control equipment at certain of these
facilities.
Approximately 220 suits involving 9,160 plaintiffs are currently
pending in several state courts in Mississippi. The suits allege a
variety of torts including nuisance, trespass and infliction of
emotional distress primarily related to the alleged discharge of
dioxin into the Leaf River from a pulp mill owned by a subsidiary of
the Corporation. Three of these cases have been tried. A total of
$241,000 in compensatory damages and $4 million in punitive damages
were awarded to three plaintiffs in the first two cases (Simmons and
Ferguson) with respect to certain claims. The jury found in favor
of the Corporation with respect to a fourth plaintiff. The
Corporation appealed both judgments. On July 8, 1993, in the third
Mississippi dioxin case tried, the jury returned a verdict in favor
of the Corporation on all counts (Beech/Williams). The plaintiffs
have appealed. In early 1994 two dioxin cases pending in federal
court in Mississippi were voluntarily dismissed with prejudice by
the plaintiffs.
<PAGE> 8
On October 19, 1995, the Mississippi Supreme Court reversed the
judgment in the Ferguson case. In Ferguson, compensatory damages of
$200,000 and punitive damages of $3,000,000 were assessed against
the Corporation. The Mississippi Supreme Court ruled that the
plaintiffs failed to prove that the defendants had caused any
emotional distress or created a nuisance with respect to the
plaintiffs' properties. The Court also ruled that the plaintiffs
had failed to show that the defendants' conduct constituted
intentional, willful, wanton or grossly negligent behavior. The
Court reversed the lower court verdict and ordered judgment for the
defendants. No decisions have been issued by the Mississippi
Supreme Court in the other cases on appeal, Simmons and
Beech/Williams.
Although there can be no assurances as to the ultimate outcome of
the approximately 220 suits pending against the Corporation for
alleged discharges of dioxin, however, based on the decision of the
Mississippi Supreme Court in the Ferguson case the Corporation
believes it has valid defenses to the remaining lawsuits. Suit has
been filed against the mill's insurance carriers seeking a
declaratory judgment to the effect that these dioxin claims are
covered by various insurance policies issued to the Corporation.
The Corporation and many other companies are defendants in suits
brought in various courts around the nation by plaintiffs who allege
that they have suffered personal injury as a result of exposure to
asbestos-containing products. As of November 1, 1995, the
Corporation is defending lawsuits and claims of approximately 38,000
such plaintiffs and anticipates that additional suits or claims will
be filed against it over the next several years. These suits allege
a variety of lung and other diseases based on alleged exposure to
products previously manufactured by the Corporation. In many cases
the plaintiffs are unable to demonstrate that they have suffered any
compensable loss as a result of such exposure.
The Corporation generally resolves asbestos cases by voluntary
dismissal or settlement for amounts it considers reasonable given
the facts and circumstances of each case. The amounts it has paid
in settlement have been substantially covered by product liability
insurance, and the Corporation believes that it has insurance
available in amounts adequate to cover substantially all of the
reasonably foreseeable damages and settlement amounts arising out of
claims and suits currently pending. The Corporation also
anticipates that equivalent amounts of insurance will be available
with respect to the disposition of suits and claims that may be
filed against the Corporation in the future, but there can be no
assurance in this regard. The Corporation has established reserves
for liabilities and legal defense costs for these suits and claims
in amounts it believes are probable and reasonably estimable. It
also has recorded a receivable for expected insurance recoveries
with respect to pending suits and claims.
On October 2, 1995, the Corporation was sued in an action in state
court in Mobile, Alabama, (Bettner, et al. v. Georgia-Pacific
Corporation) that seeks to certify a class of all persons currently
owning structures in the United States on which hardboard siding
manufactured by the Corporation after January 1, 1980 has been
installed. The plaintiffs allege that the hardboard siding
manufactured and distributed by Georgia-Pacific was inadequately
designed and manufactured and as a consequence prematurely discolors
and deteriorates when exposed to moisture and other climatic
conditions. The plaintiffs also dispute the validity and
availability of the warranty issued with the product. Plaintiffs
seek unspecified compensatory and punitive damages, declaratory
relief regarding the availability of warranties, restitution and
injunctive relief. Although there can be no assurances as to the
ultimate outcome of this litigation, the Corporation believes that
<PAGE> 9
it has meritorious defenses to the claims of plaintiffs, and
that it has accepted and paid all valid warranty claims of its
customers.
Although the ultimate outcome of these environmental matters and
legal proceedings cannot be determined with certainty, based on
presently available information management believes that adequate
reserves have been established for probable losses with respect
thereto and that such ultimate outcome, after taking such reserves
into account, will not have a material adverse effect on the
consolidated financial position of the Corporation.
<PAGE> 10
SALES AND OPERATING PROFITS BY INDUSTRY SEGMENT (unaudited)
Georgia-Pacific Corporation and Subsidiaries
<TABLE>
<CAPTION>
(Dollar amounts, except Second Quarter
per share, in millions) First --------------------
Quarter Quarter Year-to-date
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1995
NET SALES
Building products $1,800 52% $1,860 50% $3,660 51%
Pulp and paper 1,665 48 1,829 50 3,494 49
Other operations 12 - 11 - 23 -
- --------------------------------------------------------------------------------
Total net sales $3,477 100% $3,700 100% $7,177 100%
================================================================================
OPERATING PROFITS
Building products $ 197 35% $ 143 24% $ 340 29%
Pulp and paper 368 65 457 76 825 70
Other operations 5 - 4 - 9 1
- --------------------------------------------------------------------------------
Total operating
profits 570 100% 604 100% 1,174 100%
=== === ===
General corporate expense (62) (55) (117)
Interest expense (105) (100) (205)
Cost of accounts
receivable sale
program (11) (12) (23)
Provision for
income taxes (160) (172) (332)
- --------------------------------------------------------------------------------
Net income $ 232 $ 265 $ 497
================================================================================
Per common share:
Net income $ 2.59 $ 2.95 $ 5.54
================================================================================
</TABLE>
<TABLE>
<CAPTION>
(Dollar amounts,
except per share, Third Quarter Fourth Quarter
in millions) ----------------- --------------------
Quarter Year-to-date Quarter Year-to-date
- --------------------------------------------------------------------------------
<S> <C> <C>
1995
NET SALES
Building products $1,901 51% $ 5,561 51%
Pulp and paper 1,789 49 5,283 49
Other operations 15 - 38 -
- --------------------------------------------------------------------------------
Total net sales $3,705 100% $10,882 100%
================================================================================
OPERATING PROFITS
Building products $ 221 31% $ 561 30%
Pulp and paper 478 68 1,303 69
Other operations 4 1 13 1
- --------------------------------------------------------------------------------
Total operating
profits 703 100% 1,877 100%
=== ===
General corporate
expense (61) (178)
Interest expense (94) (299)
Cost of accounts
receivable sale
program (8) (31)
Provision for
income taxes (216) (548)
- --------------------------------------------------------------------------------
Net income $ 324 $ 821
================================================================================
Per common share:
Net income $ 3.57 $ 9.12
================================================================================
</TABLE>
<PAGE> 11
SALES AND OPERATING PROFITS BY INDUSTRY SEGMENT (unaudited)
Georgia-Pacific Corporation and Subsidiaries
<TABLE>
<CAPTION>
(Dollar amounts, except Second Quarter
per share, in millions) First --------------------
Quarter Quarter Year-to-date
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1994
NET SALES
Building products $1,767 60% $1,982 62% $3,749 61%
Pulp and paper 1,167 40 1,196 38 2,363 39
Other operations 8 - 9 - 17 -
- --------------------------------------------------------------------------------
Total net sales $2,942 100% $3,187 100% $6,129 100%
================================================================================
OPERATING PROFITS
Building products $ 247 97% $ 218 118% $ 465 106%
Pulp and paper (53)(20) (40)(21) (93)(21)
Other operations 3 1 6 3 9 2
Other income 57 22 - - 57 13
- --------------------------------------------------------------------------------
Total operating
profits 254 100% 184 100% 438 100%
=== === ===
General corporate expense (28) (31) (59)
Interest expense (121) (113) (234)
Cost of accounts
receivable sale
program (6) (8) (14)
Provision for
income taxes (43) (18) (61)
- --------------------------------------------------------------------------------
Income before
extraordinary item and
accounting change 56 14 70
Extraordinary item, net
of taxes (11) - (11)
Cumulative effect of
accounting change, net
of taxes (5) - (5)
- --------------------------------------------------------------------------------
Net income $ 40 $ 14 $ 54
================================================================================
Per common share:
Income before
extraordinary item
and accounting
change $ .63 $ .16 $ .79
Extraordinary item,
net of taxes (.12) - (.12)
Accounting change,
net of taxes (.06) - (.06)
- --------------------------------------------------------------------------------
Net income $ .45 $ .16 $ .61
================================================================================
</TABLE>
<TABLE>
<CAPTION>
(Dollar amounts,
except per share, Third Quarter Fourth Quarter
in millions) ----------------- --------------------
Quarter Year-to-date Quarter Year-to-date
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994
NET SALES
Building products $1,941 60% $5,690 61% $1,871 56% $ 7,561 60%
Pulp and paper 1,315 40 3,678 39 1,460 44 5,138 40
Other operations 11 - 28 - 11 - 39 -
- --------------------------------------------------------------------------------
Total net sales $3,267 100% $9,396 100% $3,342 100% $12,738 100%
================================================================================
OPERATING PROFITS
Building products $ 262 75% $ 727 93% $ 262 59% $ 989 81%
Pulp and paper 83 24 (10) (1) 181 41 171 14
Other operations 3 1 12 1 (2) - 10 -
Other income - - 57 7 - - 57 5
- --------------------------------------------------------------------------------
Total operating
profits 348 100% 786 100% 441 100% 1,227 100%
=== === === ===
General corporate
expense (78) (137) (32) (169)
Interest expense (110) (344) (109) (453)
Cost of accounts
receivable sale
program (9) (23) (10) (33)
Provision for
income taxes (64) (125) (121) (246)
- --------------------------------------------------------------------------------
Income before
extraordinary item
and accounting
change 87 157 169 326
Extraordinary item,
net of taxes - (11) - (11)
Cumulative effect
of accounting
change, net of
taxes - (5) - (5)
- --------------------------------------------------------------------------------
Net income $ 87 $ 141 $ 169 $ 310
================================================================================
Per common share:
Income before
extraordinary
item and
accounting
change $ .98 $ 1.77 $ 1.89 $ 3.66
Extraordinary
item, net of
taxes - (.12) - (.12)
Accounting
change, net of
taxes - (.06) - (.06)
- --------------------------------------------------------------------------------
Net income $ .98 $ 1.59 $ 1.89 $ 3.48
================================================================================
</TABLE>
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH 1994
The Corporation reported consolidated net sales of $3.7 billion for the three
months ended September 30, 1995, compared with $3.3 billion for the same 1994
period, an increase of 13.4 percent. The Corporation also reported an increase
in net income for the three months ended September 30, 1995 ($324 million or
$3.57 per share), compared with net income for the 1994 third quarter ($87
million or 98 cents per share).
The remaining discussion refers to the "Sales and Operating Profits by Industry
Segment" table and Statements of Income (included in Part I - Item 1. hereto).
The Corporation's building products segment reported net sales of $1.9 billion
and operating profits of $221 million for the three months ended September 30,
1995. For the same 1994 period, reported net sales were $1.9 billion and
operating profits were $262 million. Accordingly, return on sales decreased to
11.6 percent from 13.5 percent a year ago. The decrease in operating profits is
primarily the result of a decrease in third quarter average prices of
approximately 12 percent for the Corporation's softwood lumber business compared
with a year ago. Operating profits for this business were also impacted
by higher wood costs compared with year ago levels and, in part, by an increase
in the availability of Canadian lumber. Although average plywood prices for the
third quarter were approximately 4 percent higher than the 1994 third quarter,
operating profits, like the softwood lumber business, were adversely affected by
higher wood costs. Finally, 1995 third quarter profits for the Corporation's
distribution business were lower than the same 1994 period primarily because of
increased costs ascribed to initiatives to change and improve certain
administrative processes of that business (discussed in the Corporation's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995).
The pulp and paper segment reported $1.8 billion in net sales in the 1995 third
quarter, up from $1.3 billion in the same 1994 period. This segment also
reported operating profits of $478 million for this three month period compared
with operating profits of $83 million a year ago. Return on sales increased
significantly in the 1995 third quarter compared with the 1994 third quarter
primarily as a result of higher prices for most of the Corporation's pulp and
paper products. Third quarter average prices for market pulp increased more
than 70 percent from 1994 third quarter average prices; average containerboard
prices increased more than 40 percent; communication paper prices increased more
than 60 percent; and corrugated packaging prices increased more than 30 percent
compared with third quarter 1994 levels. However, during the 1995 third
quarter, the Corporation began to experience a slowing of demand for several of
its pulp and paper products. As a result, operating profits for this business
in the fourth quarter are expected to decline from the third quarter.
General corporate expense decreased to $61 million for the three months ended
September 30, 1995 compared with $78 million in 1994. The majority of the
decrease is attributable to compensation programs tied to the Corporation's
common stock price.
For the third quarter, the Corporation's interest expense and cost of accounts
receivable sale program were a combined $102 million, a decrease of 14.3
percent compared with $119 million a year ago. Lower expense in 1995 was
primarily the result of a lower level of debt and the expiration since
September 30, 1994 of $500 million in interest rate exchange agreements which
had effectively fixed the rates on a portion of the Corporation's variable rate
debt.
The Corporation reported pretax income of $540 million and an income tax
provision of $216 million for the three months ended September 30, 1995. The
Corporation reported pretax income of $151 million and an income tax provision
of $64 million for the three months ended September 30, 1994. The actual
effective tax rate for both periods was different than the federal statutory
<PAGE> 13
tax rate primarily because of nondeductible goodwill amortization expense.
NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH 1994
The Corporation reported consolidated net sales for the nine months ended
September 30, 1995 of $10.9 billion, compared with $9.4 billion in 1994.
Consolidated net income was $821 million ($9.12 per share), compared with $141
million ($1.59 per share) in the 1994 comparable period. The 1994 results
include a net, after-tax gain of $34 million (38 cents per share) primarily
related to the sale of the Corporation's envelope and roofing manufacturing
businesses. In addition, 1994 net income includes an $11 million (12 cents per
share) after-tax loss on the early retirement of debt and a $5 million (6 cents
per share) one-time after-tax charge for an accounting change.
The remaining discussion refers to the "Sales and Operating Profits by Industry
Segment" table and Statements of Income (included in Part I - Item 1. hereto).
The building products segment reported net sales of $5.6 billion for the nine
months ended September 30, 1995, a slight decrease from the first nine months
of 1994. Operating profits also declined to $561 million for the nine-month
period ended September 30, 1995, compared with $727 million in 1994. Return
on sales decreased to 10.1 percent from 12.8 percent a year ago. Rising wood
costs in the Corporation's softwood lumber and plywood businesses, due in part
to an increase in the supply of Canadian lumber compared with a year ago, have
continued to affect the building products segment results. For example, year-
to-date average softwood lumber prices are 11 percent below average in 1994;
and although average plywood prices for the first nine months of 1995 are 8
percent higher than average for the first nine months of 1994, profits were
adversely affected by the rise in wood costs.
The Corporation's pulp and paper segment reported net sales of $5.3 billion and
operating profits of $1.3 billion for the nine-month period ended September 30,
1995. For the same 1994 period, the segment reported net sales of $3.7 billion
and an operating loss of $10 million. The improved results in 1995 are
primarily attributable to significantly higher average prices during the first
nine months of 1995 for most of the Corporation's pulp and paper products,
compared with the first nine months of 1994. Average market pulp prices
increased by more than 80 percent, corrugated packaging average prices
increased by more than 30 percent, and average communication paper and
containerboard prices increased by more than 50 percent.
General corporate expense of $178 million for the nine months ended September
30, 1995 increased 30.0 percent from the 1994 year-to-date expense of $137
million. The increase is primarily attributable to the costs of initiatives to
change and improve certain administrative processes.
The Corporation reported a combined $330 million for interest expense and the
cost of the accounts receivable sale program for the first three quarters of
1995, a decrease of 10.1 percent from $367 million for the first three quarters
of 1994. The decrease is primarily the result of the expiration since September
30, 1994 of $500 million in interest rate exchange agreements which had
effectively fixed the rates on a portion of the Corporation's variable rate
debt.
The Corporation reported pretax income of $1.4 billion and an income tax
provision of $548 million for the nine months ended September 30, 1995.
Excluding asset sales, the Corporation reported pretax income before
extraordinary item and accounting change of $225 million and an income tax
provision of $102 million for the nine months ended September 30, 1994.
<PAGE> 14
The actual effective tax rate for both periods was different than the federal
statutory tax rate primarily because of nondeductible goodwill amortization
expense.
Selling, general and administrative expenses for the nine-month period ended
September 30, 1995 increased 18.3 percent to $1.1 billion from $906 million for
the same 1994 period, primarily due to labor, systems and other costs
associated with initiatives to change and improve certain operating and
administrative processes.
Liquidity and Capital Resources
Operating Activities
The Corporation generated cash from operations of $1.1 billion for the nine
months ended September 30, 1995, compared with $389 million for the same 1994
period. These results include a $200 million reduction in the accounts
receivable sale program in June 1995 and tax payments of $84 million paid to
the Internal Revenue Service in 1994. The tax payments were to settle the
1989 and 1990 tax years for the Corporation and to resolve substantially all
pending income tax issues related to Great Northern Nekoosa Corporation for the
years 1985 through March 1990. Excluding these items, cash provided by
operations in 1995 and 1994 was $1.3 billion and $473 million, respectively.
The increase in cash from operations is primarily the result of higher prices
in the Corporation's pulp and paper segment for the nine-month period ended
September 30, 1995 compared with the first nine months of 1994.
Investing Activities
During the first nine months of 1995, the Corporation spent $887 million on
capital expenditures, including $415 million in the pulp and paper segment,
$366 million in the building products segment, $60 million for timber and
timberlands and $46 million in other expenditures. The Corporation's total
projected capital spending for 1995 is approximately $1.2 billion.
As previously disclosed in the Corporation's Annual Report on Form 10-K for the
year ended December 31, 1994, the sales of its roofing manufacturing and
envelope businesses were completed during the first quarter of 1994. The
Corporation received after-tax cash proceeds of approximately $156 million from
these transactions.
Financing Activities
Total debt of the Corporation, including $500 million in the accounts
receivable sale program and excluding $366 million in marketable securities,
was $5.4 billion as of September 30, 1995, a decrease of $307 million since
December 31, 1994. This includes a net increase in long-term debt of $340
million and a net increase in bank overdrafts of $12 million, both of which
were partially offset by a reduction in the accounts receivable sale program of
$200 million and a net decrease of $459 million in commercial paper and
short-term notes.
On September 29, 1995, the Corporation sold certain of its assets for $354
million. The Corporation has agreed to lease the assets back from the
purchaser over a period of 30 years. Under the agreement with the purchaser,
the Corporation will maintain a deposit (initially in the amount of $322
million) which together with interest is expected to be sufficient to fund the
Corporation's obligations. In accordance with generally accepted accounting
principles, the lease transaction is being accounted for as a financing
arrangement. Accordingly, the Corporation has recorded on its balance sheet at
September 30, 1995 a long-term asset for the proceeds received from the sale
and a long-term liability for the lease obligation.
At September 30, 1995, the Corporation borrowed funds on a short-term basis to
establish the deposit account. The proceeds from the asset sale were invested
in marketable securities until such securities matured on October 5, 1995, when
<PAGE> 15
they were used to reduce short-term borrowings. The Corporation treated these
marketable securities as cash equivalents at September 30, 1995 because of
their near-term maturities.
During the 1995 second quarter, the Corporation issued $250 million of 8-5/8%
Debentures Due April 30, 2025 and $250 million of 7.70% Debentures Due June 15,
2015. In addition, the Corporation redeemed at par $200 million of its 10-1/8%
Debentures. Effective June 29, 1995, the Corporation repurchased $200 million
of receivables, reducing the accounts receivable sale program from $700 million
to $500 million.
In the first quarter of 1994, the Corporation called for redemption
approximately $204 million in principal of its 10-1/4% Debentures Due September
15, 2018, which it redeemed in April 1994. The Corporation reported an after-
tax extraordinary loss of $11 million (12 cents per share) in the first half of
1994 as a result of this early retirement.
The Corporation has a $1.5 billion unsecured revolving credit facility which is
used for direct borrowings and as support for commercial paper and other short-
term borrowings, including bid borrowings made under that agreement. As of
September 30, 1995, $725 million of committed credit was available in excess of
all short-term borrowings outstanding under or supported by the facility.
The Corporation's weighted average interest rate on total debt as of September
30, 1995 and 1994 was 8.0%, including the accounts receivable sale program and
the outstanding interest rate exchange agreements.
At September 30, 1995, the Corporation had outstanding interest rate exchange
agreements which effectively converted $546 million of floating rate
obligations with a weighted average interest rate of approximately 5.9% to fixed
rate obligations with an average effective interest rate of approximately 9.2%.
On that date, the Corporation's total floating rate debt, including the accounts
receivable sale program, exceeded related interest rate exchange agreements by
approximately $1.4 billion. Interest rate exchange agreements of $400 million
expired in 1995 and another $50 million of these agreements are due to expire in
November.
As previously reported in the Corporation's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995, the Corporation's Board of Directors
authorized management to make purchases of the Corporation's common stock on the
open market or in private transactions. Purchases will be made from time to
time using available cash provided that total debt, including the accounts
receivable sale program, is less than $5.5 billion after funding all other cash
requirements of the Corporation. As of September 30, 1995, no purchases had
been made.
As of September 30, 1995, the Corporation had registered for sale up to $250
million of debt securities under a shelf registration statement filed with the
Securities and Exchange Commission.
In 1995, the Corporation expects its cash flow from operations, together with
proceeds from any asset sales and available financing sources, to be sufficient
to fund planned capital investments, pay dividends and make scheduled debt and
interest payments.
Other
For a discussion of other commitments and contingencies, refer to Note 10 of the
Notes to Financial Statements.
<PAGE> 16
PART II - OTHER INFORMATION
GEORGIA-PACIFIC CORPORATION
September 30, 1995
ITEM 1. LEGAL PROCEEDINGS
The information contained in Note 10 "Commitments and Contingencies" of the
Notes to Financial Statements filed as part of this Quarterly Report on Form
10-Q is incorporated herein by reference.
As last reported in the Corporation's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995, the EPA filed a Complaint and Compliance Order
("Order") against the Corporation on September 30, 1994, for alleged
violations of the Resource Conservation and Recovery Act at its Brunswick,
Georgia, pulp and paper mill. The Order alleged disposal of black liquor
without a permit, treatment of wastewater from accumulated lime mud without a
permit, and failure to respond to a spill of sulfuric acid in a manner adequate
to minimize the flow of hazardous waste. This matter was settled by Consent
Agreement and Consent Order dated September 29, 1995, pursuant to which the
Corporation paid a penalty of $127,168.50 and is obligated to perform certain
cleanup tasks, for which the current cost estimate is not considered material
to the Corporation.
ITEM 5. OTHER INFORMATION.
On November 9, 1995, the Corporation and Domtar Inc. announced that they had
executed agreements pursuant to which the Corporation will purchase Domtar's
gypsum wallboard business for $350 million in cash. Domtar's gypsum business
includes nine U.S. and four Canadian wallboard manufacturing plants, and one
gypsum paperboard plant. The acquisition is subject to compliance with U.S.
and Canadian antitrust laws and other regulatory approvals. The Corporation
anticipates the transaction will be closed in the first quarter 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 2.1 Asset Purchase Agreement between Domtar Inc. and
Georgia-Pacific Corporation dated November 8,
1995.
Exhibit 2.2 Share Purchase Agreement between Domtar Industries
Inc., Domtar Gypsum Inc., Domtar Inc. and Georgia-
Pacific Corporation dated November 8, 1995.
Exhibit 11 Statements of Computation of Per Share Earnings.
Exhibit 27 Financial Data Schedule (for SEC use only).
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 10, 1995 GEORGIA-PACIFIC CORPORATION
(Registrant)
by /s/John F. McGovern
----------------------------
John F. McGovern,
Executive Vice President -
Finance and Chief
Financial Officer
by /s/James E. Terrell
----------------------------
James E. Terrell,
Vice President and
Controller (Chief Accounting
Officer)
<PAGE> 18
GEORGIA-PACIFIC CORPORATION
INDEX TO EXHIBITS
FILED WITH THE QUARTERLY REPORT
ON FORM 10-Q FOR THE
QUARTER ENDED SEPTEMBER 30, 1995
Number Description
2.1 Asset Purchase Agreement between Domtar Inc. and Georgia-
Pacific Corporation dated November 8, 1995. (1)
2.2 Share Purchase Agreement between Domtar Industries Inc.,
Domtar Gypsum Inc., Domtar Inc. and Georgia-Pacific
Corporation dated November 8, 1995. (1)
11 Statements of Computation of Per Share Earnings. (1)
27 Financial Data Schedule (for SEC use only). (1)
__________________
(1) Filed by EDGAR
<PAGE> 1
EXHIBIT 2.1
DOMTAR CANADIAN GYPSUM PRODUCTS BUSINESS
ASSET PURCHASE AGREEMENT
BETWEEN
DOMTAR INC.
AND
GEORGIA-PACIFIC CORPORATION
DATED NOVEMBER 8, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE 1. DEFINITIONS AND PRINCIPLES OF INTERPRETATION . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Number and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.4 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.6 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.9 Table of Contents and List of Schedules . . . . . . . . . . . . . . . . . . 16
1.10 Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.12 Delays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 2. PURCHASE AND SALE AND PURCHASE PRICE . . . . . . . . . . . . . . . . . 16
2.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.3 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.4 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.5 Tax Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.6 Goods and Services Tax Election . . . . . . . . . . . . . . . . . . . . . . 18
2.7 Adjustment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 3. TRANSFER OF BUSINESS AND PURCHASED ASSETS . . . . . . . . . . . . . . . 21
3.1 Transfer and Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.2 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.3 Consents to Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.4 Assumption of Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . 22
3.5 Non-Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE VENDOR . . . . . . . . . . . . . 23
4.1 Incorporation and Authorization . . . . . . . . . . . . . . . . . . . . . . 23
4.2 Enforceability of the Agreement . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
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4.3 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.4 No Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.5 Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.7 Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.8 Real Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.9 Equipment, Rolling Stock and Inventory . . . . . . . . . . . . . . . . . . . 26
4.10 Operating Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.11 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.12 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.13 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.14 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.15 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.16 Employees, Pension and Other Benefit Plans . . . . . . . . . . . . . . . . . 31
4.17 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.18 Absence of Material Changes . . . . . . . . . . . . . . . . . . . . . . . . 34
4.19 Vendor's Residence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.20 Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.21 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.22 Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.23 Gypsum Rock Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER . . . . . . . . . . . . 36
5.1 Incorporation and Authorization . . . . . . . . . . . . . . . . . . . . . . 36
5.2 Enforceability of the Agreement . . . . . . . . . . . . . . . . . . . . . . 36
5.3 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.4 Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 6. EMPLOYEES AND BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . 37
6.1 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.2 Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.3 Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.4 Canada and Quebec Savings Bonds . . . . . . . . . . . . . . . . . . . . . . 45
6.5 Employee Share Purchase and Executive Stock Option and Purchase Plans . . . 46
6.6 Subsidized Mortgage Plans . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.7 Cooperation with Respect to Employee Notices . . . . . . . . . . . . . . . . 46
ARTICLE 7. REAL PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 8. NON-COMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.1 Non-Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.2 Permitted Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
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8.3 Limited Exception for Incidental Acquisitions . . . . . . . . . . . . . . . 47
ARTICLE 9. COVENANTS OF THE VENDOR . . . . . . . . . . . . . . . . . . . . . . . . 48
9.1 Maintenance and Preservation of Business . . . . . . . . . . . . . . . . . . 48
9.2 Notice of Cessation in Ordinary Course . . . . . . . . . . . . . . . . . . . 50
9.3 Access for Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.4 Maintain Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.5 Corporate Proceedings for Transfer . . . . . . . . . . . . . . . . . . . . . 52
9.6 Adjustment Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.7 Sale of Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.8 Retail Sales Tax Certificates . . . . . . . . . . . . . . . . . . . . . . . 52
9.9 Tax Returns Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.10 Operation of Business After the Second Fixture Date . . . . . . . . . . . . 53
9.11 Guarantees, Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE 10. COVENANTS OF THE PURCHASER . . . . . . . . . . . . . . . . . . . . . . 54
10.1 Tax Returns Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.2 Use of Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.3 Key Employee Retention Program . . . . . . . . . . . . . . . . . . . . . . . 54
10.4 Sale of Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.5 No Interference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.6 Guarantees, Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 11. CONDITIONS OF CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 55
11.1 Purchaser's Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
11.1.1 Representations and Warranties Remain Correct . . . . . . . . . . . 55
11.1.2 Performance of Obligations . . . . . . . . . . . . . . . . . . . . 57
11.1.3 Permits, Consents and Approvals . . . . . . . . . . . . . . . . . . 57
11.1.4 Corporate and Other Proceedings . . . . . . . . . . . . . . . . . . 58
11.1.5 Trade-Marks Agreement . . . . . . . . . . . . . . . . . . . . . . . 58
11.1.6 Domtar Gypsum Inc. . . . . . . . . . . . . . . . . . . . . . . . . 58
11.1.7 Opinion of Vendor's Counsel . . . . . . . . . . . . . . . . . . . . 58
11.1.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.1.9 Rescission . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.1.10 Waiver by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . 59
11.2 Vendor's Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.2.1 Representations and Warranties Remain Correct . . . . . . . . . . . 59
11.2.2 Performance of Obligations . . . . . . . . . . . . . . . . . . . . 60
11.2.3 Corporate and Other Proceedings . . . . . . . . . . . . . . . . . . 60
11.2.4 Goods and Services and Sales Taxes . . . . . . . . . . . . . . . . 60
11.2.5 Domtar Gypsum Inc. . . . . . . . . . . . . . . . . . . . . . . . . 60
11.2.6 Opinion of Purchaser's Counsel . . . . . . . . . . . . . . . . . . 61
</TABLE>
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11.2.7 Rescission . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
11.2.8 Waiver by Vendor . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE 12. SURVIVAL AND RELIANCE ON REPRESENTATIONS AND WARRANTIES AND
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
12.1 Survival and Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
12.2 Survival of Liability for Representations and Warranties . . . . . . . . . . 62
12.3 Indemnification by the Vendor . . . . . . . . . . . . . . . . . . . . . . . 63
12.4 Indemnification by the Purchaser . . . . . . . . . . . . . . . . . . . . . . 64
12.5 Indemnification against Third Party Claims . . . . . . . . . . . . . . . . . 65
12.6 Indemnification after Insurance and Other Recoveries . . . . . . . . . . . . 66
12.6.1 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
12.6.2 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
12.7 Vendor's Maximum Liability . . . . . . . . . . . . . . . . . . . . . . . . . 67
12.8 Details of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
12.9 Indemnification Sole Remedy . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE 13. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE 14. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
14.1 Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
14.2 Continuing Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE 15. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
15.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
15.2 Public Announcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
15.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
15.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
15.5 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
15.6 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
15.7 No Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . 72
15.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
</TABLE>
<PAGE> 6
ASSET PURCHASE AGREEMENT
THIS AGREEMENT made as of November 8, 1995
BETWEEN: DOMTAR INC., a company incorporated under the laws
of Canada
(the "VENDOR")
AND: GEORGIA-PACIFIC CORPORATION, a company
incorporated under the laws of Georgia
(the "PURCHASER")
WHEREAS the Vendor owns all the assets relating to the
Business;
WHEREAS the Vendor desires to sell, assign and transfer to the
Purchaser who desires to purchase, the Business and Purchased Assets subject
and pursuant to the provisions hereof;
NOW, THEREFOR, THIS AGREEMENT WITNESSES that in consideration
of the mutual covenants and agreements herein set out and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties covenant and agree as follows:
ARTICLE 1. DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1 Definitions
For the purposes of this Agreement and any other agreement or
document entered into pursuant hereto or thereto and any
notice, consent, direction or other communication required or
permitted to be given pursuant hereto or thereto, the
following words and phrases shall have the following meanings
ascribed to them respectively, unless the subject matter or
context otherwise requires:
(A) "ACCOUNTS RECEIVABLE" means all accounts and notes
receivable, trade accounts, book debts and other
debts due or accruing to the Vendor with respect to
the Business.
<PAGE> 7
-2-
(B) "ADJUSTMENT ARBITRATOR" means the Person, if any,
chosen pursuant to Section 2.7 hereof to make the
final determination of the adjustment to the Purchase
Price.
(C) "ADJUSTMENT BALANCE SHEET" means the balance sheet of
the Vendor with respect to the Business as at the
Adjustment Date which shall be prepared in accordance
with Section 2.7.4 hereof.
(D) "ADJUSTMENT DATE" means the earlier of the Closing
Date and the Second Fixture Date.
(E) "ADJUSTMENT PAYMENT DATE" means the later of (i) the
fifth (5th) Business Day from and after the final
determination (and, if determined by the Adjustment
Arbitrator, delivery to the Parties) of the
adjustment (if any) to the Purchase Price, as
provided in Section 2.7 hereof and (ii) the Closing
Date.
(F) "AFFILIATE" of any specified Person means any Person
directly or indirectly controlling or controlled by
or under direct or indirect common control with such
Person. For the purposes of this definition,
"CONTROL" when used with respect to any Person means
the power to direct the management and policies of
such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or
otherwise; and the terms "CONTROLLING" and
"CONTROLLED" have meanings correlative to the
foregoing.
(G) "AGREEMENT" means this agreement entitled "ASSET
PURCHASE AGREEMENT" and all agreements or documents
supplemental hereto or in amendment or confirmation
hereof; "HEREIN", "HEREOF", "HERETO", "HEREUNDER" and
similar expressions mean and refer to this Agreement
and not to any particular article or section hereof;
"ARTICLE", "SECTION" or other subdivision of this
Agreement means and refers to the specified article,
section or other subdivision of this Agreement.
(H) "AMOUNTS" has the meaning ascribed thereto in Section
6.3.4 hereof.
(I) "ASSUMED LIABILITIES" means all the obligations and
liabilities of the Vendor incurred solely in
connection with, and in the ordinary course of, the
Business in a manner consistent with the past
practices for the Business of the Vendor to the
extent the same exist or come into existence at or
after the Effective Time, but excluding the Excluded
Liabilities.
<PAGE> 8
-3-
(J) "BOOKS AND RECORDS" means all books, records, files
and documentation of the Vendor primarily relating to
or used or held for use by the Vendor with respect to
the Business or Purchased Assets (as original copies
or, if such books, records, files or documentation
are relevant to both the Business and the businesses
of the Vendor other than the Business, as photostatic
copies).
(K) "BUSINESS" means the business presently conducted by
the Vendor at and from its facilities in Canada set
out in SCHEDULE 1.1(k) and known as Domtar Canadian
Gypsum Products Business.
(L) "BUSINESS DAY" means a day other than a Saturday,
Sunday or any other day on which the principal banks
located in Montreal, Canada or Atlanta, Georgia, are
not open for business during normal banking hours.
Whenever any payment to be made or any action to be
taken pursuant to this Agreement is required to be
made or taken on a day other than a Business Day,
such payment shall be made or such action shall be
taken on the next succeeding Business Day.
(M) "CLAIMS" has the meaning ascribed thereto in Section
12.3.1 hereof.
(N) "CLOSING" means the consummation of the sale by the
Vendor and the purchase by the Purchaser of the
Business and Purchased Assets by the transfer and
delivery of instruments of transfer and documents of
title thereto and the payment of the Purchase Price
on the Closing Date as provided herein.
(O) "CLOSING DATE" means the day which is the Closing
Date pursuant to the Share Purchase Agreement.
(P) "CLOSING PLACE" means the offices of the Purchaser's
headquarters, or such other location as the Vendor
may designate upon at least five (5) Business Days'
notice to the Purchaser, subject to the Purchaser's
right to reject such designated location if such
designation would impose an unreasonable burden on
the Purchaser.
(Q) "CONFIDENTIALITY AGREEMENT" means the confidentiality
agreement between the Vendor and the Purchaser dated
August 30, 1995.
<PAGE> 9
-4-
(R) "CONSENT" has the meaning ascribed thereto in Section
3.2 hereof.
(S) "CONTRACTS" means all written or oral outstanding
contracts (other than insurance contracts or
policies), agreements, deeds, negotiable instruments,
bid, performance, surety, custom or other bonds,
leases, licenses, commitments, covenants and
warranties to which the Vendor is entitled or under
which it is bound with respect to the Business, and
all amendments and modifications thereto.
(T) "EFFECTIVE TIME" means 12:01 a.m. on the Closing Date.
(U) "EMPLOYEES" means, as at the date of determination,
the Salaried Employees and Unionized Employees.
(V) "EMPLOYEES ON MEDICAL LEAVE" means those of the
Employees (other than the Retired Employees) who, as
at the date of determination, are absent from work
because of disability or are otherwise incapable of
working in their regular duties or who have claimed
that they are so disabled or incapable of working as
at such date.
(W) "EMPLOYEES ON LONG-TERM MEDICAL LEAVE" means, as at
the date of determination, all Employees on Medical
Leave other than Employees on Short-Term Medical
Leave.
(X) "EMPLOYEES ON SHORT-TERM MEDICAL LEAVE" means, as at
the date of determination, Employees on Medical Leave
who are receiving or are eligible for short-term
salary continuation benefits under the Laws or the
Vendor's Employee Plans or would be so eligible if
their illnesses or injuries were not covered by
workers' compensation.
(Y) "ENVIRONMENT" means soil, land, water and air in
their natural state including, without limitation,
land surface or subsurface strata, surface water,
ground water and ambient air.
(Z) "ENVIRONMENTAL AUTHORITIES" means all federal,
provincial or state ministries or federal,
provincial, state or local governmental bodies or
regulatory agencies, foreign or domestic, charged
with enforcing any of the Environmental Laws.
(AA) "ENVIRONMENTAL CLAIMS" has the meaning ascribed
thereto in Section 12.7.1 hereof.
<PAGE> 10
-5-
(BB) "ENVIRONMENTAL LAW" means all applicable federal,
provincial, state or local codes, laws, statutes,
regulations, decrees, orders and by-laws, in force
and applicable to the Vendor with respect to the
Business (otherwise than as a result of retroactive
application of a subsequent legislative or regulatory
change or enactment adopted after the Adjustment
Date) as at the date with respect to which such
defined term is used, in respect of the protection of
the quality of the Environment and the health and
safety of employees including, without limitation,
those relating to the Release of Hazardous Substances
into the Environment or the manufacture, processing,
distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances.
(CC) "ENVIRONMENTAL NOTICE" means any notice of
investigation, notice of non-compliance or written
order from any of the Environmental Authorities,
including any notice of contamination or clean-up
requirements.
(DD) "ENVIRONMENTAL PERMITS" means all permits, licenses,
certificates and authorizations of, and registrations
with, any of the Environmental Authorities pursuant
to any of the Environmental Laws, issued or granted
to the Vendor for the purpose of conducting the
Business as presently conducted, set out in SCHEDULE
1.1(DD).
(EE) "EQUIPMENT" means all machinery, equipment,
forklifts, tools, computer systems (hardware and
software), furnishings, accessories and office
supplies owned or ordered for purchase by the Vendor
with respect to the Business and whether situated at
the Locations, in transit, ordered but not delivered,
warehoused or wherever situated, and all assignable
warranties of any Person covering all or any part
thereof.
(FF) "EXCLUDED LIABILITIES" means any liability or
obligation of the Vendor which is:
(i) required by U.S. GAAP to be reserved for in
the Adjustment Balance Sheet and which is
not so reserved for;
(ii) listed in SCHEDULE 12.3.2;
(iii) the Vendor's tax liabilities for income
tax, payroll tax and other taxes for all
taxation periods up until the Effective
Time; or
<PAGE> 11
-6-
(iv) any employment, compensation or employee
benefit obligation not specifically assumed
by the Purchaser under Article 6 of this
Agreement,
in each case, to the extent that such liability or
obligation is not reserved for in the Adjustment
Balance Sheet.
(GG) "FINANCIAL STATEMENTS" means the historical income
and cash flow statements of the Vendor with respect
to the Business for the twelve (12) months ended
December 31, 1994 extracted from the Vendor's audited
financial statements for such period and the
unaudited historical income and cash flow statements
of the Vendor with respect to the Business for the
six (6) months ended June 30, 1995, respectively, and
the related notes thereto, set out in SCHEDULE
1.1(GG).
(HH) "FINANCIAL STATEMENTS DATE" means June 30, 1995.
(II) "FIRST CORE REPRESENTATIONS" means (i) those
representations and warranties contained in Sections
4.1, 4.2, 4.3.1, 4.6.1, 4.6.2, 4.7.1, 4.20 and 4.21
hereof and (ii) all other representations and
warranties of the Vendor but with all references to
Laws (other than the Income Tax Act (Canada) and the
Supplemental Pension Plans Act (Quebec)) and
Environmental Laws being limited to those in effect
on or before the First Fixture Date.
(JJ) "FIRST FIXTURE DATE" means May 23, 1996.
(KK) "GOODWILL" means the goodwill of the Vendor with
respect to the Business including, without
limitation, the goodwill associated with the
Intellectual Property and customer lists and the
right of the Purchaser to represent itself as
conducting the Business in continuation of, and in
succession to, the Vendor.
(LL) "HAZARDOUS SUBSTANCES" means all contaminants issued
or discharged in the Environment in a greater
quantity or concentration than that provided for in
any of the Environmental Laws or the presence of
which in the Environment is prohibited pursuant to
any of the Environmental Laws. For the purposes of
this definition, "CONTAMINANTS" means all solid,
liquid or gaseous matter, micro-organism, sound,
vibration, ray, heat, water, radiation or a
combination of any of them that adversely alters the
quality of the Environment.
<PAGE> 12
-7-
(MM) "INDEMNIFIED CLAIMS" means the Purchaser's
Indemnified Claims and the Vendor's Indemnified
Claims.
(NN) "INDEMNITEE" and "INDEMNITOR" have the respective
meanings ascribed thereto in Section 12.5.1 hereof.
(OO) "INITIAL PERIOD" has the meaning ascribed thereto in
Section 6.3.10 hereof.
(PP) "INITIAL 30-DAY PERIOD" has the meaning ascribed
thereto in Section 2.7.4 hereof.
(QQ) "INTELLECTUAL PROPERTY" means all patents, copyrights
(including renewal rights thereto), trade-marks,
service marks, trade names, industrial designs
(registered and unregistered and including
applications therefor and distinguishing guise) and
all other confidential information, improvements,
discoveries, data, trade secret information,
inventions, patterns, drawings, technical
information, research and development works,
concepts, methods, processes, procedures, know-how
and other intellectual property (in whatever medium
or support) owned or actively used by the Vendor with
respect to the Business.
(RR) "INTERIM BALANCE SHEET" means the unaudited balance
sheet of the Vendor with respect to the Business as
at June 30, 1995, and the related notes thereto, set
out in SCHEDULE 1.1(RR).
(SS) "INVENTORY" means all inventories, finished goods,
work-in-progress, raw materials, operating supplies,
shipping supplies, maintenance items, spare and
replacement parts and advertising materials owned or
ordered for purchase by the Vendor for use or sale in
the Business and whether situated at the Locations,
on consignment, in transit, ordered but not
delivered, warehoused or wherever situated.
(TT) The "KNOWLEDGE" of the Vendor means the knowledge of
the Persons listed in SCHEDULE 1.1(TT).
(UU) "LAW" means all applicable federal, provincial, state
or local codes, laws, statutes, regulations, decrees,
orders and by-laws, in force and applicable to the
Vendor with respect to the Business (otherwise than
as a result of retroactive application of a
subsequent legislative or regulatory change or
enactment adopted after the Adjustment Date) as at
the date with respect to which such defined term is
<PAGE> 13
-8-
used, but excluding Environmental Law.
(VV) "LEASED REAL PROPERTIES" means all real and immovable
properties leased by the Vendor as tenant, with
respect to the Business, as set out in SCHEDULE
1.1(VV).
(WW) "LIENS" means all liens, prior claims, privileges,
security interests, hypothecs, mortgages, pledges,
charges, encumbrances, easements and servitudes,
leases, licenses, options, claims, rights, ownership
or title retention agreements, conditional sale
agreements, rights of first refusal, leasing, sale
and leaseback agreements and all other agreements
that in substance secure payment or performance of an
obligation.
(XX) "LOCATIONS" means the Real Properties and the Leased
Real Properties.
(YY) "MATERIAL ADVERSE EFFECT" means, with respect to any
event, act, condition or occurrence of whatever
nature (including any adverse determination in any
litigation, arbitration, or governmental
investigation or proceedings), whether singly or in
conjunction with any other event, act, condition or
occurrence, whether or not related, a material
adverse change in, or a material adverse effect upon,
any of (i) the legality, validity or enforceability
of this Agreement or the ability of the Vendor to
execute and deliver this Agreement and consummate the
transactions contemplated hereby, or (ii) the
financial condition, results of operations, cash
flows, business or properties of (a) if for purposes
of determining compliance with Section 11.1, the
Corporation and its Subsidiaries (as such terms are
defined in the Share Purchase Agreement) and of the
Vendor with respect to the Business, taken as a
whole, and (b) for all other purposes (including for
purposes of the indemnities of Section 12.3), the
Vendor with respect to the Business.
(ZZ) "MATERIAL CONTRACTS" means those of the Contracts
which (a) require (or, in the absence of a default,
may require) an expenditure by or to the Vendor in
excess of $500,000, and (b) are:
(i) not in the ordinary course of the Business;
(ii) title retention, conditional sales, leasing,
sale and leaseback, loan, credit or security
agreements or other agreements that in
<PAGE> 14
-9-
substance secure payment or performance of
an obligation;
(iii) guarantees, sureties, promissory notes or
other negotiable instruments;
(iv) related to Intellectual Property or computer
software;
(v) leases for the Leased Real Properties;
(vi) personal and movable property leases and
licenses of the Vendor as lessee or licensee
thereunder, other than those referred to in
paragraphs (ii) or (iv) of this Section;
(vii) with Affiliates or Subsidiaries of the Vendor;
(viii) federal, provincial or local government or
governmental body contracts, tenders or bids
and bonds therefor;
(ix) non-competition or confidentiality agreements
or other agreements in restriction of trade;
(x) franchise and distribution agreements;
(xi) utility supply agreements; or
(xii) raw material purchase and supply agreements,
including, without limitation, those set out in
SCHEDULE 1.1(ZZ).
(AAA) "OPERATING PERMITS" means all permits, licenses,
certificates and authorizations of, and registrations
with, any federal, provincial or local government or
governmental body or regulatory agency pursuant to
any of the Laws, issued or granted to the Vendor for
the purpose of conducting the Business as presently
conducted, set out in SCHEDULE 1.1(AAA), but
excluding the Environmental Permits.
(BBB) "OWNER'S EQUITY" has the meaning ascribed thereto and
is determined pursuant to the formula set out in
SCHEDULE 1.1(BBB).
(CCC) "PARTIES" means the Vendor and the Purchaser
collectively and "PARTY" means either one of them.
<PAGE> 15
-10-
(DDD) "PERMITTED ENCUMBRANCES" means
(i) all liens, prior claims, privileges, security
interests, hypothecs, mortgages and charges
for real and immovable property taxes
contested in good faith by appropriate
proceedings for which adequate reserves are
being maintained or which are incurred in the
ordinary course of the Business in connection
with real and immovable property construction
or renovation or with workers or with
workers' compensation, unemployment
insurance, social security, retirement and
other similar legislation;
(ii) all easements and servitudes (including,
without limitation, easements and servitudes
for public utility services);
(iii) all encroachments, restrictive covenants and
licenses;
(iv) all site plan agreements, subdivision
agreements and leases;
(v) all minor irregularities of title; and
(vi) all by-laws, planning acts, building
restrictions and zoning regulations,
which affect the Real Properties and which (a)
individually would cost less than $50,000 to correct,
and (b) both individually and in the aggregate, are
of a minor nature and do not impair the use of those
of the Real Properties which are so affected for the
purpose of conducting the Business as presently
conducted.
(EEE) "PERSON" means an individual, partnership, joint
venture, association, cooperative, corporation,
public utility, trust or a government or any
department, body or agency thereof or any other
entity with juridical personality.
(FFF) "PREPAID EXPENSES" means all expenses paid by the
Vendor with respect to the Business or Purchased
Assets up to the Effective Time in respect of or for
any period which expires after the Effective Time.
(GGG) "PURCHASED ASSETS" means the following assets:
(i) the Real Properties;
(ii) the Equipment;
<PAGE> 16
-11-
(iii) the Rolling Stock;
(iv) the Inventory;
(v) the Accounts Receivable;
(vi) the Prepaid Expenses;
(vii) the Contracts;
(viii) the Operating Permits;
(ix) the Environmental Permits;
(x) subject to the provisions of Section 10.2
hereof, the Intellectual Property;
(xi) the Goodwill; and
(xii) the Books and Records.
(HHH) "PURCHASE PRICE" has the meaning ascribed thereto in
Section 2.2 hereof.
(III) "PURCHASER PROTECTED PERSONS" has the meaning
ascribed thereto in Section 12.3.1 hereof.
(JJJ) "PURCHASER'S COUNSEL" means Purchaser's Senior
Vice-President - Law and General Counsel.
(KKK) "PURCHASER'S EMPLOYEE PLANS" has the meaning ascribed
thereto in Section 6.2.2 hereof.
(LLL) "PURCHASER'S INDEMNIFIED CLAIMS" has the meaning
ascribed thereto in Section 12.3.1 hereof.
(MMM) "REAL PROPERTIES" means all real and immovable
properties owned by the Vendor with respect to the
Business, together with all plants, buildings,
structures, improvements and appurtenances thereon or
thereto and forming part thereof and all servitudes,
easements and rights of way in favour thereof, set
out in SCHEDULE 1.1(MMM).
(NNN) "RELEASE" means releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing or dumping.
<PAGE> 17
-12-
(OOO) "RETIRED EMPLOYEES" means all former employees of the
Vendor with respect to the Business, who, as at the
date of determination, have rights under the Vendor's
Employee Plans, provided, however, that no Employee
on Long-Term Medical Leave shall be deemed to be a
Retired Employee.
(PPP) "RIGHTS" has the meaning ascribed thereto in Section
3.2 hereof.
(QQQ) "ROLLING STOCK" means all automobiles, trucks,
trailers, material handling equipment and other
rolling stock owned or ordered for purchase by the
Vendor with respect to the Business and whether
situated at the Locations, in transit, ordered but
not delivered, warehoused or wherever situated, set
out in SCHEDULE 1.1(QQQ), and all assignable
warranties of any Person covering all or any part
thereof.
(RRR) "SALARIED EMPLOYEES" means all the employees
(including, for greater certainty, those of the
Employees on Medical Leave who are not Unionized
Employees), other than the Unionized Employees, who,
as at the date of determination, are employed in the
Business by the Vendor.
(SSS) "SAVINGS BONDS PROGRAMS" has the meaning ascribed
thereto in Section 6.4 hereof.
(TTT) "SECOND CORE REPRESENTATIONS" means those
representations and warranties contained in Sections
4.1, 4.2, 4.3.1.1(a), 4.3.1.2, 4.4, 4.7.1 and (to the
extent necessary for any Vendor's Employee Plans to
be in compliance with the Income Tax Act (Canada) and
the Supplemental Pension Plans Act (Quebec)) 4.16
hereof.
(UUU) "SECOND FIXTURE DATE" means the day which is the
Second Fixture Date pursuant to the Share Purchase
Agreement.
(VVV) "SHARE PURCHASE AGREEMENT" means the share purchase
agreement for the sale of all the issued and
outstanding shares of Domtar Gypsum Inc. entered into
concurrently herewith between, on the one hand, the
Vendor, Domtar Industries Inc. and Domtar Gypsum Inc.
and, on the other hand, the Purchaser.
(WWW) "SUBSIDIARY" of any Person means any corporation more
than 50% of whose shares of stock having general
voting power under ordinary circumstances to elect a
majority of the board of directors of such
corporation, irrespective of whether or not at the
time stock of any other class or classes shall have
or might have voting power by reason of the happening
<PAGE> 18
-13-
of any contingency, is owned or controlled directly or
indirectly by such Person or by any other Subsidiary
of such Person.
(XXX) "SUBSIDIZED MORTGAGE PLANS" has the meaning ascribed
thereto in Section 6.6 hereof.
(YYY) "SUPPORT INSTRUMENTS" has the meaning ascribed
thereto in Section 9.11.
(ZZZ) "TERMINATION DATE" has the meaning ascribed thereto
in Section 14.1 hereof.
(AAAA) "THIRD PARTY CLAIM" means any demand or statement or
any notice or overt threat thereof which has been
made on or communicated to a Party by or on behalf of
any other Person and which, if maintained or
enforced, will or might result in a Claim of the
nature described in either Section 12.3 or 12.4
hereof.
(BBBB) "TRADE-MARKS AGREEMENT" has the meaning ascribed
thereto in Section 11.1.5 hereof.
(CCCC) "TRANSFERRING EMPLOYEES" means those of the Salaried
Employees at the Effective Time (i) who receive and
accept offers of employment from the Purchaser and
(ii) who are not Employees on Long-Term Medical
Leave.
(DDDD) "TRANSITIONAL PERIOD" has the meaning ascribed
thereto in Section 6.3.6 hereof.
(EEEE) "UNIONIZED EMPLOYEES" means all the employees
(including, for greater certainty, those of the
Employees on Medical Leave who were covered by a
collective agreement at the commencement of their
medical leaves) and who, as at the date of
determination, are employed in the Business by the
Vendor under a collective agreement.
(FFFF) "UNIONIZED NON-LEAVE EMPLOYEES" means, as at the date
of determination, those Unionized Employees who are
not Employees on Long-Term Medical Leave.
(GGGG) "U.S. GAAP" means generally accepted accounting
principles, as of December 31, 1994, set forth in the
opinions and pronouncements of the Accounting
Principles Board and the American Institute of
Certified Public Accountants and statements and
<PAGE> 19
-14-
pronouncements of the Financial Accounting Standards
Board (or agencies with similar functions of
comparable stature and authority within the
accounting profession) or in such other statements by
such other entity as may be in general use by
significant segments of the accounting profession.
(HHHH) "VENDOR PROTECTED PERSON" has the meaning ascribed
thereto in Section 12.4 hereof.
(IIII) "VENDOR'S COUNSEL" means Ogilvy Renault.
(JJJJ) "VENDOR'S EMPLOYEE PLANS" means all employee benefit
and pension plans, all other bonus, deferred
compensation, retirement, savings, excess benefit,
stock option or purchase, retention, termination,
severance and incentive plans, contracts, programs,
funds, arrangements or practices and all other plans,
contracts, programs, funds, arrangements or
practices, that provide or may provide money (other
than as current salary or wages), services, property
or other benefits, whether written or oral and
whether funded or unfunded, including, without
limitation, any that have been frozen or terminated
since the Financial Statements Date, and any trust,
escrow or similar agreement related thereto, whether
written or oral and whether funded or unfunded, which
are established or maintained by the Vendor with
respect to any of its Employees or Retired Employees,
independent contractors, directors, officers or
shareholders or with respect to which the Vendor has
made or is required to make payments, transfers or
contributions.
(KKKK) "VENDOR'S INDEMNIFIED CLAIMS" has the meaning
ascribed thereto in Section 12.4 hereof.
(LLLL) "VENDOR'S PENSION PLANS" means the Vendor's pension
plans for the Salaried Employees and Unionized
Employees, respectively set out in SCHEDULE 4.16.3.
1.2 Number and Gender
Words (including, without limitation, words and phrases
defined herein) importing the singular include the plural and
vice versa; and words (including, without limitation, words
and phrases defined herein) importing gender include all
genders.
<PAGE> 20
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1.3 ENTIRE AGREEMENT
This Agreement, together with the agreements entered into, and
other documents delivered, pursuant hereto or concurrently
herewith constitute the entire agreement between the Parties
on the subject matter hereof and supersede all prior
agreements, understandings, negotiations and discussions,
whether written or oral, of the Parties on the subject matter
hereof, other than the Confidentiality Agreement, and there
are no warranties, representations, undertakings, obligations,
covenants, conditions or other agreements between the Parties
in connection with the subject matter hereof except as
specifically provided herein or therein.
1.4 SCHEDULES
The Schedules referred to herein and attached hereto form an
integral part of this Agreement. Nothing set out in the
Schedules shall be deemed to establish a standard of
materiality.
1.5 GOVERNING LAW
This Agreement shall be governed by, and construed in
accordance with, the laws of the Province of Ontario and the
laws of Canada applicable therein.
1.6 AMENDMENT
No supplement or amendment of this Agreement shall be binding
upon the Parties unless expressly provided in a document duly
executed by the Parties.
1.7 WAIVER
The failure by either Party, at any time or for any period of
time, to require performance by the other Party of any of the
latter's respective obligations under this Agreement shall not
affect the former's rights thereafter to require such
performance. No waiver by either Party of any of the
provisions of this Agreement shall constitute or be deemed to
constitute a waiver of any other provision hereof (whether or
not similar) nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided in a document duly
executed by the Parties.
<PAGE> 21
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1.8 HEADINGS
The Article, Section and other subdivision headings contained
herein are included for convenience of reference only, are not
intended to be full or accurate descriptions of the content
thereof and shall not affect or be utilized in the
construction or interpretation of this Agreement.
1.9 TABLE OF CONTENTS AND LIST OF SCHEDULES
The table of contents and list of Schedules preceding this
Agreement are included for convenience of reference only and
shall not affect or be utilized in the construction or
interpretation of this Agreement.
1.10 CURRENCY
Unless otherwise indicated herein, all dollar amounts referred
to in this Agreement are in legal currency of the United
States of America and all dollar signs ($) used herein refer
to such currency. If for the purposes of any payment required
to be made in order to give effect to the provisions hereof it
is necessary to convert a sum of money in United States of
America currency into Canadian currency or vice versa, the
applicable rate of exchange shall be the spot buying rate of
exchange of Mellon Bank in Pittsburgh, Pennsylvania, at 12
noon on the date such payment is due.
1.11 SEVERABILITY
If any provision of this Agreement shall be held illegal,
invalid or unenforceable by any competent court or tribunal in
any relevant jurisdiction, such illegality, invalidity or
unenforceability shall attach only to such provision in such
jurisdiction and such provision shall be severed herefrom and
be ineffective to the extent of such illegality, invalidity or
unenforceability and shall not affect or impair or render
illegal, invalid or unenforceable such provision in any other
jurisdiction or any other provision of this Agreement in any
jurisdiction.
1.12 DELAYS
In calculating the delay or period of time within or following
which any act is to be done or step taken pursuant to this
Agreement, the day which marks the start of such delay or
period shall be excluded from such calculation.
ARTICLE 2. PURCHASE AND SALE AND PURCHASE PRICE
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2.1 PURCHASE AND SALE
Upon the terms and subject to the conditions of this
Agreement, the Vendor shall sell, assign and transfer to the
Purchaser and the Purchaser shall purchase, assume and accept
from the Vendor, at the Closing but with effect as at the
Effective Time, all of the Vendor's right, title and interest
in, to or under the Business and Purchased Assets for the
Purchase Price and upon the terms and conditions herein
contained.
2.2 PURCHASE PRICE
The purchase price for the Business and Purchased Assets shall
be, subject to the adjustments, if any, pursuant to the
provisions of Section 2.7 hereof, the amount of Seventy
Million Dollars ($70,000,000) (plus, if the Closing occurs
after the Second Fixture Date, interest on such amount at the
prime rate of Mellon Bank, as defined in Section 2.7.3 hereof,
calculated from the Second Fixture Date until paid in full)
(the "PURCHASE PRICE"). The Purchase Price and the Assumed
Liabilities shall be allocated by the Parties to the Business
and Purchased Assets as set out in SCHEDULE 2.2, and each
Party agrees to file its income tax returns in accordance with
such allocation.
2.3 PAYMENT OF PURCHASE PRICE
The Purchaser shall pay the Purchase Price at the Closing, at
the Closing Place, by wire transfer for, or certified cheque
in, the amount of the Purchase Price payable to the Vendor or
as directed by the Vendor.
2.4 TRANSFER TAXES
The Purchaser shall be liable for and pay, within the time
specified therefor, any and all federal, provincial and local
taxes (including, without limitation, goods and services,
sales, transfer and value added taxes), duties or other like
imposts and charges (including, without limitation, penalties
and interest) payable upon and in relation to the sale,
assignment and transfer of the Business and Purchased Assets
by the Vendor to the Purchaser pursuant hereto and all other
transactions pursuant to this Agreement, except for any income
tax payable by the Vendor.
2.5 TAX ELECTION
The Parties shall jointly make, execute and file, in a manner
consistent with SCHEDULE 2.2, an election under Section 22 of
the Income Tax Act (Canada) and the corresponding provisions
of all applicable provincial statutes in respect of the sale,
<PAGE> 23
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assignment and transfer of the Accounts Receivable, in each
case, on the forms and within the delays prescribed for such
purposes, and shall also prepare and file all of their
respective tax returns in a manner consistent with the
election stipulated in this Section 2.5.
2.6 GOODS AND SERVICES TAX ELECTION
The Parties shall jointly make and execute an election under
Section 167 of the Excise Tax Act (Canada) and Section 75 of
the Quebec Sales Tax Act on the forms prescribed for such
purposes along with any documentation necessary or desirable
in order to effect the transfer of the Business and Purchased
Assets by the Vendor without payment of any Goods and Services
Tax ("GST") or Quebec Sales Tax ("QST"). The Purchaser shall
file the election forms referred to in this Section 2.6,
together with any documentation necessary or desirable to give
effect to such election, with Revenue Canada and the Ministere
du Revenu du Quebec, respectively, together with the
Purchaser's GST and QST returns for the reporting period in
which the transactions provided for herein are consummated.
Notwithstanding such election, in the event that it is
determined by Revenue Canada or by the Ministere du Revenu du
Quebec that there is a GST or QST liability of the Purchaser
to pay GST or QST on all or part of the Business or Purchased
Assets, such GST or QST, as the case may be, shall, unless
already collected from the Purchaser and remitted by the
Vendor be forthwith remitted by the Purchaser to Revenue
Canada or the Ministere du Revenu du Quebec, as the case may
be. Should the Vendor be assessed by Revenue Canada or the
Ministere du Revenu du Quebec for any such GST or QST
liability, the Purchaser shall indemnify and hold harmless the
Vendor for all taxes, interest and penalties which the Vendor
may be required to pay.
2.7 Adjustment of Purchase Price
2.7.1 An adjustment, if any, based on U.S. GAAP, with
respect to the Purchase Price shall be made as of the
Adjustment Date as follows:
2.7.1.1 if the value of the Owner's Equity as
determined by the Adjustment Balance
Sheet exceeds the value of the Owner's
Equity as determined by the Interim
Balance Sheet, the Purchaser shall pay to
the Vendor, as an adjustment to the
Purchase Price, the amount of such
excess; and
<PAGE> 24
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2.7.1.2 if the value of the Owner's Equity as
determined by the Interim Balance Sheet
exceeds the value of the Owner's Equity
as determined by the Adjustment Balance
Sheet, the Vendor shall pay to the
Purchaser, as an adjustment to the
Purchase Price, the amount of such
excess.
2.7.2 The amount of any adjustment payable in accordance
with the provisions of this Section 2.7 shall bear
interest at the prime rate of Mellon Bank calculated
from the Adjustment Date until paid in full, and the
amount of any such adjustment and interest accrued
thereon shall be paid, subject to Section 2.7.4, on
the Adjustment Payment Date by wire transfer or
certified cheque payable to or as directed by the
Party entitled thereto pursuant to the provisions of
this Section 2.7. If the Adjustment Payment Date is
the Closing Date, the adjustment may be added to or
netted against the Purchase Price, as the case may
be.
2.7.3 For the purposes hereof, the "prime rate of Mellon
Bank" means the prime rate of Mellon Bank announced
by said Bank from time to time in Pittsburgh,
Pennsylvania, as its reference rate of interest
(commonly known as its prime rate) for commercial
loans made by said Bank in the United States in
United States of America dollars.
2.7.4 Within sixty (60) days after the Adjustment Date, the
Vendor shall (i) prepare the Adjustment Balance
Sheet, a calculation of Owner's Equity pursuant
thereto, and a calculation, in accordance with this
Section 2.7, of the Purchase Price adjustment (if
any) and (ii) deliver to the Purchaser a copy of such
Adjustment Balance Sheet and calculations. If the
Purchaser is satisfied that the Purchase Price
adjustment as calculated and submitted by the Vendor
has been properly calculated, the Purchaser shall so
notify the Vendor. If the Purchaser disagrees with
such calculation of the Purchase Price adjustment
(whether such objection relates to the mathematical
calculation thereof or of Owner's Equity, to the
Adjustment Balance Sheet or its preparation, or any
combination thereof) calculated by the Vendor, then
the Purchaser shall deliver to the Vendor, within
thirty (30) days after delivery to the Purchaser of
the Vendor's calculation of the Purchase Price
adjustment (the "INITIAL 30-DAY PERIOD"), a written
description of any adjustment proposed by the
Purchaser to such calculation, and the Vendor and the
Purchaser shall negotiate in good faith to resolve
<PAGE> 25
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any disagreement with respect thereto. If the
Purchaser fails to give the Vendor notification
within the Initial 30-Day Period of any objection to
such calculation of the Purchase Price adjustment (or
gives objections only to portions thereof), then such
calculation (or the part not objected to) shall be
binding upon the Parties. Any undisputed amount
shall be paid promptly on or before the later of (i)
the Closing Date or (ii) the fifth (5th) Business Day
after the Initial 30-Day Period. If the Vendor and
the Purchaser have not resolved any such disagreement
(or portion thereof) within fifty (50) days following
the date on which the Purchaser receives the Vendor's
proposed adjustment to the Purchase Price, then such
disagreement shall be submitted to the Adjustment
Arbitrator for a final and binding resolution of the
disagreement and calculation of the final Purchase
Price adjustment. The costs and expenses for the
services of the Adjustment Arbitrator shall be borne
by the Party whose position in the dispute submitted
to the Adjustment Arbitrator has the greatest dollar
discrepancy from the calculation determined by the
Adjustment Arbitrator.
The Adjustment Arbitrator shall be chosen as follow:
(i) if the amount of the dispute is less than or
equal to $1,000,000, the Adjustment
Arbitrator shall be KPMG-Peat Marwick in
Chicago; or
(ii) if the amount of the dispute is in excess of
$1,000,000, then three arbitrators shall be
chosen from a list of ten (10) disinterested
accountants in Chicago or its vicinity
compiled by the American Arbitration
Association, with the Vendor and the
Purchaser alternatively striking a name from
such list until only three names remain. The
Vendor shall have the right to strike the
first name, and such right shall be exercised
within five (5) Business Days after the list
is presented to both the Vendor and the
Purchaser. Thereafter in turn, the Purchaser
and the Vendor shall have two (2) Business
Days after notification to it of the last
name stricken by the other Party, to strike a
name from the list until only three (3) names
are left. The arbitrators shall be those
three (3) Persons whose names remain after
the above process. If any such Person cannot
or does not serve as an arbitrator, then such
Person shall be replaced by the Person whose
name was last stricken who is available. If
any Party fails to strike a name from the
list within the allotted time, then the other
<PAGE> 26
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Party shall have the right to name the three
arbitrators.
Each of the Parties represents and warrants to the
other Party that it has disclosed to the other Party
all significant business and other relationships that
it has had with KPMG-Peat Marwick on or after January
1, 1993.
The Adjustment Balance Sheet shall present fairly the
financial position of the Vendor with respect to the
Business, and shall be based on the books and records
of the Vendor which will be kept, and such Adjustment
Balance Sheet shall be calculated, in accordance with
U.S. GAAP applied on a basis consistent with the
period covered by the Financial Statements and the
Interim Balance Sheet. All liabilities, contingent
or otherwise, of the Vendor with respect to the
Business which are required to be reflected or
reserved against in the Adjustment Balance Sheet
shall be reflected therein.
ARTICLE 3. TRANSFER OF BUSINESS AND PURCHASED ASSETS
3.1 TRANSFER AND DELIVERY
Subject to the provisions of Sections 3.2 and 3.3 hereof, at
the Closing, the Vendor shall execute and deliver to the
Purchaser all such instruments of transfer and documents of
title as shall be necessary to transfer title to the Business
and Purchased Assets to the Purchaser, and shall deliver to
the Purchaser possession of the Business and Purchased Assets,
in each case, with effect as at the Effective Time.
3.2 ASSIGNMENT
Nothing in this Agreement shall be construed as a sale,
assignment or transfer, or an attempted sale, assignment or
transfer, of any of the Contracts, Accounts Receivable,
Operating Permits, Environmental Permits or other Purchased
Assets (collectively, the "RIGHTS") if such Right can only be
obtained or exercised by the Purchaser if it is re-issued or
issued to the Purchaser by a Person (if such re-issuance or
issuance has not been obtained) or if such Right is not
saleable, assignable or transferable without the consent,
approval, registration, filing, application, notice, transfer,
order, qualification, waiver or other action of any kind of a
Person (a "CONSENT") (if such Consent has not been obtained)
and such sale, assignment or transfer or attempted sale,
assignment or transfer would constitute a breach of such Right
or of any agreement or instrument by which the Vendor is bound
with respect to such Right. The Vendor hereby represents and
<PAGE> 27
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warrants that set forth on SCHEDULE 3.2 is a true, correct and
complete list of all Consents, the failure of which to obtain
prior to the Closing Date might reasonably be expected to have
a Material Adverse Effect.
3.3 CONSENTS TO ASSIGNMENTS
The Vendor shall exercise its best efforts to obtain, and
cooperate with the Purchaser for the purpose of obtaining, all
Consents of all Persons necessary for the sale, assignment or
transfer by the Vendor to the Purchaser of the Rights
(including, without limitation, the re-issuance or issuance in
the name and for the benefit of the Purchaser of the Operating
Permits and Environmental Permits or of permits, licenses,
certificates and authorizations to replace those of the
Operating Permits or Environmental Permits which are
non-saleable, non-assignable or non-transferable). If any
Person whose Consent is required does not consent to the sale,
assignment or transfer of any of the Rights from the Vendor to
the Purchaser, the Vendor shall, at the request of the
Purchaser and to the extent permitted by the Laws and
Environmental Laws, enforce, use, carry-out and comply with
such Right against such Person as mandatary and agent, and for
the exclusive benefit of, the Purchaser, provided that the
Vendor shall not be liable for any loss (including, without
limitation, loss of profits or economic loss) or damages
(including, without limitation, indirect, consequential or
incidental damages) suffered or incurred by the Purchaser as a
result of the failure to obtain any Consent to the sale,
assignment or transfer of the Rights (including, without
limitation, the re-issuance or issuance in the name and for
the benefit of the Purchaser of the Operating Permits and
Environmental Permits or of permits, licenses, certificates
and authorizations to replace those of the Operating Permits
or Environmental Permits which are non-saleable,
non-assignable or non-transferable) or arising from any such
attempted sale, assignment or transfer.
3.4 ASSUMPTION OF ASSUMED LIABILITIES
The Purchaser shall assume and become liable for, and shall
pay, perform, discharge, satisfy and fulfil, in a timely
manner and strictly in accordance with their terms, the
Assumed Liabilities as at and with effect from the Effective
Time.
3.5 NON-ASSUMED LIABILITIES
The Vendor shall remain liable for, and pay, perform,
discharge, satisfy and fulfill, in a timely manner and
strictly in accordance with their terms, all its liabilities
<PAGE> 28
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relating to the Business that are not Assumed Liabilities.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE VENDOR
The Vendor represents and warrants to the Purchaser as follows:
4.1 INCORPORATION AND AUTHORIZATION
The Vendor is a corporation duly incorporated, organized,
validly existing and in good standing under the laws of Canada
and has full capacity, power and authority, corporate and
otherwise, to execute, deliver and perform this Agreement and
to consummate the transactions contemplated hereby, and has
been duly authorized to execute and become a party to this
Agreement and to consummate the transactions provided herein
or pursuant hereto.
4.2 ENFORCEABILITY OF THE AGREEMENT
This Agreement constitutes a legal, valid and binding
obligation of the Vendor enforceable against it in accordance
with its terms, except to the extent that the enforcement
hereof may be limited by bankruptcy, insolvency, arrangement,
reorganization, moratorium or other similar laws relating to
creditors' rights generally and general principles of equity
(regardless of whether enforceability is considered in a
proceeding in equity or at law).
4.3 NO CONFLICT
4.3.1 Neither the entering into of this Agreement nor
the consummation by the Vendor of any of the
transactions contemplated hereby shall:
4.3.1.1 with or without the giving of notice
or the lapse of time, or both,
violate, conflict with, or result in
a breach or default under, or cause
the termination of, (a) any of the
provisions of the articles of
incorporation, articles of
amendment, certificates in respect
thereto, by-laws or other charter
documents of the Vendor or of any
written shareholders agreement or
shareholders, stock or voting trust
to which the Vendor is a party or
(b) any Law or Environmental Law to
which the Vendor is subject;
<PAGE> 29
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4.3.1.2 with or without the giving of notice
or the lapse of time, or both,
violate, conflict with, or result in
a breach or default under, or cause
the termination of, any written
Contract, except for such
violations, conflicts, breaches,
defaults, or terminations which are
not likely to have a Material
Adverse Effect; or
4.3.1.3 result in the creation or imposition
of any Lien upon the Purchased
Assets.
4.3.2 There are no judicial, quasi-judicial,
administrative, quasi-administrative or
arbitration proceedings pending against the
Vendor which, if adversely determined, may
interfere with the sale, assignment, transfer or
delivery of the Business and Purchased Assets or
the consummation of any of the transactions
herein provided.
4.4 NO OPTION
No Person has any agreement, option or right capable of
becoming an agreement or option to acquire the Business or any
of the Purchased Assets, or that would restrict the ability of
the Vendor to transfer the Purchased Assets to the Purchaser
hereunder, other than pursuant to purchase orders for
Inventory accepted by the Vendor in the ordinary course of the
Business.
4.5 BUSINESS
Except as set out in SCHEDULE 4.5, the Vendor is conducting
the Business in compliance with all Laws of each jurisdiction
in which it presently conducts the Business and is duly
qualified, licensed or registered in each jurisdiction in
which the nature of the Business or the Purchased Assets makes
such qualification, licensing or registration necessary,
except where the failure to so comply or to be so qualified,
registered or licensed is not likely to have a Material
Adverse Effect.
4.6 FINANCIAL STATEMENTS
4.6.1 The Financial Statements present fairly, in all
material respects, the results of operations and
cash flows of the Business, for the periods
covered by the relevant statements forming part
of the Financial Statements.
<PAGE> 30
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4.6.2 The Interim Balance Sheet presents fairly, in all
material respects, the financial position of the
Business as at the date thereof.
4.6.3 The Financial Statements and the Interim Balance
Sheet are based on the books and records of the
Vendor which have been kept, and such Financial
Statements and Interim Balance Sheet have been
calculated, in accordance with U.S. GAAP applied
on a consistent basis throughout the periods
involved.
4.6.4 There are no liabilities, contingent or
otherwise, of the Vendor with respect to the
Business not reflected in the Financial
Statements or Interim Balance Sheet or in the
notes thereto which are required to be disclosed
therein in accordance with U.S. GAAP.
4.7 PURCHASED ASSETS
4.7.1 Subject to Permitted Encumbrances and except as
set out in SCHEDULE 4.7, the Vendor owns and
possesses the Purchased Assets with good and
marketable title thereto free and clear of all
Liens and also with registered or recorded title
to the Real Properties and the Vendor has the
exclusive right to possess, sell, assign and
transfer the Purchased Assets.
4.7.2 Except as otherwise expressly provided in this
Agreement, the Purchased Assets are sold,
assigned and transferred by the Vendor to the
Purchaser and purchased, assumed and accepted by
the Purchaser without any warranty whatsoever
including, for greater certainty, any legal,
statutory, contractual or customary warranty.
4.7.3 The Purchased Assets include all tangible
personal and real properties necessary to permit
the Purchaser to conduct the Business in the same
manner as such Business has been conducted by the
Vendor since December 31, 1994, without any need
for replacement, refurbishment or repair
otherwise than in the ordinary course of Business
and in a manner consistent with the past
practices of the Vendor for the Business.
4.8 REAL PROPERTIES
4.8.1 Subject to Permitted Encumbrances, the Real
Properties and the use of the Leased Real
Properties do not violate, contravene or breach
<PAGE> 31
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and are used in compliance with the Laws, except
for such violations, contraventions, breaches and
non-compliances which, individually or in the
aggregate, are not likely to have a Material
Adverse Effect. Except as set out in SCHEDULE
4.8.1 or except for Permitted Encumbrances, there
does not exist (i) any encroachment by any
building or structure not owned by the Vendor on
the Real Properties nor any encroachment by any
of the buildings and structures constituting
part of or located on the Real Properties on any
real property not included in the Real Properties
or (ii) any condemnation proceedings or, to the
best of the Vendor's knowledge, any threat
thereof relating to the Real Properties which,
in either case, is likely to have a Material
Adverse Effect. The Real Properties and the
Leased Real Properties are in compliance with
the Planning Act (Ontario) and all comparable
legislation in the other Canadian jurisdictions.
4.8.2 All personal property taxes, ad valorem taxes,
real and immovable property taxes, surtaxes,
charges, levies, rates, duties and assessments,
whether general or special, and real and
immovable property mutation taxes due and payable
pursuant to the Laws with respect to the Real
Properties before the Adjustment Date and any
interest and penalties thereon or adjustments
thereto, have been paid by the Vendor or such
taxes, surtaxes, charges, levies, rates, duties
and assessments shall be reflected and reserved
against in the Adjustment Balance Sheet.
4.8.3 The buildings, plants and structures included in
the Real Properties are in good condition and
repair and are adequate for the conduct of the
Business as conducted by the Vendor since
December 31, 1994, except for normal wear and
tear and normal usage.
4.9 EQUIPMENT, ROLLING STOCK AND INVENTORY
4.9.1 The Equipment and Rolling Stock and the equipment
leased by the Vendor under the lease, leasing or
sale and leaseback agreements forming part of the
Material Contracts (other than any idle item
thereof) are in good condition and repair and are
adequate for the conduct of the Business as
conducted by the Vendor since December 31, 1994,
except for normal wear and tear and normal usage.
<PAGE> 32
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4.9.2 The Inventories reflected in the Interim Balance
Sheet or subsequently acquired and properly
included in the Adjustment Balance Sheet are
reflected therein at the lower of cost or market
value in accordance with U.S. GAAP and are, in
all material respects, of good and marketable
quality and in sufficient quantity for the
conduct of the Business as presently conducted,
and the reserves for obsolete or surplus
inventories reflected on the Interim Balance
Sheet and Adjustment Balance Sheet are and shall
be adequate as at the respective dates thereof in
accordance with U.S. GAAP consistently applied.
4.9.3 The Accounts Receivable reflected in the Interim
Balance Sheet are, and the Accounts Receivable
that will be reflected in the Adjustment Balance
Sheet will be, reflected therein in accordance
with U.S. GAAP and are and will be bona fide,
have been and will be properly recorded in the
ordinary course of the Business and represent
amounts due for goods or services sold or
rendered in the ordinary course of the Business.
The reserves for doubtful accounts reflected on
the Interim Balance Sheet and Adjustment Balance
Sheet are and shall be adequate as at the
respective dates thereof in accordance with U.S.
GAAP consistently applied.
4.10 OPERATING PERMITS
Except as set out in SCHEDULE 4.10, the Operating Permits are
all the material permits, licenses, certificates and
authorizations of, and registrations with, any federal,
provincial or local governmental body or regulatory agency
necessary to conduct the Business as presently conducted, and
the Operating Permits are in good standing and the Vendor is
in compliance in all material respects thereunder.
4.11 BOOKS AND RECORDS
The Books and Records include all such books, records, files
and documentation as are reasonably necessary for the conduct
of the Business as presently conducted. The Books and Records
have been maintained in accordance with sound business
practices and present fairly, in all material respects, the
matters referred to therein.
4.12 CONTRACTS
4.12.1 Except as set out in SCHEDULE 1.1(ZZ) OR 4.12,
the Material Contracts have been entered into in
the ordinary course of the Business and are in
full force and effect. No material default,
<PAGE> 33
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violation or breach on the part of the
Vendor exists in respect of the Material
Contracts and, to the best of the Vendor's
knowledge, no event exists which, in the case of
any default, violation or breach but for the
lapse of time, the giving of notice, or both,
would entitle the other contracting Person to
terminate any of the Material Contracts or would
have a Material Adverse Effect.
4.12.2 To the best of the Vendor's knowledge, there is
no default, violation or breach under any of the
Material Contracts on the part of the other
contracting Person.
4.12.3 True, correct and complete copies of all Material
Contracts, including any amendments thereto, have
been made available to the Purchaser, along with
a detailed description and explanation of all
oral Material Contracts.
4.13 INSURANCE
4.13.1 The Vendor, the Business and the Purchased Assets
are insured with financially sound and reputable
insurers against claims, losses and damages from
all reasonably foreseeable liability, hazards and
risks, to such extent and in such amounts and
with such deductible amounts therefrom as is
customary for reasonably prudent Persons
operating like businesses and owning like
properties, all as provided for in and by the
policies and contracts of insurance set out in
SCHEDULE 4.13.
4.13.2 All such policies and contracts of insurance are
in full force and effect, and the Vendor is in
good standing and compliance with respect to each
such policy or contract to which it is a party.
The Vendor has not received notice of any pending
or threatened cancellation of any such insurance
or of any premium increase. Except as set out in
SCHEDULE 4.13, there are no pending claims
against such insurance as to which insurers are
defending under reservation of rights or have
denied liability, and there exists no claim under
such insurance that has not been properly filed
with such insurers by the Vendor.
4.14 INTELLECTUAL PROPERTY
4.14.1 SCHEDULE 4.14 sets out a true and complete list
of all registered patents and copyrights and all
registered or unregistered trade-marks, service
marks, trade-names and industrial designs
<PAGE> 34
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(including, in each case, any registrations or
applications therefor) owned or actively used by
the Vendor with respect to the Business. With
respect to any patent, copyright, trade-mark,
service mark, trade name or industrial design
listed in SCHEDULE 4.14 which is not owned
in its entirety by the Vendor and included
within the Intellectual Property to be
transferred pursuant hereto, the Vendor has (i)
identified in SCHEDULE 4.14 the owner of the
subject patent, copyright, trade-mark, service
mark, trade-name or industrial design and (ii)
delivered to the Purchaser true and correct
copies of the licenses or other agreements
authorizing the Vendor's use thereof. Except as
specifically disclosed in SCHEDULE 4.14, no
rights under any such licenses or agreements will
be terminated, limited or otherwise adversely
affected as a result of the transactions
contemplated hereunder.
4.14.2 Except as set out in SCHEDULE 4.14, there is not
any claim existing or, to the best of the
Vendor's knowledge, threatened of adverse
ownership, invalidity or other opposition to or
conflict with any of the patents, copyrights,
trade-marks, service marks, trade-names and
industrial designs (including, in each case, any
registrations or applications therefor) listed in
SCHEDULE 4.14, nor does the conduct of the
Business by the Vendor breach any registered or,
to the best of the Vendor's knowledge,
unregistered patent, copyright, trade-mark,
service mark, trade-name or industrial design or
any other intellectual property right owned by
any other Person.
4.15 ENVIRONMENTAL MATTERS
Except as set out in SCHEDULE 4.15:
4.15.1 The Environmental Permits are all the permits,
licenses, certificates and authorizations of, and
registrations with, any of the Environmental
Authorities pursuant to the Environmental Laws
necessary to conduct the Business substantially
as presently conducted. The Environmental
Permits are in full force and effect and the
Vendor is in substantial compliance in all
respects thereunder. The Vendor is in compliance
with the Environmental Laws applicable to the
conduct of the Business, except to the extent
such non-compliance would not constitute a
Material Adverse Effect.
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4.15.2 There is no claim, suit, action or other
proceeding, including appeals and applications
for review, outstanding or pending or, to the
best of the Vendor's knowledge, threatened
against the Vendor in respect of the Business or
Purchased Assets pursuant to any of the
Environmental Laws. To the best of the Vendor's
knowledge, no facts or circumstances exist which
are reasonably likely to give rise to such a
claim, suit, action or other proceeding which
would have a Material Adverse Effect.
4.15.3 The Vendor has not caused the Release of any
Hazardous Substances on or from the Locations,
except in such a manner or quantity as would not
constitute a violation of any of the
Environmental Laws or Environmental Permits or
would not reasonably be expected to result in a
Material Adverse Effect.
4.15.4 The Vendor has maintained in respect of the
Business and Purchased Assets records
substantially in the manner and for the time
periods required by the Environmental Laws and
Environmental Permits.
4.15.5 The Vendor has no knowledge of any fact or
circumstance that is likely to prohibit or
prevent the issuance to the Purchaser of any of
the permits, licenses, certificates and
authorizations of, and registrations with, any of
the Environmental Authorities pursuant to any of
the Environmental Laws, which are necessary for
the Purchaser to conduct the Business
substantially as presently conducted.
4.15.6 The Vendor has not received any Environmental
Notice pursuant to any of the Environmental Laws
and, to the best of the Vendor's knowledge, there
are no facts or circumstances that would result
in the issuance of an Environmental Notice (i)
which would require that capital expenditures in
excess of $1,000,000 in the aggregate be made in
respect of the Business or Purchased Assets as a
condition of compliance with all of the
Environmental Laws or Environmental Permits, or
(ii) to the effect that any of the Environmental
Permits is about to be made subject to
limitations or conditions or revoked.
4.15.7 The Vendor has delivered to the Purchaser true,
correct and complete copies of all material
environmental audit reports which have been
prepared in respect of the Business in the
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five (5) year period ending on the date of this
Agreement by or for the Vendor and which are in
its possession.
4.16 EMPLOYEES, PENSION AND OTHER BENEFIT PLANS
4.16.1 SCHEDULE 4.16.1 lists, as at the date of this
Agreement, (i) all the Employees together with
their respective positions, years of employment
and rates of remuneration, (ii) all the Employees
on Medical Leave who are receiving benefits under
the Law or the Vendor's Employee Plans, together
with their respective entitlement under the
Vendor's Employee Plans, and (iii) the Retired
Employees. All Employees who are Employees on
Medical Leave and Employees on Short-Term Medical
Leave, as at the date of this Agreement, are
included (without limitation) and specifically so
designated in SCHEDULE 4.16.1.
4.16.2 Except as set out in SCHEDULE 4.16.2, the Vendor
is not, with respect to the Business, a party to
or bound by any collective bargaining agreement
or any other agreement with, or commitment to,
any union of employees or any contract of
employment, written or oral, with any of its
Employees. The bargaining agents set out in
SCHEDULE 4.16.2 are the exclusive bargaining
agents of the Unionized Employees at the Vendor's
plants and the conditions governing the working
conditions of the Unionized Employees are
determined by the collective agreements set out
in SCHEDULE 4.16.2 between the Vendor and the
said unions.
4.16.3 The only Vendor's Employee Plans are those set
out in SCHEDULE 4.16.3 and except as set out in
SCHEDULE 4.16.3 the Vendor is not, with respect
to the Business, a party to nor operates any
other employee benefit or pension plan, bonus,
deferred compensation, retirement, savings,
excess benefit, stock option or purchase,
retention, termination, severance or incentive
plan, contract, program, fund, arrangement or
practice or any other trust, escrow or similar
agreement related thereto with respect to any of
its Employees, Retired Employees, directors,
officers or shareholders or with respect to which
the Vendor has made or is required to make
payments, transfers or contributions. The
Vendor's Employee Plans are duly registered where
required by, and are in good standing under, the
Laws, and each of the pension plans thereunder
are in a funding status as set out in SCHEDULE
4.16.3.
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4.16.4 The Vendor has delivered to the Purchaser true,
complete and up-to-date copies of all documents
embodying or summarizing the Vendor's Employee
Plans including, without limitation, all
amendments thereto, all funding agreements
thereunder, all summaries of the Vendor's
Employee Plans provided by the Vendor to any of
its Employees, Retired Employees, directors,
officers or shareholders and all material
communications received from or sent to the
regulatory authorities as well as the most recent
actuarial valuation filed with the regulatory
authorities for the Vendor's Employee Plans for
which valuations are required.
4.16.5 No promise or commitment has been made by the
Vendor (i) to amend any of the Vendor's Employee
Plans or to provide increased benefits thereunder
to any of its Employees, Retired Employees,
directors, officers or shareholders except
pursuant to the requirements, if any, of the
Vendor's Employee Plans or collective bargaining
agreements, nor (ii) to establish any new
employee benefit or pension plan or bonus,
deferred compensation, retirement, savings,
excess benefit, stock option or purchase,
retention, termination, severance or incentive
plan, contract, program, fund, arrangement or
practice or any new trust, escrow or similar
agreement related thereto with respect to any of
its Employees, Retired Employees, directors,
officers or shareholders. Except as set out in
SCHEDULE 4.16.5, no actual amendment to any plan,
policy or arrangement referenced in this Section
4.16.5 has been adopted by the Vendor since the
Financial Statements Date.
4.16.6 Each of the Vendor's Employee Plans has been
maintained, operated and administered in material
compliance with its terms and all related
documents or agreements and in compliance with
the Laws.
4.16.7 All required employer contributions, premium
payments and source-deducted employee
contributions under the Vendor's Employee Plans
have been made and remitted to the funding agents
thereunder including, without limitation, all
current service costs and special payments within
the time prescribed by the relevant Vendor's
Employee Plan and the Laws.
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4.16.8 All insurance premiums required with respect to
the Vendor's Employee Plans have been paid, made,
accrued or booked within the time prescribed by
the relevant Vendor's Employee Plan and the Laws.
4.16.9 All benefits, expenses and other amounts due and
payable to or under the Vendor's Employee Plans,
and all contributions, transfers or payments
required to be made to the Vendor's Employee
Plans, have been paid, made, accrued or booked
within the time prescribed by the relevant
Vendor's Employee Plan and the Laws.
4.16.10 Except as set out in SCHEDULE 4.16.10, the Vendor
has not, with respect to the Business, taken any
"contribution holiday" with respect to, nor has
withdrawn any amount from, the Vendor's Employee
Plans.
4.16.11 There are no material claims pending or, to the
best of the Vendor's knowledge, threatened by or
on behalf of any of the Vendor's Employee Plans
or by any Employee other than routine claims for
benefits.
4.16.12 Except as set out in SCHEDULE 4.16.12, (i) there
is no strike, lockout, or other labour trouble
(including, but not limited to, any work slowdown
or work stoppage) pending or, to the best of the
Vendor's knowledge, threatened which,
individually or in the aggregate, could
reasonably be expected to have a Material Adverse
Effect; (ii) there is no union election pending
or, to the best of the Vendor's knowledge,
threatened nor, to the best of the Vendor's
knowledge, is any union conducting any organizing
campaign with respect to any of the Employees;
and (iii) there is no outstanding grievance under
any collective bargaining agreement or unfair
labour practice charge pending or, to the best of
the Vendor's knowledge, threatened which,
individually or in the aggregate, could
reasonably be expected to have a Material Adverse
Effect.
4.17 LITIGATION
Except as set out in SCHEDULE 4.17:
4.17.1 there is not any suit, action, claim or other
proceeding or investigation pending or, to the
best of the Vendor's knowledge, threatened
against or affecting the Vendor or to which the
Vendor is a party, with respect to the Business
in or before or by any judicial, quasi-judicial,
<PAGE> 39
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administrative or quasi-administrative court,
tribunal, arbitrator, agency or other
governmental body. Except as described in
SCHEDULE 4.17, none of such matters, if adversely
determined, is likely to have a Material Adverse
Effect;
4.17.2 there is not any order, decree, injunction or
judgment of any judicial, quasi-judicial,
administrative or quasi-administrative court,
tribunal, arbitrator, agency or other
governmental body against or affecting the Vendor
with respect to the Business.
4.18 ABSENCE OF MATERIAL CHANGES
Except as set out in SCHEDULE 4.18, the Business has been
conducted by the Vendor since the Financial Statements Date in
the ordinary course and in a manner consistent with the
practices applied during the periods specified in the
Financial Statements, and since the Financial Statements Date,
except as set out in SCHEDULE 4.18, the Vendor has not, with
respect to the Business:
4.18.1 incurred or discharged any obligation or
liability (whether accrued, absolute or
contingent) other than in the ordinary course of
and in a manner consistent with the Vendor's past
practices for the Business;
4.18.2 entered into any transaction, contract,
agreement, indenture, instrument or commitment
other than in the ordinary course of and in a
manner consistent with the Vendor's past
practices for the Business;
4.18.3 suffered or incurred any damage, destruction,
loss or liability (whether or not covered by any
insurance), any strike, lock-out or other labour
trouble such as slow down or work stoppage, or
any loss of any of its employees, customers,
suppliers or distributors which, individually or
in the aggregate, has had a Material Adverse
Effect;
4.18.4 suffered any shortage or cessation or
interruption of raw materials, supplies or
utilities which, individually or in the
aggregate, has had a Material Adverse Effect;
4.18.5 made any change in its accounting principles,
policies and practices as utilized in the
preparation of the Financial Statements;
<PAGE> 40
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4.18.6 granted to any customer any allowance or discount
or changed its pricing, credit or payment
policies other than in the ordinary course of and
in a manner consistent with the Vendor's past
practices for the Business;
4.18.7 incurred any indebtedness, liability or
obligation (absolute, accrued, contingent or
otherwise) other than in the ordinary course of
and in a manner consistent with the Vendor's past
practices for the Business, or permitted any of
the Purchased Assets to be subject to a Lien;
4.18.8 sold, leased or otherwise disposed of any of the
Purchased Assets or any right, title or interest
therein other than in the ordinary course of and
in a manner consistent with the Vendor's past
practices for the Business;
4.18.9 committed to any capital expenditure project or
made any investment, in either case in excess of
$1,000,000, not disclosed to the Purchaser prior
to the date of this Agreement or consented to by
the Purchaser; or
4.18.10 authorized or agreed to do any of the foregoing
matters referred to in this Section 4.18.
4.19 VENDOR'S RESIDENCE
The Vendor is not a non-resident for the purposes of the
Income Tax Act (Canada) and the Taxation Act (Quebec).
4.20 FINDER'S FEE
No Person has, or as a result of any of the transactions
contemplated hereby shall have, as a result of any commitment
of the Vendor towards such Person any right, interest or claim
against or upon the Purchaser or any of its properties or the
Purchased Assets for any commission, fee or other compensation
as broker or finder or for services in any similar capacity.
4.21 FULL DISCLOSURE
The Vendor has made or caused to be made due enquiry with
respect to each of the representations and warranties
contained in this Agreement and in any other agreement
delivered by the Vendor to the Purchaser pursuant hereto and
for the purposes hereof, and none of the same intentionally
contains any untrue statement of a material fact or
intentionally omits to state a material fact necessary to make
<PAGE> 41
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any of the representations or warranties contained herein not
misleading.
4.22 REGISTRATION
The Vendor is registered for the purposes of Part IX of the
Excise Tax Act (Canada) and Chapter VIII of the Quebec Sales
Tax Act and its registration numbers are as follows:
Federal: 101438984
Quebec: 1001613819
4.23 GYPSUM ROCK RESERVES
SCHEDULE 4.23 sets forth a true, complete and correct report,
as of the date thereof, of all reserves of gypsum rock (i)
owned by Domtar Gypsum Inc. or (ii) owned by the Vendor and to
be transferred to the Purchaser as part of the Purchased
Assets.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Vendor as follows:
5.1 INCORPORATION AND AUTHORIZATION
The Purchaser is a corporation duly incorporated, organized,
validly existing and in good standing under the laws of
Georgia and has full capacity, power and authority, corporate
and otherwise, to execute, deliver and perform this Agreement
and to consummate the transactions contemplated hereby, and
has been duly authorized to execute and become a party to this
Agreement and to consummate the transactions provided herein
or pursuant hereto.
5.2 ENFORCEABILITY OF THE AGREEMENT
This Agreement constitutes a legal, valid and binding
obligation of the Purchaser enforceable against it in
accordance with its terms, except to the extent that the
enforcement hereof may be limited by bankruptcy, insolvency,
arrangement, reorganization, moratorium or other similar laws
relating to creditors' rights generally and general principles
of equity (regardless of whether enforceability is considered
in a proceeding in equity or at law).
5.3 NO CONFLICT
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5.3.1 Neither the entering into of this Agreement nor
the consummation by the Purchaser of any of the
transactions contemplated hereby shall, with or
without the giving of notice or the lapse of
time, or both, violate, conflict with, or result
in a breach or default under, or cause the
termination of, any of the provisions of the
articles of incorporation, articles of amendment,
certificates in respect thereto, by-laws or other
charter documents of the Purchaser or of any
written shareholders agreement or shareholders,
stock or voting trust to which the Purchaser is a
party or any Law to which the Purchaser is
subject.
5.3.2 There are no judicial, quasi-judicial,
administrative, quasi-administrative or
arbitration proceedings pending against the
Purchaser which, if adversely determined, may
interfere with the purchase of or payment for the
Business and Purchased Assets or the consummation
of any of the transactions herein provided.
5.4 FINDER'S FEE
No Person has, or as a result of any of the transactions
contemplated hereby shall have, as a result of any commitment
of the Purchaser towards such Person, any right, interest or
claim against or upon the Vendor or any of its properties for
any commission, fee or other compensation as broker or finder
or for services in any similar capacity.
ARTICLE 6. EMPLOYEES AND BENEFIT PLANS
6.1 EMPLOYEES
6.1.1 Except as otherwise provided in this Article 6,
all liabilities to the Employees or the Retired
Employees, determined as at the Effective Time,
or any other Person relating to the employment
of, or services rendered by, such Employees or
Retired Employees up to the Effective Time
(including all liabilities for (i) compensation
for services rendered by the Employees or Retired
Employees up to the Effective Time and related
employment and withholding taxes and (ii)
benefits accrued under the Vendor's Employee
Plans as at the Effective Time), shall be
Excluded Liabilities and shall be the sole and
complete responsibility of the Vendor.
<PAGE> 43
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6.1.2 Except as otherwise provided in this Article 6,
all liabilities to the Unionized Non-Leave
Employees, Transferring Employees or any other
Person, relating to the employment of, or
services rendered by, such Employees from and
after the Effective Time, shall be the sole and
complete responsibility of the Purchaser.
6.1.3 The Purchaser shall continue the employment of
the Unionized Employees as at the Effective Time
in conformity with the terms and conditions of
the applicable collective agreements set out in
SCHEDULE 4.16.2, as in effect at the Effective
Time and as amended from time to time by
agreement of the Purchaser and the bargaining
agents under the collective agreements. The
Purchaser shall assume the collective agreements
effective as at the Effective Time and shall
perform fully all rights, duties and obligations
pursuant to such collective agreements from and
after the Effective Time. The Vendor shall
retain any liabilities existing up to the
Effective Time under the collective agreements.
Subject to the provisions of Section 6.1.4, the
Purchaser shall offer employment to (a) the
Salaried Employees as determined as of the date
of this Agreement (as listed on SCHEDULE 4.6.1)
and (b) any Salaried Employees hired by the
Vendor between the date of this Agreement and the
Effective Time with the advance knowledge and
approval of the Purchaser; provided, however,
that notwithstanding the foregoing, the Purchaser
may, in its sole discretion, elect not to offer
employment to up to thirty (30) Salaried
Employees. Any offer of employment to such
Salaried Employees shall be under such terms and
conditions as the Purchaser, in its sole
discretion, may determine; provided that such
offer shall include: (i) participation in
employee benefit plans comparable to those
provided to the Purchaser's similar-situated
Canadian employees; (ii) credit for past service
(as defined in Section 6.2.3); and (iii) waiver
of any pre-existing condition exceptions under
the Purchaser's medical plans. Notwithstanding
anything in this Section 6.1.3 to the contrary,
the Purchaser shall have no obligation to offer
employment to (i) any Salaried Employee as at the
date of this Agreement who voluntarily terminates
employment prior to the Effective Time or who is
terminated by the Vendor for business reasons not
related to this Agreement or for cause prior to
the Effective Time and (ii) Salaried Employees on
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Long-Term Medical Leave at the Effective Time.
6.1.4 From and after the Effective Time, the employment
or cost of termination of employment of, or
severance obligations to or future compensation
to, the Transferring Employees and severance
obligations for those who refuse the Purchaser's
offer of employment, shall be the sole
responsibility of the Purchaser. For the
purposes of this Section 6.1 "severance
obligations" include, without limitation, claims
for severance pay, termination pay, notice
obligation, pay in-lieu of notice, damages for
wrongful or constructive dismissal or loss of
benefits, or other similar liabilities including
attorney's fees or judgements or settlements in
lieu of judgements, rendered in respect of a
termination of employment. The Vendor shall
retain all responsibility for severance
obligations with respect to the Salaried
Employees (up to thirty (30)) to whom the
Purchaser makes no offer of employment.
6.1.5 The Purchaser shall be responsible for workers'
compensation obligations for Unionized Employees
and Transferring Employees, pursuant to the Laws,
with respect to injuries and illnesses occurring
after the Effective Time. All other workers'
compensation obligations, with respect to the
Employees, pursuant to the Laws, other than the
Employees on Short-Term Medical Leave (subject to
Section 6.1.6 hereof), at the Effective Time
shall be the responsibility of the Vendor.
6.1.6 The Vendor shall retain responsibility for all
benefits liabilities (including, without
limitation, medical, long-term disability,
severance obligations (as defined in Section
6.1.4), workers' compensation and vacation pay)
with respect to Employees on Long-Term Medical
Leave at the Effective Time and, from and after
the effective date of transfer to long-term
medical leave status, the Employees on Short-Term
Medical Leave at the Effective Time who
thereafter transfer directly to long-term medical
leave status.
6.1.7 Subject to Section 6.1.5, the Purchaser shall be
responsible for all benefits liabilities
(including, without limitation, medical,
long-term disability, severance obligations (as
defined in Section 6.1.4), workers' compensation
and vacation pay) with respect to Employees on
Short-Term Medical Leave at the Effective Time
until the termination of their short-term medical
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leave or their transfer to a long-term
medical leave status.
6.2 BENEFIT PLANS
6.2.1 With effect as at the Effective Time, the
Unionized Non-Leave Employees, Transferring
Employees and Retired Employees shall cease to
participate in, or be covered by or entitled
under, the Vendor's Employee Plans and shall
cease to accrue benefits thereunder.
6.2.2 As soon as practicable after the Closing Date,
but in any event within six (6) months of the
Closing Date, the Purchaser shall, subject to the
provisions of Section 6.3 hereof, establish or
designate, with effect at the Effective Time,
employee benefit and pension benefit plans
covering the Unionized Non-Leave Employees,
Transferring Employees and Retired Employees (the
"PURCHASER'S EMPLOYEE PLANS"). Pension benefits
enjoyed by the Retired Employees up to the
Effective Time shall be continued after the
Effective Time by the Purchaser (subject to the
completion of the transfers contemplated in
Section 6.3), but will be administered through a
pension plan of the Purchaser's selection. Other
Retired Employee benefits shall be administered
by the Purchaser in accordance with the terms of
the applicable Vendor's Employee Plans and
applicable Laws.
6.2.3 With respect to the Transferring Employees, the
Purchaser and the Purchaser's Employee Plans
shall recognize all years of past service for
purposes of (i) participation in the Purchaser's
Employee Plans, (ii) determining the amount, if
any, of short- or long-term disability or
severance benefits due, (iii) for purposes of
vesting (including, without limitation,
eligibility for early retirement, disability and
benefit option and forms) under any pension plan,
(iv) determining vacation entitlement under the
Purchaser's applicable vacation policy and (v)
service awards. The Transferring Employees will
also receive credit toward any deductible under
the Purchaser's medical plans for expenses
incurred under the Vendor's corresponding plans
and shall not be subject to any pre-existing
condition limitation. For purposes of this
Section 6.2.3, "past service" means continuous
service with regard to the Business (i) as an
Employee of the Vendor and (ii) as an employee of
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predecessor companies prior to the acquisition of
the Business by the Vendor, but only to the
extent that such service is recognized, for
similar purposes immediately prior to the
Effective Time.
6.2.4 Subject to the provisions of Sections 6.1.6 and
6.3 and effective as of the completion of the
assets transfers contemplated in Section 6.3, the
Purchaser shall cause to be assumed by the
Purchaser's Employee Plans which receive such
asset transfers all the obligations of the
Vendor's Employee Plans which are pension plans
with respect to the Unionized Non-Leave
Employees, Transferring Employees and Retired
Employees as at the Effective Time. Prior to the
completion of the assets transfers described in
Section 6.3, the Vendor's Employee Plans shall
retain all liability with respect to such
obligations, as specified in more detail in
Section 6.3.5.
Except as otherwise specifically provided in this
Article 6 (and subject, in particular, but
without limitation, Section 6.1.6 with respect to
Employees on Medical Leave), the Purchaser's
Employee Plans which are employee plans shall be
responsible for the following benefits payments
with respect to the Unionized Non-Leave
Employees, Transferring Employees and Retired
Employees and their covered dependants, subject
to the terms and conditions of the particular
plan: (i) claims for health care benefits with
respect to expenses incurred by, services
performed for or supplies or pharmaceuticals
provided to such Persons after the Effective
Time; and (ii) claims for life insurance,
accidental death and dismemberment and short- and
long-term disability benefits with respect to
death, disability or injury arising or occurring
after the Effective Time. The Vendor's Employee
Plans shall be responsible for all other employee
plan claims incurred up to the Effective Time (of
the types referenced in this paragraph) of
Employees and Retired Employees and their
dependants. In all cases, the amount and types
of benefits payable shall be determined in
accordance with the terms of the affected
Purchaser or Vendor Employee Plan.
Division of responsibility between the Purchaser
and the Vendor for other types of employee
benefit plans, programs and arrangements shall be
determined in accordance with Sections 6.1.1,
6.1.2 and 6.1.4.
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6.2.5 Subject to the terms of the Purchaser's Employee
Plans, the Unionized Non-Leave Employees,
Transferring Employees and, if applicable,
Retired Employees shall be eligible to
participate in, be covered by and accrue benefits
under the Purchaser's Employee Plans from and
after the Effective Time.
6.2.6 The Vendor shall deliver to the Purchaser at the
Closing, the entire employment record of each of
the Unionized Non-Leave Employees, Transferring
Employees and Retired Employees including,
without limitation, the summary of the benefit
records of the Unionized Non-Leave Employees,
Transferring Employees and Retired Employees
under the Vendor's Employee Plans and all
information required to administer the
Purchaser's Employee Plans to the extent
permitted by the Laws.
6.3 PENSION PLANS
6.3.1 Without in any way detracting from its
obligations under Section 6.2 hereof and
notwithstanding the provisions of Section 6.1
hereof, and subject to the completion of the
transfer contemplated in Section 6.3.2 hereof,
the Purchaser assumes all responsibility for all
pension benefits accrued to the Unionized
Non-Leave Employees, Transferring Employees and
Retired Employees under the Vendor's Pension
Plans up to the Effective Time.
6.3.2 Subject to the registration of the Purchaser's
pension plans and all necessary regulatory
approvals and further subject to the provisions
of this Section 6.3, the Vendor shall transfer or
cause to be transferred to the Purchaser's
pension plans from the Vendor's Pension Plans,
the amounts determined under this Section with
respect to all the benefits accrued by the
Unionized Non-Leave Employees, Transferring
Employees and Retired Employees under the
Vendor's Pension Plans up to the Effective Time,
such transfer to occur no later than sixty (60)
Business Days after receipt of the last required
regulatory approval.
6.3.3 The Parties confirm that upon the completion of
the transfer contemplated in Section 6.3.2
hereof, the Vendor and the Vendor's Pension Plans
shall be completely discharged of all of their
respective obligations with respect to the
pension benefits accrued by the Unionized
Non-Leave Employees, Transferring Employees and
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Retired Employees under the said plans up to the
Effective Time.
6.3.4 As soon as practicable after the Closing Date,
but no later than sixty (60) Business Days after
the Closing Date, the Vendor shall initiate the
procedure leading to the division of the Vendor's
Pension Plans in order to allow for the transfer
of the amounts contemplated in Section 6.3.2
hereof (the "AMOUNTS").
6.3.5 Until the transfer of the Amounts is completed
pursuant to Section 6.3.2 hereof, the Vendor
shall administer and be liable for all
obligations with respect to all benefits accrued
to the Unionized Non-Leave Employees,
Transferring Employees and Retired Employees up
to the Effective Time, and shall make all
benefits payments, under the Vendor's Pension
Plans and the Amounts shall be adjusted
accordingly as at the date of the actual
transfer.
6.3.6 The Vendor shall not make, without the prior
written consent of the Purchaser, any
modification to the Vendor's Pension Plans
between the Effective Time and the date of the
actual transfer of the Amounts (the "TRANSITIONAL
PERIOD"), if such modifications would affect the
Amounts, the benefits accrued to the Unionized
Non-Leave Employees, Transferring Employees and
Retired Employees up to the Effective Time or the
contributions with respect to such benefits.
Notwithstanding anything in this Section 6.3.6 to
the contrary, if a change proposed by the Vendor
is mandated by the Law, the Vendor need not
obtain the Purchaser's prior approval (but prior
notice is still required) unless the latest
effective date of the change permitted by Law (as
applied to the Vendor Pension Plan in question)
falls more than sixty (60) days after the date on
which the requirement of the Law was first
published or the requirement of the Law may be
satisfied in more than one way.
6.3.7 For the purposes of Section 6.3.2 hereof, the
Amounts shall equal the projected benefit
obligation under the Vendor's Pension Plans in
respect of the Unionized Non-Leave Employees,
Tranferring Employees and Retired Employees. The
Amounts shall be determined as at the Effective
Time using the same funding actuarial methods and
assumptions as those used in the actuarial
valuations of the Vendor's Pension Plans as at
<PAGE> 49
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May 1, 1994 and filed with the Regie des rentes
du Quebec as set out in SCHEDULE 6.3.7.
For the purposes of this Section 6.3.7, the
projected benefit obligation will be calculated
on the basis that the temporary formulas set out
in the actuarial valuations referred to in the
preceding paragraph of this Section 6.3.7 are
permanent and that salary projections will be
extended without limit in accordance with normal
actuarial practice. In case of any ambiguity,
this paragraph of Section 6.3.7 shall prevail
over SCHEDULE 6.3.7. The Vendor undertakes to
amend the Vendor's Pension Plans prior to the
Closing Date so as to give effect to the
provisions contained in the preceding sentence.
6.3.8 The Vendor shall be responsible for the division
of the Vendor's Pension Plans in accordance with
the Laws, including the preparation of the
relevant actuarial reports. These reports shall
be completed within a period of five (5) months
from and after the Effective Time and a copy of
these reports shall be delivered to the Purchaser
prior to their filing with the relevant
regulatory authorities.
6.3.9 The Purchaser's actuary shall have sixty (60)
Business Days from receipt of such actuarial
reports to complete its review pursuant to the
standards set forth in Section 6.3.10 and to
report its findings to the Purchaser and the
Vendor. No filings with any regulatory body of
any kind (including for greater certainty, but
without limitation, actuarial reports) regarding
the division of the Vendor Pension Plans may be
made without prior review and approval of the
entire filing by the Purchaser. If the
Purchaser's actuary contests the Vendor's
actuary's calculations, a final determination
shall be made by an independent third party
actuary acceptable to the Parties, and each Party
shall be responsible for one half of the cost of
such final determination by such independent
third party actuary.
6.3.10 During the Transitional Period, the Amounts and
all adjustments thereof shall be credited with
interest at the following rates:
(i) for the period ending on the date of
determination of the last known rate of
return of the pension fund of the relevant
Vendor's Pension Plan (the "INITIAL
PERIOD"), the rates of return of the
<PAGE> 50
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pension fund of said relevant Vendor's
Pension Plan; and
(ii) from the end of the Initial Period to the
date of the actual transfer of the Amounts,
investment return rate assumed under the
actuarial assumptions set out in SCHEDULE
6.3.7.
The transfer of the Amounts and the adjustments
shall be made as set out in SCHEDULE 6.3.10.
6.3.11 The Vendor shall indemnify and hold the Purchaser
and the Purchaser's Employee Plans harmless
against any claims, liabilities and expenses
(including, for greater certainty and without
limitation, attorney's fees) arising from the
failure of the Vendor's Pension Plans to be in
compliance with applicable Laws (including,
without limitation, those pertaining to
registration standards and favourable tax
treatment of registered plans) at the time of the
asset transfers.
6.4 CANADA AND QUEBEC SAVINGS BONDS
Canada and Quebec savings bonds purchase programs (the
"SAVINGS BONDS PROGRAMS") have been instituted by the Vendor
for the benefit of its Employees. The Unionized Non-Leave
Employees and Transferring Employees listed in SCHEDULE 6.4
participate in the Savings Bonds Programs and their
contributions for the purchase of such bonds are deducted from
their salaries. The Vendor shall continue to administer the
Savings Bond Programs following the Effective Time, but shall
assign to the Purchaser, at the Closing but with effect as at
the Effective Time, the right to collect the payments due from
the said participating Employees with respect to the Savings
Bonds Programs. The Purchaser shall assume responsibility for
collecting the payments due from the said participating
Employees with respect to the Savings Bonds Programs and shall
remit to the Vendor such collected funds within thirty (30)
Business Days following the end of the calendar month in which
they are collected. The Purchaser's obligation in this regard
shall continue until the said participating Employees are no
longer employed by the Purchaser or, if earlier, have paid in
full the amounts remaining to be paid, under the Savings Bonds
Programs in effect as of the Effective Time.
The Vendor, immediately upon its receipt of the bonds, shall
distribute them to the said participating Employees. The
Purchaser will cooperate with the Vendor by providing to the
Vendor any changes of address with respect to the said
<PAGE> 51
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participating Employees and by notifying the Vendor of
the termination of the employment of any of the said
participating Employee. Upon the receipt by the Vendor of
such contributions withheld by the Purchaser from the pay of
the said participating Employees, the Vendor shall forever
release the Purchaser from any liability pertaining thereto.
6.5 EMPLOYEE SHARE PURCHASE AND EXECUTIVE STOCK OPTION AND
PURCHASE PLANS
The Vendor shall terminate, as at the Effective Time, its
Employee Share Purchase Plans and Executive Stock Option and
Purchase Plans set out in SCHEDULE 4.16.3 insofar as the
Employees and Retired Employees are concerned and shall be
responsible for all benefits accrued as at the Effective Time
by the Employees and Retired Employees entitled to such
benefits under such plans.
6.6 SUBSIDIZED MORTGAGE PLANS
The Purchaser shall assume the Vendor's obligations as at the
Effective Time under the Subsidized Mortgage Plans set out in
SCHEDULE 6.6 (the "SUBSIDIZED MORTGAGE PLANS") with respect to
affected Transferring Employees listed in such Schedule. The
Purchaser shall also maintain for such Transferring Employees
the life insurance covering them in connection with their
mortgage subsidy in the event equal to the outstanding
principal amount as at the Effective Time for a period which
shall continue so long as such affected Transferring Employees
remain eligible for a mortgage subsidy under the Subsidized
Mortgage Plans.
6.7 COOPERATION WITH RESPECT TO EMPLOYEE NOTICES
The Parties acknowledge that between the time of execution of
this Agreement and the Effective Time, it may be necessary
from time to time for the Purchaser to give written notices
for various purposes to the Employees regarding their future
employment with the Purchaser. The Purchaser agrees not to
disseminate any such notices without having first consulted
with and obtained the consent of the Vendor, which consent
shall not be unreasonably withheld, and the Vendor agrees to
cooperate fully in the timely dissemination of such notices
upon request by the Purchaser.
<PAGE> 52
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ARTICLE 7. REAL PROPERTIES
The Vendor shall cause to be conducted, at its cost, title searches
and the Vendor shall deliver to the Purchaser, on or prior to the
Closing Date, title opinions with respect to the Real Properties,
dated the Closing Date in form and substance satisfactory to the
Purchaser's Counsel.
ARTICLE 8. NON-COMPETITION
8.1 NON-COMPETITION
From and after the Closing Date, the Vendor shall not, for a
period of five (5) years, on its own behalf or on behalf of
any other Person, directly or indirectly, in any capacity
whatsoever including, without limitation, as employer,
principal, mandator, agent, mandatary, joint venturer,
partner, shareholder or other equity holder, independent
contractor, manufacturer, seller, licensor, licensee,
franchisor, franchisee, distributor, consultant, supplier or
trustee or by or through any Person, conduct or be engaged in
or have financial interests in any gypsum wallboard business
in the United States of America or in Canada.
8.2 PERMITTED ACTIVITIES
Notwithstanding the provisions of Section 8.1 hereof, the
Vendor shall not be prohibited from owning an interest, as
passive investor, in any gypsum wallboard business provided
that the interest owned, whether directly or indirectly, by
the Vendor in such business, if any, shall not exceed 10% of
all the outstanding equity securities of any Person whose
equity securities are listed on a recognized securities
exchange and with whom the Vendor does not have any connection
whatsoever except for such ownership interest.
8.3 LIMITED EXCEPTION FOR INCIDENTAL ACQUISITIONS
Notwithstanding the provisions of Section 8.1 hereof, the
Vendor shall not be prohibited from acquiring assets (or a
controlling stock interest) of a Person where the assets of
such Person include gypsum wallboard assets (the "ACQUIRED
GYPSUM ASSETS"), provided that if the gross revenues generated
by the Acquired Gypsum Assets during the last full fiscal year
period (the "GROSS REVENUES") exceed $35,000,000, the Vendor
shall offer to sell the Acquired Gypsum Assets to the
Purchaser. Such offer to the Purchaser shall be made by the
Vendor promptly upon the execution by the Vendor of a binding
agreement to purchase such assets (but in no event less than
thirty (30) days prior to closing the acquisition contemplated
<PAGE> 53
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by such agreement). If the Purchaser elects to purchase
the Acquired Gypsum Assets, the Vendor and Purchaser shall
negotiate in good faith the price to be paid by the Purchaser
to the Vendor for the Acquired Gypsum Assets. If the Vendor
and the Purchaser cannot agree upon the terms and conditions
of such sale, then the Vendor shall use its commercially
reasonable efforts to sell the Acquired Gypsum Assets to a
third party within two (2) years after negotiations with the
Purchaser cease, but no such sale shall be on terms and
conditions in the aggregate more favourable to the third party
than those offered to the Purchaser. If the Gross Revenues
are less than or equal to $35,000,000, then the Vendor need
not offer the Acquired Gypsum Assets to the Purchaser, but if
the Vendor determines to sell the Acquired Gypsum Assets prior
to the fifth (5th) anniversary of the Closing, the Vendor
shall first offer the Acquired Gypsum Assets to the Purchaser
following the procedures set out in the preceding sentences of
this Section 8.3.
ARTICLE 9. COVENANTS OF THE VENDOR
The Vendor covenants and agrees with the Purchaser as follows:
9.1 MAINTENANCE AND PRESERVATION OF BUSINESS
From and after the date hereof to the Closing Date or the date
of termination of the Parties' obligation to close under this
Agreement, the Vendor covenants to the Purchaser that, except
as may be specifically approved in writing by the Purchaser,
the Business will be conducted only in the ordinary course and
substantially in the same manner as presently conducted, the
Vendor will not, with respect to the Business, make or
institute any new methods, principles or practices of
manufacture, purchase, sale, lease, management, accounting or
operation except in the ordinary course of business, and the
Vendor will use commercially reasonable efforts with due
diligence to (i) maintain the business organization of the
Business, and (ii) maintain its relationships with and the
goodwill of its suppliers, distributors, licensors, customers
and others having business relations with the Business, so as
to maintain the goodwill and ongoing business of the Business.
By way of illustration and not by way of limitation of the
foregoing:
9.1.1 the Vendor shall manage its working capital with
respect to the Business, including receivables,
other current assets, trade payables and other
current liabilities, in a fashion consistent with
past practice, including by selling inventory and
other property in an orderly and prudent manner
<PAGE> 54
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and paying outstanding obligations, trade
accounts and other indebtedness as they come due;
9.1.2 the Vendor shall maintain the Purchased Assets in
good condition and repair, except for normal wear
and tear and normal usage;
9.1.3 the Vendor shall not, without the prior written
approval of the Purchaser, take any of the
following actions:
(i) dispose of any of the Purchased Assets,
other than sales of inventory in the
ordinary course of business;
(ii) subject any of the Purchased Assets to any
Lien, except Permitted Encumbrances;
(iii) make any payment to, or for the benefit
of, any of its Employees or Retired
Employees otherwise than at the regular
rates payable to them, by way of salary,
pension, bonus or other remuneration
consistent with past practices for the
Business;
(iv) cancel any debts pertaining to the
Business;
(v) solicit or entertain any offer for, or
sell or agree to sell, or participate in
any business combination with respect to,
any of the Purchased Assets or the
Business;
(vi) do any act or fail to do any act, when
such act or failure to act will cause a
breach of any representation, warranty or
obligation contained in this Agreement or
any obligation contained in any Material
Contract;
(vii) commit to any capital expenditure project
or make any investment, in either case in
excess of $1,000,000, not disclosed to the
Purchaser prior to the date of this
Agreement; or
(viii) enter into any transaction, contract,
agreement, indenture, instrument or
commitment other than in the ordinary
course of and in a manner consistent with
past practices for the Business.
<PAGE> 55
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9.2 NOTICE OF CESSATION IN ORDINARY COURSE
The Vendor shall promptly notify the Purchaser of the
occurrence or existence of any event or circumstance on or
prior to the Closing Date by reason of which the Business has
ceased to be conducted as provided for in Section 9.1 hereof
or by reason of which the representations and warranties made
by the Vendor herein have ceased to be true and correct in any
material respect.
9.3 ACCESS FOR PURCHASER
The Vendor shall permit the Purchaser by its duly appointed
employees, officers and consultants at any time and from time
to time prior to the Closing Date, during reasonable business
hours and without unreasonably affecting the conduct of the
Business in the ordinary course, to make such investigation of
the Business and Purchased Assets and of their financial and
legal condition as the Purchaser may deem necessary or
advisable in order to become familiar with the Business and
Purchased Assets including, without limitation, full access to
all premises at which the Business is conducted and produce or
cause to be produced for inspection by the Purchaser, its
employees, officers and consultants, all title documents,
title deeds, books and records of the Vendor, agreements,
contracts, leases, licenses, insurance policies, pension and
benefit plans, documents relating to pending lawsuits and all
other information which in the reasonable opinion of the
Purchaser or its said employees, officers or consultants is
required to make an examination of the Business and Purchased
Assets and to verify the accuracy of the Vendor's
representations and warranties contained herein.
9.4 MAINTAIN INSURANCE
9.4.1 The Vendor shall take all actions necessary to
continue to maintain in full force and effect until
the Closing Date all policies of insurance with
respect to the Business and Purchased Assets in
effect on the Financial Statements Date or duly renew
the same upon substantially the same terms and
conditions. The Vendor will cooperate fully with the
Purchaser and take such actions (including, without
limitation, placing insurance carriers on notice of
this Agreement and/or providing or seeking necessary
consents) as the Purchaser may reasonably request to
ensure that from and after the Effective Time, the
Purchaser will be entitled to make claims, or receive
the proceeds of claims, under all insurance policies
(whether in the name of the Vendor or any other
Person) which insure or have insured the Business
<PAGE> 56
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and Purchased Assets, which are or were in effect at
any time prior to the Effective Time.
In furtherance of the foregoing, the Vendor,
(i) will take all reasonable measures to
identify and make copies available to the
Purchaser of all historical policies of
insurance of the Vendor with respect to the
Business and Purchased Assets and, at the
Purchaser's expense, of all predecessor
corporations with respect to the Business;
(ii) agrees to make all reasonable and necessary
attempts to purchase, at the Purchaser's
expense, extended reporting coverages or
the equivalent thereof for five (5) years
from the Closing Date for all current
claims made or modified claims made
coverages of the Business and Purchased
Assets, including without limitation all
casualty, liability and directors and
officers coverages and shall give periodic
status reports to the Purchaser concerning
such attempts; and
(iii) agrees not to release any policies of
insurance which provide or have provided
coverage applicable to the Business and
Purchased Assets without the prior written
consent of the Purchaser.
9.4.2 The Vendor and the Purchaser acknowledge that the
policies of insurance applicable to the Vendor are
not necessarily exclusive to the Business and
Purchased Assets and that certain coverages and
limits may be impaired by claims arising from other
companies or businesses currently or previously owned
by the Vendor; however, the Vendor will notify the
Purchaser of all such claims and impairment as soon
as reasonably practicable. The Vendor makes no
representations or warranties in respect of any
policy of insurance and shall not be responsible for
any allocations, determinations as to coverage or
lack thereof or any decision or interpretation made
by insurers or their agents with respect thereto.
The Purchaser shall be responsible for all
retrospective premiums and associated third party
administrator and insurer management and
administration costs allocable to the claims
experience of the Vendor with respect to the
Business. The Purchaser recognizes and accepts that
the Vendor has in the past and may in the future
compromise rights and claims in good faith which may
have an effect on the consumption of aggregate
<PAGE> 57
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insurance limits and the allocation of retrospective
premiums.
9.4.3 As soon as practicable after the Closing Date, but no
later than thirty (30) Business Days after the
Closing Date, the Vendor and the Purchaser shall
enter into an agreement setting forth the procedures
for implementation and administration of the
entitlements and responsibilities provided for by
this Section 9.4.
9.5 CORPORATE PROCEEDINGS FOR TRANSFER
The Vendor shall take all necessary steps and proceedings as
may be reasonably considered appropriate by the Purchaser's
Counsel in order that the Business and Purchased Assets be
duly and regularly transferred to the Purchaser as at the
Effective Time.
9.6 ADJUSTMENT BALANCE SHEET
The Vendor shall deliver to the Purchaser the Adjustment
Balance Sheet as provided for in Section 2.7.4 hereof.
9.7 SALE OF ENTERPRISES
The Vendor shall not require the Purchaser to comply with the
requirements of the Civil Code of Quebec or other Laws
relating to the sale of enterprises or bulk sales as may be
applicable to the transactions provided for hereunder.
9.8 RETAIL SALES TAX CERTIFICATES
The Vendor shall deliver to the Purchaser on or before the
Closing Date a certificate issued by the Minister of Finance
(Ontario) pursuant to Section 6 of the Retail Sales Tax Act
(Ontario) and certificates issued under any other applicable
provincial sales tax legislation which certificates shall
indicate that the Vendor has collected, paid and remitted,
with respect to the Business, all taxes applicable under such
legislation up to the Closing Date or has entered into an
arrangement satisfactory to the said Minister or other taxing
authority for the payment of such taxes.
9.9 Tax Returns Assistance
After the Closing Date, the Vendor shall furnish or cause to
be furnished to the Purchaser, upon request, such information
with respect to the Business or the Purchased Assets as is
<PAGE> 58
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reasonably necessary for the Purchaser for the preparation and
filing of any tax returns, for the preparation for any tax
audit or for the prosecution or defence of any proceeding or
proposed adjustment with respect to taxes of the Purchaser.
9.10 OPERATION OF BUSINESS AFTER THE SECOND FIXTURE DATE
If the Closing does not occur on or before the Second Fixture
Date, the adjustment to the Purchase Price shall be determined
on the Second Fixture Date pursuant to Section 2.7 hereof. In
such event, from and after the Second Fixture Date,
(i) the Vendor covenants to the Purchaser that, except as
otherwise specifically approved in writing by the
Purchaser, the Business will be conducted as provided
in Sections 9.1, 9.2, 9.3 and 9.4 hereof;
(ii) all of the earnings and profits of the Vendor with
respect to the Business shall be for the account of
the Purchaser, and the Vendor shall deposit such
earnings and profits in one or more interest-bearing
bank accounts as the Purchaser may direct;
(iii) the Vendor may expend funds included in such earnings
and profits to permit the Vendor to carry out its
obligations with respect to the Business under
Sections 9.1.1 and 9.1.2 hereof; and
(iv) in the event that the Vendor determines that it is
necessary to make any capital expenditures with
respect to the Business (whether above or below the
threshold amount specified in Section 9.1.3), it
shall promptly give notice of such expenditure to the
Purchaser, and if the amount of such expenditure
exceeds said threshold amount, shall request the
Purchaser's approval of such capital expenditure.
In the event that the Closing Date occurs after the Second
Fixture Date, then the provisions of Section 11.1.1.3 and all
the provisions of Sections 11.1.2 to 11.1.8 and Sections
11.2.1 to 11.2.6 shall be satisfied as provided therein, and
the Closing shall occur as provided in Article 13 hereof.
9.11 GUARANTEES, LETTERS OF CREDIT
The Vendor will use its reasonable efforts to replace, renew
or extend any surety bonds, letters of credit or corporate
guarantees previously provided by the Vendor with respect to,
and which are required to operate, the Business in the
<PAGE> 59
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ordinary and usual course and to preserve in all
material respects the Business intact (the "SUPPORT
INSTRUMENTS"). The Vendor shall continue any such
arrangements with respect to the Business until the Purchaser
obtains such surety and letter of credit arrangements with
existing or replacement surety companies or financial
institutions or provides substitute guarantees (but in any
event such obligation shall not continue for a period
exceeding six (6) months from and after the Closing Date).
ARTICLE 10. COVENANTS OF THE PURCHASER
The Purchaser covenants and agrees with the Vendor as follows:
10.1 TAX RETURNS ASSISTANCE
After the Closing Date the Purchaser shall furnish or cause to
be furnished to the Vendor, upon request, such information
with respect to the Business or the Purchased Assets as is
reasonably necessary for the Vendor for the preparation and
filing of any tax return, for the preparation for any tax
audit or for the prosecution or defence of any proceeding or
proposed adjustment with respect to taxes of the Vendor.
Without limiting the generality of the foregoing provisions of
this Section 10.1, the Purchaser shall furnish or cause to be
furnished to the Vendor, upon request, tax packages with
respect to the Business or the Purchased Assets on schedules
to be provided by the Vendor for the periods from January 1,
1995 through December 31, 1995 and from January 1, 1996
through the Closing Date. Each such tax package shall be
completed and delivered by the Purchaser to the Vendor within
sixty (60) days after receipt thereof by the Purchaser.
10.2 USE OF NAME
The Purchaser shall not use nor allow any of its Affiliates or
Subsidiaries to use, directly or indirectly, the name "Domtar"
or the prefix "Dom" as a trade-mark, service mark or
trade-name in connection with any product or service offered
by the Business from and after the Closing Date, except as
permitted in the Trade-Marks Agreement.
10.3 KEY EMPLOYEE RETENTION PROGRAM
All bonuses, if any, payable pursuant to the Vendor's "Key
Employee Retention Program" set out in SCHEDULE 10.3
(including any special bonus noted in said Schedule), which
shall not be accrued in the Adjustment Balance Sheet, shall be
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paid by the Purchaser to said Employees within a period
of thirty (30) days from and after the date of their
entitlement thereto pursuant to said Program.
10.4 SALE OF ENTERPRISES
The Purchaser shall not require the Vendor to comply with the
requirements of the Civil Code of Quebec or other Laws
relating to the sale of enterprises or bulk sales as may be
applicable to the transactions provided for hereunder.
10.5 NO INTERFERENCE
The Purchaser shall not take any action prior to the Closing
Date which would negatively impact the ability of the Vendor
to operate the Business or to comply with its obligations
under Section 9.1 or other provisions of this Agreement.
10.6 GUARANTEES, LETTERS OF CREDIT
The Purchaser shall (i) reimburse the Vendor for the cost of
the Support Instruments continued after the Closing Date, (ii)
indemnify and hold harmless the Vendor with respect to all
Support Instruments in existence at the Closing Date or
thereafter with respect to the Business, and (iii) promptly
undertake to have the Vendor released from all such Support
Instruments, in each case to the extent they relate to the
Business.
ARTICLE 11. CONDITIONS OF CLOSING
11.1 PURCHASER'S CONDITIONS
The purchase and sale of the Business and Purchased Assets is
subject to the following terms and conditions for the
exclusive benefit of the Purchaser to be fulfilled and
performed on or prior to the Closing Date:
11.1.1 REPRESENTATIONS AND WARRANTIES REMAIN CORRECT
11.1.1.1 If the Closing Date occurs on or
before the First Fixture Date, each
of the representations and
warranties of the Vendor contained
in this Agreement shall be true and
correct in all material respects on
and as at the Closing Date (except
as such representations and
warranties may have been affected by
the occurrence of events or
circumstances occurring in
contemplation of the consummation of
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the transactions provided for
hereunder) with the same force and
effect as though such
representations and warranties had
been made on and as at such date and
the Purchaser shall have received on
the Closing Date a certificate dated
the Closing Date, in form
satisfactory to the Purchaser's
Counsel, signed by the Senior
Vice-President and Chief Financial
Officer of the Vendor, to the effect
that such representations and
warranties are true and correct in
all material respects on and as at
the Closing Date with the same force
and effect as though made on and as
at such date.
11.1.1.2 If the Closing Date occurs after the
First Fixture Date but on or before
the Second Fixture Date, each of the
representations and warranties of
the Vendor contained in this
Agreement shall be true and correct
in all material respects on and as
at the First Fixture Date and each
of the First Core Representations
shall be true and correct in all
material respects on and as at the
Closing Date (in each case except as
such representations and warranties
may have been affected by the
occurrence of events or
circumstances occurring in
contemplation of the consummation of
the transactions provided for
hereunder) with the same force and
effect as though such
representations and warranties had
been made on and as at the First
Fixture Date or the Closing Date, as
the case may be, and the Purchaser
shall have received on the Closing
Date a certificate dated the Closing
Date, in form satisfactory to the
Purchaser's Counsel, signed by the
Senior Vice-President and Chief
Financial Officer of the Vendor, to
the effect that such representations
and warranties are true and correct
in all material respects on and as
at the First Fixture Date or the
Closing Date, as the case may be,
with the same force and effect as
though made on and as at such dates.
11.1.1.3 If the Closing Date occurs after the
Second Fixture Date, each of the
representations and warranties of
the Vendor contained in this
Agreement shall be true and correct
in all material respects on and as
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at the First Fixture Date, each of
the First Core Representations shall
be true and correct in all material
respects on and as at the Second
Fixture Date, and each of the Second
Core Representations shall be true
and correct in all material respects
on and as at the Closing Date (in
each case except as such
representations and warranties may
have been affected by the occurrence
of events or circumstances occurring
in contemplation of the consummation
of the transactions provided for
hereunder) with the same force and
effect as though such
representations and warranties had
been made on and as at the First
Fixture Date, the Second Fixture
Date or the Closing Date, as the
case may be, and the Purchaser shall
have received on the Closing Date a
certificate dated the Closing Date,
in form satisfactory to the
Purchaser's Counsel, signed by the
Senior Vice-President and Chief
Financial Officer of the Vendor, to
the effect that such representations
and warranties are true and correct
in all material respects on and as
at the First Fixture Date, the
Second Fixture Date or the Closing
Date, as the case may be, with the
same force and effect as though made
on and as at such dates.
11.1.2 PERFORMANCE OF OBLIGATIONS
The Vendor shall have performed or complied in
all material respects with all of its agreements,
covenants, obligations and conditions herein
agreed to be performed or complied with by the
Vendor on or prior to the Closing Date.
11.1.3 PERMITS, CONSENTS AND APPROVALS
All permits, consents, orders and approvals
required by any federal, provincial or local
governmental authority, as the case may be,
including, without limitation, all consents and
approvals required under the applicable federal,
provincial or local competition laws including,
without limitation, Competition Act (Canada) for
the purposes of the consummation of the
transactions contemplated hereby shall have been
obtained by the Vendor and the Purchaser and all
statutory periods in connection with notification
procedures required under the said federal,
provincial or local competition laws, as the
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case may be, for the purposes of the
consummation of the transactions contemplated
hereby shall have lapsed prior to the Closing
Date.
11.1.4 CORPORATE AND OTHER PROCEEDINGS
All corporate and other proceedings of the Vendor
in connection with the transactions contemplated
hereby, and all documents evidencing same or
incidental thereto, shall have been duly
authorized and executed, shall be in form and
substance to the reasonable satisfaction of the
Purchaser and the Purchaser's Counsel, and the
Purchaser and the Purchaser's Counsel shall have
received all such proceedings and documents, or
duly certified copies thereof, as may be
reasonably requested.
11.1.5 TRADE-MARKS AGREEMENT
The Parties shall have entered into a trade-marks
license pursuant to which the Vendor shall
license to the Purchaser the Trade-Marks as
defined in, and subject and pursuant to, the
Trade-Marks Agreement (the "TRADE-MARKS
AGREEMENT") set out in SCHEDULE 11.1.5.
11.1.6 DOMTAR GYPSUM INC.
The consummation of the purchase and sale of the
Business and Purchased Assets pursuant hereto
shall take place concurrently with the
consummation of the purchase and sale
contemplated in the Share Purchase Agreement.
11.1.7 OPINION OF VENDOR'S COUNSEL
The Purchaser shall have received from the
Vendor's Counsel a favourable opinion addressed
to the Purchaser, dated the Closing Date in form
and substance reasonably satisfactory to the
Purchaser, as to the matters contained in
Sections 4.1, 4.2 and 4.3.1.1 hereof and such
other matters as reasonably requested by the
Purchaser, with such qualifications as may be
consistent with opinion practices on such issues.
The Vendor's Counsel may rely, as to facts
material to said opinion which are not
independently established by the Vendor's
Counsel, on certificates of public officials or
of officers of the Vendor and, as to matters of
law in other jurisdictions, on opinions of
counsel in such jurisdictions.
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11.1.8 LITIGATION
No suit, action or proceeding shall be pending
against the Purchaser or the Vendor before any
court or governmental agency which is reasonably
likely to result in (i) the restraint or
prohibition of the consummation of the
transactions contemplated hereby or (ii) an order
restricting the Purchaser in the conduct of the
Business in such a manner so as to have a
Material Adverse Effect.
11.1.9 RESCISSION
In case any of the foregoing conditions provided
for in this Section 11.1 shall not be fulfilled
and performed on or prior to the Closing Date to
the reasonable satisfaction of the Purchaser and
the Purchaser's Counsel, the Purchaser may
rescind this Agreement by notice to the Vendor
and in such event, the Parties shall be released
from all obligations whatsoever to whomsoever
including, without limitation, all obligations of
the Purchaser to the Vendor, its Affiliates and
Subsidiaries and their respective shareholders,
directors, officers and employees, pursuant to
this Agreement and all other agreements entered
into pursuant hereto, other than the obligations
of confidentiality of the Purchaser pursuant to
the Confidentiality Agreement.
11.1.10 WAIVER BY PURCHASER
The conditions set out in this Section 11.1 may
be waived by the Purchaser in whole or in part by
a written document to such effect duly signed
thereby.
11.2 VENDOR'S CONDITIONS
The purchase and sale of the Business and Purchased Assets is
subject to the following terms and conditions for the
exclusive benefit of the Vendor to be fulfilled and performed
on or prior to the Closing Date:
11.2.1 REPRESENTATIONS AND WARRANTIES REMAIN CORRECT
Each of the representations and warranties of the
Purchaser contained in this Agreement shall be
true and correct in all material respects on and
as at the Closing Date (except as such
representations and warranties may have been
affected by the occurrence of events or
circumstances occurring in contemplation of the
consummation of the transactions provided for
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hereunder) with the same force and effect as
though such representations and warranties had
been made on and as at such date and the Vendor
shall have received on the Closing Date a
certificate dated the Closing Date, in form
satisfactory to the Vendor's Counsel, signed by
the President or a Vice-President of the
Purchaser, to the effect that such
representations and warranties are true and
correct in all material respects on and as at the
Closing Date with the same force and effect as
though made on and as at such date.
11.2.2 PERFORMANCE OF OBLIGATIONS
The Purchaser shall have performed or complied in
all material respects with all of its agreements,
covenants, obligations and conditions herein
agreed to be performed or complied with by the
Purchaser on or prior to the Closing Date.
11.2.3 CORPORATE AND OTHER PROCEEDINGS
All corporate and other proceedings of the
Purchaser in connection with the transactions
contemplated hereby, and all documents evidencing
same or incidental thereto, shall have been
authorized and executed, shall be in form and
substance to the reasonable satisfaction of the
Vendor and the Vendor's Counsel, and the Vendor
and the Vendor's Counsel shall have received all
such proceedings and documents or duly certified
copies thereof, as may be reasonably requested.
11.2.4 GOODS AND SERVICES AND SALES TAXES
The Vendor shall have received from the Purchaser
the confirmation of the Purchaser's registration
for the purposes of Part IX of the Excise Tax Act
(Canada) and Chapter VIII of the Quebec Sales Tax
Act, and the Purchaser's registration numbers for
such purposes.
11.2.5 DOMTAR GYPSUM INC.
The consummation of the purchase and sale of the
Business and Purchased Assets pursuant hereto
shall take place concurrently with the
consummation of the purchase and sale
contemplated in the Share Purchase Agreement.
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11.2.6 OPINION OF PURCHASER'S COUNSEL
The Vendor shall have received from the
Purchaser's Counsel a favourable opinion
addressed to the Vendor, dated the Closing Date
in form and substance reasonably satisfactory to
the Vendor, as to the matters contained in
Sections 5.1, 5.2, and 5.3.1 hereof and such
other matters as reasonably requested by the
Vendor, with such qualifications as may be
consistent with opinion practices on such issues.
The Purchaser's Counsel may rely, as to facts
material to said opinion which are not
independently established by the Purchaser's
Counsel, on certificates of public officials or
of officers of the Purchaser and, as to matters
of law in other jurisdictions, on opinions of
counsel in such jurisdictions.
11.2.7 RESCISSION
In case any of the foregoing conditions provided
for in this Section 11.2 shall not be fulfilled
and performed on or prior to the Closing Date to
the reasonable satisfaction of the Vendor and the
Vendor's Counsel, the Vendor may rescind this
Agreement by notice to the Purchaser and in such
event, the Parties shall be released from all
obligations whatsoever to whomsoever including,
without limitation, all obligations of the Vendor
to the Purchaser, its Affiliates and Subsidiaries
and their respective shareholders, directors,
officers and employees, pursuant to this
Agreement and all other agreements entered into
pursuant hereto, other than the obligations of
confidentiality of the Purchaser pursuant to the
Confidentiality Agreement.
11.2.8 WAIVER BY VENDOR
The conditions set out in this Section 11.2 may
be waived by the Vendor in whole or in part by a
written document to such effect duly signed
thereby.
ARTICLE 12. SURVIVAL AND RELIANCE ON REPRESENTATIONS AND
WARRANTIES AND INDEMNIFICATION
12.1 SURVIVAL AND RELIANCE
The Parties shall be entitled to rely upon the representations
and warranties contained herein and the obligations of the
Parties with respect thereto shall survive the date
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of this Agreement and shall continue in full force and effect
as provided in Section 12.2 hereof.
12.2 SURVIVAL OF LIABILITY FOR REPRESENTATIONS AND WARRANTIES
12.2.1 The Second Core Representations of the Vendor
shall survive the Closing Date for a period of
one (1) year, the First Core Representations of
the Vendor shall survive the Adjustment Date for
a period of one (1) year, and all other
representations and warranties of the Vendor
contained herein shall survive the earlier of the
First Fixture Date and the Closing Date for a
period of one (1) year, except for
12.2.1.1 the representations and warranties
contained in Section 4.8.2 (taxes)
and 4.16 (Employees, Pensions and
Other Benefit Plans) which shall
survive the Closing Date until the
expiry of the limitation or
prescription period under the
relevant Laws, and the Purchaser
covenants that, from and after the
Closing Date, it shall not enter
into, without the prior written
consent of the Vendor, any
agreement, waiver or other
arrangement which provides for an
extension of time with respect to
the filing of any tax return or the
payment or assessment of any taxes
dealt with by any such
representation or warranty, as the
case may be;
12.2.1.2 the representations and warranties
contained in Section 4.15 hereof
(Environmental Matters) which shall
survive the earlier of (i) the First
or Second Fixture Date (as
determined by the date on which such
representations and warranties were
last deemed made) and (ii) the
Closing Date for a period of three
(3) years; and
12.2.1.3 the representations and warranties
contained in Sections 4.1, 4.2, 4.3
and 4.7.1 hereof which shall survive
without limitation as to time except
as may be limited by law,
and except in each case to the extent that during
such period the Purchaser shall have given notice
to the Vendor of a claim in respect of any such
representation or warranty, in which case such
representation or warranty with respect to such
claim (but not as to other claims) shall continue
in full force and effect until the final
determination of such claim.
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After the end of the applicable survival periods
described in this Section 12.2.1, the Vendor
shall have no liability with respect to the
representations and warranties contained herein
except as to claims made prior to the expiry of
the relevant period of survival pursuant to this
Section 12.2.1.
12.2.2 All the representations and warranties of the
Purchaser contained herein shall survive the
Closing Date for a period of one (1) year, except
to the extent that during such period the Vendor
shall have given notice to the Purchaser of a
claim in respect of any such representation or
warranty, in which case such representation or
warranty with respect to such claim (but not as
to other claims) shall continue in full force and
effect until the final determination of such
claim. After the end of such survival period,
the Purchaser shall have no liability with
respect to any of its representations and
warranties contained herein except as to claims
made prior to the expiry of the period of
survival pursuant to this Section 12.2.2.
12.3 INDEMNIFICATION BY THE VENDOR
12.3.1 The Vendor shall defend, indemnify and hold
harmless the Purchaser and each Affiliate thereof
and any present or future officer, director,
agent or employee of the Purchaser (all of which
are herein collectively referred to as "PURCHASER
PROTECTED PERSONS") against any and all claims,
proceedings, judgments, penalties, fines, claims,
damages (other than indirect, incidental or
consequential), losses (other than loss of
profits), liabilities, fees (including, without
limitation, reasonable fees and expense of
counsel), costs or expenses (the "CLAIMS")
incurred or required to be paid by any Purchaser
Protected Person arising out of the breach or
non-fulfillment of any representation, warranty,
agreement, covenant, condition or any other
obligation of the Vendor contained in this
Agreement. All such Claims are referred to
herein as "PURCHASER'S INDEMNIFIED CLAIMS".
12.3.2 Without limiting the generality of the provisions
of Section 12.3.1 hereof and notwithstanding the
provisions of Section 12.7 hereof, the Vendor
shall defend, indemnify and hold harmless the
Purchaser Protected Persons against all Claims
with respect to or in any way relating to the
matters set out in SCHEDULE 12.3.2 or in Sections
6.1.6 and 6.5, and the obligation of the Vendor
to indemnify the Purchaser Protected Persons
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pursuant to this Section 12.3.2 with respect to
such Claims shall not be subject to the
deductible and limiting amounts referred to in
Section 12.7 hereof, and the amount for which the
Purchaser Protected Persons shall be indemnified
for such Claims shall be the entire amount
thereof. Claims for indemnification under this
Section 12.3.2 shall not be subject to any
limitations on survival of warranties contained
in this Article 12, and the Purchaser Protected
Persons may seek indemnification hereunder at any
time after the Effective Time, except as
otherwise expressly provided for in SCHEDULE
12.3.2.
12.3.3 Notwithstanding any other provision of this
Article 12, the Vendor shall have no liability
whatsoever to indemnify the Purchaser Protected
Persons against any Claims with respect to the
ongoing operational environmental matters set out
in SCHEDULE 12.3.3.
12.3.4 Notwithstanding any other provision of this
Article 12, the Vendor shall indemnify and hold
harmless the Purchaser Protected Persons against
all Claims arising from the failure to comply
with the requirements of the Civil Code of Quebec
or other Laws relating to the sale of enterprises
or bulk sales as may be applicable to the
transactions provided for hereunder, and the
obligation of the Vendor to indemnify the
Purchaser Protected Persons pursuant to this
Section 12.3.4 shall not be subject to the
deductible and limiting amounts referred to in
Section 12.7 hereof, and the amount for which the
Purchaser Protected Persons shall be indemnified
for such Claims shall be the entire amount
thereof.
12.4 INDEMNIFICATION BY THE PURCHASER
The Purchaser shall defend, indemnify and hold harmless the
Vendor and each Affiliate thereof and any present, former or
future officer, director, agent or employee of the Vendor (all
of which are herein collectively referred to as "VENDOR
PROTECTED PERSONS") against any and all Claims incurred by the
Vendor Protected Persons
12.4.1 arising out of the breach or non-fulfillment of
any representation, warranty, agreement,
covenant, condition or any other obligation of
the Purchaser contained in this Agreement; or
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12.4.2 with respect to the environmental matters set out
in SCHEDULE 12.3.3.
All such claims are referred to herein as
"VENDOR'S INDEMNIFIED CLAIMS".
12.5 INDEMNIFICATION AGAINST THIRD PARTY CLAIMS
12.5.1 Promptly upon receipt by either Party (the
"INDEMNITEE") of a notice of any Third Party
Claim in respect of which the Indemnitee proposes
to demand indemnification from the other Party
(the "INDEMNITOR"), the Indemnitee shall give
notice to that effect to the Indemnitor with
reasonable promptness.
12.5.2 Without prejudice to the Indemnitee's right to
participate in the defence, compromise or
settlement of the Third Party Claim, the
Indemnitor shall have the right by notice to the
Indemnitee not later than ten (10) days after
receipt of the notice described in Section 12.5.1
hereof to assume (and in the case of asbestos
claims, shall assume) the control of the defence,
compromise or settlement of the Third Party
Claim, provided that such assumption shall, by
its terms, be without cost or liability to the
Indemnitee and provided that the Indemnitor shall
have first delivered to Indemnitee a written
acknowledgement by the Indemnitor that the
relevant Claim is an Indemnified Claim and that
the Indemnitor, in its good faith judgment, will
be able to pay any award of money damages against
the Indemnitee in connection with such action.
If the Indemnitor assumes the defence of an
action, (i) the Indemnitee shall be entitled to
meaningfully participate therein; (ii) no
settlement or compromise thereof may be effected
(x) by the Indemnitor without the consent of the
Indemnitee (which consent shall not be
unreasonably withheld or delayed) unless (A)
there is no finding or admission of any violation
of law or any violation of the rights of any
person by the Indemnitee and no adverse effect on
any other claims that may be made against any
Indemnitee and (B) all relief provided is paid or
satisfied in full by the Indemnitor or (y) by the
Indemnitee without the consent of the Indemnitor;
and (iii) the Indemnitee may subsequently assume
the defence of such action if a court of
competent jurisdiction determines the Indemnitor
is not vigorously defending such action.
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12.5.3 Upon the assumption of control by the Indemnitor
pursuant to the provisions of Section 12.5.2
hereof, the Indemnitor shall, at its expense,
diligently proceed with the defence, compromise
or settlement of the Third Party Claim at
Indemnitor's sole expense, including employment
of counsel reasonably satisfactory to the
Indemnitee and, in connection therewith, the
Indemnitee shall cooperate fully, but at the
expense of the Indemnitor, to make available to
the Indemnitor all pertinent information and
witnesses under the Indemnitee's control, make
such assignments and take such other steps as in
the opinion of counsel for the Indemnitor are
necessary to enable the Indemnitor to conduct
such defence.
12.5.4 The final determination of any such Third Party
Claim, including all related costs and expenses,
shall be binding and conclusive upon the Parties
as to the validity or invalidity, as the case may
be, of such Third Party Claim against the
Indemnitor.
12.5.5 Should the Indemnitor fail to defend the
Indemnitee as provided in Section 12.5.2 hereof,
the Indemnitee shall be entitled to make such
settlement of the Third Party Claim as in its
sole discretion may appear advisable, and such
settlement or any other final determination of
the Third Party Claim shall be binding upon the
Indemnitor.
12.6 INDEMNIFICATION AFTER INSURANCE AND OTHER RECOVERIES
12.6.1 INSURANCE
The amount of the indemnification for any and all
Claims which either the Purchaser Protected
Persons or the Vendor Protected Persons shall be
entitled to receive pursuant to this Article 12
shall be determined after giving effect to any
and all insurance proceeds received by the
Indemnitee from its insurers and any and all
recoveries from any other Persons against which
there may be indemnity rights pursuant to the
Contracts. The Indemnitee shall use all
reasonable efforts to collect such insurance
proceeds or, if the Indemnitee is the Purchaser,
claims with respect to such indemnity rights
against any other Persons under any of the
Contracts; provided that nothing in this Section
12.6 shall require any Indemnitee to make or
prosecute a claim for insurance proceeds if such
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a claim would adversely affect the Indemnitee
with respect to matters other than the Claim.
12.6.2 COOPERATION
If an Indemnitee seeks indemnity from an
Indemnitor with respect to any matters relating
to environmental or asbestos related matters, the
Indemnitee shall cooperate with the Indemnitor,
at the Indemnitor's expense, in assisting the
Indemnitor to obtain indemnity under agreements
with third parties or insurance proceeds under
any insurance policies maintained by the
Indemnitor covering the claims in question.
12.7 VENDOR'S MAXIMUM LIABILITY
12.7.1 The obligation of the Vendor to indemnify the
Purchaser Protected Persons pursuant to this
Article 12, excluding the obligation to indemnify
for all Claims with respect to the
representations and warranties contained in
Section 4.15 hereof (Environmental Matters) (the
"ENVIRONMENTAL CLAIMS") and further excluding the
obligation to provide unlimited indemnification
pursuant to Section 12.3.2, shall be limited, in
the aggregate, to 10% of the Purchase Price;
provided however that the Purchaser shall not
exercise its right of indemnification in relation
thereto pursuant to this Article 12 unless and
until the aggregate amount of the Claims and
Section 12.3.2 Claims, asserted against the
Vendor, excluding Environmental Claims, is in
excess of the aggregate amount of 1% of the
Purchase Price, and the amount then claimable
shall be only the amount of such Claims which
exceeds 1% of the Purchase Price;
12.7.2 Subject to the provisions of Sections 12.3.2,
12.3.3 and 12.4.2 hereof, the obligation of the
Vendor to indemnify the Purchaser pursuant to
this Article 12 with respect to Environmental
Claims shall be limited, in the aggregate, to the
sum obtained by adding to 15% of the Purchase
Price an amount equal to the difference between
10% of the Purchase Price and the aggregate of
the Claims indemnified against or outstanding,
pursuant to the provisions of Section 12.7.1
hereof, if any; provided however that the
Purchaser shall not exercise its right of
indemnification in relation thereto pursuant to
this Article 12 unless and until the aggregate
amount of the Environmental Claims asserted
against the Vendor is in excess of the
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aggregate amount of 1% of the Purchase Price,
and the amount then claimable shall be only the
amount of such Environmental Claims which exceeds
1% of the Purchase Price; and provided further
that the combined amount recoverable under
Section 12.7.1 and 12.7.2 shall not exceed in the
aggregate 25% of the Purchase Price.
12.8 DETAILS OF CLAIMS
With respect to any Claim pursuant to Section 12.3 or 12.4
hereof, no indemnity hereunder shall be sought unless written
notice providing reasonable details of the reasons for which
the indemnity is sought is provided to the Vendor or the
Purchaser, as the case may be. Such notice shall be given
promptly on the occurrence of the circumstances giving rise to
the Claim coming to the attention of the Indemnitee hereunder;
provided that failure to so notify the Indemnitor shall not
relieve the Indemnitor from any liabilities which it may have
to the Indemnitee (i) hereunder, except to the extent that is
actually prejudiced thereby, or (ii) otherwise than under this
Article 12.
12.9 INDEMNIFICATION SOLE REMEDY
The provisions of this Agreement shall constitute the sole
indemnification remedy to either Party against the other with
respect to any breach or non-fulfillment of any
representation, warranty, agreement, covenant, condition or
any other obligation contained in this Agreement.
ARTICLE 13. CLOSING
The sale and purchase of the Business and Purchased Assets herein
provided for shall be consummated on the Closing Date at the Closing
Place.
13.1 At the Closing, the Vendor shall deliver or cause to be
delivered to the Purchaser:
13.1.1 instruments of transfer for and documents of
title to the Business and Purchased Assets,
registered or submitted for registration in the
name of the Purchaser or its duly appointed
nominee; and
13.1.2 all such other agreements, certificates,
consents, approvals, opinions and other documents
herein required to be delivered by the Vendor at
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or prior to the Closing Date and not theretofore
received by the Purchaser.
13.2 The Purchaser shall deliver or cause to be delivered to or to
the order of the Vendor:
13.2.1 the Purchase Price herein required to be paid by
the Purchaser pursuant to Section 2.2 hereof;
13.2.2 all such other agreements, certificates,
consents, approvals, opinions and other documents
herein required to be delivered by the Purchaser
at or prior to the Closing Date and not
theretofore received by the Vendor.
ARTICLE 14. TERMINATION
14.1 ELECTION
The Parties shall exercise all reasonable efforts and
cooperate, with reasonable diligence, in order for the
consummation of the transactions contemplated hereunder to
take place at the earliest possible date. Subject to the
provisions of Section 11.1.10 or 11.2.8 hereof, as the case
may be, in the event that the sale and purchase of the
Business and Purchased Assets herein provided for is not
consummated within five (5) months from the date of this
Agreement (the "FIVE-MONTH ANNIVERSARY") as a result of the
failure of either Party to fulfil any of the conditions
provided for in Section 11.1 or 11.2, as the case may be, for
the benefit of the other Party on or before the Five-Month
Anniversary and the Party who has the benefit of such
condition (the "ELECTING PARTY") refuses to waive it, the
Electing Party shall have the right, exercisable at any time
after the Five-Month Anniversary, to terminate this Agreement
by giving at least forty-five (45) days written notice to the
other Party (the "NON-ELECTING PARTY"). If the Non-Electing
Party does not cure its failure to fulfil the conditions of
Section 11.1 or 11.2, as the case may be, by the date for
termination (the "TERMINATION DATE") specified in the
termination notice given by the Electing Party, then this
Agreement shall terminate on the Termination Date, and, except
as set forth in Section 14.2 hereof, each Party shall be
released from
14.1.1 all obligations whatsoever to whomsoever
including, without limitation, all obligations to
the other Party, its Affiliates and Subsidiaries
and their respective shareholders, directors,
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officers and employees, pursuant to this
Agreement and all other agreements entered into
pursuant hereto; and
14.1.2 all Claims arising out of, directly or
indirectly, the failure to consummate the sale
and purchase of the Business and Purchased Assets
as herein provided for.
14.2 CONTINUING LIABILITY
If this Agreement is terminated concurrently with the
termination of the Share Purchase Agreement pursuant to
Section 13.1 thereof, effective as of a date after the Second
Fixture Date, because of the breach by the Purchaser under the
Share Purchase Agreement of its obligations under Article 9
(Antitrust and Competition Regulatory Approvals) under the
Share Purchase Agreement, then the Purchaser under this
Agreement shall remain liable to the Vendor for the failure to
consummate the sale and purchase of the Business and Purchased
Assets as herein provided.
ARTICLE 15. MISCELLANEOUS
15.1 NOTICES
Any notice or communication provided for under this Agreement
shall be in writing and be sufficiently given to the Party to
whom it is addressed if it is delivered or sent by prepaid
registered or certified mail or transmitted by telecopier to
or for such Party at the address or telecopier number of such
Party as set out hereinafter or at such other address or
telecopier number as such Party shall have hereafter notified
to the other Party in the manner provided for in this Section.
If to the Vendor:
Domtar Inc.
395 de Maisonneuve Blvd. West
Montreal, Canada
H3A 1L6
Fax: (514) 848-6850
Attention: Secretary
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If to the Purchaser:
c/o Georgia-Pacific Corporation
133 Peachtree Street, N.E.
Atlanta, GA 30303
(30348-05605 for notice by mail)
Fax: (404) 584-1461
Attention: Secretary
Any notice or communication addressed and delivered, mailed or
telecopied, as the case may be, as aforesaid shall be deemed
to have been sufficiently given and received on the date on
which it was so delivered or, if such date is not on a
Business Day, on the Business Day next following such date, or
on the 5th Business Day next following the date of its mailing
or on the 1st Business Day next following the date of its
transmission by telecopier, as the case may be.
15.2 PUBLIC ANNOUNCEMENT
All public announcements concerning the transactions
contemplated hereby shall be jointly planned and coordinated
by the Parties and neither Party shall act unilaterally in
this regard without the prior approval of the other Party,
except where required to do so by the Laws or by the
applicable regulations or policies of any stock exchange, in
which case, the Party obliged to make public disclosure shall
promptly inform thereof the other Party and discuss with the
other Party the extent and timing of such disclosure.
15.3 EXPENSES
All costs and expenses (including, without limitation,
the fees and disbursement of legal counsel) incurred in
connection with the negotiation and the preparation of this
Agreement and the consummation of the transactions provided
for hereunder shall be paid by the Party incurring such
expenses.
15.4 SUCCESSORS AND ASSIGNS
This Agreement shall enure to the benefit of and be binding
upon the Parties and their respective successors and assigns,
provided that neither this Agreement nor any right or
obligation hereunder shall be assigned by either Party without
the prior written consent of the other Party, except that the
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Purchaser may assign this Agreement and its rights
hereunder to any Affiliate thereof without such consent
provided that, notwithstanding any such assignment, the
Purchaser shall remain liable to the Vendor, jointly and
severally and solidarily with such assignee, for the
performance of all the obligations pertaining to the Purchaser
pursuant to this Agreement.
15.5 FURTHER ASSURANCES
The Parties shall do with reasonable diligence, all
such things and provide all such reasonable assurances as may
be required to consummate the transactions provided for
hereunder, and each Party shall provide such further documents
required by the other Party as may be reasonably necessary or
desirable to effect the purpose of this Agreement and carry
out its provisions, whether before or after the Closing,
including, without limitation, the execution of agreements
concerning transitional services as may be mutually agreed by
the Parties.
15.6 DISPUTE RESOLUTION
In the event of any and all disputes between the Parties
resulting out of or relating to this Agreement or its breach,
the Parties shall attempt, in good faith, to settle amicably
such disputes (including referral of the dispute to a neutral
third-party mediator) prior to submitting same to the court of
competent jurisdiction.
15.7 NO THIRD PARTY BENEFICIARY
Nothing contained in this Agreement or any other agreement
entered into pursuant hereto is intended, or should be
interpreted as having been intended, to create any right or
assume any obligation in favour of, or grant any waiver or
release from any obligation to, or otherwise constitute a
stipulation in favour of any Person, other than the Parties,
the Purchaser Protected Persons and the Vendor Protected
Persons.
15.8 COUNTERPARTS
This Agreement may be executed by the Parties in several
counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall
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constitute but one and the same document.
IN WITNESS WHEREOF the Parties have executed this Agreement as
of the date first hereinbefore written.
DOMTAR INC.
per: /s/ Stephen C. Larson
----------------------------
per: /s/ Pierre Fitzgibbon
----------------------------
GEORGIA-PACIFIC CORPORATION
per: /s/ Michael A. Vidan
----------------------------
<PAGE> 1
EXHIBIT 2.2
DOMTAR U.S. GYPSUM PRODUCTS BUSINESS
SHARE PURCHASE AGREEMENT
BETWEEN
DOMTAR INDUSTRIES INC.,
DOMTAR GYPSUM INC.,
DOMTAR INC.
AND
GEORGIA-PACIFIC CORPORATION
DATED NOVEMBER 8, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE 1. DEFINITIONS AND PRINCIPLES OF INTERPRETATION . . . . . . . . . . . . . 2
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Number and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.4 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.6 Submission to Jurisdiction: Appointment of Agent for Service of Process . . 15
1.7 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.8 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.9 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.10 Table of Contents and List of Schedules . . . . . . . . . . . . . . . . . . 16
1.11 Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.13 Delays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 2. PURCHASED SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 3. PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.1 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.2 Adjustment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE VENDOR . . . . . . . . . . . . . 20
4.1 Incorporation and Authorization . . . . . . . . . . . . . . . . . . . . . . 20
4.2 Ownership of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.3 Enforceability of the Agreement . . . . . . . . . . . . . . . . . . . . . . 21
4.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.5 Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.6 Capital Stock and Records . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.7 Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.9 Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.10 Inventories and Accounts Receivable . . . . . . . . . . . . . . . . . . . . 27
4.11 Absence of Material Changes . . . . . . . . . . . . . . . . . . . . . . . . 28
4.12 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
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4.13 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.15 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.17 Employees, Pension and Other Benefit Plans . . . . . . . . . . . . . . . . . 35
4.18 Litigation; Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . 39
4.19 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.20 Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.21 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.22 Consents and Approvals; Permits . . . . . . . . . . . . . . . . . . . . . . 40
4.23 Gypsum Rock Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER . . . . . . . . . . . . 41
5.1 Incorporation and Authorization . . . . . . . . . . . . . . . . . . . . . . 41
5.2 Enforceability of the Agreement . . . . . . . . . . . . . . . . . . . . . . 41
5.3 Investment Representation . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.4 Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 6. NON-COMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.1 Non-Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.2 Permitted Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.3 Limited Exception for Incidental Acquisitions . . . . . . . . . . . . . . . 43
ARTICLE 7. COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . 44
7.1 Maintenance and Preservation of Business . . . . . . . . . . . . . . . . . . 44
7.2 Notice of Cessation in Ordinary Course . . . . . . . . . . . . . . . . . . . 46
7.3 Access for the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.4 Maintain Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.5 Corporate Proceedings for Transfer . . . . . . . . . . . . . . . . . . . . . 48
7.6 Adjustment Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.7 Tax Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.8 Hazardous Waste . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
7.9 Operation of Business After Second Fixture Date . . . . . . . . . . . . . . 49
ARTICLE 8. ADDITIONAL COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . . 50
8.1 Tax Returns Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.2 Use of Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.3 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.3.1 Vendor Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.3.2 Employees On Medical Leave . . . . . . . . . . . . . . . . . . . . 51
8.3.3 Key Employee Retention Program . . . . . . . . . . . . . . . . . . 52
</TABLE>
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8.3.4 Employee Share Purchase and Executive Stock Option Plans . . . . . 52
8.3.5 U.S. 401(k) Plan . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.4 Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.5 Affidavits for Title Insurance . . . . . . . . . . . . . . . . . . . . . . . 56
8.6 No Interference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
8.7 Guarantees, Letters of Credit, Etc. . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 9. ANTITRUST AND COMPETITION REGULATORY APPROVALS . . . . . . . . . . . . 57
9.1 Obtaining Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.2 Dealings With Authority . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 10. CONDITIONS OF CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.1 Purchaser's Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.1.1 Representations and Warranties Remain Correct . . . . . . . . . . . 59
10.1.2 Performance of Obligations . . . . . . . . . . . . . . . . . . . . 61
10.1.3 Permits, Consents and Approvals . . . . . . . . . . . . . . . . . . 61
10.1.4 Corporate and Other Proceedings . . . . . . . . . . . . . . . . . . 62
10.1.5 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.1.6 Real Property Title Insurance . . . . . . . . . . . . . . . . . . . 62
10.1.7 Resignation and Releases by Directors and Officers . . . . . . . . 62
10.1.8 Opinion of the Vendor's Counsel . . . . . . . . . . . . . . . . . . 62
10.1.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
10.1.10 Domtar Canadian Gypsum Products Business . . . . . . . . . . . . . 63
10.1.11 Rescission . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
10.1.12 Waiver by the Purchaser . . . . . . . . . . . . . . . . . . . . . . 63
10.2 Vendor's Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.2.1 Representations and Warranties Remain Correct . . . . . . . . . . . 64
10.2.2 Performance of Obligations . . . . . . . . . . . . . . . . . . . . 64
10.2.3 Corporate and Other Proceedings . . . . . . . . . . . . . . . . . . 64
10.2.4 Change of Name . . . . . . . . . . . . . . . . . . . . . . . . . . 65
10.2.5 Domtar Canadian Gypsum Products
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
10.2.6 Opinion of the Purchaser's Counsel . . . . . . . . . . . . . . . . 65
10.2.7 Rescission . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
10.2.8 Waiver by the Vendor . . . . . . . . . . . . . . . . . . . . . . . 66
</TABLE>
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ARTICLE 11. SURVIVAL AND RELIANCE ON REPRESENTATIONS AND WARRANTIES AND
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
11.1 Survival and Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
11.2 Survival of Liability for Representations and Warranties . . . . . . . . . . 66
11.3 Indemnification by the Vendor . . . . . . . . . . . . . . . . . . . . . . . 67
11.4 Indemnification by the Purchaser . . . . . . . . . . . . . . . . . . . . . . 68
11.5 Indemnification against Third Party Claims . . . . . . . . . . . . . . . . . 69
11.6 Indemnification after Insurance and Other Recoveries . . . . . . . . . . . . 70
11.7 Vendor's Maximum Liability . . . . . . . . . . . . . . . . . . . . . . . . . 71
11.8 Details of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
11.9 Indemnification Sole Remedy . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE 12. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
ARTICLE 13. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
13.1 Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
13.2 Continuing Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE 14. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
14.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
14.2 Public Announcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
14.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
14.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
14.5 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
14.6 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
14.7 No Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . 76
14.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
</TABLE>
<PAGE> 6
SHARE PURCHASE AGREEMENT
THIS AGREEMENT made as of November 8, 1995
BETWEEN: GEORGIA-PACIFIC CORPORATION, a company
incorporated under the laws of Georgia
(the "PURCHASER")
AND: DOMTAR INDUSTRIES INC., a company incorporated
under the laws of Delaware
(the "VENDOR")
DOMTAR GYPSUM INC., a company incorporated under
the laws of Delaware, which is a party to this
Agreement for the purpose of making the
representations set forth in Article 4 and certain
covenants set forth in Articles 7 and 8, and
DOMTAR INC., a company incorporated under the laws
of Canada, which is a party to this Agreement for
the purpose of making the covenants set forth in
Articles 6 and 11 and certain representations set
forth in Article 4.
WHEREAS the Vendor is a wholly-owned subsidiary of Domtar;
WHEREAS the Corporation is a wholly-owned subsidiary of the
Vendor which owns all the United States of America assets relating to the
Business and, indirectly through its wholly-owned subsidiary KMHC, 49% of all
the issued and outstanding shares of the capital stock of COMSA, which owns all
the Mexican assets (Gypsum rock mine) relating to the Business;
WHEREAS the Vendor desires to sell, assign and transfer to the
Purchaser who desires to purchase, the Purchased Shares subject and pursuant to
the provisions hereof;
<PAGE> 7
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NOW, THEREFORE, THIS AGREEMENT WITNESSES that in consideration
of the mutual covenants and agreements herein set out and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties covenant and agree as follows:
ARTICLE 1. DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1 DEFINITIONS
For the purposes of this Agreement and any other agreement or
document entered into pursuant hereto or thereto and any
notice, consent, direction or other communication required or
permitted to be given pursuant hereto or thereto, the
following words and phrases shall have the following meanings
ascribed to them respectively, unless the subject matter or
context otherwise requires:
(A) "ADJUSTMENT ARBITRATOR" means the Person, if any,
chosen pursuant to Section 3.2 to make the final
determination of the adjustment to the Purchase
Price.
(B) "ADJUSTMENT BALANCE SHEET" means the balance sheet of
the Corporation as at the Adjustment Date which shall
be prepared in accordance with Section 3.2.4 hereof.
(C) "ADJUSTMENT DATE" means the earlier of the Closing
Date and the Second Fixture Date.
(D) "ADJUSTMENT PAYMENT DATE" means the later of (i) the
fifth (5th) Business Day from and after the final
determination (and, if determined by the Adjustment
Arbitrator, delivery to the Parties) of the
adjustment (if any) to the Purchase Price, as
provided in Section 3.2 hereof and (ii) the Closing
Date.
(E) "AFFILIATE" of any specified Person means any Person
directly or indirectly controlling or controlled by
or under direct or indirect common control with such
Person. For the purposes of this definition,
"CONTROL" when used with respect to any Person means
the power to direct the management and policies of
such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or
otherwise; and the terms "CONTROLLING" and
"CONTROLLED" have meanings correlative to the
foregoing.
(F) "AGREEMENT" means this Agreement entitled "SHARE
PURCHASE AGREEMENT" and all agreements or documents
supplemental hereto or in amendment or confirmation
hereof; "HEREIN", "HEREOF", "HERETO", "HEREUNDER"
<PAGE> 8
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and similar expressions mean and refer to this
Agreement and not to any particular article or
section hereof; "ARTICLE", "SECTION" or other
subdivision of this Agreement means and refers
to the specified article, section or other
subdivision of this Agreement.
(G) "ANTITRUST AUTHORITY" has the meaning ascribed
thereto in Article 9.
(H) "ANTITRUST LAW" has the meaning ascribed thereto in
Article 9.
(I) "ASSET PURCHASE AGREEMENT" means that certain Asset
Purchase Agreement dated as of even date herewith
between Domtar and the Purchaser, as it may be
amended from time to time.
(J) "BUSINESS" means the business presently conducted by
the Corporation at and from its facilities, all of
which are in the United States of America, as set out
in SCHEDULE 1.1(J) and known as Domtar U.S. Gypsum
Products Business, excluding any business conducted
at the Corporation's Vernon, California facility.
(K) "BUSINESS DAY" means a day other than a Saturday,
Sunday or any other day on which the principal banks
located in Montreal, Canada or Atlanta, Georgia are
not open for business during normal banking hours.
Whenever any payment to be made or any action to be
taken pursuant to this Agreement is required to be
made or taken on a day other than a Business Day,
such payment shall be made or such action shall be
taken on the next succeeding Business Day.
(L) "CLAIMS" has the meaning ascribed thereto in Section
11.3.1 hereof.
(M) "CLOSING" means the consummation of the sale by the
Vendor and the purchase by the Purchaser of the
Purchased Shares by the transfer and delivery of
certificates and documents of title thereto and the
payment of the Purchase Price on the Closing Date as
provided herein.
(N) "CLOSING DATE" means the fifth Business Day after the
Purchaser shall have notified the Vendor in writing
(or the Vendor shall have notified the Purchaser in
writing, if earlier) that the provisions of Section
10.1.3 hereof have been met, or such earlier date as
the Parties may agree.
<PAGE> 9
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(O) "CLOSING PLACE" means the offices of the Purchaser's
headquarters, or such other location as the Vendor
may designate upon at least five (5) Business Days'
notice to the Purchaser, subject to the Purchaser's
right to reject such designated location if such
designation would impose an unreasonable burden on
the Purchaser.
(P) "CODE" means the Internal Revenue Code of 1986
(U.S.A.), as amended, and regulations promulgated
thereunder.
(Q) "COMSA" means Compania Occidental Mexicana, S.A. de
C.V., a company incorporated under the laws of
Mexico.
(R) "CONFIDENTIALITY AGREEMENT" means the confidentiality
agreement between the Vendor and the Purchaser dated
August 30, 1995.
(S) "CONTRACTS" means all written or oral outstanding
contracts, agreements, deeds, negotiable instruments,
bid, performance, surety, custom or other bonds,
leases, licenses, commitments, covenants and
warranties to which the Corporation is entitled or
under which it is bound, and all amendments and
modifications thereto.
(T) "CORPORATION" means Domtar Gypsum Inc., a company
incorporated under the laws of Delaware, to be
renamed G-P Gypsum Corporation (or such other name as
may be acceptable to the Vendor) prior to or at the
Closing.
(U) "DOMTAR" means Domtar Inc., a company incorporated
under the laws of Canada.
(V) "EFFECTIVE TIME" means 12:01 a.m. on the Closing Date.
(W) "EMPLOYEE PLANS" means all "employee welfare benefit
plans" and "employee pension benefit plans" as
respectively defined in Sections 3(1) and 3(2) of
ERISA, all employee benefit and pension plans, all
other bonus, deferred compensation, retirement,
savings, excess benefit, stock option or purchase,
retention, termination, severance and incentive
plans, contracts, programs, funds, arrangements or
practices and all other plans, contracts, programs,
funds, arrangements or practices, that provide or may
provide money (other than as current salary or
wages), services, property or other benefits, whether
written or oral and whether funded or unfunded,
including, without limitation, any that have been
frozen or terminated since the Financial Statements
<PAGE> 10
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Date, and any trust, escrow or similar
agreement related thereto, whether written or oral
and whether funded or unfunded, which are established
or maintained by the Corporation with respect to any
of its Employees or Retired Employees, independent
contractors, directors, officers or shareholders or
which are established or maintained by any Person
which together with the Corporation is or would have
been at any date of determination treated as a single
employer under Section 414 of the Code (the "RELATED
PERSONS") or with respect to which the Corporation or
the Related Persons have made or are required to make
payments, transfers or contributions.
(X) "EMPLOYEES" means all the employees who, as at the
date of determination, are employed by the
Corporation whether or not as salaried or unionized
employees and whether or not on short or long-term
disability, accident or sickness, maternity, lay-off
or other authorized leave of absence and including,
without limitation, the Retired Employees.
(Y) "EMPLOYEES ON MEDICAL LEAVE" means those of the
Employees other than the Retired Employees) who, as
at the date of determination, are absent from work
because of disability or are otherwise incapable of
working in their regular duties or who have claimed
that they are so disabled or incapable of working as
at such date.
(Z) "EMPLOYEES ON SHORT-TERM MEDICAL LEAVE" means
Employees on Medical Leave who as at the date of
determination, are receiving or are eligible for
benefits under the Short Term Disability (STD) Salary
Continuation Plan for Non-Union Employees of Domtar
Industries Inc. and the corresponding plans or
agreements for unionized employees maintained by the
Corporation or the Vendor or would be so eligible if
their illnesses or injuries were not covered by
workers' compensation.
(AA) "EMPLOYEES ON LONG-TERM MEDICAL LEAVE" means, as at
the date of determination, all Employees on Medical
Leave other than Employees on Short-Term Medical
Leave.
(BB) "ENVIRONMENT" means soil, land, water and air in
their natural state including, without limitation,
land surface or subsurface strata, surface water,
ground water and ambient air.
(CC) "ENVIRONMENTAL AUTHORITIES" means all federal,
provincial or state ministries or federal, state,
provincial or local governmental bodies
<PAGE> 11
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or regulatory agencies, foreign or domestic, charged
with enforcing any of the Environmental Laws.
(DD) "ENVIRONMENTAL CLAIMS" has the meaning ascribed
thereto in Section 11.7.1 hereof.
(EE) "ENVIRONMENTAL LAW" means all applicable federal,
state, provincial or local codes, laws, statutes,
regulations, decrees, orders and by-laws, in respect
of the protection of the quality of the Environment
and the health and safety of employees including,
without limitation, those relating to the Release of
Hazardous Substances into the Environment or the
manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling
of Hazardous Substances in force, otherwise than as a
result of retroactive application of a subsequent
legislative or regulatory change or enactment adopted
after the Adjustment Date, as at the date with
respect to which such defined term is used.
(FF) "ENVIRONMENTAL NOTICE" means any notice of
investigation, notice of non-compliance or written
order from any of the Environmental Authorities
including any notice of contamination or clean-up
requirements.
(GG) "ENVIRONMENTAL PERMITS" means all permits, licenses,
certificates and authorization of, and registrations
with, any of the Environmental Authorities pursuant
to any of the Environmental Laws, issued or granted
to the Corporation for the purpose of conducting the
Business as presently conducted, set out in SCHEDULE
1.1(GG).
(HH) "ERISA" means the Employee Retirement Income Security
Act of 1974 (U.S.A.), as amended, and regulations
promulgated thereunder.
(II) "EXCLUDED ASSETS" means the following assets of the
Corporation:
(i) all real and personal property located in
Vernon, California or arising out of the sale
of such property;
(ii) the agreements with Public Service Electric &
Gas relating to environmental clean-up at
Camden plant; and
<PAGE> 12
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(iii) any indemnification rights from prior owners
of any of the Corporation's facilities with
respect to the matters set forth on SCHEDULE
11.3.2.
(JJ) "FINANCIAL STATEMENTS" means the income and cash flow
statements of the Corporation for the twelve (12)
months ended December 31, 1994 extracted from the
Corporation's audited financial statements for such
period and the unaudited income and cash flow
statements of the Corporation for the six (6) months
ended June 30, 1995, respectively, and the related
notes thereto set out in SCHEDULE 1.1(JJ).
(KK) "FINANCIAL STATEMENTS DATE" means June 30, 1995.
(LL) "FIRST CORE REPRESENTATIONS" means those (i)
representations and warranties of the Vendor, the
Corporation and Domtar, as the case may be, contained
in Sections 4.1, 4.2, 4.3.1, 4.3.2, 4.4, 4.5, 4.6,
4.7.1, 4.7.3, 4.8.1, 4.8.2, 4.20, 4.21 and 4.22 and
(ii) all other representations and warranties of the
Vendor but with all references to Laws (other than
ERISA and the Code) and Environmental Laws being
limited to those in effect on or before the First
Fixture Date.
(MM) "FIRST FIXTURE DATE" means May 23, 1996.
(NN) "HAZARDOUS SUBSTANCES" means all contaminants issued
or discharged in the Environment in a greater
quantity or concentration than that provided for in
any of the Environmental Laws or the presence of
which in the Environment is prohibited pursuant to
any of the Environmental Laws. For the purposes of
this definition, "CONTAMINANTS" means all solid,
liquid or gaseous matter, micro-organism, sound,
vibration, ray, heat, water, radiation or a
combination of any of them that adversely alters the
quality of the Environment.
(OO) "HAZARDOUS WASTE" means a waste which meets the
criteria for, or which has been listed or identified
as, a hazardous waste by (a) the U.S. Environmental
Protection Agency under the U.S. Resource
Conservation and Recovery Act, 42 USC Section 6901
et seq. and regulations promulgated by the U.S.
Environmental Protection Agency, 40 C.F.R. Part 261
or (b) the California Department of Toxic Substances
under California Health and Safety Code Section
25110 et seq. and regulations promulgated thereunder.
<PAGE> 13
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(PP) "HSR ACT" means the Hart-Scott-Rodino Antitrust
Improvement Act of 1976 (U.S.A.), as amended, and
regulations promulgated thereunder.
(QQ) "INDEMNIFIED CLAIMS" means the Purchaser's
Indemnified Claims and the Vendor's Indemnified
Claims.
(RR) "INDEMNITEE" and "INDEMNITOR" have the respective
meanings ascribed thereto in Section 11.5.1 hereof.
(SS) "INITIAL PERIOD" has the meaning ascribed thereto in
Section 8.4.9 hereof.
(TT) "INITIAL 30-DAY PERIOD" has the meaning ascribed
thereto in Section 3.2.4 hereof.
(UU) "INTELLECTUAL PROPERTY" means all patents, copyrights
(including renewal rights thereto), trade-marks,
service marks, trade names, industrial designs
(registered and unregistered and including
applications therefor and distinguishing guise) and
all other confidential information, improvements,
discoveries, data, trade secret information,
inventions, patterns, drawings, technical
information, research and development works,
concepts, methods, processes, procedures, know-how
and other intellectual property (in whatever medium
or support) owned or actively used by the Corporation
with the exception of the trade-mark "Domcrete".
(VV) "INTERIM BALANCE SHEET" means the unaudited balance
sheet of the Business as at June 30, 1995, and the
related notes thereto, set out in SCHEDULE 1.1(VV).
(WW) "KMHC" means KMHC, Incorporated, a company
incorporated under the laws of California.
(XX) The "KNOWLEDGE" of the Corporation, the Vendor or
Domtar shall mean the knowledge of
(i) the Persons listed in Part 1 of SCHEDULE
1.1(XX) in the case of the Corporation;
(ii) the Persons listed in Part 2 of the SCHEDULE
1.1(XX) in the case of the Vendor or Domtar.
(YY) "LAW" means all applicable federal, state, provincial
or local codes, laws, statutes, regulations, decrees,
orders and by-laws in force, otherwise than as a
<PAGE> 14
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result of retroactive application of a
subsequent legislative or regulatory change or
enactment adopted after the Adjustment Date, as at the
date with respect to which such defined term is used,
but excluding Environmental Law.
(ZZ) "LEASED REAL PROPERTIES" means all real and immovable
properties leased by the Corporation, as tenant, as
set out in SCHEDULE 1.1(ZZ).
(AAA) "LIENS" means all liens, prior claims, privileges,
security interests, hypothecs, mortgages, pledges,
charges, encumbrances, easements and servitudes,
leases, licenses, options, claims, rights, ownership
or title retention agreements, conditional sale
agreements, rights of first refusal, leasing, sale
and leaseback agreements and all other agreements
that in substance secure payment or performance of an
obligation.
(BBB) "MATERIAL ADVERSE EFFECT" means, with respect to any
event, act, condition or occurrence of whatever
nature (including any adverse determination of any
litigation, arbitration, or governmental
investigation or proceedings), whether singly or in
conjunction with any other event, act, condition or
occurrence, whether or not related, a material
adverse change in, or a material adverse effect upon,
any of (i) the legality, validity or enforceability
of this Agreement or the ability of the Vendor, the
Corporation or Domtar, as the context may require, to
execute and deliver this Agreement and consummate the
transactions contemplated hereby, or (ii) the
financial condition, results of operations, cash
flows, business or properties of (a), if for purposes
of determining compliance with Section 10.1, the
Corporation and its Subsidiaries and the Business (as
defined in the Asset Purchase Agreement), taken as a
whole, and (b), for all other purposes (including for
purposes of the indemnities of Section 11.3), the
Corporation and its Subsidiaries, taken as a whole.
(CCC) "MATERIAL CONTRACTS" means those of the Contracts
which (a) require (or, in the absence of a default,
may require) an expenditure by or to the Corporation
in excess of $500,000, and (b) are:
(i) not in the ordinary course of the Business;
(ii) title retention, conditional sales, leasing,
sale and leaseback, loan, credit or security
agreements or other agreements that in
<PAGE> 15
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substance secure payment or performance of
an obligation;
(iii) guarantees, sureties, promissory notes or
other negotiable instruments;
(iv) related to Intellectual Property or computer
software;
(v) leases for the Leased Real Properties;
(vi) personal and movable property leases and
licenses of the Corporation, as lessee or
licensee thereunder, other than those
referred to in paragraphs (ii) or (iv) of
this Section;
(vii) with Affiliates or Subsidiaries of the
Corporation;
(viii) federal, state or local government or
governmental body contracts, tenders or bids
and bonds therefor;
(ix) non-competition or confidentiality agreements
or other agreements in restriction of trade;
(x) franchise and distribution agreements;
(xi) utility supply agreements; or
(xii) raw material purchase and supply agreements;
including, without limitation, those set out in
SCHEDULE 1.1(CCC), but excluding those being assumed
by the Vendor or Domtar in connection with the
Excluded Assets.
(DDD) "OWNER'S EQUITY" has the meaning ascribed thereto and
is determined pursuant to the formula set out in
SCHEDULE 1.1(DDD).
(EEE) "PARTIES" means the Vendor, the Corporation and
Domtar (on the one hand) and the Purchaser (on the
other hand) collectively and "PARTY" means any one of
them.
(FFF) "PERMITTED ENCUMBRANCES" means
(i) all liens, prior claims, privileges, security
interests, hypothecs, mortgages and charges
for real and immovable property taxes
contested in good faith by appropriate
proceedings for which adequate reserves are
being maintained or which are incurred in the
ordinary course of the Business in connection
<PAGE> 16
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with real and immovable property construction
or renovation or with workers or with workers'
compensation, unemployment insurance, social
security, retirement and other similar
legislation;
(ii) all easements and servitudes (including,
without limitation, easements and servitudes
for public utility services);
(iii) all encroachments, restrictive covenants and
licenses;
(iv) all site plan agreements, subdivision
agreements and leases;
(v) all minor irregularities of title; and
(vi) all by-laws, planning acts, building
restrictions and zoning regulations;
which affect the Real Properties and which (i)
individually would cost less than $50,000 to correct,
and (ii) both individually and in the aggregate, are
of a minor nature and do not impair the use of those
of the Real Properties which are so affected for the
purpose of conducting the Business as presently
conducted.
(GGG) "PERSON" means an individual, partnership, joint
venture, association, cooperative, corporation,
public utility, trust or a government or any
department, body or agency thereof or any other
entity with juridical personality.
(HHH) "PROPERTIES" means the Real Properties and all
personal and movable properties purportedly owned by
the Corporation, other than the Excluded Assets.
(III) "PURCHASE PRICE" has the meaning ascribed thereto in
Section 3.1 hereof.
(JJJ) "PURCHASED SHARES" has the meaning ascribed thereto
in Article 2 hereof.
(KKK) "PURCHASER'S COUNSEL" means Purchaser's Senior
Vice-President - Law and General Counsel.
(LLL) "PURCHASER'S INDEMNIFIED CLAIMS" has the meaning
ascribed thereto in Section 11.3.1 hereof.
<PAGE> 17
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(MMM) "PURCHASER'S PENSION PLAN" has the meaning ascribed
thereto in Section 8.4.1 hereof.
(NNN) "PURCHASER PROTECTED PERSONS" has the meaning
ascribed thereto in Section 11.3.1 hereof.
(OOO) "REAL PROPERTIES" means all real and immovable
properties owned by the Corporation, together with
all plants, buildings, structures, improvements and
appurtenances thereon or thereto and forming part
thereof and all servitudes, easements and rights of
way in favour thereof, set out in SCHEDULE 1.1(OOO).
(PPP) "RELEASE" means releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing or dumping.
(QQQ) "RETIRED EMPLOYEES" means all former employees of the
Corporation who, as at the date of determination,
have rights under the Employee Plans, provided,
however, that no Employee on Long-Term Medical Leave
shall be deemed to be a Retired Employee.
(RRR) "SECOND CORE REPRESENTATIONS" means those
representations and warranties contained in Section
4.1, 4.2, 4.3.1, 4.3.2.1(a), 4.3.2.3, 4.3.2.4 (as to
the Purchased Shares), 4.4, 4.5, 4.6, and (to the
extent necessary for any Employee Plans to be in
compliance with ERISA and the Code) 4.17.
(SSS) "SECOND FIXTURE DATE" means September 30, 1996,
provided, however, that the Second Fixture Date shall
be postponed by the number of days, if any, by which
the date described in (ii) below follows the date
described in (i) below: (i) the later of the date on
which the Purchaser files a complete response to a
Second Request or the date which is sixty (60) days
after the date of such Second Request and (ii) the
date the Vendor, the Corporation or Domtar (as the
case may be) files its complete response to such
Second Request.
(TTT) "SECOND REQUEST" shall mean a request for additional
information and documentary material under the HSR
Act relating to the transactions contemplated by this
Agreement.
(UUU) "SECURITIES ACT" means the Securities Act of 1933
(U.S.A.), as amended.
<PAGE> 18
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(VVV) "SELLING PARTIES" means the Vendor, the Corporation
and Domtar, individually and collectively.
(WWW) "SUBSIDIARY" of any Person means any corporation more
than 50% of whose shares of stock having general
voting power under ordinary circumstances to elect a
majority of the board of directors of such
corporation, irrespective of whether or not at the
time stock of any other class or classes shall have
or might have voting power by reason of the happening
of any contingency, is owned or controlled directly
or indirectly by such Person or by any other
Subsidiary of such Person.
(XXX) "TAXES" means all taxes, assessments, reassessments,
charges, levies and all other imposts, together with
all interest, penalties and fines thereon or
additions thereto, of whatever kind or nature,
including, without limitation, gross or net income,
ad valorem, alternative or add-on minimum tax,
capital stock, documentary, employment (including,
without limitation, social security and
unemployment), environmental, excise, franchise,
gains, goods and services, gross receipts, import,
intangible, license, mining, net worth, occupation,
payroll, privilege, production, profits, property,
registration, sales, services, severance, stamp,
surplus, transfer, use, wage, withholding, workers
compensation, value added taxes, charges, fees and
customs duties, imposed, levied or assessed by any
federal, state, provincial or local government or
taxing authority.
(YYY) "TAX RETURNS" means all federal, state or local tax
reports, returns, declarations of estimated tax or
other information required to be filed with respect
to the Corporation, its income, the Properties or the
Business.
(ZZZ) "TERMINATION DATE" has the meaning ascribed thereto
in Article 13 hereof.
(AAAA) "THIRD PARTY CLAIM" means any demand or statement or
any notice or overt threat thereof which has been
made on or communicated to a Party by or on behalf of
any other Person and which, if maintained or
enforced, will or might result in a Claim of the
nature described in either Section 11.3 or 11.4
hereof.
(BBBB) "TRANSITIONAL PERIOD" has the meaning ascribed
thereto in Section 8.4.7.
(CCCC) "U.S. GAAP" means generally accepted accounting
principles as of December 31, 1994, set forth in the
opinions and pronouncements of the Accounting
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<PAGE> 19
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Principles Board and the American Institute of
Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards
Board (or agencies with similar functions of
comparable stature and authority within the
accounting profession) or in such other statements
by such other entity as may be in general use by
significant segments of the accounting profession.
(DDDD) "U.S. 401(K) PLAN" means the 401(k) Retirement
Savings Plan for Non-Negotiated Employees of the
Vendor.
(EEEE) "U.S. PLAN" means the Pension Plan for Non-Negotiated
Employees of the Vendor.
(FFFF) "VENDOR PLANS" has the meaning ascribed thereto in
Section 8.3.1.
(GGGG) "VENDOR PROTECTED PERSON" has the meaning ascribed
thereto in Section 11.4.
(HHHH) "VENDOR'S COUNSEL" means Brobeck, Phleger & Harrison.
(IIII) "VENDOR'S INDEMNIFIED CLAIMS" has the meaning
ascribed thereto in Section 11.4.
1.2 NUMBER AND GENDER
Words (including, without limitation, words and phrases
defined herein) importing the singular include the plural and
vice versa; and words (including, without limitation, words
and phrases defined herein) importing gender include all
genders.
1.3 ENTIRE AGREEMENT
This Agreement, together with the agreements entered into, and
other documents delivered, pursuant hereto or concurrently
herewith constitute the entire agreement between the Parties
on the subject matter hereof and supersede all prior
agreements, understandings, negotiations and discussions,
whether written or oral, of the Parties on the subject matter
hereof, other than the Confidentiality Agreement, and there
are no warranties, representations, undertakings, obligations,
covenants, conditions or other agreements between the Parties
in connection with the subject matter hereof except as
specifically provided herein or therein.
<PAGE> 20
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1.4 SCHEDULES
The Schedules referred to herein and attached hereto form an
integral part of this Agreement. Nothing set out in the
Schedules shall be deemed to establish a standard of
materiality.
1.5 GOVERNING LAW
This Agreement shall be deemed to be made in and in all
respects shall be interpreted, construed and governed by and
in accordance with the laws of the State of Delaware without
reference to the choice of law principles thereof. The
Parties irrevocably agree that any legal action or proceeding
arising out of or in connection with this Agreement shall be
brought in the Chancery or Superior Court of the State of
Delaware, or the United States District Court for the State of
Delaware.
1.6 SUBMISSION TO JURISDICTION: APPOINTMENT OF AGENT FOR SERVICE
OF PROCESS
Each of the Parties to this Agreement hereby irrevocably and
unconditionally agrees (i) to be subject to the jurisdiction
of the courts of the State of Delaware and of the federal
courts sitting in the State of Delaware, and (ii) to the
extent such Party is not otherwise subject to service of
process in the State of Delaware, to appoint and maintain an
agent in the State of Delaware as such Party's agent for
acceptance of legal process, and that service made pursuant to
(ii) above shall have the same legal force and effect as if
served upon such Party personally within the State of
Delaware. For purposes of implementing the Parties' agreement
to appoint and maintain an agent for service of process in the
State of Delaware, each such Party that has not as of the date
hereof already duly appointed such an agent does hereby
appoint RL&F Service Corp., One Rodney Square, 10th Floor,
Wilmington, Delaware 19801, as such agent.
1.7 AMENDMENT
No supplement or amendment of this Agreement shall be binding
upon the Parties unless expressly provided in a document duly
executed by the Parties.
1.8 WAIVER
The failure by either Party, at any time or for any period of
time, to require performance by the other Party of any of the
latter's respective obligations under this Agreement shall not
affect the former's rights thereafter to require such
performance. No waiver of any of the provisions of this
<PAGE> 21
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Agreement shall constitute or be deemed to constitute a
waiver of any other provision hereof (whether or
not similar) nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided in a document duly
executed by the Parties.
1.9 HEADINGS
The Article, Section and other subdivision headings contained
herein are included for convenience of reference only, are not
intended to be full or accurate descriptions of the content
thereof and shall not affect or be utilized in the
construction or interpretation of this Agreement.
1.10 TABLE OF CONTENTS AND LIST OF SCHEDULES
The table of contents and list of Schedules preceding this
Agreement are included for convenience of reference only and
shall not affect or be utilized in the construction or
interpretation of this Agreement.
1.11 CURRENCY
Unless otherwise indicated herein, all dollar amounts referred
to in this Agreement are in legal currency of the United
States of America and all dollar signs ($) used herein refer
to such currency. If for the purposes of any payment required
to be made in order to give effect to the provisions hereof it
is necessary to convert a sum of money in United States of
America currency into Canadian currency or vice versa, the
applicable rate of exchange shall be the spot buying rate of
exchange of the Mellon Bank at 12 noon on the date such
payment is due.
1.12 SEVERABILITY
If any provision of this Agreement shall be held illegal,
invalid or unenforceable by any competent court or tribunal in
any relevant jurisdiction, such illegality, invalidity or
unenforceability shall attach only to such provision in such
jurisdiction and such provision shall be severed herefrom and
be ineffective to the extent of such illegality, invalidity or
unenforceability and shall not affect or impair or render
illegal, invalid or unenforceable such provision in any other
jurisdiction or any other provision of this Agreement in any
jurisdiction.
<PAGE> 22
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1.13 DELAYS
In calculating the delay or period of time within or following
which any act is to be done or step taken pursuant to this
Agreement, the day which marks the start of such delay or
period shall be excluded from such calculation.
ARTICLE 2. PURCHASED SHARES
Upon the terms and subject to the conditions of this Agreement, the
Vendor covenants and agrees to sell, assign, transfer and deliver to
the Purchaser and the Purchaser agrees to purchase from the Vendor on
the Closing Date, as at the Effective Time, all of the issued and
outstanding shares of the capital stock of the Corporation, being 312
shares (the "PURCHASED SHARES"), for the Purchase Price and upon the
terms and conditions herein provided.
ARTICLE 3. PURCHASE PRICE
3.1 PAYMENT OF PURCHASE PRICE
The price payable by the Purchaser to the Vendor for the
Purchased Shares shall be, subject to the adjustments, if any,
pursuant to the provisions of Section 3.2 hereof, the amount
of Two Hundred Eighty Million Dollars ($280,000,000) (plus, if
the Closing occurs after the Second Fixture Date, interest on
such amount at the prime rate of Mellon Bank (as defined in
Section 3.2.3) calculated from the Second Fixture Date until
paid in full) (the "PURCHASE PRICE"), which shall be paid at
the Closing Place by wire transfer or certified cheque payable
to the Vendor or as directed by the Vendor.
3.2 ADJUSTMENT OF PURCHASE PRICE
3.2.1 An adjustment, if any, based on U.S. GAAP with
respect to the Purchase Price shall be made as of the
Adjustment Date as follows:
3.2.1.1 if the value of the Owner's Equity as
determined by the Adjustment Balance
Sheet exceeds the value of the Owner's
Equity as determined by the Interim
Balance Sheet, the Purchaser shall pay to
the Vendor, as an adjustment to the
Purchase Price, the amount of such
excess; and
<PAGE> 23
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3.2.1.2 if the value of the Owner's Equity as
determined by the Interim Balance Sheet
exceeds the value of the Owner's Equity
as determined by the Adjustment Balance
Sheet, the Vendor shall pay to the
Purchaser, as an adjustment to the
Purchase Price, the amount of such
excess.
3.2.2 The amount of any adjustment payable in accordance
with the provisions of this Section 3.2 shall bear
interest at the prime rate of Mellon Bank calculated
from the Adjustment Date until paid in full, and the
amount of any such adjustment and interest accrued
thereon shall be paid, subject to Section 3.2.4, on
the Adjustment Payment Date by wire transfer or
certified cheque payable to or as directed by the
Party entitled thereto pursuant to the provisions of
this Section 3.2. If the Adjustment Payment Date is
the Closing Date, the adjustment may be added to or
netted against the Purchase Price , as the case may
be.
3.2.3 For the purposes hereof, the "prime rate of Mellon
Bank" means the prime rate of Mellon Bank announced
by said Bank from time to time in Pittsburgh,
Pennsylvania, as its reference rate of interest
(commonly known as its prime rate) for commercial
loans made by said Bank in United States of America
in United States of America dollars.
3.2.4 Within sixty (60) days after the Adjustment Date, the
Vendor shall (i) prepare the Adjustment Balance
Sheet, a calculation of Owner's Equity pursuant
thereto, and a calculation, in accordance with this
Section 3.2, of the Purchase Price adjustment (if
any) and (ii) deliver to the Purchaser a copy of such
Adjustment Balance Sheet and calculations. If the
Purchaser is satisfied that the Purchase Price
adjustment as calculated and submitted by the Vendor
has been properly calculated, the Purchaser shall so
notify the Vendor. If the Purchaser disagrees with
such calculation of the Purchase Price adjustment
(whether such objection relates to the mathematical
calculation thereof or of Owner's Equity, to the
Adjustment Balance Sheet or its preparation, or any
combination thereof) calculated by the Vendor, then
the Purchaser shall deliver to the Vendor, within
thirty (30) days after delivery to the Purchaser of
the Vendor's calculation of the Purchase Price
adjustment (the "INITIAL 30-DAY PERIOD"), a written
description of any adjustment proposed by the
Purchaser to such calculation, and the Vendor and the
Purchaser shall negotiate in good faith to
<PAGE> 24
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resolve any disagreement with respect thereto. If
the Purchaser fails to give the Vendor notification
within the Initial 30-Day Period of any objection to
such calculation of the Purchase Price adjustment (or
gives objections only to portions thereof), then such
calculation (or the part not objected to) shall be
binding upon the Parties. Any undisputed amount
shall be paid promptly on or before the later of (i)
the Closing Date or (ii) the fifth (5th) Business Day
after the Initial 30-Day Period. If the Vendor and
the Purchaser have not resolved any such disagreement
(or portion thereof) within fifty (50) days following
the date on which the Purchaser receives the Vendor's
proposed adjustment to the Purchase Price, then such
disagreement shall be submitted to the Adjustment
Arbitrator for a final and binding resolution of the
disagreement and calculation of the final Purchase
Price adjustment. The costs and expenses for the
services of the Adjustment Arbitrator shall be borne
by the Party whose position in the dispute submitted
to the Adjustment Arbitrator has the greatest dollar
discrepancy from the calculation determined by the
Adjustment Arbitrator.
The Adjustment Arbitrator shall be chosen as follow:
(i) if the amount of the dispute is less than or
equal to $1,000,000, the Adjustment
Arbitrator shall be the Chicago office of
KPMG Peat Marwick; or
(ii) if the amount of the dispute is in excess of
$1,000,000, then three arbitrators shall be
chosen from a list of 10 disinterested
accountants in Chicago or its vicinity
compiled by the American Arbitration
Association, with the Vendor and the
Purchaser alternatively striking a name from
such list until only three names remain. The
Vendor shall have the right to strike the
first name, and such right shall be exercised
within five (5) Business Days after the list
is presented to both the Vendor and the
Purchaser. Thereafter in turn, the Purchaser
and the Vendor shall have two (2) Business
Days after notification to it of the last
name stricken by the other Party, to strike a
name from the list until only three names are
left. The arbitrators shall be those three
Persons whose names remain after the above
process. If any such Person cannot or does
not serve as an arbitrator, then such Person
shall be replaced by the Person whose name
was last stricken who is available. If any
Party fails to strike a name from the list
within the allotted time, then the other
<PAGE> 25
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Party shall have a right to name the three
arbitrators.
Each of the Parties represents and warrants to the
other Parties that it has disclosed to the other
Parties all significant business and other
relationships that it has had with KPMG Peat Marwick
on or after January 1, 1993.
The Adjustment Balance Sheet shall present fairly the
consolidated financial position of the Corporation
and its Subsidiaries, and shall be based on the books
and records of the Corporation which will be kept,
and such Adjustment Balance Sheet shall be
calculated, in accordance with U.S. GAAP applied on a
basis consistent with the period covered by the
Financial Statements and the Interim Balance Sheet.
All liabilities, contingent or otherwise, of the
Corporation which are required to be reflected or
reserved against in the Adjustment Balance Sheet
shall be reflected therein.
3.3 TRANSFER TAXES
All stock and other transfer taxes including sales taxes and
document recording fees, if any, imposed in connection with
the transfer of the Purchased Shares to the Purchaser shall be
paid by the Vendor, and all applicable stock transfer tax
stamps shall be provided by the Vendor at the Closing.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE VENDOR
The Vendor and the Corporation each represent and warrant to the
Purchaser as follows and Domtar represents and warrants to the
Purchaser the matters in Sections 4.1.2 and 4.3:
4.1 INCORPORATION AND AUTHORIZATION
4.1.1 The Vendor is a corporation duly incorporated,
organized, validly existing and in good standing
under the laws of Delaware and has full capacity,
power and authority, corporate and otherwise, to
execute, deliver and perform this Agreement and
consummate the transactions contemplated hereby, and
has been duly authorized to execute and become a
party to this Agreement and to consummate the
transactions provided herein or pursuant hereto.
<PAGE> 26
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4.1.2 Domtar is a corporation duly incorporated, organized,
validly existing and in good standing under the laws
of Canada and has full capacity, power and authority,
corporate and otherwise, to execute, deliver and
perform this Agreement and consummate the
transactions contemplated hereby, and has been duly
authorized to execute and become a party to this
Agreement and to consummate the transactions provided
herein or pursuant hereto.
4.2 OWNERSHIP OF STOCK
The Vendor is the sole and absolute owner of the Purchased
Shares with good and marketable record and beneficial title
thereto free and clear of all Liens and upon the consummation
of the sale of the Purchased Shares to the Purchaser pursuant
to this Agreement, the Vendor shall assign, transfer and
deliver the Purchased Shares to the Purchaser with good and
marketable title, free and clear of all Liens. The Vendor has
the sole and exclusive right, power and authority to vote the
Purchased Shares.
4.3 ENFORCEABILITY OF THE AGREEMENT
4.3.1 This Agreement constitutes a legal, valid and
binding obligation of each of the Vendor, the
Corporation and Domtar, enforceable against them
in accordance with its terms, except to the
extent that the enforcement hereof may be limited
by bankruptcy, insolvency, arrangement,
reorganization, moratorium or other similar laws
relating to creditors' rights generally and
general principles of equity (regardless of
whether enforceability is considered in a
proceeding in equity or at law).
4.3.2 Neither the entering into of this Agreement nor
the consummation by any of the Vendor, the
Corporation and Domtar of any of the transactions
contemplated hereby shall:
4.3.2.1 with or without the giving of notice
or the lapse of time, or both,
violate, conflict with, or result in
a breach or default under, or cause
the termination of (a) any of the
provisions of the articles of
incorporation, articles of
amendment, certificates in respect
thereto, by-laws or other charter
document of any of the Vendor,
Domtar and the Corporation or of any
written shareholders agreement or
shareholders, stock or voting trust
to which any of the Vendor, Domtar
and the Corporation is a party
<PAGE> 27
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or (b) any Law or any Environmental
Law to which any of the Vendor,
Domtar and the Corporation is
subject;
4.3.2.2 subject any of the Vendor and the
Corporation to any penalty or
liability;
4.3.2.3 with or without the giving of notice
or the lapse of time, or both,
violate, conflict with, or result in
a breach or default under, or cause
the termination of, any contract,
agreement or undertaking applicable
to any of the Vendor, Domtar and the
Corporation, except for such
violations, conflicts, breaches,
defaults, or terminations which are
not likely to have a Material
Adverse Effect; or
4.3.2.4. result in the creation or imposition
of any Lien upon the Purchased
Shares or any of the Properties.
4.3.3 There are no judicial, quasi-judicial,
administrative, quasi-administrative or
arbitration proceedings pending against any of
the Vendor, Domtar and the Corporation which, if
adversely determined, may interfere with the
sale, assignment, transfer or delivery of the
Purchased Shares or the consummation of any of
the transactions herein provided.
4.4 SUBSIDIARIES
Except as set out in SCHEDULE 4.4, the Corporation does not
have any Subsidiary other than KMHC.
4.5 CORPORATE STATUS
4.5.1 The Corporation
4.5.1.1 is duly incorporated, organized,
validly existing and in good
standing under the laws of the State
of Delaware; and
4.5.1.2 has the all requisite capacity,
authority and power, corporate and
otherwise, to own, operate and use
the Properties, to lease the Leased
Real Properties and all personal and
movable properties leased thereby
and to conduct the Business, as
presently owned, operated, used,
<PAGE> 28
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leased and conducted, respectively.
4.5.2 KMHC is duly incorporated, organized, validly
existing and in good standing under the laws of
the State of California, and has all requisite
capacity, authority and power, corporate and
otherwise, to hold the 49% interest in COMSA, as
presently held.
4.6 CAPITAL STOCK AND RECORDS
4.6.1 The authorized capital stock of the Corporation
consists of 1,000 shares of which only 312
shares, being the Purchased Shares, are issued
and outstanding and each of such outstanding
shares has been duly authorized and issued and is
fully paid and non-assessable, and the paid-up
capital of the class of such shares has not been
changed since December 31, 1994. The Vendor is
the sole registered holder and beneficial owner
of each of such outstanding shares.
4.6.2 The authorized capital stock of KMHC consists of
2,500 shares of which only 50 shares are issued
and outstanding and each of such outstanding
shares has been duly authorized and issued and is
fully paid and non-assessable, and the paid-up
capital of the class of such shares shall be as
shown in the Adjustment Balance Sheet, and the
Corporation is the sole registered holder and
beneficial owner of each of such KMHC outstanding
shares.
4.6.3 No Person has any agreement, option or right
capable of becoming an agreement or option
4.6.3.1 to acquire any of the Purchased
Shares or any of the issued shares
of KMHC; or
4.6.3.2 to subscribe for or otherwise
acquire any of the unissued shares
of the capital stock of any of the
Corporation or KMHC.
4.6.4 The copies of the charter documents and by-laws
of the Corporation, KMHC and COMSA that have been
previously delivered to the Purchaser are the
complete, true and correct charter documents and
by-laws of the Corporation, KMHC and COMSA in
effect as of the date hereof. The minutes of
directors' and shareholders' meetings and the
stock books of each of the Corporation and KMHC
that have previously been delivered to the
<PAGE> 29
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Purchaser are the complete, true and correct
records of directors' and shareholders' meetings
and capital stock issuances and transfers through
and including the date hereof and reflect all
transactions required to be contained in such
records, as well as those matters customarily
contained in records of such type. The
corporate records of each of the Corporation and
KMHC have been maintained in accordance with
sound corporate and business practices and
present fairly, in all material respects, the
matters referred to therein.
4.6.5 Except as set out in SCHEDULE 4.6.5, neither the
Corporation nor KMHC exists as a result or
incident of any merger or amalgamation between
any of the Vendor, the Corporation and KMHC and
any other Person or between other Persons
pursuant to which the Properties, the 49%
interest in COMSA, the Purchased Shares, as the
case may be, currently remain subject to the
rights of the creditors of the Vendor or such
previously existing Person or Persons except as
such obligations are reflected in the Interim
Balance Sheet.
4.7 BUSINESS
4.7.1 The locations or jurisdictions where the
Corporation presently has places of business and
where the Corporation had places of business
during the preceding three (3) years are set out
in SCHEDULE 4.7.1 and, except as therein set out,
the Corporation does not have and has not had
during such three year period any place of
business in any other location or jurisdiction.
4.7.2 Except as set out in SCHEDULE 4.7.2, the
Corporation is conducting the Business in
compliance with all Laws of each jurisdiction in
which it presently conducts the Business and is
duly qualified, licensed or registered in each
jurisdiction in which the nature of the Business
makes such qualification, licensing or
registration necessary, except where the failure
to so comply or to be so qualified, registered or
licensed is not likely to have a Material Adverse
Effect.
4.7.3 The sole present corporate purpose of KMHC is
holding the 49% interest in COMSA and, except as
to the holding of said interest, it is not
conducting nor has it conducted since April 3,
1978 any other business or activity nor does it
have any employees or is it party to any
<PAGE> 30
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collective bargaining agreement.
4.8 FINANCIAL STATEMENTS
4.8.1 The Financial Statements present fairly in all
material respects the consolidated results of
operations and cash flows of the Business, for
the periods covered by the relevant statements
forming part of the Financial Statements.
4.8.2 The Interim Balance Sheet presents fairly in all
material respects the consolidated financial
position of the Business as at the date thereof.
4.8.3 The Financial Statements and the Interim Balance
Sheet are based on the books and records of the
Corporation which have been kept, and such
Financial Statements and Interim Balance Sheet
have been calculated, in accordance with U.S.
GAAP applied on a consistent basis throughout the
periods involved.
4.8.4 There are no liabilities, contingent or
otherwise, of the Corporation and its
Subsidiaries not reflected in the Financial
Statements or Interim Balance Sheet or in the
notes thereto which are required under U.S. GAAP
to be disclosed therein. Except as and to the
extent reflected and adequately reserved against
in the Interim Balance Sheet, or as disclosed in
SCHEDULE 4.8.4, as of the Financial Statements
Date, the Corporation and its Subsidiaries did
not have any liability or obligation whatsoever,
whether accrued, absolute, contingent or
otherwise.
4.9 ASSETS AND LIABILITIES
4.9.1 All the Properties purported to be owned by the
Corporation as at the Adjustment Date shall be
reflected in the Adjustment Balance Sheet and,
except for Permitted Encumbrances and as set out
in SCHEDULE 4.9.1, the Corporation owns the
Properties reflected in the Interim Balance Sheet
and Adjustment Balance Sheet, together with the
Intellectual Property, with good and marketable
title thereto free and clear of all Liens and
also with registered or recorded title to the
Real Properties. Except as set out in SCHEDULE
4.9.1, the Properties are in the possession and
control of the Corporation, and no other Person
is entitled to possession of any such Properties
of the Corporation.
<PAGE> 31
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4.9.2 The Corporation does not lease any real and
immovable property other than the Leased Real
Properties.
4.9.3 Except as set out in SCHEDULE 4.9.3, the
Corporation does not hold any loan or advance due
by, or any stock, obligation or securities of, or
any other interest in, any other Person.
4.9.4 Subject to the Permitted Encumbrances, the Real
Properties and the use of the Leased Real
Properties do not violate, contravene or breach
and are used in compliance with the Laws, except
for such violations, contraventions, breaches and
non-compliances which, individually or in the
aggregate, are not likely to have a Material
Adverse Effect. Except as set out in SCHEDULE
4.9.4 or except for Permitted Encumbrances, there
does not exist (i) any encroachment by any
building or other property not owned by the
Corporation on the Real Properties or (ii) any
condemnation proceedings or, to the best
knowledge of the Vendor and the Corporation, any
threat thereof relating to the Real Properties,
or (iii) any encroachment by any of the buildings
and structures constituting part of or located on
the Real Properties and the Leased Properties on
any real property not included in the Real
Properties or the Leased Real Properties.
4.9.5 All personal property taxes, ad valorem taxes,
real and immovable property taxes, surtaxes,
charges, levies, rates, duties and assessments,
whether general or special, and real and
immovable property mutation taxes due and payable
pursuant to the Laws with respect to the Real
Properties before the Adjustment Date and any
interest and penalties thereon or adjustments
thereto, have been paid by the Corporation or
such taxes, surtaxes, charges, levies, rates,
duties and assessments shall be reflected and
reserved against in the Adjustment Balance Sheet.
4.9.6 All the Real Properties are legally described in
SCHEDULE 4.9.6, and the Vendor has provided the
Purchaser with access to true and complete copies
of surveys for all the plants forming part of the
Real Properties.
4.9.7 All the equipment, machinery, rolling stock and
communications, computer (other than personal
computers) and information systems, and all
buildings, plants and structures, whether owned
or leased by the Corporation, are in good
condition and repair and are adequate for the
<PAGE> 32
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conduct of the Business as conducted by the
Corporation since December 31, 1994, except for
normal wear and tear and normal usage. Except as
set out in SCHEDULE 4.9.7, the buildings, plants
and structures and the tangible assets presently
owned, leased or licensed by the Corporation
include all buildings, plants, structures and
other tangible assets necessary to permit the
Corporation to conduct the Business in the same
manner as such Business has been conducted since
December 31, 1994, without any need for
replacement, refurbishment or repair otherwise
than in the ordinary course and in a manner
consistent with the past practices for the
Business.
4.9.8 The Corporation does not own the real property
located in New Hampshire described on SCHEDULE
4.9.8.
4.10 INVENTORIES AND ACCOUNTS RECEIVABLE
4.10.1 The inventories of raw materials, work in
process, finished goods and supplies of the
Corporation reflected in the Interim Balance
Sheet or subsequently acquired and properly
included in the Adjustment Balance Sheet are
reflected therein at the lower of cost or market
value in accordance with U.S. GAAP and are in all
material respects, of good and marketable quality
and in sufficient quantity for the conduct of the
Business as presently conducted, and the reserves
for obsolete or surplus inventories reflected on
the Interim Balance Sheet and Adjustment Balance
Sheet are and shall be adequate as at the
respective dates thereof in accordance with U.S.
GAAP consistently applied.
4.10.2 The accounts receivable of the Corporation
reflected in the Interim Balance Sheet are, and
the accounts receivable that will be reflected on
the Adjustment Balance Sheet will be, reflected
therein in accordance with U.S. GAAP and are and
will be bona fide, have been and will be properly
recorded in the ordinary course of the Business
and represent amounts due for goods or services
sold or rendered in the ordinary course of the
Business. The reserves for doubtful accounts
reflected on the Interim Balance Sheet and
Adjustment Balance Sheet are and shall be
adequate as at the respective dates thereof in
accordance with U.S. GAAP consistently applied.
<PAGE> 33
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4.11 ABSENCE OF MATERIAL CHANGES
Except as set out in SCHEDULE 4.11, the Business has been
conducted since the Financial Statements Date in the ordinary
course and in a manner consistent with the practices applied
during the periods specified in the Financial Statements, and
since the Financial Statements Date, except as set out in
SCHEDULE 4.11 neither the Corporation nor KMHC has:
4.11.1 purchased or redeemed directly or indirectly any
shares of its capital stock;
4.11.2 issued or sold or agreed to issue or sell any
shares of its capital stock or any option,
warrant, conversion or other right to acquire any
such share or any securities convertible into or
exchangeable for such shares;
4.11.3 been a party to any corporate reorganization,
restructuring or merger or amalgamation or
amended its articles of incorporation, articles
of amendment or certificates in connection
therewith or by-laws;
4.11.4 declared or paid any dividend or declared or made
any other distribution (whether in cash, stock or
property) on any of the shares of its capital
stock;
4.11.5 incurred or discharged any obligation or
liability (whether accrued, absolute or
contingent) other than in the ordinary course of
and in a manner consistent with past practices
for the Business;
4.11.6 entered into any transaction, contract,
agreement, indenture, instrument or commitment
other than in the ordinary course of and in a
manner consistent with past practices for the
Business;
4.11.7 suffered or incurred any damage, destruction,
loss or liability (whether or not covered by any
insurance), any strike, lock-out or other labour
trouble such as slow down or work stoppage, or
any loss of any of its employees, customers,
suppliers or distributors which, individually or
in the aggregate, has had a Material Adverse
Effect;
4.11.8 suffered any shortage or cessation or
interruption of raw materials, supplies or
utilities which, individually or in the
aggregate, has had a Material Adverse Effect;
<PAGE> 34
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4.11.9 made any change in its accounting principles,
policies and practices as utilized in the
preparation of the Financial Statements;
4.11.10 made any loan or advance, or assumed, guaranteed,
endorsed or otherwise become liable with respect
to the liabilities or obligations of any other
Person, or permitted any of its assets to be
subjected to any Lien;
4.11.11 granted to any customer any allowance or discount
or changed its pricing, credit or payment
policies other than in the ordinary course of and
in a manner consistent with past practices for
the Business;
4.11.12 incurred any indebtedness, liability or
obligation (absolute, accrued, contingent or
otherwise) other than in the ordinary course of
and in a manner consistent with past practices
for the Business;
4.11.13 sold, leased or otherwise disposed of any of the
Properties or Intellectual Property or any right,
title or interest therein other than in the
ordinary course of and in a manner consistent
with past practices for the Business;
4.11.14 made any payment to, or for the benefit of, any
present or former employee, director, officer or
shareholder otherwise than at the regular rates
payable to them, by way of salary, pension, bonus
or other remuneration consistent with past
practices for the Business;
4.11.15 taken any action which has had a Material Adverse
Effect;
4.11.16 committed to any capital expenditure project or
made any investment, in either case in excess of
$1,000,000 not disclosed to the Purchaser prior
to the date of this Agreement or consented to by
the Purchaser; or
4.11.17 authorized or agreed to do any of the foregoing
matters referred to in this Section 4.11.
4.12 CONTRACTS
4.12.1 Except as set out in SCHEDULE 1.1(CCC) OR 4.12.1,
the Material Contracts have been entered into in
the ordinary course of the Business and are in
full force and effect. No material default,
violation or breach on the part of the
<PAGE> 35
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Corporation exists in respect of the Material
Contracts and, to the best of the Vendor's
knowledge, no event exists which, in the case of
any such default, violation or breach but for the
lapse of time, the giving of notice, or both,
would entitle the other contracting Person to
terminate any of the Material Contracts or would
have a Material Adverse Effect.
4.12.2 To the best of the Vendor's knowledge, there is
no default, violation or breach under any of the
Material Contracts on the part of the other
contracting Person.
4.12.3 True, correct and complete copies of all Material
Contracts, including any amendments thereto, have
been made available to the Purchaser, along with
a detailed description and explanation of all
oral Material Contracts.
4.13 INSURANCE
4.13.1 The Corporation and the Business and Properties
are insured with financially sound and reputable
insurers against claims, losses and damages from
all reasonably foreseeable liabilities, hazards
and risks, to such extent and in such amounts and
with such deductible amounts therefrom as is
customary for reasonably prudent Persons
operating like businesses and owning like
properties, all as provided for in and by the
policies and contracts of insurance set out in
SCHEDULE 4.13.
4.13.2 All such policies and contracts of insurance are
in full force and effect, and the Corporation is
in good standing and compliance with respect to
each such policy or contract to which it is a
party. Neither the Corporation, the Vendor nor
Domtar has received notice of any pending or
threatened cancellation of any such insurance or
of any premium increase. Except as set out in
SCHEDULE 4.13, there are no pending claims with
respect to the Corporation against such insurance
as to which insurers have asserted a reservation
of rights or have denied liability, and there
exists no claim under such insurance that has not
been properly filed with such insurers by the
Corporation or, where necessary, the Vendor or
Domtar.
4.14 TAXES
4.14.1 The goods and services tax and sales tax returns
of the Corporation have been filed monthly with
federal and state tax authorities, as the case
<PAGE> 36
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may be, for all fiscal periods through the
Financial Statements Date and thereafter through
the Adjustment Date, and all deficiencies,
including interest, penalties and fines thereon
and adjustments thereto as a result of such
filings have been paid or shall be reflected and
reserved against in the Adjustment Balance Sheet.
No extensions of the applicable statute of
limitations period for examination of such
returns have been requested or granted.
4.14.2 The Corporation has duly and timely filed all Tax
Returns required to be filed by it and has paid
all Taxes due and payable by it on or prior to
the Adjustment Date or such Taxes shall be
reflected and reserved against in the Adjustment
Balance Sheet; such Tax Returns correctly
reflected the facts regarding the income,
business, assets, operations, activities, status
or other matters of the Corporation or any other
information required to be shown thereon. In
particular, but without limitation, none of the
Tax Returns contains any position which is or
would be subject to penalties under Section 6661
or Section 6662 of the Code (or any corresponding
provision of any state, local or foreign Tax
law). Adequate provision shall be made in the
Adjustment Balance Sheet for all such Taxes
payable for the current year for which Tax
Returns are not yet required to be filed.
The unpaid Taxes of the Corporation do not
exceed the reserve for Tax liability set forth or
included in the Financial Statements or the
Interim Balance Sheet. There are no agreements,
waivers or other arrangements providing for an
extension of time with respect to the filing of
any of the Tax Returns or payment of any of the
Taxes by the Corporation; except as set out in
SCHEDULE 4.14.2 or 4.18, there are no
investigations, examinations, reassessments,
claims, actions, suits or proceedings threatened
or pending against the Corporation in respect of
any of the Taxes, nor are there any matters under
discussion with any federal, provincial, state or
local government or taxing authority, relating to
any of the Taxes imposed, levied or assessed by
any such government or authority.
4.14.3 The Corporation has withheld from each payment
made to any of its former or present employees,
directors, officers or shareholders all amounts
which it is required by the Laws to which it is
subject to withhold or deduct and has duly
remitted all amounts so withheld or deducted to
the proper recipients thereof within the time
<PAGE> 37
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limits and in the manner required by such Laws.
4.14.4 All tax-sharing agreements or similar
arrangements with respect to or involving the
Corporation shall be terminated as of the Closing
Date, and after the Closing Date the Corporation
shall not be bound thereby or have any liability
thereunder for amounts due in respect of periods
prior to the Closing Date.
4.14.5 Except for the group of which the Corporation is
currently a member and except as set out in
SCHEDULE 4.14.5, the Corporation has never been a
member of an affiliated group of corporations,
within the meaning of Section 1504 of the Code,
and any Subsidiary of the Corporation has never
been a member of any other affiliated group of
corporations.
4.14.6 All material elections with respect to Taxes
affecting the Corporation as of the date hereof
are set forth in SCHEDULE 4.14.6. After the date
hereof, no election with respect to Taxes (other
than the elections made by the Selling Parties
with respect to net operating losses described on
SCHEDULE 4.14.6) will be made without the written
consent of the Purchaser.
4.14.7 Except as set out in SCHEDULE 4.14.7, none of the
assets of the Corporation is property which the
Corporation is required to treat as being owned
by any other person pursuant to the "safe harbor
lease" provisions of former Section 168(f)(8) of
the Code, or any similar provision of any Tax
law.
4.14.8 None of the assets of the Corporation directly or
indirectly secures any debt, the interest on
which is tax-exempt under Section 103(a) of the
Code.
4.14.9 None of the assets of the Corporation is
"tax-exempt use property" within the meaning of
Section 168(h) of the Code.
4.14.10 The Corporation is not a party to any agreement,
contract, arrangement or plan that has resulted
or would result in the payment of any "excess
parachute payments" within the meaning of Section
280G of the Code.
4.14.11 The Corporation is not a party to any joint
venture, partnership, limited liability company,
or other arrangement or contract which could be
<PAGE> 38
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treated as a partnership for federal income tax
purposes.
4.14.12 The Corporation is authorized to conduct business
in every state in which it is conducting
business, and is filing all necessary Tax Returns
in all states in which it is conducting business
except in either case where a failure to be so
authorized or to so file would not have a
Material Adverse Effect.
4.14.13 The Vendor will indemnify the Purchaser against
and hold it harmless from any liability of the
Corporation or any Subsidiary of the Corporation
for Taxes of any person other than the
Corporation or any Subsidiary of the Corporation
under Treasury Regulation 1.1502-6 (or any
similar provision of state, local or foreign
law), for any period ending prior to the Closing
Date and for any costs, expenses, attorneys' fees
or similar costs incurred by the Purchaser or the
Corporation as a result of the assertion of such
liability by any Taxing Authority.
4.15 INTELLECTUAL PROPERTY
4.15.1 SCHEDULE 4.15 sets out a true and complete list
of all registered patents and copyrights and all
registered or unregistered trade-marks, service
marks, trade-names and industrial designs
(including, in each case any registrations or
applications therefor) owned or actively used by
the Corporation, with the exception of the
trade-mark "Domcrete". With respect to any
patent, copyright, trademark, service mark, trade
name or industrial design listed on SCHEDULE 4.15
which is not owned in its entirety by the
Corporation and included within the Intellectual
Property to be transferred pursuant hereto, the
Vendor has (i) identified on SCHEDULE 4.15 the
owner of the subject patent, copyright, trademark
service mark, trade name or industrial design and
(ii) delivered to the Purchaser true and correct
copies of the license or other agreement
authorizing the Corporation's use thereof.
Except as specifically disclosed on SCHEDULE
4.15, no rights under any such licences or
agreements will be terminated, limited or
otherwise adversely affected as a result of the
transactions contemplated hereunder.
<PAGE> 39
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4.15.2 Except as set out in SCHEDULE 4.15, there is not
any claim existing or, to the best of the
Vendor's knowledge, threatened of adverse
ownership, invalidity or other opposition to or
conflict with any of the patents, copyrights,
trade-marks, service marks, trade-names and
industrial designs (including, in each case, any
registrations or applications therefor) listed on
SCHEDULE 4.15 pursuant to Section 4.15.1 hereof,
nor does the conduct of the Business by the
Corporation breach any registered (or, to the
knowledge of the Vendor, unregistered) patent,
copyright, trade-mark, service mark, trade-name,
industrial design or any other intellectual
property right owned by any other Person.
4.16 ENVIRONMENTAL MATTERS
Except as set out in SCHEDULE 4.16:
4.16.1 The Environmental Permits are all the permits,
licenses, certificates and authorizations of, and
registrations with, any of the Environmental
Authorities pursuant to the Environmental Laws
necessary to conduct the Business substantially
as presently conducted. The Environmental
Permits are in full force and effect and the
Corporation is in substantial compliance in all
respects thereunder. The Corporation is in
compliance with the Environmental Laws applicable
to the conduct of the Business, except to the
extent such noncompliance would not constitute a
Material Adverse Effect.
4.16.2 There is no claim, suit, action or other
proceeding, including appeals and applications
for review, outstanding or pending or, to the
best of the Vendor's and the Corporation's
knowledge, threatened against the Corporation
pursuant to any of the Environmental Laws.
To the best of the Vendor's and the Corporation's
knowledge, no facts or circumstances exist which
are reasonably likely to give rise to such a
claim, suit, action or other proceeding which
would have a Material Adverse Effect.
4.16.3 The Corporation has not caused the Release of any
Hazardous Substances on or from the Real
Properties or the Leased Real Properties, except
in such a manner or quantity as would not
constitute a violation of any of the
Environmental Laws or Environmental Permits or
would not reasonably be expected to result in a
<PAGE> 40
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Material Adverse Effect.
4.16.4 The Corporation has maintained in respect of the
Business records substantially in the manner and
for the time periods required by the
Environmental Laws and Environmental Permits.
4.16.5 The Vendor and the Corporation have no knowledge
of any fact or circumstance that is likely to
prohibit or prevent the issuance to the Purchaser
of any of the permits, licenses, certificates and
authorizations of, and registrations with, any of
the Environmental Authorities pursuant to any of
the Environmental Laws, which are necessary for
the Purchaser to conduct the Business
substantially as presently conducted.
4.16.6 The Corporation has not received any
Environmental Notice pursuant to any of the
Environmental Laws and, to the best of the
Corporation's and the Vendor's knowledge, there
are no facts or circumstances that would result
in the issuance of an Environmental Notice (i)
which would require that capital expenditures in
excess of $1,000,000 in the aggregate be made in
respect of the Business as a condition of
compliance with all of the Environmental Laws or
Environmental Permits, or (ii) to the effect that
any of the Environmental Permits is about to be
made subject to limitations or conditions or
revoked.
4.16.7 The Vendor has delivered to the Purchaser true,
correct and complete copies of all material
environmental audit reports which have been
prepared in respect of the Business in the five
(5) year period ending on the date of this
Agreement by or for any of the Selling Parties
and which are in the possession of any of the
Selling Parties.
4.17 EMPLOYEES, PENSION AND OTHER BENEFIT PLANS
4.17.1 SCHEDULE 4.17.1 lists (i) all the Employees
together with their respective positions, years
of employment and rates of remuneration, as at
the date of this Agreement and (ii) all the
Employees on Medical Leave who are receiving
benefits under the Law or the Employee Plans,
together with their respective entitlement under
the Employee Plans, as at the date of this
Agreement. All Employees who are Employees on
Medical Leave (and Employees on Short-Term
Medical Leave) are included (without limitation)
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and specifically so designated on SCHEDULE 4.17.1.
4.17.2 Except as set out in SCHEDULE 4.17.2, the
Corporation is not a party to or bound by any
collective bargaining agreement or any other
agreement with, or commitment to, any union of
employees or any contract of employment, written
or oral, with any of its Employees.
4.17.3 The only Employee Plans are those set out in
SCHEDULE 4.17.3 and except as set out in SCHEDULE
4.17.3 the Corporation is not a party to and it
does not operate any other "employee welfare
benefit plan" or "employee pension benefit plan"
as respectively defined in Sections 3(1) and 3(2)
of ERISA or any other employee benefit or pension
plan, bonus, deferred compensation, retirement,
savings, excess benefit, stock option or
purchase, retention, termination, severance or
incentive plan, contract, program, fund,
arrangement or practice or any other trust,
escrow or similar agreement related thereto with
respect to any of its Employees, Retired
Employees, directors, officers or shareholders or
which are established or maintained by any
Related Person or with respect to which the
Corporation has made or is required to make
payments, transfers or contributions. The
Employee Plans are duly registered where required
by, and are in good standing under, the Laws, and
each of the pension plans thereunder is in the
funding status as set out in SCHEDULE 4.17.3.
4.17.4 The Vendor has delivered to the Purchaser true,
complete and up-to-date copies of all documents
embodying or summarizing the Employee Plans
including, without limitation, all amendments
thereto, all funding agreements thereunder, all
summaries of such Employee Plans provided by the
Corporation to any of its Employees, Retired
Employees, directors, officers or shareholders
and all material communications received from or
sent to the regulatory authorities as well as the
most recent actuarial valuation filed with the
regulatory authorities for each of the Employee
Plans for which valuations are required.
4.17.5 No promise or commitment has been made by the
Corporation (i) to amend any of the Employee
Plans or to provide increased benefits thereunder
to any of its Employees, Retired Employees,
directors, officers or shareholders except
pursuant
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to the requirements, if any, of the Employee
Plans or collective bargaining agreements, nor
(ii) to establish any new "employee welfare
benefit plan" or "employee pension benefit plan"
as respectively defined in Sections 3(1) and 3(2)
of ERISA or any new employee benefit or pension
plan or bonus, deferred compensation, retirement,
savings, excess benefit, stock option or purchase,
retention, termination, severance or incentive
plan, contract, program, fund, arrangement or
practice or any new trust, escrow or similar
agreement related thereto with respect to any of
its Employees, Retired Employees, directors,
officers or shareholders. Except as set out in
SCHEDULE 4.17.5, no actual amendment to any plan,
policy or arrangement referenced in this Section
4.17.5 has been adopted by the Vendor since the
Financial Statements Date.
4.17.6 Each Employee Plan has been maintained, operated
and administered in material compliance with its
terms and all related documents or agreements and
in compliance with the Laws.
4.17.7 All required employer contributions, premium
payments and source-deducted employee
contributions under the Employee Plans have been
made and remitted to the funding agents
thereunder including, without limitation, all
current service costs and special payments within
the time prescribed by any such Employee Plan and
the Laws.
4.17.8 All insurance premiums required with respect to
any Employee Plan, including any premiums payable
to U.S. Pension Benefit Guarantee Corporation,
have been paid, made, accrued or booked within
the time prescribed by any such Employee Plan and
the Laws.
4.17.9 All benefits, expenses and other amounts due and
payable to or under any Employee Plan, and all
contributions, transfers or payments required to
be made to any Employee Plan, have been paid,
made, accrued or booked within the time
prescribed by any such Employee Plan and the
Laws.
4.17.10 Except as set out in SCHEDULE 4.17.10, neither
the Vendor nor the Corporation has taken any
"contribution holiday" with respect to, or has
withdrawn any amount from, the Employee Plans.
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4.17.11 There are no material claims pending or, to the
best of the Vendor's or the Corporation's
knowledge, threatened by or on behalf of any of
the Employee Plans or by any Employee other than
routine claims for benefits.
4.17.12 The only Employee Plans that are subject to Title
IV of ERISA are the U.S. Plan and Pension Plan
for Unionized Employees of Domtar Gypsum Inc.
Except as set out in SCHEDULE 4.17.12, neither
the Corporation nor any Related Person would be
liable for any material amount pursuant to
Section 4062, 4063 or 4064 of ERISA if either of
such plans were to terminate as at the Adjustment
Date.
4.17.13 Neither the Corporation nor any Related Person
has incurred any material liability under or
pursuant to Title I or IV of ERISA or the
penalty, excise tax or joint and several
liability provisions of the Code relating to
employee benefit plans and, to the best of the
Vendor's or the Corporation's knowledge, no event
or condition has occurred or exists which could
result in any material liability to the
Corporation, such Related Person or the Purchaser
under or pursuant to Title I or IV of ERISA or
such penalty, excise tax or joint and several
liability provisions of the Code.
4.17.14 Each of the Employee Plans that is subject to the
minimum funding standards of ERISA or the Code
satisfies such standards under Sections 412 and
302 of the Code and ERISA, respectively, and no
Employee Plan has incurred an "accumulated
funding deficiency" within the meaning of such
sections, whether or not waived.
4.17.15 Each of the Employee Plans intended to be
qualified under Section 401(a) of the Code, and
the trust, if any, forming a part thereof, has
received a favorable determination letter from
the U.S. Internal Revenue Service as to its
qualification under the Code and to the effect
that each such trust is exempt from taxation
under Section 501(a) of the Code, and nothing has
occurred since the date of such determination
letter that adversely affects such qualification
or tax-exempt status.
4.17.16 Except as set out in SCHEDULE 4.17.16, neither
the Vendor nor the Corporation contributes to,
nor do they have any obligation to contribute to,
a multiemployer plan as defined in Section
4001(a)(3) of ERISA with regard to the Employees
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or Retired Employees. The Vendor shall be
responsible for and shall indemnify the Purchaser
against all contributions assessed relating to
any such multiemployer plan for the period prior
to the Closing Date and any assessment of
withdrawal liability from any such multiemployer
plan based on events occurring during the period
prior to and including the Closing Date
(including the consummation of the sale of the
Purchased Shares). The Purchaser shall be
responsible for and shall indemnify the Vendor
against all contributions assessed relating to
any such multiemployer plan for the period
subsequent to the Closing Date and any assessment
of withdrawal liability from any such
multiemployer plan based on events occurring at
any time subsequent to the Closing Date. In the
event that an assessment of withdrawal liability
by a multiemployer plan is based on events
occurring both before and subsequent to the
Closing Date, such assessment shall be divided
between the Parties prorata based on the
contribution base units that are lost before and
after the Closing Date. The indemnities in this
Section do not apply to payments made or accrued
by the Corporation.
4.17.17 Except as set out in SCHEDULE 4.17.17, (i) there
is no strike, lockout, or other labour trouble
(including, but not limited to, any work slowdown
or work stoppage) pending or, to the best of the
Vendor's or the Corporation's knowledge,
threatened which, individually or in the
aggregate, could reasonably be expected to have a
Material Adverse Effect; (ii) there is no union
election pending or, to the best of the Vendor's
knowledge, threatened nor, to the best of the
Vendor's knowledge, is any union conducting any
organizing campaign with respect to any of the
Employees; and (iii) there is no outstanding
grievance under any collective bargaining
agreement or unfair labor practice charge pending
or, to the best of the Vendor's knowledge,
threatened which, individually or in the
aggregate, could reasonably be expected to have a
Material Adverse Effect.
4.18 LITIGATION; COMPLIANCE WITH LAWS
Except as set out in SCHEDULE 4.18:
4.18.1 there is not any suit, action, claim or other
proceeding or investigation pending or, to the
best of the Vendor's and the Corporation's
knowledge, threatened against or affecting the
<PAGE> 45
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Corporation or to which the Corporation is a
party, in or before or by any judicial,
quasi-judicial, administrative or
quasi-administrative court, tribunal, arbitrator,
agency or other governmental body. Except as
described in SCHEDULE 4.18, none of such matters,
if adversely determined, is likely have a
Material Adverse Effect.
4.18.2 there is not any order, decree, injunction or
judgment of any judicial, quasi-judicial,
administrative or quasi-administrative court,
tribunal, arbitrator, agency or other
governmental body against or affecting the
Corporation.
4.19 BANK ACCOUNTS
SCHEDULE 4.19 sets out the name of
4.19.1 each bank, trust company or other Person with
which the Corporation has an account or
safekeeping arrangement or safety deposit box and
the names of each Person authorized to operate or
who has access to such account, arrangement or
box on behalf thereof; and
4.19.2 each Person holding a general or special power of
attorney from the Corporation with a summary of
the terms thereof.
4.20 FINDER'S FEE
No Person has, or as a result of any of the transactions
contemplated hereby shall have, as a result of any commitment
of the Vendor towards such Person any right, interest or claim
against or upon the Purchaser or the Corporation or any of
their respective properties for any commission, fee or other
compensation as broker or finder or for services in any
similar capacity.
4.21 FULL DISCLOSURE
The Vendor has made or caused to be made due enquiry with
respect to each of the representations and warranties
contained in this Agreement and in any other agreement
delivered by the Vendor to the Purchaser pursuant hereto and
for the purposes hereof and none of the same intentionally
contains any untrue statement of a material fact or
intentionally omits to state a material fact necessary to make
any of the representations or warranties contained herein not
misleading.
<PAGE> 46
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4.22 CONSENTS AND APPROVALS; PERMITS
Except as set forth in SCHEDULE 4.22 and except for filings
required under the HSR Act, no consent, exemption, approval
of, or filing with, any governmental body, agency, authority
or court (whether foreign or domestic) or any other Person is
required for the execution and delivery of this Agreement, the
sale of the Purchased Shares pursuant hereto, or the
consummation of the other transactions contemplated hereby.
4.23 GYPSUM ROCK RESERVES
SCHEDULE 4.23 sets forth a true, complete and correct report,
as of the date thereof, of all reserves of gypsum rock (i)
owned by the Corporation or (ii) owned by Domtar and to be
transferred to the Purchaser pursuant to the Asset Purchase
Agreement.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Vendor as follows:
5.1 INCORPORATION AND AUTHORIZATION
The Purchaser is a corporation duly incorporated, organized,
validly existing and in good standing under the laws of
Georgia and has full capacity, power and authority, corporate
and otherwise, to execute, deliver and perform this Agreement
and consummate the transactions contemplated hereby, and has
been duly authorized to execute and become a party to this
Agreement and to consummate the transactions provided herein
or pursuant hereto.
5.2 Enforceability of the Agreement
5.2.1 This Agreement constitutes a legal, valid and
binding obligation of the Purchaser enforceable
against it in accordance with its terms, except
that the enforcement hereof may be limited by
bankruptcy, insolvency, arrangement,
reorganization, moratorium or other similar laws
relating to creditors' rights generally and
general principles of equity (regardless of
whether enforceability is considered in a
proceeding in equity or at law).
5.2.2 Neither the entering into of this Agreement nor
the consummation by the Purchaser of any of the
transactions contemplated hereby shall, with
<PAGE> 47
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or without the giving of notice or the
lapse of time, or both, result in the violation
of any of the provisions of the articles of
incorporation, articles of amendment,
certificates in respect thereto, or by-laws of
the Purchaser or of any written shareholders
agreement or shareholders, stock or voting trust
to which the Purchaser is a party or any Law to
which the Purchaser is subject.
5.2.3 There are no judicial, quasi-judicial,
administrative, quasi-administrative or
arbitration proceedings pending against the
Purchaser which, if adversely determined, may
interfere with the purchase of or payment for the
Purchased Shares or the consummation of any of
the transactions herein provided.
5.3 INVESTMENT REPRESENTATION
The Purchased Shares are purchased by the Purchaser for its
own account and not with a view to, or for sale in connection
with, any distribution thereof that would require registration
under the Securities Act, or any other Laws in respect of
securities, nor with any intention of reselling or granting
any participation in all or any part of the Purchased Shares
to any Person in a transaction that would violate the
Securities Act or any other Laws (including, without
limitation, those in respect of securities) or this Agreement.
5.4 FINDER'S FEE
No Person has, or as a result of any of the transactions
contemplated hereby shall have, as a result of any commitment
of the Purchaser towards such Person, any right, interest or
claim against or upon the Vendor or any of its respective
properties for any commission, fee or other compensation as
broker or finder or for services in any similar capacity.
ARTICLE 6. NON-COMPETITION
6.1 NON-COMPETITION
From and after the Closing Date, neither Domtar nor the Vendor
shall, for a period of five (5) years, on its own behalf or on
behalf of any other Person, directly or indirectly, in any
capacity whatsoever including, without limitation, as
employer, principal, mandator, agent, mandatary, joint
venturer, partner, shareholder or other equity holder,
independent contractor, manufacturer, seller, licensor,
licensee, franchisor, franchisee, distributor, consultant,
supplier or trustee or by or through any Person, conduct
<PAGE> 48
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or be engaged in or have financial interests in any
gypsum wallboard business in the United States of America or in
Canada. The Parties intend that the covenant contained in the
preceding sentence of this Section 6.1 shall be construed as a
series of separate covenants, one for each county and Province
of the United States of America or Canada, as the case may be,
and except for geographic coverage, each such separate covenant
shall be deemed identical in terms to the covenant contained in
the preceding sentence. In the event that in any judicial
proceeding, a court should refuse to enforce any of the
separate covenants deemed included in this Section 6.1, it is
the intent of the Parties that the breadth of such covenant be
reduced to the maximum legally allowable parameters rather than
such covenant being deemed totally unenforceable or invalid.
If such a reduction is not feasible, it is the intent of
the Parties that the unenforceable covenant be deemed
eliminated from these provisions for the purpose of those
proceedings only to the extent necessary to permit the
remaining separate covenants to be enforced.
6.2 PERMITTED ACTIVITIES
Notwithstanding the provisions of Section 6.1 hereof, the
Vendor shall not be prohibited from owning an interest, as
passive investor, in any gypsum wallboard business provided
that the interest owned, whether directly or indirectly, by
the Vendor in such business, if any, shall not exceed 10% of
all the outstanding equity securities of any Person whose
equity securities are listed on a recognized securities
exchange and with whom the Vendor does not have any connection
whatsoever except for such ownership interest.
6.3 LIMITED EXCEPTION FOR INCIDENTAL ACQUISITIONS
Notwithstanding the provisions of Section 6.1 hereof, neither
the Vendor nor Domtar shall be prohibited from acquiring
assets (or a controlling stock interest) of a Person where the
assets of such Person include gypsum wallboard assets (the
"ACQUIRED GYPSUM ASSETS"), provided that if the gross revenues
generated by Acquired Gypsum Assets during the last full
fiscal year period ("GROSS REVENUES") exceed $35,000,000, the
Vendor or Domtar, as the case may be (the "ACQUIROR"), shall
offer to sell the Acquired Gypsum Assets to the Purchaser.
Such offer to the Purchaser shall be made by the Acquiror
promptly upon the execution by the Acquiror of a binding
agreement to purchase such assets (but in no event less than
30 days prior to closing the acquisition contemplated by such
agreement). If the Purchaser elects to purchase the Acquired
Gypsum Assets, the Acquiror and the Purchaser shall negotiate
in good faith the price to be paid by the Purchaser to the
<PAGE> 49
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Acquiror for the Acquired Gypsum Assets. If the
Acquiror and the Purchaser cannot agree upon the terms and
conditions of such sale, then the Acquiror shall use its
commercially reasonable efforts to sell the Acquired Gypsum
Assets to a third party within two years after negotiations
with the Purchaser cease, but no such sale shall be on terms
and conditions in the aggregate more favorable to the third
party than those offered to the Purchaser. If the Gross
Revenues are less than or equal to $35,000,000, then the
Acquiror need not offer the Acquired Gypsum Assets to the
Purchaser, but if the Acquiror determines to sell the Acquired
Gypsum Assets prior to the fifth anniversary of the Closing,
the Acquiror shall first offer the Acquired Gypsum Assets to
the Purchaser following the procedures set out in the
preceding sentences of this Section 6.3.
ARTICLE 7. COVENANTS OF THE PARTIES
The Parties, as specified in this Article 7, covenant and agree as
follows:
7.1 MAINTENANCE AND PRESERVATION OF BUSINESS
From and after the date hereof to the Closing Date or the date
of termination of the Parties' obligation to close under this
Agreement, the Vendor and the Corporation covenant to the
Purchaser that, except as may be specifically approved in
writing by the Purchaser, the Business will be conducted, and
the Corporation and KMHC will operate their respective
businesses, only in the ordinary course and substantially in
the same manner as presently conducted, will not make or
institute any new methods, principles or practices of
manufacture, purchase, sale, lease, management, accounting or
operation except in the ordinary course of business, and will
use their commercially reasonable efforts with due diligence
to (i) maintain their business organizations, and (ii)
maintain their relationships with and the goodwill of their
suppliers, distributors, licensors, customers and others
having business relations with them, so as to maintain the
goodwill and ongoing business of the Corporation. By way of
illustration and not by way of limitation of the foregoing:
(A) The Corporation shall manage its working capital,
including receivables, other current assets,
trade payables and other current liabilities, in
a fashion consistent with past practice,
including by selling inventory and other property
in an orderly and prudent manner and paying
outstanding obligations, trade accounts and other
indebtedness as they come due.
<PAGE> 50
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(B) The Corporation shall maintain its assets in good
condition and repair.
(C) The Corporation shall not, without the prior
written approval of the Purchaser, take any of
the following actions:
(I) dispose of any assets, other than
(x) sales of inventory in the
ordinary course of business and (y)
Excluded Assets;
(II) subject any of its assets to any
Lien, except Permitted Encumbrances;
(III) make any payments to, or for the
benefit of, any present or former
employee, director, officer or
shareholder otherwise than at the
regular rates payable to them, by
way of salary, pension, bonus or
other remuneration consistent with
past practices for the Business;
(IV) amend its articles of incorporation,
articles of amendment, or
certificates in connection therewith
or by-laws;
(V) incur, assume or guarantee any
obligation or liability for borrowed
money, or exchange, refund or renew
any outstanding indebtedness in such
a manner as to reduce the principal
amount of such indebtedness and
increase the rate or balance
outstanding;
(VI) cancel any debts;
(VII) solicit or entertain any offer for,
or sell or agree to sell, or
participate in any business
combination with respect to, any of
the Purchased Shares;
(VIII) do any act or fail to do any act,
where such act of failure to act
will cause a breach of any
representation, warranty or
obligation contained in this
Agreement or any obligation
contained in any Material Contract;
(IX) commit to any capital expenditure
project or make any investment, in
either case in excess of
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$1,000,000 not disclosed to the
Purchaser prior to the date of this
Agreement;
(X) organize any Subsidiary, acquire any
capital stock or other equity
securities of any corporation, or
acquire any equity or other
ownership interest in any business;
or
(XI) enter into any transaction,
contract, agreement, indenture,
instrument or commitment other than
in the ordinary course of and in a
manner consistent with past
practices for the Business.
Notwithstanding the foregoing or any other provision of this
Agreement, each of the Corporation and KMHC may give to any of
the present and former directors and/or officers of itself or
any of its predecessor corporations a full release from all
its respective claims against them, whether past, present or
future, actual, contingent or otherwise.
7.2 NOTICE OF CESSATION IN ORDINARY COURSE
The Vendor shall promptly notify the Purchaser of the
occurrence or existence of any event or circumstance on or
prior to the Closing Date by reason of which the Business has
ceased to be conducted as provided for in Section 7.1 or by
reason of which the representations and warranties made by the
Vendor, Domtar or the Corporation herein have ceased to be
true and correct in any material respect.
7.3 ACCESS FOR THE PURCHASER
The Vendor shall cause the Corporation to, and the Corporation
shall, permit the Purchaser by its duly appointed employees,
officers and consultants at any time and from time to time
prior to the Closing Date, during reasonable business hours
and without unreasonably affecting the conduct of the Business
in the ordinary course, to make such investigation of the
Business, Intellectual Properties, Properties and Leased Real
Properties and of its financial and legal condition as the
Purchaser may deem necessary or advisable in order to become
familiar with the Business, Intellectual Properties,
Properties and Leased Real Properties including, without
limitation, full access to all premises at which the Business
is conducted and produce or cause to be produced for
inspection by the Purchaser, its employees, officers and
consultants, all title documents, title deeds, share
certificate books, share registers, articles of incorporation,
articles of amendment and certificates in connection
therewith, by-laws, books and records of
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the Corporation, agreements, contracts, leases, licenses,
insurance policies, pension and benefit plans, documents
relating to pending lawsuits and all other information which
in the reasonable opinion of the Purchaser or its said
employees, officers or consultants is required to make an
examination of the Corporation, Business, Intellectual
Properties, Properties and Leased Real Properties and to
verify the accuracy of Vendor's and the Corporation's
representations and warranties contained herein.
7.4 MAINTAIN INSURANCE
7.4.1 The Vendor, Domtar and the Corporation shall take
all actions necessary to continue to maintain in
full force and effect until the Closing Date all
policies of insurance with respect to the
Corporation and the Business in effect on the
Financial Statements Date or duly renew the same
upon substantially the same terms and conditions.
The Vendor, Domtar and the Corporation will
cooperate fully with the Purchaser and take such
actions (including, without limitation, placing
insurance carriers on notice of this Agreement
and/or providing or seeking necessary consents)
as the Purchaser may reasonably request to ensure
that from and after the Effective Time, the
Purchaser will be entitled to make claims (or
receive the proceeds of claims) under all
insurance policies (whether in the name of the
Corporation, Domtar or any other Person) which
insure or have insured the Corporation, the
Business or the Properties and which are in
effect or were in effect at any time prior to the
Effective Time.
In furtherance of the foregoing, the Vendor,
Domtar and the Corporation
(a) will take all reasonable measures to
identify and make copies available to the
Purchaser of all historical policies of
insurance with respect to the Corporation
and Business and, at the Purchaser's
expense, all predecessor corporations and
businesses which were owned by the
Corporation and Business;
(b) agree to make all reasonable and
necessary attempts to purchase, at the
Purchaser's expense, extended reporting
coverages or the equivalent thereof for
five (5) years from the Closing Date for
all current claims made or modified
claims made coverages of the
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Corporation and Business including
without limitation all casualty,
liability and directors and officers
coverages and shall give periodic status
reports to the Purchaser concerning such
attempts; and
(c) agree not to release any insurance
policies which provide or have provided
coverage applicable to the Corporation or
the Business without the prior written
consent of the Purchaser.
7.4.2 The Vendor and the Purchaser acknowledge that the
policies of insurance applicable to the
Corporation are not necessarily exclusive to the
Corporation and that certain coverages and limits
may be impaired by claims arising from other
companies currently or previously owned by
Domtar; however, the Vendor will notify the
Purchaser of all such claims and impairment as
soon as reasonably practicable. The Vendor and
Domtar make no representations or warranties in
respect of any policy of insurance and shall not
be responsible for any allocations,
determinations as to coverage or lack thereof or
any decision or interpretation made by insurers
or their agents with respect thereto. The
Purchaser and the Corporation shall be
responsible for any retrospective premiums and
associated third party administrator and insurer
management and administration costs allocable to
the claims experience of the Corporation. The
Purchaser recognizes and accepts that the Vendor
has in the past and may in the future compromise
rights and claims in good faith which may have an
effect on the consumption of aggregate insurance
limits and the allocation of retrospective
premiums.
7.4.3 As soon as practicable after the Closing Date,
but no later than thirty (30) Business Days after
the Closing Date, the Vendor and the Purchaser
shall enter into an agreement setting forth the
procedures for implementation and administration
of the entitlements and responsibilities provided
for by this Section 7.4.
7.5 CORPORATE PROCEEDINGS FOR TRANSFER
The Vendor shall cause the Corporation to take all necessary
steps and proceedings as may be reasonably considered
appropriate by the Purchaser's Counsel in order that the
Purchased Shares be duly and regularly transferred to the
Purchaser as at the Effective Time.
<PAGE> 54
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7.6 ADJUSTMENT BALANCE SHEET
The Vendor shall deliver to the Purchaser the Adjustment
Balance Sheet as provided for in Section 3.2.4.
7.7 TAX ASSISTANCE
After the Closing Date, the Vendor shall furnish or cause to
be furnished to the Purchaser, upon request, such information
with respect to the Corporation as is reasonably necessary for
the Purchaser for the preparation and filing of any Tax
Return, for the preparation for any tax audit or for the
prosecution or defence of any proceeding or proposed
adjustment with respect to taxes of the Corporation or the
Purchaser.
7.8 HAZARDOUS WASTE
Prior to the Closing, the Vendor and the Corporation shall
properly remove and dispose of all Hazardous Waste which may
be located at the Corporation's facility at Long Beach,
California.
7.9 OPERATION OF BUSINESS AFTER SECOND FIXTURE DATE
If the Closing does not occur on or before the Second Fixture
Date, the adjustment to the Purchase Price shall be determined
on the Second Fixture Date pursuant to Section 3.2 hereof. In
such event, from and after the Second Fixture Date,
(i) the Vendor and the Corporation covenant to the
Purchaser that, except as otherwise specifically
approved in writing by the Purchaser, the business
will be conducted, and the Corporation and KHMC will
operate their respective businesses, as provided in
Sections 7.1, 7.2, 7.3 and 7.4;
(ii) the Vendor and the Corporation will hold in trust,
for the account of the Purchaser, all of the earnings
and profits of the Business, and shall deposit such
earnings and profits in one or more interest-bearing
bank accounts as the Purchaser may direct;
(iii) the Corporation may expend funds included in such
earnings and profits to permit the Corporation and
KHMC to carry out their obligations under Sections
7.1(a) and (b); and
(iv) in the event that the Corporation determines that is
necessary to make any capital expenditures with
respect to the Business, (whether above or below
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the threshold amount specified in Section 7.1),
it shall promptly give notice of such expenditure to
the Purchaser, and if the amount of such expenditure
exceeds said threshold amount, shall request the
Purchaser's approval of such capital expenditure.
In the event the Closing Date occurs after the Second Fixture
Date, then the provisions of Section 10.1.1.3, and all of the
provisions of Sections 10.1.2 - 10.1.10 and Sections 10.2.1 -
10.2.6 shall be satisfied as provided therein, and the Closing
shall occur as provided in Article 12 hereof.
ARTICLE 8. ADDITIONAL COVENANTS OF THE PARTIES
The Parties, as specified in this Article 8, further covenant and
agree as follows:
8.1 TAX RETURNS ASSISTANCE
After the Closing Date the Purchaser shall furnish or cause to
be furnished to the Vendor, upon request, such information
with respect to the Corporation as is reasonably necessary for
the Vendor for the preparation and filing of any Tax Return,
for the preparation for any tax audit or for the prosecution
or defence of any proceeding or proposed adjustment with
respect to taxes of the Vendor. Without limiting the
generality of the foregoing provisions of this Section 8.1,
the Purchaser shall furnish or cause to be furnished to the
Vendor, upon request, tax packages with respect to the
Corporation on schedules to be provided by the Vendor for the
periods from January 1, 1995 through December 31, 1995 and
from January 1, 1996 through the Closing Date. Each such tax
package shall be completed and delivered by the Purchaser to
the Vendor within sixty (60) days after receipt thereof by the
Purchaser. The Purchaser shall cooperate with the Selling
Parties with regard to the elections to be made by the Selling
Parties described on SCHEDULE 4.14.6.
The Purchaser's obligations under this Section 8.1 are
conditional on the Purchaser's prior receipt of copies of all
Tax Returns for periods ending prior to the Closing Date.
8.2 USE OF NAME
The Purchaser shall not use nor allow any of its Affiliates or
Subsidiaries including, without limitation, the Corporation to
use, directly or indirectly, the name "Domtar" or the prefix
"Dom" as a trade-mark, service mark or trade-name in
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connection with any product or service offered by the
Business from and after the Closing Date except as permitted
by the Trademarks Agreement between Domtar and the Purchaser
executed pursuant to the Asset Purchase Agreement.
EMPLOYEES
8.3.1 VENDOR PLANS
The Parties acknowledge that some of the Employee
Plans covering Employees or Retired Employees of
the Corporation prior to the Effective Time are
maintained by the Vendor for the benefit of its
employees as well as those of the Corporation
("VENDOR PLANS") (SCHEDULE 4.17.3 shall designate
which Employee Plans are the Vendor Plans). In
general, with respect to benefits provided by
such plans (except as may be otherwise
specifically provided in this Section 8.3), the
Vendor agrees to retain all benefits obligations
under the Vendor Plans with respect to the
Employees and Retired Employees accruing prior to
the Effective Time. In particular, but without
limitation, the Vendor Plans which are employee
welfare plans shall be responsible for the
following benefits payments, subject to the terms
and conditions of particular plan: (i) claims
for health care benefits with respect to expenses
incurred by, services performed for or supplies
or pharmaceuticals provided to Employees and
Retired Employees and their covered dependants
prior to the Effective Time; and (ii) claims for
life insurance, accidental death and
dismemberment and short- and long-term disability
benefits with respect to death, disability or
injury arising or occurring prior to Effective
Time. In all cases, the amount and types of
benefits payable shall be determined in
accordance with the terms of the affected Vendor
Plan, and benefits payable for Employees shall be
for the account of the Corporation.
8.3.2 EMPLOYEES ON MEDICAL LEAVE
The Vendor will indemnify and hold the
Corporation and the Purchaser harmless against
the costs of all benefits payable under Employee
Plans (i) to Employees on Long-Term Medical Leave
as at the Effective Time and (ii) Employees on
Short-Term Medical Leave as at the Effective Date
who thereafter go directly to the status of
Employees on Long-Term Medical Leave (in each
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case other than benefits payable with Employee
Plan assets specifically transferred to the
Purchaser for this purpose).
8.3.3 KEY EMPLOYEE RETENTION PROGRAM
All bonuses, if any, payable pursuant to the
Vendor's "Key Employee Retention Program" set out
in SCHEDULE 8.3.3 (including any special bonus
noted on that Schedule), which shall not be
accrued in the Adjustment Balance Sheet except to
the extent that such bonuses required to be paid
under such Program in the aggregate exceed the
Total Cost set out on SCHEDULE 8.3.3, shall be
paid by the Purchaser to said Employees within a
period of thirty (30) days from and after the
date of their entitlement thereto pursuant to
said Program.
8.3.4 EMPLOYEE SHARE PURCHASE AND EXECUTIVE STOCK
OPTION PLANS
The Vendor shall indemnify and hold the
Corporation and the Purchaser harmless against
any and all claims, obligations and liabilities
of Employees and Retired Employees under the
Employee Share Purchase and Executive Stock
Option Plans covering Employees and Retired
Employees prior to the Effective Time and
acknowledges that the Purchaser is not
responsible for any compensation or benefits
under such plan.
8.3.5 U.S. 401(K) PLAN
Effective as of the Effective Time, the Purchaser
shall designate a defined contribution plan or
plans (the "PURCHASER'S SAVINGS PLANS") to cover
those Employees who participated in the U.S.
401(k) Plan as at the Effective Time (other than
Employees on Long-Term Medical Leave). The
Purchaser's Savings Plans shall meet the
requirements of Sections 401(a) and 401(k) of the
Code and shall recognize the service of the
affected Employees with the Corporation prior to
the Effective Time for all purposes under such
plans, to the extent credited under the terms of
the U.S. 401(k) Plan (as in effect on the
Effective Time). As soon as practicable after
the Effective Time and when all applicable
requirements under the Laws have been met (but no
later than 150 days thereafter), the Vendor shall
transfer, or cause to be transferred, to the
Purchaser's Savings Plans an amount (the
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"AGGREGATE ACCOUNT BALANCES"), calculated as of
the Effective Time and adjusted as provided below
in this Section 8.3.5, in cash (and the notes
representing loans to the affected Employees),
equal to the total of the individual account
balances (the "ACCOUNT BALANCES") of the affected
Employees under the U.S. 401(k) Plan, reduced by
the amount of any distributions to the affected
Employees made in accordance with the terms of
the U.S. 401(k) Plan between the Effective Time
and the date of the transfer of such Employees'
Account Balances. The Aggregate Account Balances
shall be increased or decreased by the amount of
any actual earnings or losses on each individual
account of the affected Employees included
therein from the Effective Time to the date of
the transfer of the Aggregate Account Balances,
which earnings or losses shall be credited or
debited to the appropriate accounts. The affected
Employees who have loans outstanding under the
U.S. 401(k) Plan at the Effective Time shall have
the right to periodically repay such loans in
accordance with their terms while such persons
are employed by the Purchaser. Effective upon
the transfer of the Aggregate Account Balances to
the Purchaser's Savings Plans, the Purchaser and
such Purchaser's Savings Plans shall assume all
liabilities of the U.S. 401(k) Plan with respect
to such Aggregate Account Balances. Prior to
such transfer, the Vendor shall be responsible
for the administration of the U.S. 401(k) Plan
accounts of participants whose accounts will be
transferred to the Purchaser's Savings Plans in
accordance with this Section 8.3.5 and shall
retain all fiduciary responsibility under ERISA
with respect to such funds. The Purchaser and
the Vendor agree to cooperate in developing
procedures to facilitate the administration of
loans during the period between the Effective
Time and the date of the actual transfers and in
implementing the transfer of the Aggregate
Account Balances as contemplated in this section.
8.4 PENSION PLANS
8.4.1 Subject to the completion of the transfers
contemplated in Section 8.4.2 hereof, the
Purchaser shall designate an employee pension
benefits plan ("Purchaser's Pension Plan") to
assume all responsibility for all pension
benefits accrued by the Employees (excluding,
however, any Employee on Long-Term Medical Leave
at the Effective Time) and Retired Employees
under the U.S. Plan.
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8.4.2 Subject to the qualification of the Purchaser's
Pension Plan and all necessary approvals and
further subject to the provisions of this Section
8.4, the Vendor shall transfer or cause to be
transferred to the Purchaser's Pension Plans from
the U.S. Plan, the amounts determined in
accordance with this Section 8.4 with respect to
all the benefits accrued by the Employees
(excluding, however, any Employee on Long-Term
Medical Leave) and Retired Employees under the
U.S. Plan up to the Effective Time, such transfer
to occur no later than ninety (90) Business Days
after the actuarial matters have been settled and
all regulatory requirements have been met.
8.4.3 The Parties confirm that upon the completion of
the transfer contemplated in Section 8.4.2
hereof, the Vendor and the U.S. Plan shall be
completely discharged of all of their respective
obligations with respect to the pension benefits
accrued by the Employees and Retired Employees
with respect to whom transfers are made under the
said plans up to the Effective Time. Prior to
the completion of such transfers, the Vendor and
U.S. Plan shall remain responsible for the
administration of, and liable for all fiduciary
and other obligations with respect to, the
benefits due to Employees and Retired Employees.
8.4.4 As soon as practicable after the Closing Date,
but no later than sixty (60) Business Days after
the Closing Date, the Vendor shall initiate the
procedure leading to the division of the U.S.
Plan in order to allow for the transfer, in
compliance with the requirements of the Code, of
the amounts contemplated in Section 8.4.2 hereof
(the "AMOUNTS").
8.4.5 The Vendor shall be responsible for the division
of the U.S. Plan in accordance with the Law,
including the preparation of the relevant
actuarial reports. These reports shall be
completed within a period of five (5) months from
and after the Effective Time and a copy of these
reports shall be delivered to the Purchaser for
review and approval by the Purchaser's actuary
prior to their filing with the relevant
regulatory authorities. The Purchaser's actuary
shall have sixty (60) Business Days from receipt
of such actuarial reports to complete its review
pursuant to the standards set forth in Section
8.4.8 and to report its findings to the Purchaser
and the Vendor. No filing with any regulatory
body of any kind (including for greater
certainty, but without limitation, actuarial
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reports) regarding the division of the Vendor
Pension Plans may be made without prior review
and approval of the entire filing by the
Purchaser.
8.4.6 Until the transfer of the Amounts is completed
pursuant to Section 8.4.2 hereof, the Vendor
shall administer all benefits accrued to the
Employees and Retired Employees, and shall make
all benefits payments, under the U.S. Plan and
the Amounts shall be adjusted accordingly as at
the date of the actual transfer.
8.4.7 The Vendor shall not make, without the prior
written consent of the Purchaser, any
modification to the U.S. Plan between the
Effective Time and the date of the actual
transfer of the Amounts (the "TRANSITIONAL
PERIOD"), if such modifications would change in
any way the terms and conditions affecting the
accrued benefits to be transferred to the
Purchaser's Employee Plans (including for greater
certainty, but without limitation the benefits of
the affected Employees and Retired Employees or
the contributions with respect to such benefits)
or would otherwise affect the calculation of the
Amounts. Notwithstanding anything in this
Section 8.4.7 to the contrary, if a change
proposed by the Vendor is mandated by the Law,
the Vendor need not obtain the Purchaser's prior
approval (but prior notice is still required)
unless the latest effective date of the change
permitted by Law (as applied to the Vendor
Pension Plan in question) falls more than sixty
(60) days after the date on which the requirement
of the Law was first published or the requirement
of the Law may be satisfied in more than one way.
8.4.8 For the purpose of Section 8.4.2 hereof, the
Amounts shall equal the projected benefit
obligation in respect of the accrued benefits as
of the Effective Time of the affected Employees
and Retired Employees. The Amounts shall be
determined as at the Effective Time using the
same funding actuarial methods and assumptions
used in the actuarial valuations of the U.S. Plan
as at January 1, 1995.
Initial calculations shall be performed by the
Vendor's actuary using the actuarial assumptions
and the methods referred to in this Section 8.4.8
within six (6) months after the Effective Time
and shall be submitted for review and approval to
the Purchaser's actuary. The Purchaser's
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actuary shall have sixty (60) days to review the
calculations and report back to the Parties. If
the Purchaser's actuary contests the Vendor's
actuary's calculations, a final determination
shall be made by an independent third party
actuary acceptable to the Parties, and each Party
shall be responsible for one half of the cost of
such final determination by such independent
third party actuary.
8.4.9 During the Transitional Period, the Amounts and
all adjustments thereof shall be adjusted as
follows:
(i) for the period ending on the date of
determination of the last known rate
of return of the pension fund of the
relevant Vendor's Pension Plan (the
"INITIAL PERIOD"), the rates of
return of the pension fund of said
relevant Vendor's Pension Plan; and
(ii) from the end of the Initial Period
to the date of the actual transfer
of the Amounts, at the investment
return rate used in the actuarial
assumptions referred to in Section
8.4.8.
The transfer of the Amounts and the adjustments
shall be made in kind and in cash as determined
in SCHEDULE 8.4.9. If any portion of the Amounts
is transferred in kind, the assets shall be
valued for purposes of the transfer at the market
value as of the close of business on the market
day immediately preceding the transfer.
8.4.10 The Vendor shall indemnify and hold the Purchaser
and the Purchaser's Employee Plans against any
claims, liabilities and expenses (including, for
greater certainty and without limitation,
attorney's fees) arising from the failure of the
U.S. Plan or the U.S. 401(k) Plan to be in
compliance with applicable Law (including,
without limitation, those pertaining to
qualification standards and favorable tax
treatment of qualified plans) at the time of the
assets transfers contemplated in Sections 8.3.5
and 8.4.
8.5 AFFIDAVITS FOR TITLE INSURANCE
The Corporation will cooperate with the Purchaser with respect
to obtaining real property title insurance in accordance with
Section 10.1.6, including providing owner's affidavits and
taking other actions as may reasonably be requested by the
Purchaser.
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8.6 NO INTERFERENCE
The Purchaser shall not take any action prior to the Closing
which would negatively impact the ability of the Vendor and
the Corporation to operate the Business or to comply with
their obligations under Section 7.1 or other provisions of
this Agreement. After the Closing, the Parties shall
cooperate and not interfere with one another in the efforts of
Domtar, the Vendor and Public Service Electric & Gas to
clean-up the Camden facility under the Administrative Consent
Order issued under the New Jersey Environmental Clean-up
Responsibility Act, as amended, and related statutes, with due
allowance for the operation of the facility.
8.7 GUARANTEES, LETTERS OF CREDIT, ETC.
(a) The Vendor and Domtar will use their reasonable
efforts to replace, renew or extend any surety bonds,
letters of credit or corporate guarantees previously
provided by the Vendor or Domtar which are required
to operate the Business in the ordinary and usual
course and to preserve in all material respects the
Business intact (the "SUPPORT INSTRUMENTS"). The
Vendor and Domtar shall continue any such
arrangements with respect to the Business until the
Purchaser obtains such surety and letter of credit
arrangements with existing or replacement surety
companies or financial institutions or provides
substitute guarantees (but in any event such
obligation shall not continue for a period exceeding
6 months from Closing).
(b) The Purchaser shall (i) reimburse the Vendor for the
cost of the Support Instruments continued after the
Closing Date, (ii) indemnify and hold harmless the
Vendor with respect to all Support Instruments in
existence at the Closing Date or thereafter with
respect to the Business, and (iii) promptly undertake
to have the Vendor and Domtar released from all such
Support Instruments, in each case to the extent they
relate to the Business.
ARTICLE 9. ANTITRUST AND COMPETITION REGULATORY APPROVALS
9.1 OBTAINING APPROVALS
The Purchaser and the Vendor shall prepare and file promptly,
with all reasonable diligence, all notifications, forms,
reports and other documents, and shall take and complete
promptly, with all reasonable diligence, all steps, measures
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and procedures, as may be required by any federal,
state, provincial or local governmental authority, as the case
may be (the "ANTITRUST AUTHORITY"), for the purpose of
obtaining all permits, consents, orders or approvals required
under the applicable federal, state, provincial or local
antitrust and competition laws (the "ANTITRUST LAWS")
including, without limitation, the HSR Act, for the purpose of
the consummation of the transaction contemplated hereby;
provided that the Vendor shall not be obligated to modify the
scope or terms of the transaction or to undertake any
obligations with respect to the Corporation or any Subsidiary
thereof or the assets of any thereof beyond those already
required by other sections of this Agreement. Without
limiting the generality of the foregoing provisions of this
Section, the Purchaser shall:
9.1.1 take promptly, with all reasonable diligence, any
and all of the following actions to the extent
reasonably required to eliminate any objections
on the part of any Antitrust Authority regarding
the legality under any Antitrust Law of the
Purchaser's acquisition of the Purchased Shares
in accordance with the terms of this Agreement,
namely, making proposals, executing and carrying
out agreements and submitting to judicial or
administrative orders, providing for the sale or
other disposition, or the holding separate
(though the establishment of a trust or
otherwise) of particular assets or categories of
assets or businesses of any of the Purchaser and
the Corporation or any Subsidiary thereof, as the
case may be, or, pending completing of any of the
foregoing actions, the holding separate (through
the establishment of a trust or otherwise) of the
voting securities of the Corporation or any
Subsidiary thereof, as the case may be;
9.1.2 use all reasonable efforts to prevent the entry
in a judicial or administrative proceeding
brought under any Antitrust Law by any Antitrust
Authority of any permanent or preliminary
injunction or other order that would make the
consummation of the acquisition of the Purchased
Shares in accordance with the terms of this
Agreement unlawful or would prevent or
unreasonably delay it, including, without
limitation, taking the steps contemplated in
Section 9.1.1;
9.1.3 take promptly, with all reasonable diligence, in
the event that such an injunction or order has
been issued in such a proceeding, any and all
steps, including, without limitation, appeal
thereof, the posting of a bond or the steps
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contemplated in Section 9.1.1, necessary to
vacate, modify or suspend such injunction or
order so as to permit the consummation of the
acquisition of the Purchased Shares in accordance
with the terms of this Agreement as nearly as
possible on the timetable contemplated by this
Agreement; and
9.1.4 take promptly, with all reasonable diligence, all
other actions and do all other things reasonably
necessary and proper to avoid or eliminate each
and every impediment under any Antitrust Law
which may be asserted by any Antitrust Authority,
to the consummation of the acquisition of the
Purchased Shares in accordance with the terms of
this Agreement.
9.2 DEALINGS WITH AUTHORITY
Nothing in this Agreement shall be deemed to limit the ability
of the Purchaser to contest, in any appropriate administrative
or judicial forum, any effort of any Antitrust Authority to
require the divestiture by the Purchaser of particular assets
or categories of assets or businesses of any of the Purchaser
and the Corporation or any Subsidiary thereof, or the holding
separate (through establishment of a trust or otherwise) of
the voting securities of the Corporation or any Subsidiary
thereof; provided, however, that the Purchaser shall take such
steps to hold separate the acquired businesses as may be
reasonably necessary (and after the entry of an injunction or
other order described in Section 9.1.2, as may be necessary)
to permit the completion of the transactions contemplated by
this Agreement.
The Purchaser shall not agree with the Antitrust Authority to
postpone the consummation of the transaction without the prior
written consent of the Vendor, which consent shall not be
unreasonably withheld.
ARTICLE 10. CONDITIONS OF CLOSING
10.1 PURCHASER'S CONDITIONS
The purchase and sale of the Purchased Shares is subject to
the following terms and conditions for the exclusive benefit
of the Purchaser to be fulfilled and performed on or prior to
the Closing Date:
10.1.1 REPRESENTATIONS AND WARRANTIES REMAIN CORRECT
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10.1.1.1 If the Closing Date occurs on or
before the First Fixture Date, each
of the representations and
warranties of the Selling Parties
contained in this Agreement shall be
true and correct in all material
respects on and as at the Closing
Date (except as such representations
and warranties may have been
affected by the occurrence of events
or circumstances occurring in
contemplation of the consummation of
the transactions provided for
hereunder) with the same force and
effect as though such
representations and warranties had
been made on and as at such date and
the Purchaser shall have received on
the Closing Date a certificate dated
the Closing Date, in form
satisfactory to the Purchaser's
Counsel, signed by the President of
the Vendor, to the effect that such
representations and warranties are
true and correct on and as at the
Closing Date with the same force and
effect as though made on and as at
such date.
10.1.1.2 If the Closing Date occurs after the
First Fixture Date but on or before
the Second Fixture Date, each of the
representations and warranties of
the Selling Parties contained in
this Agreement shall be true and
correct in all material respects on
and as at the First Fixture Date and
each of the First Core
Representations shall be true and
correct in all material respects on
and as at the Closing Date (in each
case except as such representations
and warranties may have been
affected by the occurrence of events
or circumstances occurring in
contemplation of the consummation of
the transactions provided for
hereunder) with the same force and
effect as though such
representations and warranties had
been made on and as at the First
Fixture Date or the Closing Date, as
the case may be, and the Purchaser
shall have received on the Closing
Date a certificate dated the Closing
Date, in form satisfactory to the
Purchaser's Counsel, signed by the
President of the Vendor, to the
effect that such representations and
warranties are true and correct on
and as at the First Fixture Date or
the Closing Date, as the case may
be, with the same force and effect
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as though made on and as at such
dates.
10.1.1.3 If the Closing Date occurs after the
Second Fixture Date, each of the
representations and warranties of
the Selling Parties contained in
this Agreement shall be true and
correct in all material respects on
and as at the First Fixture Date,
each of the First Core
Representations shall be true and
correct in all material respects on
and as at the Second Fixture Date,
and each of the Second Core
Representations shall be true and
correct in all material respect on
and as at the Closing Date (in each
case except as such representations
and warranties may have been
affected by the occurrence of events
or circumstances occurring in
contemplation of the consummation of
the transactions provided for
hereunder) with the same force and
effect as though such
representations and warranties had
been made on and as at the First
Fixture Date, the Second Fixture
Date or the Closing Date, as the
case may be, and the Purchaser shall
have received on the Closing Date a
certificate dated the Closing Date,
in form satisfactory to the
Purchaser's Counsel, signed by the
President of the Vendor, to the
effect that such representations and
warranties are true and correct on
and as at the First Fixture Date,
the Second Fixture Date or the
Closing Date, as the case may be,
with the same force and effect as
though made on and as at such dates.
10.1.2 PERFORMANCE OF OBLIGATIONS
The Vendor shall have performed or complied in
all material respects with all of its agreements,
covenants, obligations and conditions herein
agreed to be performed or complied with by the
Vendor on or prior to the Closing Date.
10.1.3 PERMITS, CONSENTS AND APPROVALS
All permits, consents, orders and approvals
required by any federal, provincial, state or
local governmental authority, as the case may be,
including, without limitation, all consents and
approvals required under the Antitrust Laws
including the HSR Act for the purposes
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of the consummation of the transactions
contemplated hereby shall have been obtained by
the Vendor and the Purchaser and all statutory
periods in connection with notification
procedures required under such Antitrust Laws,
for the purposes of the consummation of the
transactions contemplated hereby shall have
lapsed prior to the Closing Date.
10.1.4 CORPORATE AND OTHER PROCEEDINGS
All corporate and other proceedings of the Vendor
in connection with the transactions contemplated
hereby, and all documents evidencing same or
incidental thereto, shall have been duly
authorized and executed, shall be in form and
substance to the reasonable satisfaction of the
Purchaser and the Purchaser's Counsel, and the
Purchaser and the Purchaser's Counsel shall have
received all such proceedings and documents, or
duly certified copies thereof, as may be
reasonably requested.
10.1.5 EXCLUDED ASSETS
The transfer of the Excluded Assets by the
Corporation shall have been completed.
10.1.6 REAL PROPERTY TITLE INSURANCE
The Purchaser shall have obtained at its option
and expense a title insurance policy insuring the
Purchaser that the Corporation has good and
marketable title in fee simple absolute to all
the Real Properties free and clear of all title
defects or Liens of any nature whatsoever, except
as described in such policies and which are
reasonably acceptable to the Purchaser, and
except for Permitted Encumbrances.
10.1.7 RESIGNATION AND RELEASES BY DIRECTORS AND OFFICERS
Each of the directors and officers of the
Corporation and KMHC shall have signed in favour
of and delivered to the Corporation and KMHC a
resignation as a director and/or officer thereof,
as the case may be, and a release from all their
respective claims against the Corporation and
KMHC as a director and/or officer thereof, as the
case may be.
10.1.8 OPINION OF THE VENDOR'S COUNSEL
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The Purchaser shall have received from the
Vendor's Counsel a favorable opinion addressed to
the Purchaser, dated the Closing Date, in form
and substance reasonably satisfactory to the
Purchaser, as to the matters contained in
Sections 4.1, 4.3 and 4.5, and such other matters
as may be reasonably requested by the Purchaser.
The Vendor's Counsel may rely, as to facts
material to said opinion which are not
independently established by the Vendor's
Counsel, on certificates of public officials or
of officers of the Vendor and, as to matters of
law in other jurisdictions, on opinions of
counsel in such jurisdictions.
10.1.9 LITIGATION
No suit, action or proceeding shall be pending
against the Purchaser, the Selling Parties or
KMHC before any court or governmental agency
which could result in (i) the restraint or
prohibition of the consummation of the
transactions contemplated hereby or (ii) an order
restricting the Corporation or KMHC in conducting
their respective businesses in such a manner so
as to have a Material Adverse Effect.
10.1.10 DOMTAR CANADIAN GYPSUM PRODUCTS BUSINESS
The consummation of the purchase and sale of the
Purchased Shares pursuant hereto shall take place
concurrently with the consummation of the Asset
Purchase Agreement.
10.1.11 RESCISSION
In case any of the foregoing conditions provided
for in this Section 10.1 shall not be fulfilled
and performed on or prior to the Closing Date to
the reasonable satisfaction of the Purchaser and
the Purchaser's Counsel, the Purchaser may
rescind this Agreement by notice to the Vendor
and in such event, the Parties shall be released
from all obligations whatsoever to whomsoever
including, without limitation, all obligations of
the Purchaser to the Vendor, its Affiliates and
Subsidiaries and their respective shareholders,
directors, officers and employees, pursuant to
this Agreement and all other agreements entered
into pursuant hereto, other than the obligations
of confidentiality of the Purchaser pursuant to
the Confidentiality Agreement.
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10.1.12 WAIVER BY THE PURCHASER
The conditions set out in this Section 10.1 may
be waived by the Purchaser in whole or in part by
a written document to such effect duly signed
thereby.
10.2 VENDOR'S CONDITIONS
The purchase and sale of the Purchased Shares is subject to
the following terms and conditions for the exclusive benefit
of the Vendor to be fulfilled and performed on or prior to the
Closing Date:
10.2.1 REPRESENTATIONS AND WARRANTIES REMAIN CORRECT
Each of the representations and warranties of the
Purchaser contained in this Agreement shall be
true and correct in all material respects on and
as at the Closing Date (except as such
representations and warranties may have been
affected by the occurrence of events or
circumstances occurring in contemplation of the
consummation of the transactions provided for
hereunder) with the same force and effect as
though such representations and warranties had
been made on and as at such date and the Vendor
shall have received on the Closing Date a
certificate dated the Closing Date, in form
satisfactory to the Vendor's Counsel, signed by
the President or a Vice-President of the
Purchaser, to the effect that such
representations and warranties are true and
correct in all material respects on and as at the
Closing Date with the same force and effect as
though made on and as at such date.
10.2.2 PERFORMANCE OF OBLIGATIONS
The Purchaser shall have performed or complied in
all material respects with all of its agreements,
covenants, obligations and conditions herein
agreed to be performed or complied with by the
Purchaser on or prior to the Closing Date.
10.2.3 CORPORATE AND OTHER PROCEEDINGS
All corporate and other proceedings of the
Purchaser in connection with the transactions
contemplated hereby, and all documents evidencing
same or incidental thereto, shall have been
authorized and executed, shall be in form and
substance to the reasonable satisfaction of the
Vendor and the Vendor's Counsel, and the Vendor
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and the Vendor's Counsel shall have received
all such proceedings and documents or duly
certified copies thereof, as may be reasonably
requested.
10.2.4 CHANGE OF NAME
The Corporation shall have changed its name to
one which does not include the name "Domtar" or
the prefix "Dom".
10.2.5 DOMTAR CANADIAN GYPSUM PRODUCTS BUSINESS
The consummation of the purchase and sale of the
Purchased Shares pursuant hereto shall take place
concurrently with the consummation of the Asset
Purchase Agreement.
10.2.6 OPINION OF THE PURCHASER'S COUNSEL
The Vendor shall have received from the
Purchaser's Counsel a favorable opinion addressed
to the Vendor, dated the Closing Date, in form
and substance reasonably satisfactory to the
Vendor, as to the matters contained in Sections
5.1 and 5.2, and such other matters as may be
reasonably requested by the Vendor, with such
qualifications as may be consistent with opinion
practice on such issues. The Purchaser's Counsel
may rely, as to facts material to said opinion
which are not independently established by the
Purchaser's Counsel, rely on certificates of
public officials or of officers of the Purchaser
and, as to matters of law in other jurisdictions,
on opinions of counsel in such jurisdictions.
10.2.7 RESCISSION
In case any of the foregoing conditions provided
for in this Section 10.2 shall not be fulfilled
and performed on or prior to the Closing Date to
the reasonable satisfaction of the Vendor and the
Vendor's Counsel, the Vendor may rescind this
Agreement by notice to the Purchaser and in such
event, the Parties shall be released from all
obligations whatsoever to whomsoever including,
without limitation, all obligations of the Vendor
to the Purchaser, its Affiliates and Subsidiaries
and their respective shareholders, directors,
officers and employees, pursuant to this
Agreement and all other agreements entered into
pursuant hereto, other than the obligations of
confidentiality of the Purchaser pursuant to the
Confidentiality Agreement.
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10.2.8 WAIVER BY THE VENDOR
The conditions set out in this Section 10.2 may
be waived by the Vendor in whole or in part by a
written document to such effect duly signed
thereby.
ARTICLE 11. SURVIVAL AND RELIANCE ON REPRESENTATIONS AND WARRANTIES AND
INDEMNIFICATION
11.1 SURVIVAL AND RELIANCE
The Parties shall be entitled to rely upon the representations
and warranties contained herein and the obligations of the
Parties with respect thereto shall survive the dates and shall
continue in full force and effect as provided in Section 11.2
hereof.
11.2 SURVIVAL OF LIABILITY FOR REPRESENTATIONS AND WARRANTIES
11.2.1 The Second Core Representations of the Vendor
shall survive the Closing Date for a period of
one (1) year, the First Core Representations of
the Vendor shall survive the Adjustment Date and
the Closing Date for a period of one (1) year,
and all other representations and warranties of
the Vendor and the Corporation contained herein
shall survive the earlier of the First Fixture
Date and the Closing Date for a period of one (1)
year, except for
11.2.1.1 the representations and warranties
contained in Sections 4.9.5 and 4.14
hereof (Taxes) and 4.17 (Employees,
Pensions and Other Benefit Plans)
which shall survive the Closing Date
until the expiry of the limitation
or prescription period under the
relevant Laws, and the Purchaser
covenants that, from and after the
Closing Date, it shall not enter
into, without the prior written
consent of the Vendor, any
agreement, waiver or other
arrangement which provides for an
extension of time with respect to
the filing of any Tax Return or the
payment or assessment of any Taxes
dealt with by any such
representation or warranty;
11.2.1.2 the representations and warranties
contained in Section 4.16 hereof
(Environmental Matters) which shall
survive the earlier of (i) the First
or Second Fixture Date (as
determined by the date on which
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representations and warranties were
last deemed made) and (ii) the
Closing Date for a period of three
(3) years; and
11.2.1.3 the representations and warranties
contained in Sections 4.1, 4.2 and
4.3 which shall survive without
limitation as to time except as may
be limited by law.
except in each case to the extent that during
such period the Purchaser shall have given notice
to the Vendor or Domtar of a claim in respect of
any such representation or warranty, in which
case such representation or warranty with respect
to such claim (but not as to other claims) shall
continue in full force and effect until the final
determination of such claim. After the end of
the applicable survival period described above,
the Vendor shall have no liability with respect
to the representations and warranties contained
herein except as to claims made prior to the
expiry of the relevant period of survival
pursuant to this Section 11.2.1.
11.2.2 All the representations and warranties of the
Purchaser contained herein shall survive the
Closing Date for a period of one (1) year, except
to the extent that during such period the Vendor
shall have given notice to the Purchaser of a
claim in respect of any such representation or
warranty, in which case such representation or
warranty with respect to such claim (but not as
to other claims) shall continue in full force and
effect until the final determination of such
claim. After the end of such survival period,
the Purchaser shall have no liability with
respect to any of its representations and
warranties contained herein except as to claims
made prior to the expiry of the period of
survival pursuant to this Section 11.2.2.
11.3 INDEMNIFICATION BY THE VENDOR
11.3.1 Each of Domtar and the Vendor, jointly and
severally, shall defend, indemnify and hold
harmless the Purchaser and (after the Effective
Time) the Corporation and each Affiliate thereof
and any present or future officer, director,
agent or employee of Purchaser (all of which are
herein collectively referred to as "PURCHASER
PROTECTED PERSONS") against any and all claims,
proceedings, judgments, penalties, fines, claims,
damages (other than indirect, incidental or
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consequential), losses (other than loss of
profits), liabilities, fees (including, without
limitation, reasonable fees and expense of
counsel), costs or expenses (the "CLAIMS")
incurred or required to be paid by any Purchaser
Protected Person arising out of the breach or
non-fulfillment of any representation, warranty,
agreement, covenant, condition or any other
obligation of the Vendor, Domtar or the
Corporation contained in this Agreement. All
such Claims are referred to herein as
"PURCHASER'S INDEMNIFIED CLAIMS".
11.3.2 Without limiting the generality of the provisions
of Section 11.3.1 hereof and notwithstanding the
provisions of Section 11.7 hereof, the Vendor
and Domtar shall jointly and severally defend,
indemnify and hold harmless the Purchaser
Protected Persons against all Claims with respect
to or in any way relating to the matters set out
in SCHEDULE 11.3.2 or in Sections 8.3.2, 8.3.4
and 8.4.10, and the obligation of the Vendor and
Domtar to indemnify the Purchaser Protected
Persons pursuant to this Section 11.3.2 with
respect to such Claims shall not be subject to
the deductible and limiting amounts referred to
in Section 11.7 hereof and the amount for which
the Purchaser Protected Persons shall be
indemnified for such Claims shall be the entire
amount thereof. Claims for indemnification under
this Section 11.3.2 shall not be subject to any
limitations on survival of warranties contained
in this Article 11, and the Purchaser Protected
Persons may seek indemnification hereunder at any
time after the Effective Time, except as
otherwise expressly provided for in SCHEDULE
11.3.2.
11.3.3 Notwithstanding any other provision of this
Article 11, the Vendor and Domtar shall have no
liability whatsoever to indemnify the Purchaser
Protected Persons against any Claims with respect
to the ongoing operational environmental matters
set out in SCHEDULE 11.3.3.
11.4 INDEMNIFICATION BY THE PURCHASER
The Purchaser shall defend, indemnify and hold harmless the
Vendor and each Affiliate thereof and any present, former or
future officer, director, agent or employee of the Vendor (all
of which are herein collectively referred to as "VENDOR
PROTECTED PERSONS") against any and all Claims incurred by the
Vendor Protected Persons
<PAGE> 74
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11.4.1 arising out of the breach or non-fulfillment of
any representation, warranty, agreement,
covenant, condition or any other obligation of
the Purchaser contained in this Agreement;
provided that any Claim for the breach or
nonfulfillment by the Purchaser of its
obligations under Article 9 shall not be subject
to indemnification under this Section 11.4 but
shall be subject to the provisions of Section
13.2; or
11.4.2 with respect to the environmental matters set out
in SCHEDULE 11.3.3.
All such claims are referred to herein as
"VENDOR'S INDEMNIFIED CLAIMS".
11.5 INDEMNIFICATION AGAINST THIRD PARTY CLAIMS
11.5.1 Promptly upon receipt by either Party (the
"INDEMNITEE") of a notice of any Third Party
Claim in respect of which Indemnitee proposes to
demand indemnification from the other Party (the
"INDEMNITOR"), the Indemnitee shall give notice
to that effect to the Indemnitor with reasonable
promptness.
11.5.2 Without prejudice to the Indemnitee's right to
participate in the defense, compromise or
settlement of the Third Party Claim, the
Indemnitor shall have the right by notice to the
Indemnitee not later than ten (10) days after
receipt of the notice described in Section 11.5.1
hereof to assume (and in the case of asbestos
claims, shall assume) the control of the defence,
compromise or settlement of the Third Party
Claim, provided that such assumption shall, by
its terms, be without cost or liability to the
Indemnitee and provided that the Indemnitor shall
have first delivered to Indemnitee a written
acknowledgement by Indemnitor that the relevant
Claim is an Indemnified Claim and that the
Indemnitor, in its good faith judgment, will be
able to pay any award of money damages against
the Indemnitee in connection with such action.
If the Indemnitor assumes the defense of an
action, (i) the Indemnitee shall be entitled to
meaningfully participate therein; (ii) no
settlement or compromise thereof may be effected
(x) by the Indemnitor without the consent of the
Indemnitee (which consent shall not be
unreasonably withheld or delayed) unless (A)
there is no finding or admission of any violation
of law or any violation of the rights of any
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person by Indemnitee and no adverse effect on any
other claims that may be made against any
Indemnitee and (B) all relief provided is paid or
satisfied in full by the Indemnitor or (y) by the
Indemnitee without the consent of the Indemnitor;
and (iii) the Indemnitee may subsequently assume
the defense of such action if a court of
competent jurisdiction determines the Indemnitor
is not vigorously defending such action.
11.5.3 Upon the assumption of control by the Indemnitor
pursuant to the provisions of Section 11.5.2
hereof, the Indemnitor shall, at its expense,
diligently proceed with the defence, compromise
or settlement of the Third Party Claim at
Indemnitor's sole expense, including employment
of counsel reasonably satisfactory to the
Indemnitee and, in connection therewith, the
Indemnitee shall cooperate fully, but at the
expense of the Indemnitor, to make available to
the Indemnitor all pertinent information and
witnesses under the Indemnitee's control, make
such assignments and take such other steps as in
the opinion of counsel for the Indemnitor are
necessary to enable the Indemnitor to conduct
such defence.
11.5.4 The final determination of any such Third Party
Claim, including all related costs and expenses,
shall be binding and conclusive upon the Parties
as to the validity or invalidity, as the case may
be, of such Third Party Claim against the
Indemnitor.
11.5.5 Should the Indemnitor fail to defend the
Indemnitee as provided in Section 11.5.2 hereof,
the Indemnitee shall be entitled to make such
settlement of the Third Party Claim as in its
sole discretion may appear advisable, and such
settlement or any other final determination of
the Third Party Claim shall be binding upon the
Indemnitor.
11.6 INDEMNIFICATION AFTER INSURANCE AND OTHER RECOVERIES
11.6.1 INSURANCE
The amount of the indemnification for any and all
Claims which either the Purchaser Protected Persons
or the Vendor Protected Persons shall be entitled
to receive pursuant to this Article 11 shall be
determined after giving effect to any and all
insurance proceeds received by the Indemnitee from
its insurers and any and all recoveries from any
other Persons against which there may be
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indemnity rights pursuant to the Contracts.
The Indemnitee shall use all reasonable efforts to
collect such insurance proceeds or, if the
Indemnitee is the Purchaser, claims with respect to
such indemnity rights against any other Persons
under any of the Contracts; provided that nothing
in this Section 11.6 shall require any Indemnitee
to make or prosecute a claim for insurance proceeds
if such a claim would adversely affect the
Indemnitee with respect to matters other
than the Claim.
11.6.2 NET OPERATING LOSSES
The amount of the indemnification for any Claim by
the Purchaser or the Corporation with respect to
income taxation matters pertaining to the
Corporation shall be determined after having
deducted from the amount so claimed pursuant to
this Article 11 the amount of the respective
federal or specific state net operating losses
retained by the Corporation after the Closing Date,
as determined as of the Closing Date after the
elections made by the Selling Parties under U.S.
Treasury Regulation Section 1.1502 and similar
state law elections.
11.6.3 COOPERATION.
If an Indemnitee seeks indemnity from an Indemnitor
with respect to any matters relating to
environmental or asbestos related matters, the
Indemnitee shall cooperate with the Indemnitor, at
the Indemnitor's expense, in assisting the
Indemnitor to obtain indemnity under agreements
with third parties or insurance proceeds under any
insurance policies maintained by the Indemnitor
covering the claims in question.
11.7 VENDOR'S MAXIMUM LIABILITY
11.7.1 The obligation of the Vendor and Domtar to
indemnify the Purchaser Protected Persons
pursuant to this Article 11, excluding the
obligation to indemnify for all Claims with
respect to the representations and warranties
contained in Section 4.16 hereof (Environmental
Matters) (the "ENVIRONMENTAL CLAIMS") and further
excluding the obligation to provide unlimited
indemnification pursuant to Section 11.3.2 shall
be limited, in the aggregate, to 10% of the
Purchase Price; provided, however, that the
Purchaser shall not exercise its right of
indemnification in relation thereto pursuant to
this Article 11 unless and until the
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aggregate amount of the Claims asserted against
the Vendor and Domtar, excluding Environmental
Claims and Section 11.3.2 claims, is in excess of
the aggregate amount of 1% of the Purchase Price,
and the amount then claimable shall be only the
amount of such Claims which exceeds 1% of the
Purchase Price.
11.7.2 Subject to the provisions of Sections 11.3.2,
11.3.3 and 11.4.2 hereof, the obligation of the
Vendor and Domtar to indemnify the Purchaser
pursuant to this Article 11 with respect to
Environmental Claims shall be limited, in the
aggregate, to the sum obtained by adding to 15%
of the Purchase Price an amount equal to the
difference between 10% of the Purchase Price and
the aggregate of the Claims indemnified against
or outstanding pursuant to the provisions of
Section 11.7.1 hereof, if any; provided however,
that the Purchaser shall not exercise its right
of indemnification in relation thereto pursuant
to this Article 11 unless and until the aggregate
amount of the Environmental Claims asserted
against the Vendor is in excess of the aggregate
amount of 1% of the Purchase Price, and the
amount then claimable shall be only the amount of
such Environmental Claims which exceeds 1% of the
Purchase Price; and provided further that the
combined amount recoverable under Section 11.7.1
and 11.7.2 shall not exceed in the aggregate 25%
of the Purchase Price.
11.8 DETAILS OF CLAIMS
With respect to any Claim pursuant to Section 11.3 or 11.4
hereof, no indemnity hereunder shall be sought unless written
notice providing reasonable details of the reasons for which
the indemnity is sought is provided to the Vendor (or Domtar)
or the Purchaser, as the case may be. Such notice shall be
given promptly on the occurrence of the circumstances giving
rise to the Claim coming to the attention of the Indemnitee
hereunder; provided that failure to so notify the Indemnitor
shall not relieve the Indemnitor from any liabilities which it
may have to the Indemnitee (i) hereunder, except to the extent
that is actually prejudiced thereby, or (ii) otherwise than
under this Article 11.
11.9 INDEMNIFICATION SOLE REMEDY
The provisions of this Agreement shall constitute the sole
indemnification remedy to either Party against the other with
respect to any breach or non-fulfillment of any
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representation, warranty, agreement, covenant,
condition or any other obligation contained in
this Agreement.
ARTICLE 12. CLOSING
The sale and purchase of the Purchased Shares herein provided for
shall be consummated on the Closing Date at the Closing Place.
12.1 At the Closing, the Vendor shall deliver or cause to be
delivered to the Purchaser free and clear of all Liens:
12.1.1 certificate or certificates for the Purchased
Shares, duly endorsed for transfer or with duly
executed stock powers for transfer thereof; and
12.1.2 all such other agreements, certificates,
consents, approvals, opinions and other documents
herein required to be delivered by the Vendor or
Domtar at or prior to the Closing Date and not
therefore received by the Purchaser.
12.2 The Purchaser shall deliver or cause to be delivered to or to
the order of the Vendor:
12.2.1 the Purchase Price herein required to be paid by
the Purchaser pursuant to Section 3.1 hereof; and
12.2.2 all such other agreements, certificates,
consents, approvals, opinions and other documents
herein required to be delivered by the Purchaser
at or prior to the Closing Date and not
theretofore received by the Vendor.
ARTICLE 13. TERMINATION
13.1 ELECTION
The Parties shall exercise all reasonable efforts and
cooperate, with reasonable diligence, in order for the
consummation of the transactions contemplated hereunder to
take place at the earliest possible date. Subject to the
provisions of Section 10.1.12 or 10.2.8 hereof, as the case
may be, in the event that the sale and purchase of the
Purchased Shares herein provided for is not consummated within
five (5) months from the date of this Agreement (the
"FIVE-MONTH ANNIVERSARY") as a result of the failure of either
Party to fulfill any of the conditions provided for in Section
10.1 (other than those contained in Section 10.1.3 to the
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extent covered by Article 9) or 10.2, as the case may be, for
the benefit of the other Party on or before the Five-Month
Anniversary and the Party who has the benefit of such
condition (the "ELECTING PARTY") refuses to waive it, the
Electing Party shall have the right, exercisable at any time
after the Five-Month Anniversary, to terminate this Agreement
by giving at least forty-five (45) days written notice to the
other Party (the "NON-ELECTING PARTY"). For purposes of this
Article 13, Domtar and the Corporation shall be deemed the
same Party as the Vendor. If the Non-Electing Party does not
cure its failure to fulfil the conditions of Sections 10.1 or
10.2, as the case may be, by the date for termination (the
"TERMINATION DATE") specified in the termination notice given
by the Electing Party, then this Agreement shall terminate on
the Termination Date, and, except as set forth in Section
13.2, each Party shall be released from
13.1.1 all obligations whatsoever to whomsoever
including, without limitation, all obligations to
the other Party, its Affiliates and Subsidiaries
and their respective shareholders, directors,
officers and employees, pursuant to this
Agreement and all other agreements entered into
pursuant hereto; and
13.1.2 all Claims arising out of, directly or
indirectly, the failure to consummate the sale
and purchase of the Purchased Shares as herein
provided for.
13.2 CONTINUING LIABILITY
For purposes of Section 13.1, the responsibility for obtaining
any permits, consents, orders or approvals referred to in
Article 9 shall be that solely of the Purchaser. If this
Agreement is terminated by Vendor under Section 13.1 effective
as of a date after the Second Fixture Date because of the
breach by the Purchaser of its obligations under Article 9,
then the Purchaser shall remain liable to the Vendor for the
failure to consummate the sale and purchase of the Purchased
Shares as herein provided.
ARTICLE 14. MISCELLANEOUS
14.1 NOTICES
Any notice or communication provided for under this Agreement
shall be in writing and be sufficiently given to the Party to
whom it is addressed if it is delivered or sent by prepaid
first-class mail or transmitted by telecopier to or for such
Party at the address or telecopier number of such Party as set
out hereinafter or at such other address or telecopier
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number as such Party shall have hereafter notified to
the other Party in the manner provided for in this Section.
If to the Vendor, the Corporation (before Closing), or Domtar:
Domtar Industries Inc., Domtar Gypsum Inc., or Domtar (as
applicable)
c/o Domtar Inc.
395 de Maisonneuve Blvd. West
Montreal, Canada
H3A 1L6
Fax: (514) 848-6850
Attention: Secretary
If to the Purchaser or the Corporation (after Closing):
Georgia-Pacific Corporation or G-P Gypsum Corporation (as
applicable)
133 Peachtree Street, N.E.
Atlanta, GA 30303
(30348-05605 for notice by mail)
Fax: (404) 584-1461
Attention: Secretary
Any notice or communication addressed and delivered, mailed or
telecopied, as the case may be, as aforesaid shall be deemed
to have been sufficiently given and received on the date on
which it was so delivered or, if such date is not on a
Business Day, on the Business Day next following such date, or
on the 7th Business Day next following the date of its mailing
or on the 1st Business Day next following the date of its
transmission by telecopier, as the case may be.
14.2 PUBLIC ANNOUNCEMENT
All public announcements concerning the transactions
contemplated hereby shall be jointly planned and coordinated
by the Parties and no Party shall act unilaterally in this
regard without the prior approval of the other, except where
required to do so by the Laws or by the applicable regulations
or policies of any stock exchange, in which case, the Party
obliged to make public disclosure shall promptly inform
thereof the other Party and discuss with such other Party the
extent and timing of such disclosure.
14.3 EXPENSES
All costs and expenses (including, without limitation,
the fees and disbursement of legal counsel) incurred in
connection with the negotiation and the preparation of this
Agreement and the consummation of the transactions
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provided for hereunder shall be paid by the Party
incurring such expenses.
14.4 SUCCESSORS AND ASSIGNS
This Agreement shall enure to the benefit of and be binding
upon the Parties and their respective successors and assigns,
provided that neither this Agreement nor any right or
obligation hereunder shall be assigned by either Party without
the prior written consent of the other Party, except that the
Purchaser may assign this Agreement and its rights hereunder
to any Affiliate thereof without such consent provided that,
notwithstanding any such assignment, the Purchaser shall
remain liable to the Vendor, jointly and severally with such
assignee, for the performance of all the obligations
pertaining to the Purchaser pursuant to this Agreement.
14.5 FURTHER ASSURANCES
The Parties shall do with reasonable diligence, all
such things and provide all such reasonable assurances as may
be required to consummate the transactions provided for
hereunder, and each Party shall provide such further documents
required by the other Party as may be reasonably necessary or
desirable to effect the purpose of this Agreement and carry
out its provisions, whether before or after the Closing,
including, without limitation, the execution of agreements
concerning transitional services as may be mutually agreed by
the Parties.
14.6 DISPUTE RESOLUTION
In the event of any and all disputes between the Parties
resulting out of or relating to this Agreement or its breach,
the Parties shall attempt, in good faith, to settle amicably
such disputes (including referral of the dispute to a neutral,
third-party mediator) prior to submitting same to the court of
competent jurisdiction.
14.7 NO THIRD PARTY BENEFICIARY
Nothing contained in this Agreement or any other agreement
entered into pursuant hereto is intended, or should be
interpreted as having been intended, to create any right or
assume any obligation in favour of, or grant any waiver or
release from any obligation to, or otherwise constitute a
stipulation in favour of any Person other than the Parties,
the Purchaser Protected Persons and the Vendor Protected
Persons.
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14.8 COUNTERPARTS
This Agreement may be executed by the Parties in several
counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall
constitute but one and the same document.
IN WITNESS WHEREOF the Parties have executed this Agreement as
of the date first hereinbefore written.
GEORGIA-PACIFIC CORPORATION
per: /s/ Michael A. Vidan
-------------------------------------
DOMTAR INDUSTRIES INC.
per: /s/ Pierre Fitzgibbon
-------------------------------------
per: /s/ Gilles Pharand
-------------------------------------
DOMTAR INC.
per: /s/ Stephen C. Larson
-------------------------------------
per: /s/ Pierre Fitzgibbon
-------------------------------------
DOMTAR GYPSUM INC.
per: /s/ Pierre Fitzgibbon
-------------------------------------
per: /s/ Gilles Pharand
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<PAGE> 1
EXHIBIT 11
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
STATEMENTS OF COMPUTATION OF PER SHARE EARNINGS (Unaudited)
(Thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Sept. 30, Ended Sept. 30,
--------------- ---------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income (Loss)
- -------------
Income before extraordinary item and accounting change $ 324,000 $ 87,000 $ 821,000 $ 157,000
Extraordinary item, net of tax - - - (11,000)
Cumulative effect of accounting change, net of tax - - - (5,000)
--------- -------- --------- ---------
Net income $ 324,000 $ 87,000 $ 821,000 $ 141,000
========= ======== ========= =========
Weighted Average Shares
- -----------------------
Common shares outstanding, net of restricted stock 90,694 89,179 90,029 88,912
Add - shares assumed to be issued under long-term
incentive (restricted stock), stock option and stock
purchase plans at the average market price 930 609 899 703
--------- -------- --------- ---------
Primary shares 91,624 89,788 90,928 89,615
--------- -------- --------- ---------
Add - additional shares assumed to be issued under
long-term incentive (restricted stock), stock option
and stock purchase plans at quarter end market price
(if higher than average market price) - 248 144 345
--------- -------- --------- ---------
Fully diluted shares 91,624 90,036 91,072 89,960
========= ======== ========= =========
Income (Loss) Per Share
- -----------------------
Income before extraordinary item and accounting change $ 3.57 $ .98 $ 9.12 $ 1.77
Extraordinary item, net of tax - - - (.12)
Cumulative effect of accounting change, net of tax - - - (.06)
--------- -------- --------- ---------
Net income $ 3.57 $ .98 $ 9.12 $ 1.59
========= ======== ========= =========
Income (Loss) Per Share - Primary
- ---------------------------------
Income before extraordinary item and accounting change $ 3.54 $ .97 $ 9.03 $ 1.75
Extraordinary item, net of tax - - - (.12)
Cumulative effect of accounting change, net of tax - - - (.06)
--------- -------- --------- ---------
Net income $ 3.54 $ .97 $ 9.03 $ 1.57
========= ======== ========= =========
Income (Loss) Per Share - Fully Diluted
- ---------------------------------------
Income before extraordinary item and accounting change $ 3.54 $ .97 $ 9.01 $ 1.75
Extraordinary item, net of tax - - - (.12)
Cumulative effect of accounting change, net of tax - - - (.06)
--------- -------- --------- ---------
Net income $ 3.54 $ .97 $ 9.01 $ 1.75
========= ======== ========= =========
</TABLE>
A single presentation of income (loss) per share is made on the Statements of
Income because the effects of assuming issuance of common shares under
long-term incentive, stock option and stock purchase plans are either
antidilutive or insignificant.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF GEORGIA-PACIFIC CORPORATION AS OF AND FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 375
<SECURITIES> 0
<RECEIVABLES> 1,014
<ALLOWANCES> 31
<INVENTORY> 1,396
<CURRENT-ASSETS> 2,950
<PP&E> 12,214
<DEPRECIATION> 6,441
<TOTAL-ASSETS> 12,377
<CURRENT-LIABILITIES> 2,308
<BONDS> 4,268
<COMMON> 73
0
0
<OTHER-SE> 3,368
<TOTAL-LIABILITY-AND-EQUITY> 12,377
<SALES> 10,882
<TOTAL-REVENUES> 10,882
<CGS> 7,576
<TOTAL-COSTS> 7,576
<OTHER-EXPENSES> 566
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 299
<INCOME-PRETAX> 1,369
<INCOME-TAX> 548
<INCOME-CONTINUING> 821
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 821
<EPS-PRIMARY> 9.03
<EPS-DILUTED> 9.01
</TABLE>
