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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1 to
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended September 30, 1999
Commission File Number 1-7107
LOUISIANA-PACIFIC CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 93-0609074
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
111 S. W. Fifth Avenue, Portland, Oregon 97204-3699
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (503) 221-0800
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 Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock: 106,446,814 shares of Common Stock, $1 par value, outstanding as
of October 29, 1999.
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EXCEPT AS OTHERWISE SPECIFIED AND UNLESS THE CONTEXT OTHERWISE
REQUIRES, REFERENCES TO "L-P" REFER TO LOUISIANA-PACIFIC CORPORATION AND ITS
SUBSIDIARIES.
This amendment to Form 10-Q is filed in order to amend the following
items: Item 2 of Part I -- Management's Discussion and Analysis of Financial
Condition and Results of Operations; Item 1 of Part II -- Legal Proceedings; and
Item 6 of Part II -- Exhibits and Reports on Form 8-K.
PART I -- FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Net income for the third quarter of 1999 was $69.3 million, or $.65 per
diluted share, on sales of $797.4 million, compared to a third quarter 1998 net
loss of $192.7 million, or $1.77 per diluted share, on sales of $606.3 million.
Excluding unusual items, net income for the third quarter of 1999 was $80.8
million, or $.76 per diluted share, compared to third quarter 1998 income
excluding unusual items of $48.3 million, or $.44 per share. The unusual items
are discussed below under the heading "Unusual Credits and Charges, Net."
Net income for the first nine months of 1999 was $181.4 million, or
$1.70 per diluted share, on sales of $2.17 billion, compared to a net loss for
the first nine months of 1998 of $13.9 million, or $.13 per diluted share, on
sales of $1.78 billion. Excluding unusual items, net income for the first nine
months of 1999 was $189.7 million, or $1.78 per diluted share, compared to net
income for the first nine months of 1998 of $31.9 million, or $.29 per diluted
share. The unusual items are discussed below under the heading "Unusual Credits
and Charges, Net."
Sustained demand for building products and the continued strength in
housing markets have factored positively into both third quarter and
year-to-date earnings. This demand resulted in improved market pricing for
structural panels (oriented strand board ("OSB") and plywood) and lumber, which
was the primary factor for increased sales and earnings. Earnings from the
acquisition of ABT in February 1999 have also contributed significantly to
increased sales and earnings.
L-P operates in five segments: structural products; exterior products;
industrial panel products; other products; and pulp. Structural products is the
most significant segment, accounting for more than 56% of sales during the first
nine months of both 1999 and 1998. L-P's results of operations are discussed
separately for each segment below. Production volumes and industry product price
trends are presented below in the tables captioned "Summary of Production
Volumes" and "Industry Product Price Trends."
Most of L-P's products are sold as commodities and therefore sales
prices fluctuate based on market factors over which L-P has little or no
control. L-P cannot predict whether the prices of its products will remain at
current levels, or will increase or decrease in the future because supply and
demand are influenced by many factors, only two of which are the cost and
availability of raw materials. L-P is not able to determine to what extent, if
any, it will be able to pass any future increases in the price of raw materials
on to customers through product price increases.
Demand for the majority of L-P's products is subject to cyclical
fluctuations over which L-P has no control. Demand for L-P's building products
is heavily influenced by the level of residential construction activity, which
is subject to fluctuations due to changes in economic conditions, interest
rates, population growth and other factors. These cyclical fluctuations in
demand are unpredictable and may have a substantial influence on L-P's results
of operations.
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SELECTED SEGMENT DATA
STRUCTURAL PRODUCTS
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPT. 30, SEPT. 30,
-------------------------------- ----------------------------------
1999 1998 % CHG 1999 1998 % CHG
--------- --------- ------- --------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Sales:
Structural products.............. $ 449.1 $ 399.6 +12% $ 1,224.2 $ 1,039.0 +18%
Exterior products................ 78.6 31.1 +153% 195.5 82.8 +136%
Industrial panel products........ 70.2 43.9 +60% 197.1 132.4 +49%
Other products................... 168.8 114.6 +47% 468.7 464.8 +1%
Pulp............................. 30.7 17.1 +80% 80.5 58.8 +37%
--------- --------- --------- ---------
Total sales...................... $ 797.4 $ 606.3 +32% $ 2,166.0 $1,777.8 +22%
========= ========= ========= ========
Profit (loss):
Structural products.............. $ 149.9 $ 107.8 +39% $ 372.2 $ 155.9 +139%
Exterior products................ 17.4 7.9 +120% 41.4 17.5 +137%
Industrial panel products........ 2.5 1.2 +108% 8.3 3.9 +113%
Other products................... (3.9) .6 -750% (13.6) (9.8) -39%
Pulp............................. (3.8) (10.8) +65% (14.5) (26.3) +45%
Unusual credits and charges, net. (18.7) (392.0) +95% (13.5) (63.7) +79%
General corporate and other
expense, net..................... (25.2) (26.1) +3% (76.4) (69.8) -9%
Interest income (expense), net... (2.7) .9 -400% (3.6) (15.3) +76%
--------- --------- --------- ---------
Income (loss) before taxes and
minority interest................ $ 115.5 $ (310.5) +137% $ 300.3 $ (7.6) +4,051%
========= ========= ========= ========
</TABLE>
The structural products segment consists of OSB, plywood, lumber and
engineered wood products ("EWP"). The significant growth in sales in the
structural products segment in 1999 was primarily due to increases in OSB,
plywood and non-redwood lumber prices. OSB, lumber and EWP volume increases were
partially offset by a volume decline in plywood.
OSB market prices and sales trends continued upward through the first
nine months of 1999. OSB average selling prices increased 13% for the third
quarter of 1999 compared to the third quarter of 1998 and 28% for the first nine
months of 1999 compared to the first nine months of 1998. Robust U.S. housing
markets have created strong demand for OSB and other building products. OSB
sales volume, excluding sales from the Forex plants acquired in September 1999,
decreased approximately 2% for the third quarter of 1999 compared to the third
quarter of 1998 primarily due to down time at the Athens, Georgia facility
resulting from a fire. OSB sales volume, excluding the Forex facilities,
increased 4% for the first nine months of 1999 compared to the first nine months
of 1998 due primarily to a new mill brought on line in April of 1998 that
provided a net capacity increase.
Plywood average selling prices increased 30% for the third quarter of
1999 compared to the third quarter of 1998, offset by an approximate 22% decline
in volume. Plywood average selling prices for the first nine months of 1999
increased 25% over the same period in 1998, offset by an approximate 25% decline
in volume. The price
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increases reflect the strong demand factors discussed above. The volume
decreases are primarily the result of a temporary shut-down of plywood
manufacturing facilities and the allocation of additional veneer to laminated
veneer lumber (LVL) production rather than to plywood production.
Lumber sales increased for the third quarter of 1999 compared to the
third quarter of 1998 due to a shift to a higher percentage of outside sales and
a lower percentage of sales to the distribution business within L-P (part of
Other Products segment). Average selling prices increased approximately 13% for
the third quarter of 1999 compared to the third quarter of 1998, and volumes
increased approximately 11% over the same period in 1998. For the first nine
months of 1999, excluding redwood lumber operations that were sold in 1998,
average selling prices increased 5% and volume increased 14% compared to the
same period in 1998. The average selling price for redwood lumber is generally
significantly higher than for other species of lumber.
Engineered wood products include engineered I-Joists, LVL and hardwood
veneer. Sales of EWP products increased slightly, primarily as a result of a
marketing agreement to sell the products of an independent producer. Sales
volumes also increased in this segment due to strong residential and commercial
construction markets. The average selling prices of EWP products did not change
significantly. The price for the basic raw materials used in EWP production (OSB
used in the web stock for I-Joists, veneer used in LVL and lumber used for
flange material in I-Joists) increased significantly in 1999, which led to lower
profitability.
In the third quarter of 1999 and in the first nine months of 1999,
profitability of the structural products segment increased significantly,
largely as a result of price improvements for OSB, plywood and non-redwood
lumber and improvements in the efficiency of L-P's production facilities.
Structural products profits also benefited in 1999 from the sale of unprofitable
California operations in mid-1998. Log costs increased approximately 15% in the
third quarter of 1999 compared to the third quarter of 1998. The increase was
primarily the result of cutting timber under more expensive cutting contracts
and deeds. For the first nine months of 1999 compared to the first nine months
of 1998, southern log costs increased slightly, while log costs in northern
regions and Canada increased approximately 6%.
EXTERIOR PRODUCTS
The exterior products segment consists of siding and related products
such as soffit, fascia and trim. In 1999, this segment includes products added
from the purchase of ABT, including hardboard siding, vinyl siding and other
products. Average sales prices of OSB-based exterior products decreased 4% for
the third quarter of 1999 compared to the same period in 1998, while volumes
increased about 11%. Average sales prices of OSB-based exterior products
decreased slightly for the nine months ended September 30, 1999 compared to the
nine months ended September 30, 1998, while volumes increased about 12%.
Increased volumes were primarily due to an increase in the number of
distributors in the southeastern distribution network. Total profits increased
in 1999 primarily due to the increased sales volume, the acquisition of ABT and
more efficient use of production capacity.
INDUSTRIAL PANEL PRODUCTS
The industrial panels segment consists of particleboard, medium density
fiberboard (MDF) and hardboard and, in 1999, the laminated industrial panels
products of ABT. Increased demand for particleboard and MDF contributed to
modestly higher pricing. The addition of the ABT products in 1999 is the primary
reason for the increase in sales and profits of this segment for the third
quarter and the first nine months of 1999 compared to the same periods in 1998.
OTHER PRODUCTS
The other products segment includes distribution facilities, wood
chips, coatings and chemicals, cellulose insulation, Ireland operations, Alaska
operations, moldings and other operations. In the third quarter of 1999, sales
for this segment increased compared to the third quarter of 1998, primarily due
to increased sales in the distribution centers and the addition of ABT products
in 1999. Losses in the other products segment increased for the third quarter of
1999 compared to the third quarter of 1998 primarily due to an inventory write
down and expenses related to closed operations. The slight increase in sales for
the first nine months of 1999 compared to the first nine months
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of 1998 was primarily due to the addition of ABT products in 1999 offset by
reduced sales due to the disposition of the Weather-Seal windows and doors
division, Creative Point, Inc. and two California distribution facilities in
1998. Increased losses for the first nine months of 1999 compared to the first
nine months of 1998 are primarily due to increased losses in Alaskan operations,
asset write downs and expenses related to closed operations offset by increased
profitability in Ireland operations and in cellulose insulation products.
PULP
Pulp segment operations continued to improve in the third quarter of
1999 as the Asian economy improves. Pulp segment losses decreased for the third
quarter of 1999 compared to the third quarter of 1998 due primarily to an
increase in average sales prices of 10% and an increase in volumes of 63%. For
the first nine months of 1999 compared to the first nine months of 1998 average
selling prices increased 4% and volumes increased by approximately 32%. Other
factors contributing to the improved results were a partial recovery of
inventory market write-downs taken in prior periods and lower unit costs due to
higher volumes.
UNUSUAL CREDITS AND CHARGES, NET
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -----------------------------------------
1999 1998 1999 1998
---------- ---------- -------- --------
<S> <C> <C> <C> <C>
Gain on sale of assets.............................. $ --- $ 22.2 $ 5.2 $ 381.3
Impairment charges.................................. (7.6) (162.5) (7.6) (182.2)
Adjustment for litigation reserves and other........ (11.1) (251.7) (11.1) (262.8)
---------- ---------- -------- --------
$ (18.7) $ (392.0) $ (13.5) $ (63.7)
========== ========== ======== ========
</TABLE>
In the second quarter of 1999, L-P recorded a net gain of $5.2 million
($3.2 million after taxes, or $.03 per diluted share) from the sale of timber
and timberlands in Texas.
In the third quarter of 1999, L-P's Ketchikan Pulp Company ("KPC")
subsidiary recorded a net charge of $18.7 million ($11.5 million after taxes, or
$.11 per diluted share) primarily as a result of reducing the carrying value of
fixed assets to be sold to the fair value and to record an increase in estimated
environmental remediation and monitoring liabilities. Gains of $7 million
primarily related to the previously announced settlement with the US Forest
Service were netted against these charges. The gains were recorded in the third
quarter of 1999 primarily based on satisfaction of the requirements of
agreements with governmental agencies. The increased environmental liability
estimates resulted from further studies of certain properties in connection with
the impending sale transaction and changing environmental regulations regarding
certain sites. The sale of the KPC assets for approximately $10.5 million in
cash and promissory notes was completed in November 1999.
In the second quarter of 1998, L-P recorded a net gain of $328.3
million ($195.2 million after taxes, or $1.79 per diluted share) primarily
resulting from gains on the sales of timberland, sawmill and distribution assets
in California and the Weather-Seal window and door business. Charges relating to
the settlement of legal issues in Montrose, Colorado of $14.0 million after
taxes (or $.13 per diluted share) and other charges were netted against the
asset sales gains.
In the third quarter of 1998, L-P recorded a net loss of $392 million
($241 million after taxes, or $2.21 per share) resulting from a charge to adjust
siding-related reserves to reflect revisions to the national class-action
settlement, the write-down of an operating facility, and other items. Gains on
insurance recoveries and the sale of surplus properties were netted against this
charge.
GENERAL CORPORATE AND OTHER EXPENSE
General corporate expense increased for 1999 compared to 1998 primarily
due to the addition of sales and marketing personnel as L-P has increased its
focus on customers and additional costs for administrative infrastructure,
including the conversion to new accounting and human resource systems.
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INTEREST INCOME (EXPENSE)
Cash from asset sales was used to repay loans and lines of credit in
late 1998, reducing debt levels and net interest expense for 1999 compared to
1998. Interest expense levels will increase in the future primarily due to
indebtedness incurred in connection with the Forex acquisition in September
1999.
LEGAL AND ENVIRONMENTAL MATTERS
Refer to the "Legal Proceedings" section of this Form 10-Q for a
discussion of certain legal and environmental matters and the potential impact
of these matters on L-P.
OSB SIDING LITIGATION UPDATE
The following discussion updates, and should be read in conjunction
with, the discussion of L-P's OSB siding litigation set forth in Item 7 of L-P's
amended annual report on Form 10-K, Management's Discussion and Analysis of
Financial Condition and Results of Operations, under the subheading "Legal
Matters."
Through the first nine months of 1999, claimants have continued to file
claims under the National Settlement at a steady pace while the rate of claims
filed under the Florida Settlement has decreased. L-P is making a concerted
effort to maximize the level of participation in the Second Fund, including
participation by claimants who filed eligible claims during the first nine
months of 1999. However, L-P will not be able to assess the impact of the Second
Fund on its total siding liability until several steps are completed after the
December 31, 1999 deadline for the submission of claims eligible to participate
in the Second Fund has passed, including the verification and calculation of
individual claim amounts and the opportunity for each claimant to opt out of the
Second Fund after they have been informed of their pro rata settlement amount.
L-P's management does not expect to have all the information necessary to make
its decision until some time in the second or third quarter of 2000.
As of September 30, 1999, approximately 264,000 requests had been
received for claim forms for the National Settlement and the Florida Settlement
compared to 215,000 at December 31, 1998. Approximately 164,000 completed claim
forms have been received compared to 138,000 at December 31, 1998. The average
payment amount for settled claims as of September 30, 1999 and December 31, 1998
is approximately $5,100. The total number of completed claim forms pending (not
settled) as of September 30, 1999 was approximately 63,000 (approximately 56,000
at December 31, 1998) with approximately 75,000 claims settled (approximately
61,000 at December 31, 1998) and approximately 27,000 claims dismissed
(approximately 21,000 at December 31, 1998). Dismissal of claims is typically
the result of claims for product not produced by L-P or claims that lack
sufficient information or documentation after repeated efforts to correct those
deficiencies. The average payment amount for claims settled after September 30,
1999 may be significantly impacted by the Second Fund.
The accruals for OSB siding claims relating to both the National
Settlement and the Florida Settlement, including related legal costs, settlement
administration costs, claims of persons who opted-out of the settlements and
residual warranty claims, have been analyzed and accounted for collectively. The
activity in the combined accruals for the first nine months of 1999 is as
follows (does not include accruals for ABT hardboard siding matters):
<TABLE>
<CAPTION>
In Millions
-----------
<S> <C>
Balance at December 31, 1998 $323.9
Accruals made during the period --
Payments (87.9)
Insurance recoveries --
-----
Balance at September 30, 1999 $236.0
=====
</TABLE>
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations was $349 million for the first nine
months of 1999 compared to $182 million in the first nine months of 1998. The
increase in cash provided by operations resulted primarily from
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improved operating results (excluding unusual items). Partially offsetting this
increase, L-P made $93 million in litigation-related payments, largely due to
the early payment program relating to L-P's nationwide class action litigation
settlement, during the first nine months of 1999 compared to $51 million in the
first nine months of 1998.
Cash used in investing activities was $689 million in the first nine
months of 1999 compared to cash provided by investing activities of $228 million
in the first nine months of 1998. L-P used $213 million of cash in connection
with the acquisition of ABT in February 1999 and $399 million of cash in
connection with the acquisition of Forex in September 1999. L-P received
approximately $331 million of cash proceeds from asset sales in 1998. Capital
expenditures for property, plant, equipment and timber decreased in 1999
compared to 1998, primarily because L-P did not have any new mills under
construction. L-P has announced plans to build several wood-processing
facilities in Canada, including an OSB plant, and is building an OSB plant in
Chile.
In the first nine months of 1999, L-P borrowed $535 million primarily
to finance the acquisitions of ABT and Forex. In the first nine months of 1998,
L-P repaid $471 million in revolving and term loans with the proceeds from $349
million in new borrowings related to the monetization of notes receivable from
asset sales.
L-P expects to be able to meet its cash requirements through cash from
operations, existing cash balances, existing credit facilities and access to the
capital markets. Cash and cash equivalents totaled $168 million at September 30,
1999 compared to $127 million at December 31, 1998. L-P has a $300 million
revolving credit facility available through January 2002. L-P had no borrowings
outstanding under this facility at September 30, 1999. L-P also has a $300
million facility available through March 2000 under which L-P had $177 million
of borrowings outstanding at September 30, 1999. L-P has filed a shelf
registration statement for the sale of up to $500 million of debt securities to
be offered from time to time in one or more series. The proceeds from the sale
of such securities are anticipated to be used by L-P for general corporate
purposes, which may include repayment of debt (including debt incurred in
connection with the acquisitions of ABT and Forex), and for the acquisition of
Evans discussed below.
Changes in L-P's balance sheet from December 31, 1998 to September 30,
1999 include increases of $107 million in accounts receivable, $60 million in
inventories, $360 million in net property, plant and equipment, and $318 million
in goodwill resulting primarily from the consolidation of ABT and Forex for
financial reporting purposes. The increase of $223 million in current
liabilities resulted primarily from the consolidation of ABT and Forex for
financial reporting purposes and an increase in the current portion of
contingency reserves to reflect the expected payment, in the first quarter of
2000, of the second fund relating to L-P's nationwide class action siding
litigation settlement.
Contingency reserves, which represent an estimate of future cash needs
for various contingencies (primarily payments for siding litigation
settlements), totaled $313 million at September 30, 1999, of which $205 million
is estimated to be payable within one year. As with all accounting estimates,
there is inherent uncertainty concerning the reliability and precision of these
estimates. The amounts ultimately paid in resolving these contingencies could
exceed the current reserves by a material amount. Contingency reserves decreased
in 1999 due to the continued implementation of the early payment program
relating to L-P's nationwide class action siding litigation settlement.
Litigation-related payments totaled $93 million for the first nine months of
1999.
STOCK REPURCHASE PLAN
As of September 30, 1999, L-P had reacquired approximately 4.0 million
shares for $75.5 million under an authorization to reacquire up to 20 million
shares from time to time in the open market. L-P reacquired 475,000 shares for
$8 million in the third quarter of 1999. L-P had approximately 107 million
shares outstanding at quarter end.
ACQUISITION
On August 24, 1999 L-P announced that it has signed a definitive
agreement to purchase Evans Forest Products, Ltd. ("Evans"), a leading Canadian
producer of engineered wood and lumber products.
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The total transaction value is approximately $90 million, subject to
adjustment on the basis of Evans' working capital level at the time of closing.
The sale is subject to approval by regulatory agencies in the United States and
Canada, the successful transfer of Evan's forest licenses and other customary
closing conditions. The acquisition is expected to close during the fourth
quarter of 1999.
Evans is a private company based in southeastern British Columbia whose
assets include a new "LVL" mill, a plywood facility, and a sawmill that
specializes in producing a wide range of Western Red Cedar products. Included in
the transaction are two forest licenses and a tree farm license that will
provide access to approximately 610,000 cubic meters of wood per year.
ASSETS HELD FOR SALE
L-P is seeking to sell its Chetwynd, British Columbia pulp mill, which
is presently managed by an unrelated party pursuant to a management agreement
having a term of 24 months that expires in April 2001. In addition, L-P is
exploring the possible sale of the Samoa, California pulp mill. While L-P
currently believes it has adequate support for the carrying value of the
affected assets, there can be no assurance that the proceeds ultimately received
in any sale transaction would not fall short of the applicable carrying value,
resulting in a loss on such sale.
YEAR 2000 COMPLIANCE
The Year 2000 problem refers to a worldwide issue relating to a flaw in
many computer programs and computer applications embedded in equipment and other
devices. In many existing software and hardware applications, two digits were
used to represent the year, such as "99" for "1999." If not corrected, these
applications may interpret "00" to be the year 1900 rather than 2000, producing
erroneous data or, possibly, failing altogether. L-P recognizes the Year 2000
problem as a serious issue. Accordingly, L-P now considers the potential impact
of the Year 2000 problem in connection with all in-house application development
and purchases of third-party software. In the fall of 1997, L-P undertook a
formal project to address its Year 2000 exposure and readiness.
All of L-P's business groups, operations and corporate functions are
covered by the Year 2000 project. The project team is staffed by full-time
employees, contractors and consultants as appropriate. The project is monitored
by a management steering committee and L-P's internal auditors to ensure that
proper methodology is being followed, that adequate controls are in place and
that appropriate steps are being taken to limit risk. In addition, periodic
reports are made to senior management, the finance and audit committee and the
board of directors.
The project is divided into three primary areas: (1) information
systems; (2) manufacturing systems/building infrastructure; and (3) business
partners (including suppliers and customers).
INFORMATION SYSTEMS. L-P's information systems include such common
business applications as payroll, human resources, sales order entry, inventory
management, finance and accounting. L-P's Year 2000 project phases for
information systems include: inventorying and prioritizing all information
systems; assessing the Year 2000 readiness of such systems; remediating such
systems (through conversion, upgrades, replacement or risk-managed acceptance of
non-compliant items); testing; and developing and implementing contingency
plans, to the extent determined to be appropriate, for each system. The
inventory, assessment and remediation phases for L-P's information systems were
substantially completed on September 30, 1999 as scheduled. Testing of
information systems and related contingency planning are underway and are
scheduled to be completed by November 30, 1999.
MANUFACTURING SYSTEMS/BUILDING INFRASTRUCTURE. With respect to L-P's
manufacturing systems and building infrastructure, the Year 2000 project is
focused on surveying and, where necessary, remediating computer-controlled
and/or embedded devices used in L-P's manufacturing processes or in building
infrastructure (such as the heating and air conditioning systems, security
access and alarm systems, telephones, and office equipment used in L-P's offices
and plants). The Year 2000 project phases for manufacturing systems and building
infrastructure include: inventorying items that are exposed to Year 2000 issues;
assessing the Year 2000 readiness of such items; remediating such items (through
conversion, upgrades, replacement, or risk-managed acceptance of non-compliant
items), testing; and developing and implementing contingency plans, to the
extent determined to be appropriate, for each business group and facility
location. The inventory, assessment and remediation phases for L-P's
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manufacturing systems and building infrastructure were substantially completed
on September 30, 1999 as scheduled. Testing of manufacturing systems and
building infrastructure and related contingency planning are underway and are
scheduled to be completed by November 30, 1999.
BUSINESS PARTNERS. L-P also faces the risk of business disruption from
outside business partners, which may have information systems, manufacturing
systems or infrastructure that are not Year 2000 compliant. In this regard,
L-P's Year 2000 project includes identifying and prioritizing L-P's major
business partners (primarily suppliers of raw materials and essential services
such as utilities and transportation and significant customers), assessing their
Year 2000 readiness and developing contingency plans where appropriate. The
identification and prioritization phases of this initiative have been completed.
As part of the assessment process, L-P requested that all of its major business
partners respond to a survey eliciting information as to their Year 2000
readiness. Of the approximately 50% of the business partners that responded to
the survey pursuant to an initial series of requests made through L-P's
corporate management personnel, none disclosed significant readiness issues.
However, in light of the substantial number of parties who failed to respond to
L-P's initial series of requests, L-P decided to pursue responses from these
parties more aggressively through business-unit operating personnel rather than
through corporate management personnel. Business-unit operating personnel first
refined the identification and prioritization of L-P's major business partners
and then concentrated on obtaining responses from those that had not responded
to L-P's initial series of requests. At September 30, 1999, approximately 85% of
the business partners targeted by business-unit operating personnel had
responded to the survey. In those instances in which a major business partner
targeted by business-unit operating personnel either has not responded to the
survey or has furnished a response which L-P has determined to provide
insufficient assurance of Year 2000 readiness, L-P is developing contingency
plans that identify an alternate business partner or otherwise address the
potential business disruption associated with L-P's dependence on that business
partner. This contingency planning is scheduled to be completed by November 30,
1999.
COSTS. The total expense associated with L-P's Year 2000 project is
presently estimated to be approximately $7.8 million, of which approximately
$6.5 million (including certain costs incurred by ABT and Forex prior to being
acquired by L-P) had been incurred by September 30, 1999. These costs are being
expensed as incurred and are not expected to have a material effect on L-P's
financial position or results of operations. These costs do not include expenses
and capital costs associated with replacing systems which L-P would have
replaced regardless of Year 2000 issues, including a new human resources
information system and a new core financial system.
MOST REASONABLY LIKELY WORST-CASE SCENARIO. The occurrence of
unscheduled downtime at L-P's facilities resulting from internal or third-party
system failures could have an adverse effect on L-P's business, results of
operations and cash flows. In this regard, L-P believes that its dependence on
third parties for critical services such as telecommunications, energy, water
and other utilities, financial services and transportation poses the greatest
risk. L-P is continuing to seek to assess the Year 2000 readiness of its mission
critical systems and business partners and to develop appropriate contingency
plans. These plans may include identifying alternative systems and suppliers and
assisting major customers who may be affected by Year 2000 issues. However,
there can be no assurance that L-P will not experience unscheduled downtime,
business disruptions or other adverse consequences of the Year 2000 problem.
ADDITIONAL CONSIDERATIONS. Despite the extensive efforts of L-P's
project team, it is likely that some unexpected problems associated with the
Year 2000 issue will arise. In addition, the costs and completion dates for
L-P's Year 2000 project discussed herein are based on management's estimates,
which were derived using numerous assumptions regarding future events, including
continued availability of certain resources, remediation plans of business
partners and other factors. There can be no assurance that these estimates will
be achieved and actual results could differ significantly from L-P's current
expectations.
9
<PAGE>
LOUISIANA-PACIFIC CORPORATION
SUMMARY OF PRODUCTION VOLUMES
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPT. 30, SEPT. 30,
------------------------------ ----------------------------
1999 1998 1999 1998
--------------- -------------- --------------- ------------
<S> <C> <C> <C> <C>
Oriented strand board panels, million square
ft 3/8" basis................................... 1,069 1,006 3,164 2,913
Softwood plywood million square ft 3/8" basis...... 255 255 702 756
Lumber, million board feet...................... 264 278 793 851
Oriented strand board siding and specialty products
million square ft 3/8" basis.................... 99 107 291 301
Hardboard siding surface measure million square
ft basis........................................ 69 --- 167 ---
Engineered I-Joists, million lineal feet........... 19 23 64 69
Laminated Veneer Lumber, thousand cubic ft......... 1,500 1,900 5,000 5,600
Industrial panel products (particle board, medium
density fiberboard and hardboard), million
square ft 3/4" basis............................ 157 142 482 436
Pulp, thousand short tons.......................... 94 69 279 210
</TABLE>
10
<PAGE>
INDUSTRY PRODUCT PRICE TRENDS
<TABLE>
<CAPTION>
OSB PLYWOOD LUMBER PARTICLEBOARD
----------- ---------------------------- ----------------------
N. CENTRAL SOUTHERN FRAMING
7/16" BASIS PINE 1/2" LUMBER INLAND
24/16 BASIS COMPOSITE INDUSTRIAL
SPAN RATING CDX 3 PLY PRICES 3/4" BASIS
----------- --------- ------ ----------
<S> <C> <C> <C> <C>
Annual Average
1993 $ 236 $ 282 $ 394 $ 258
1994 265 302 405 295
1995 245 303 337 290
1996 184 258 398 276
1997 142 265 417 262
1998 205 284 349 259
1998 Third Quarter Average 289 308 343 265
1999 Second Quarter Average 289 343 423 270
1999 Third Quarter Average 301 362 421 288
</TABLE>
Source: Random Lengths. The amounts set forth are dollars per 1,000 square
feet or, in the case of lumber, 1,000 board feet.
11
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Certain legal and environmental matters involving L-P are discussed
below.
ENVIRONMENTAL MATTERS
In March 1995, L-P's subsidiary, Ketchikan Pulp Company ("KPC"),
entered into agreements with the federal government to resolve violations of the
Clean Water Act and the Clean Air Act that occurred at KPC's pulp mill during
the late 1980's and early 1990's. These agreements were subsequently approved by
the U.S. District Court for the District of Alaska. In addition to civil and
criminal penalties that were paid in 1995, KPC agreed to undertake certain
remedial and pollution-control projects. These projects included (i) capital
projects for spill containment and water treatment plant upgrades estimated to
cost approximately $13.4 million (of which approximately $7.5 million had been
spent at October 31, 1999) and (ii) non-capital projects relating to the
investigation and remediation of Ward Cove, a body of water adjacent to the mill
site, estimated to cost approximately $6.7 million (of which approximately $1.8
million had been spent at October 31, 1999). As a result of the closure of the
mill in May 1997, KPC's obligations with respect to the capital projects have
been suspended through January 2000, and KPC is in the process of seeking
permanent relief from those obligations. KPC's obligations with respect to the
Ward Cove investigation and remediation have not been affected by the closure of
the mill.
In June 1997, KPC entered into an agreement with the State of Alaska
and the U.S. Environmental Protection Agency (the "EPA") to investigate and, if
necessary, clean up the former mill site. KPC has substantially completed the
investigative portion of this project (which was recently expanded) and
commenced work on the clean-up portion of this project, which is expected to be
completed by early 2000. L-P's estimate of the costs associated with this
project was recently increased as a result of both an expansion of the scope of
the investigation and the consideration of new information developed in the
course of conducting clean-up work. Total costs associated with this project are
estimated to be approximately $4.0 million, of which approximately $3.4 million
had been spent at October 31, 1999.
KPC has completed the closure of a landfill near Thorne Bay, Alaska,
pursuant to an agreement with the U.S. Forest Service (the "USFS"). Costs of the
project totaled approximately $6.5 million. KPC is currently discussing with the
USFS the scope of water monitoring to be undertaken in connection with this
matter.
KPC has announced that is will close its Annette sawmill. L-P's
preliminary estimate of the cost of the environmental investigation and any
remediation of the mill site, together with the closure of an offsite wood waste
disposal area, is $2.6 million.
On March 10, 1999, a complaint alleging misdemeanor violations of the
Fish and Game Code and the Water Code of California in connection with the
discharge of sawdust and other pollutants into a stream near L-P's Arcata,
California particleboard plant was filed in the Superior Court of Humboldt
County, California. L-P is seeking to enter into a civil settlement agreement
that would resolve the alleged violations.
L-P is also involved in a number of other environmental proceedings and
activities, and may be wholly or partially responsible for known or unknown
contamination existing at a number of other sites at which it has conducted
operations or disposed of wastes.
Based on the information currently available, management believes that
any fines, penalties or other costs or losses resulting from the matters
discussed above will not have a material adverse effect on the consolidated
financial position or results of operations of L-P.
12
<PAGE>
COLORADO CRIMINAL PROCEEDINGS
In June 1995, a federal grand jury returned an indictment in the U.S.
District Court for the District of Colorado against L-P in connection with
alleged environmental violations, as well as alleged fraud in connection with
the submission of unrepresentative oriented strand board (OSB) product samples
to an industry product certification agency, by L-P's Montrose (Olathe),
Colorado OSB plant. Pursuant to a guilty plea to certain criminal violations
entered in May 1998, (i) L-P paid penalties of $37 million (of which $12 million
was paid in 1998 and the balance was paid in the second quarter of 1999) and was
sentenced to five years of probation and (ii) all remaining charges against L-P
were dismissed.
In December 1995, L-P received a notice of suspension from the EPA
stating that, because of the criminal proceedings pending against L-P in
Colorado, the Montrose facility would be prohibited from purchasing timber
directly from the USFS. In April 1998, L-P signed a Settlement and Compliance
Agreement with the EPA. This agreement formally lifted the 1995 suspension
imposed on the Montrose facility. The agreement has a term of five years and
obligates L-P to (i) develop and implement certain corporate policies and
programs, including a policy of cooperation with the EPA, an employee disclosure
program and a policy of nonretaliation against employees, (ii) conduct its
business to the best of its ability in accordance with federal laws and
regulations and local and state environmental laws, (iii) report significant
violations of law to the EPA, and (iv) conduct at least two audits of its
compliance with the agreement.
OSB SIDING MATTERS
L-P has been named as a defendant in numerous class action and nonclass
action proceedings brought on behalf of various persons or purported classes of
persons (including nationwide classes in the United States and Canada) who own
or have purchased or used OSB siding manufactured by L-P. In general, the
plaintiffs in these actions have alleged unfair business practices, breach of
warranty, misrepresentation, conspiracy to defraud, and other theories related
to alleged defects, deterioration, or failure of OSB siding products.
The U.S. District Court for the District of Oregon has given final
approval to a settlement between L-P and a nationwide class composed of all
persons who own, have owned, or subsequently acquire property on which L-P's OSB
siding was installed prior to January 1, 1996, excluding persons who timely
opted out of the settlement and persons who are members of the settlement class
in the Florida litigation described below. Under the settlement agreement, an
eligible claimant whose claim is filed prior to January 1, 2003 (or earlier in
certain cases) and is approved by an independent claims administrator, is
entitled to receive from the settlement fund established under the agreement a
payment equal to the replacement cost (determined by a third-party construction
cost estimator and currently estimated to be in the range of $2.20 to $6.40 per
square foot depending on the type of product and geographic location) of damaged
siding, reduced by a specific adjustment (of up to 65 percent) based on the age
of the siding. Class members who previously submitted or resolved claims under
any other warranty or claims program of L-P may be entitled to receive the
difference between the amount payable under the settlement agreement and the
amount previously paid. The extent of damage to OSB siding at each claimant's
property is determined by an independent adjuster in accordance with a specified
protocol. Settlement payments are not subject to adjustment for improper
maintenance or installation.
A claimant who is dissatisfied with the amount to be paid under the
settlement may elect to pursue claims against L-P in a binding arbitration
seeking compensatory damages without regard to the amount of payment calculated
under the settlement protocol. A claimant who elects to pursue an arbitration
claim must prove his entitlement to damages under any available legal theory,
and L-P may assert any available defense, including defenses that otherwise had
been waived under the settlement agreement. If the arbitrator reduces the damage
award otherwise payable to the claimant because of a finding of improper
installation, the claimant may pursue a claim against the contractor/builder to
the extent the award was reduced.
The settlement requires L-P to contribute $275 million to the
settlement fund in seven annual installments payable during the period from 1996
through 2002 in the following amounts: $100 million; $55 million; $40 million;
$30 million; $20 million; $15 million; and $15 million. As of September 30,
1999, L-P had funded the first four installments. In addition, L-P had funded a
significant portion of the last three installments through the Early Payment
Program discussed below.
13
<PAGE>
The estimated cumulative total of approved claims under the settlement,
as calculated under the terms of the settlement (without giving effect, in the
case of unpaid claims, to discounted settlements under the Early Payment
Program), exceeded $590 million at September 30, 1999. In these circumstances,
unless L-P makes an additional contribution of $50 million to the settlement
fund by August 2001, the settlement will terminate as to all claims in excess of
$275 million that remain unpaid. In addition, unless L-P makes a second
additional contribution of $50 million to the settlement fund by August 2002,
the settlement will terminate as to all claims in excess of $325 million that
remain unpaid. If L-P makes both of these additional contributions (a
significant portion of which had been funded as of September 30, 1999 through
the Early Payment Program discussed below), the settlement would continue in
effect until at least August 2003, at which time L-P would be required to make
an election with respect to all unpaid claims that were filed prior to December
31, 2002. If, in August 2003, L-P elects to pay pursuant to the settlement all
approved claims that remain unpaid at that time, 50% of the unpaid claims must
be paid by August 2004 and the remaining 50% must be paid by August 2005. If L-P
elects not to pay the unpaid claims pursuant to the settlement, the settlement
will terminate with respect to such unpaid claims and all unpaid claimants will
be free to pursue their individual remedies from and after August 2003.
If L-P makes all payments required under the settlement agreement,
including all additional payments as specified above, class members will be
deemed to have released L-P from all claims for damaged OSB siding, except for
claims arising under their existing 25-year limited warranty after termination
of the settlement agreement. The settlement agreement does not cover
consequential damages resulting from damage to OSB Inner-Seal siding or damage
to utility grade OSB siding (sold without any express warranty), either of which
could create additional claims. In addition to payments to the settlement fund,
L-P was required to pay fees of class counsel in the amount of $26.25 million,
as well as expenses of administering the settlement fund and inspecting
properties for damage and certain other costs. After accruing interest on
undisbursed funds and deducting class notification costs, prior claims costs
(including payments advanced to homeowners in urgent circumstances) and payment
of claims under the settlement, as of September 30, 1999, approximately $5.2
million remained of the $225 million paid into the fund to date (all of which is
presently dedicated to the payment of expenses or held in reserve).
On October 26, 1998, L-P announced an agreement to offer early payments
to eligible claimants who submitted valid and approved claims under the original
settlement agreement (the "Early Payment Program") and to establish an
additional $125 million fund to pay all other approved and unpaid claims that
are filed before December 31, 1999 (the "Second Fund").
The Early Payment Program applies to all claimants who are entitled to
be paid from the $80 million of mandatory contributions to the settlement fund
that remain to be made under the settlement agreement, and to all claimants who
otherwise would be paid from the proceeds of the two optional $50 million
contributions to the settlement fund that L-P may elect to make under the
settlement agreement. The early payments from the $80 million of mandatory
contributions are discounted at a rate of 9% per annum calculated from their
original payment dates (1999-2002) to the date the early payment offer was made.
The early payments from the two $50 million optional contributions are
discounted at a rate of 12% per annum calculated from 2001 and 2002,
respectively, to the date the early payment offer was made. Claimants may accept
or reject the discounted early payments in favor of remaining under the original
settlement, but may not arbitrate the amount of their early payments. For
purposes of determining whether L-P has made any mandatory or optional
contribution to the settlement fund as of the respective due date therefor, L-P
will receive credit for the undiscounted amount of such contribution to which
the discounted amount thereof paid pursuant to the Early Payment Program is
attributable. At September 30, 1999, approximately $131.2 million in Early
Payment Program checks had been mailed and $121.9 million had been cashed in
settlement of claims, while approximately $2.0 million in such checks remained
to be mailed. Giving effect only to Early Payment Program checks that had
actually been cashed, L-P had effectively satisfied an estimated cumulative
total of approximately $355.3 million of its mandatory and optional
contributions to the settlement fund at September 30, 1999.
The $125 million Second Fund represents an alternative source of
payment for all approved and unpaid claims filed before December 31, 1999 that
are not eligible for the Early Payment Program. In early 2000, claimants
electing to participate in the Second Fund will be offered a pro rata share of
the fund in complete satisfaction of their claims, which they may accept or
reject in favor of remaining under the original settlement. Claimants who accept
their pro rata share may not file additional claims under the settlement or
arbitrate the amount of their payments. Claimants who elect not to participate
in the Second Fund remain bound by the terms of the original settlement. If
14
<PAGE>
L-P is dissatisfied with the number of claimants who elect to be paid from the
Second Fund, L-P may refuse to proceed with funding at its sole option. In that
event, the Second Fund will be canceled and all the claimants who had elected to
participate in it will be governed by the original settlement.
A settlement of a related class action in Florida was approved by the
Circuit Court for Lake County, Florida, on October 4, 1995. Under the
settlement, L-P has established a claims procedure pursuant to which members of
the settlement class may report problems with L-P's OSB siding and have their
properties inspected by an independent adjuster, who will measure the amount of
damage and also determine the extent to which improper design, construction,
installation, finishing, painting, and maintenance may have contributed to any
damage. The maximum payment for damaged siding is $3.40 per square foot for lap
siding and $2.82 per square foot for panel siding, subject to reduction by up to
75 percent for damage resulting from improper design, construction,
installation, finishing, painting, or maintenance, and also subject to reduction
for age of siding more than three years old. L-P has agreed that the deduction
from the payment to a member of the Florida class will be not greater than the
deduction computed for a similar claimant under the national settlement
agreement described above. Class members will be entitled to make claims until
October 4, 2000.
ABT HARDBOARD SIDING MATTERS
ABT, ABTco, Inc., a wholly owned subsidiary of ABT ("ABTco" and,
together with ABT, the "ABT Entities"), Abitibi-Price Corporation ("Abitibi"), a
predecessor of ABT, and certain affiliates of Abitibi (the "Abitibi Affiliates"
and, together with Abitibi, the "Abitibi Entities") have been named as
defendants in a conditionally certified class action filed in the Circuit Court
of Choctaw County, Alabama, on December 21, 1995 and in six other putative class
action proceedings filed in the following courts on the following dates: the
Court of Common Pleas of Allegheny County, Pennsylvania on August 8, 1995; the
Superior Court of Forsyth County, North Carolina on December 27, 1996; the
Superior Court of Onslow County, North Carolina on January 21, 1997; the Court
of Common Pleas of Berkeley County, South Carolina on September 25, 1997; the
Circuit Court of Bay County, Florida on March 11, 1998; and the Superior Court
of Dekalb County, Georgia on September 25, 1998. ABT and Abitibi have also been
named as defendants in a putative class action proceeding filed in the Circuit
Court of Jasper County Texas on October 5, 1999. These actions were brought on
behalf of various persons or purported classes of persons (including nationwide
classes) who own or have purchased or used hardboard siding manufactured or sold
by the defendants. In general, the plaintiffs in these actions have alleged
unfair business practices, breach of warranty, fraud, misrepresentation,
negligence, and other theories related to alleged defects, deterioration, or
other failure of such hardboard siding, and seek unspecified compensatory,
punitive, and other damages, attorneys' fees and other relief. In addition,
Abitibi has been named in certain other actions, which may result in liability
to ABT under the allocation agreement between ABT and Abitibi described below.
Except in the case of certain of the putative class actions that have been
stayed, the ABT Entities have filed answers in these proceedings that deny all
material allegations of the plaintiffs and assert affirmative defenses. L-P
intends to cause the ABT Entities to defend these proceedings vigorously.
L-P, the ABT Entities and the Abitibi Entities have also been named as
defendants in a putative class action proceeding filed in the Circuit Court of
Jackson County, Missouri on April 22, 1999, and L-P, the ABT Entities and
Abitibi have been named as defendants in a putative class action proceeding
filed in the District Court of Johnson County, Kansas on July 14, 1999. These
actions were brought on behalf of purported classes of persons in Missouri and
Kansas, respectively, who own or have purchased hardboard siding manufactured by
the defendants. In general, the plaintiffs in these proceedings have alleged
breaches of warranty, fraud, misrepresentation, negligence, strict liability and
other theories related to alleged defects, deterioration or other failure of
such hardboard siding, and seek restitution, punitive damages, attorneys' fees
and other relief. L-P and the ABT Entities intend to defend these proceedings
vigorously.
ABT and Abitibi have agreed to an allocation of liability with respect
to claims relating to (1) siding sold by the ABT Entities after October 22, 1992
("ABT Board") and (2) siding sold by the Abitibi Entities on or before, or held
as finished goods inventory by the Abitibi Entities on, October 22, 1992
("Abitibi Board"). In general, ABT and Abitibi have agreed that all amounts paid
in settlement or judgment (other than any punitive damages assessed individually
against either the ABT Entities or the Abitibi Entities) following the
completion of any claims process resolving any class action claim (including
consolidated cases involving more than 125 homes owned by named plaintiffs)
shall be paid (a) 100% by ABT insofar as they relate to ABT Board, (b) 65% by
Abitibi and 35% by ABT
15
<PAGE>
insofar as they relate to Abitibi Board, and (c) 50% by ABT and 50% by Abitibi
insofar as they cannot be allocated to ABT Board or Abitibi Board. In general,
amounts paid in connection with class action claims for joint local counsel and
other joint expenses, and for plaintiffs' attorneys' fees and expenses, are to
be allocated in a similar manner, except that joint costs of defending and
disposing of class action claims incurred prior to the final determination of
what portion of claims relate to ABT Board and what portion relate to Abitibi
Board are to be paid 50% by ABT and 50% by Abitibi (subject to adjustment in
certain circumstances). ABT and Abitibi have also agreed to certain allocations
(generally on a 50/50 basis) of amounts paid for settlements, judgments and
associated fees and expenses in respect of non-class action claims relating to
Abitibi Board. ABT is solely responsible for such amounts in respect of claims
relating to ABT Board. Based on the information currently available, management
believes that the resolution of the foregoing matters will not have a material
adverse effect on the financial position or results of operations of L-P.
FIBREFORM WOOD PRODUCTS, INC. PROCEEDINGS
L-P has been named as a defendant in an action filed by FibreForm Wood
Products, Inc. ("FibreForm") in the Superior Court of Los Angeles County,
California on July 13, 1999. The action was subsequently removed by L-P and the
other named defendants to the United States District Court for the Central
District of California. FibreForm has alleged, in connection with failed
negotiations between FibreForm and L-P regarding a possible joint venture, that
L-P and the other defendants engaged in a fraudulent scheme to gain control over
FibreForm's proprietary manufacturing processes under the guise of such
negotiations. FibreForm has alleged fraudulent misrepresentation, negligent
misrepresentation, misappropriation of trade secrets, unfair competition, breach
of contract and breach of a confidentiality agreement by L-P and the other
defendants. FibreForm seeks general, special and consequential damages of at
least $250 million, punitive damages, restitution, injunctive and other relief
and attorneys' fees. L-P believes that FibreForm's allegations are without merit
and intends to defend this action vigorously. Based on the information currently
available, management believes that the resolution of the foregoing matters will
not have a material adverse effect on the financial position or results of
operations of L-P.
OTHER PROCEEDINGS
L-P and its subsidiaries are parties to other legal proceedings.
Management believes that the outcome of such proceedings will not have a
material adverse effect on the consolidated financial position or results of
operations of L-P.
CONTINGENCY RESERVES
L-P maintains reserves for the estimated costs of the legal and
environmental matters referred to above. However, as with any estimate, there is
uncertainty concerning the actual costs to be incurred. The discussion herein
notes some of the factors, in addition to the inherent uncertainty of predicting
the outcome of claims and litigation and environmental investigations and
remediation efforts, that could cause actual costs to vary materially from
current estimates. Due to the various uncertainties, L-P cannot predict to what
degree actual payments (including payments under the OSB siding litigation
settlements or any alternative strategies adopted by L-P with respect to OSB
siding claims) will materially exceed the recorded liabilities related to these
matters. However, it is possible that, in either the near term or the longer
term, revised estimates or actual payments will significantly exceed the
recorded liabilities.
16
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
2.1 Amended and Restated Support Agreement, dated August
12, 1999, between L-P and Le Groupe Forex Inc.
(incorporated herein by reference to Exhibit 2.1 to
the Current Report on Form 8-K filed by L-P on August
18, 1999).
2.2 Asset Purchase Agreement, dated August 23, 1999,
among Evans Forest Products, Limited,
Louisiana-Pacific Canada Engineered Wood Products
Ltd. and Louisiana-Pacific Canada Ltd.
2.3 First Amendment to Asset Purchase Agreement, dated
November 30, 1999, among Evans Forest Products
Limited, Louisiana-Pacific Engineered Wood Products
Ltd., Louisiana-Pacific Canada Dawson Creek Ltd. and
Louisiana-Pacific Canada Ltd.
10.1 Amended and Restated Lock-Up Agreement, dated August
12, 1999, among L-P and each of the parties
identified in Schedule B thereof (incorporated herein
by reference to Exhibit 2.2 to the Current Report on
Form 8-K filed by L-P on August 18, 1999).
10.2 Letter Agreement, dated September 8, 1999, between
Louisiana-Pacific Acquisition Inc. and Bank of
America, N.A., together with related Guaranty
Agreement by L-P in favor of Bank of America, N.A.
(incorporated herein by reference to Exhibit 99.2 to
the Current Report on Form 8-K filed by L-P on
September 29, 1999).
10.3 Loan Agreement, dated September 10, 1999, between
Louisiana-Pacific Acquisition Inc. and Centric
Capital Corporation, together with related Guaranty
of L-P in favor of Centric Capital Corporation
(incorporated herein by reference to Exhibit 99.3 to
the Current Report on Form 8-K filed by L-P on
September 29, 1999).
27.1 Financial Data Schedule
(b) Reports on Form 8-K
On August 18, 1999, L-P filed a Current Report on
Form 8-K reporting matters under item 5 thereof.
On September 29, 1999, L-P filed a Current Report on
Form 8-K reporting matters under items 2 and 5 thereof.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
LOUISIANA-PACIFIC CORPORATION
Date: February 15, 2000
By: /s/ Gary C. Wilkerson
------------------------------------
Gary C. Wilkerson
Vice President and General Counsel
Date: February 15, 2000 By: /s/ Curtis M. Stevens
------------------------------------
Curtis M. Stevens
Vice President, Chief Financial
Officer and Treasurer
(Principal Financial Officer)
18
<PAGE>
EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
AMONG
EVANS FOREST PRODUCTS LIMITED
AND
LOUISIANA-PACIFIC CANADA ENGINEERED WOOD PRODUCTS LTD.
AND
LOUISIANA-PACIFIC CANADA DAWSON CREEK LTD.
AND
LOUISIANA-PACIFIC CANADA LTD.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART A - INTENT AND INTERPRETATION OF AGREEMENT.................................................6
1. INTENT OF AGREEMENT........................................................................6
1.1. Purchases and Sales...........................................................6
1.2. Aggregate Purchase Price......................................................7
2. INTERPRETATION OF AGREEMENT................................................................7
2.1. Definitions...................................................................7
2.2. Schedules....................................................................15
PART B - SALE OF EVANS ASSETS BY EVANS TO L-P ENGINEERED WOOD..................................18
3. SALE AND PURCHASE OF EVANS ASSETS........................................................18
3.1. Sale of Evans Assets.........................................................18
3.2. Evans Assets.................................................................18
3.3. Liens........................................................................19
3.4. Excluded Evans Assets........................................................19
3.5. Allocation of the Purchase Price.............................................19
3.6. Payment of Taxes, Fees and Costs.............................................19
3.7. Additional Prepaid Expenses..................................................20
4. PAYMENT AND ADJUSTMENT OF EVANS EQUIPMENT PURCHASE PRICE..................................20
4.1. Basic Evans Equipment Purchase Price.........................................20
4.2. Evans Equipment Purchase Price Adjustments at Closing........................20
4.3. Adjusted Evans Equipment Purchase Price......................................21
4.4. Payment of Adjusted Evans Equipment Purchase Price...........................21
5. PAYMENT AND ADJUSTMENT OF RESIDUAL EVANS ASSETS PURCHASE PRICE............................21
5.1. Residual Evans Assets Purchase Price.........................................21
5.2. Residual Evans Assets Purchase Price Adjustments at Closing..................21
5.3. Estimated Residual Evans Assets Purchase Price at Closing....................23
5.4. Payment of Estimated Residual Evans Assets Purchase Price....................24
5.5. Holdback for Adjustment to Residual Evans Assets Purchase Price..............24
5.6. Indemnity Holdback...........................................................24
5.7. Post-Closing Residual Evans Assets Purchase Price Adjustment Procedure.......24
5.8. Post-Closing Residual Evans Assets Purchase Price Adjustment Payment.........24
5.9. Residual Evans Assets Adjustment Payment Not Subject to Minimum..............25
6. DISPUTE OF STATEMENTS OF ADJUSTMENTS......................................................25
6.1. Notice of Adjustment Disagreement............................................25
6.2. Fees of Independent Accountant...............................................26
7. ASSUMPTION OF LIABILITIES.................................................................26
7.1. Liability Assumption.........................................................26
<PAGE>
3
PART C - SALE OF SLEC ASSETS BY EVANS TO L-P DAWSON CREEK......................................27
8. SALE AND PURCHASE OF SLEC ASSETS..........................................................27
8.1. Sale of SLEC Assets..........................................................27
8.2. Liens........................................................................27
8.3. Allocation of the Purchase Price.............................................27
9. PAYMENT OF SLEC ASSETS PURCHASE PRICE.....................................................27
9.1. SLEC Assets Purchase Price...................................................27
9.2. Payment of SLEC Assets Purchase Price........................................27
9.3. Payment of Taxes, Fees and Costs.............................................27
10. ASSUMPTION OF OBLIGATIONS.................................................................27
10.1. Obligation Assumption........................................................27
PART D - REPRESENTATIONS, WARRANTIES AND COVENANTS.............................................28
11. REPRESENTATIONS AND WARRANTIES OF EVANS...................................................28
11.1. Corporate Organization, Etc..................................................28
11.2. No Violation.................................................................28
11.3. Contracts....................................................................29
11.4. Assets and Title.............................................................29
11.5. The Capital Leases...........................................................30
11.6. Litigation...................................................................30
11.7. Compliance with Laws and Regulations.........................................30
11.8. Environmental Matters........................................................30
11.9. Disclosure...................................................................31
11.10. Condition of Evans Assets and SLEC Assets....................................32
11.11. Tax Matters..................................................................32
11.12. Labour Relations.............................................................32
11.13. Salaried Employees...........................................................32
11.14. Employee Plans...............................................................32
11.15. Employment Obligations.......................................................33
11.16. Patents, Trademarks, etc.....................................................33
11.17. Year 2000 Compliance.........................................................34
11.18. Financial Statements.........................................................34
11.19. Road Costs...................................................................34
11.20. Accounts Receivable..........................................................34
11.21. Inventory....................................................................34
11.22. Insurance....................................................................34
11.23. Forest Tenures...............................................................34
11.24. Promissory Note..............................................................35
11.25. SLEC Capital Leases..........................................................35
11.26. SLEC ASSETS..................................................................35
11.27. Survival.....................................................................35
12. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS AND L-P CANADA...........................35
12.1. Organization, Standing and Power.............................................35
12.2. Authority....................................................................35
12.3. Preferred Shares.............................................................36
<PAGE>
4
12.4. SLEC Assets..................................................................36
12.5. Accuracy of Evans' Representations...........................................36
12.6. Survival.....................................................................36
13. COVENANTS.................................................................................36
13.1. Conduct of Business..........................................................36
13.2. Storage of Donald J-Bar Sorter...............................................37
13.3. Contract Consents............................................................37
13.4. Forest Tenures Consents......................................................37
13.5. Employees....................................................................37
13.6. Valuations...................................................................38
13.7. Notice of Actuarial Disagreement.............................................39
13.8. Funding......................................................................39
13.9. Pension Transfer.............................................................40
13.10. Continued Access to Employees................................................40
13.11. Consistent Use of GAAP.......................................................40
13.12. Validity of Representations..................................................40
13.13. Indemnifications.............................................................40
13.14. Loan and Promissory Note.....................................................42
13.15. SLEC Assets..................................................................42
13.16. Permitted Encumbrances.......................................................42
13.17. Defense of Claims............................................................42
13.18. Land Title Office Discharges.................................................43
13.19. Job Protection Liabilities...................................................43
13.20. Currency Conversion..........................................................43
13.21. Deliveries...................................................................43
PART E - GENERAL TERMS GOVERNING PURCHASES.....................................................44
14. INDEMNITY HOLDBACK........................................................................44
14.1. Delivery of Indemnity Holdback...............................................44
14.2. Limitation on Liability......................................................44
14.3. Claims on Indemnity Holdback.................................................44
14.4. Release of Indemnity Holdback................................................44
14.5. Interest on Indemnity Holdback...............................................44
15. COMPETITION MATTERS.......................................................................45
15.1. Hart-Scott Rodino Act........................................................45
15.2. Competition Act..............................................................45
16. INVESTMENT CANADA ACT.....................................................................45
16.1. Purchaser to make Filings....................................................45
17. CONDITIONS PRECEDENT TO THE CLOSING.......................................................45
17.1. Conditions Precedent to the Purchasers' and L-P Canada's Obligations.........45
17.2. Conditions Precedent to Obligations of Evans.................................48
17.3. Mutual Conditions Precedent to the Parties' Obligations......................48
18. CLOSING PROCEDURE.........................................................................49
18.1. The Closing..................................................................49
<PAGE>
5
18.2. Evans' Deliveries at Closing.................................................49
18.3. L-P Engineered Wood's Deliveries at Closing..................................50
18.4. L-P Dawson Creek's Deliveries at Closing.....................................51
18.5. L-P Canada's Deliveries at Closing...........................................51
18.6. Public Announcement..........................................................52
19. TERMINATION...............................................................................52
19.1. Events of Termination........................................................52
19.2. Effect of Termination........................................................52
19.3. Specific Performance.........................................................52
20. MISCELLANEOUS.............................................................................52
20.1. Notices......................................................................52
20.2. The Purchasers' Consents.....................................................55
20.3. Expenses.....................................................................55
20.4. Brokerage....................................................................55
20.5. Successors and Assigns.......................................................55
20.6. Waiver.......................................................................55
20.7. Entire Agreement.............................................................56
20.8. Amendments, Supplements......................................................56
20.9. Disclosure...................................................................56
20.10. Exclusive Applicable Law.....................................................56
20.11. Recovery of Litigation Costs.................................................56
20.12. Severability.................................................................56
20.13. Access to Information........................................................56
20.14. Post-Closing Co-operation....................................................56
20.15. Disposal of Books and Records................................................57
20.16. Further Assurances...........................................................57
20.17. No Third-Party Beneficiaries.................................................57
20.18. Counterparts.................................................................57
</TABLE>
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement"), is made by
and among EVANS FOREST PRODUCTS LIMITED, a British Columbia company ("Evans"),
LOUISIANA-PACIFIC CANADA ENGINEERED WOOD PRODUCTS LTD., a British Columbia
company ("L-P Engineered Wood"), LOUISIANA-PACIFIC CANADA DAWSON CREEK LTD., a
British Columbia company ("L-P Dawson Creek") and LOUISIANA-PACIFIC CANADA LTD.,
a British Columbia company ("L-P Canada").
RECITALS
A. Evans carries on the businesses of the manufacture of veneer, plywood,
laminated veneer lumber ("LVL"), cedar lumber and cedar mulch and of power
generation in Golden, Malakwa and Donald, British Columbia (collectively, the
"Operations").
B. St. Laurent Evans Canada Corp., a Washington state corporation ("SLEC") owns
certain assets which are leased to Evans for use in the Operations.
C. L-P Engineered Wood and L-P Dawson Creek (together, the "Purchasers") desire
to buy from Evans and Evans desires to sell to the Purchasers substantially all
of the rights and assets used in the Operations, other than the Excluded Evans
Assets (as herein defined).
D. L-P Canada owns all of the issued shares of each of L-P Engineered Wood and
L-P Dawson Creek and has agreed to give certain representations, warranties and
covenants in respect of the purchases hereunder.
E. NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties hereby agree as follows:
PART A - INTENT AND INTERPRETATION OF AGREEMENT
1. INTENT OF AGREEMENT
1.1. PURCHASES AND SALES. Subject to and upon the terms and conditions set forth
in this Agreement:
(a) L-P Engineered Wood shall buy from Evans and Evans shall sell to L-P
Engineered Wood substantially all of Evans' rights and assets used in
the Operations, other than the Excluded Evans Assets and the SLEC
Assets;
(b) L-P Dawson Creek shall buy from Evans and Evans shall sell to L-P
Dawson Creek the SLEC Assets;
(c) L-P Canada shall lend to Evans an amount equal to the Adjusted Evans
Equipment Purchase Price; and
<PAGE>
7 PART A
(d) L-P Canada shall give certain representations, warranties and
covenants in respect of each of the purchases hereunder.
1.2. AGGREGATE PURCHASE PRICE. Subject to the adjustments set out hereunder, the
aggregate purchase price payable by the Purchasers to Evans for the purchases
set out in this Agreement shall be US $95,592,000.
2. INTERPRETATION OF AGREEMENT
2.1. DEFINITIONS. The following capitalized terms when used herein shall have
the meaning indicated below:
(a) "ADJUSTED EVANS EQUIPMENT PURCHASE PRICE" shall have the meaning
ascribed to it in Section 4.3.
(b) "ADJUSTED RESIDUAL EVANS ASSETS PURCHASE PRICE" shall have the meaning
ascribed to it in Section 5.7.
(c) "ADJUSTMENT HOLDBACK" shall have the meaning ascribed to it in Section
5.5.
(d) "AFFILIATE" has the meaning attributed to that term in the COMPANY ACT
(British Columbia), as in effect on the date hereof.
(e) "Aggregate Adjusted Evans Purchase Price" means the sum of:
(i) the Adjusted Evans Equipment Purchase Price; and
(ii) the Adjusted Residual Evans Assets Purchase Price.
(f) "Aggregate Basic Evans Purchase Price" means the sum of:
(i) the Basic Evans Equipment Purchase Price; and
(ii) the Basic Residual Evans Assets Purchase Price.
(g) "Aggregate Estimated Evans Purchase Price" means the sum of:
(i) the Adjusted Evans Equipment Purchase Price; and
(ii) the Estimated Residual Evans Assets Purchase Price.
(h) "ASSETS" means:
(i) the Evans Assets; and
(ii) the SLEC Assets.
(i) "ASSUMED CAPITAL LEASES" means:
(i) the Assumed Valuation Date Capital Leases;
(ii) Capital Leases entered into by Evans after the Valuation Date and
prior to the date of this Agreement which L-P Engineered Wood
<PAGE>
8 PART A
agrees in writing to assume and which are listed in Part 3 of
Schedule 11.5; and
(iii) Capital Leases entered into by Evans after the date of this
Agreement and prior to the Closing Date in the ordinary course of
business of Evans and with the prior written consent of L-P
Engineered Wood, not to be unreasonably withheld provided that
the fair market value of the assets leased is not Material.
(j) "ASSUMED CAPITAL LEASES ADJUSTMENT" shall have the meaning ascribed to
it in Section 5.2(e).
(k) "ASSUMED CONTRACTS" means Contracts of Evans as of the Closing Date
that:
(i) are in force as of the date of this Agreement, are in the
ordinary course of Evans' business, require an expenditure by
Evans or L-P Engineered Wood of not more than Cdn. $100,000 and
either:
A. will be terminable by L-P Engineered Wood without
penalty not more than 12 months after the Closing Date;
or
B. will be fully performed within 12 months of the Closing
Date; or
(ii) are listed in Part 1 of Schedule 11.3(a) as Assumed Contracts; or
(iii) are entered into by Evans after the date of this Agreement and
prior to the Closing Date:
A. in the ordinary course of business of Evans, at fair
market value and will not require a Material
expenditure on the part of L-P Engineered Wood; or
B. are agreed to be assumed by L-P Engineered Wood in
writing at or prior to the Closing Date.
(l) "ASSUMED EVANS LIABILITIES" shall have the meaning ascribed to it in
Section 7.1(b).
(m) "ASSUMED EVANS LIABILITIES ADJUSTMENT" shall have the meaning ascribed
to it in Section 5.2(f).
(n) "ASSUMED EVANS OBLIGATIONS" shall have the meaning ascribed to it in
Section 7.1(c).
(o) "ASSUMED VALUATION DATE CAPITAL LEASES" means the Capital Leases,
other than the SLEC Capital Leases, which were in existence on the
Valuation Date and which are listed in Part 1 of Schedule 11.5.
<PAGE>
9 PART A
(p) "AUTHORITY" means any governmental, regulatory or administrative body,
agency or authority, any court or judicial authority or any public
regulatory authority, whether international, federal, provincial or
municipal.
(q) "BASIC EVANS EQUIPMENT PURCHASE PRICE" shall have the meaning ascribed
to it in Section 4.1.
(r) "BASIC RESIDUAL EVANS ASSETS PURCHASE PRICE" shall have the meaning
ascribed to it in Section 5.1.
(s) "BOOKS AND RECORDS" shall have the meaning ascribed to it in Section
3.2(g).
(t) "CAPITAL LEASES" means leases of assets or conditional sales contracts
for assets that are recorded on the financial statements of Evans as
capital leases or that should be, in accordance with GAAP, recorded on
such statements as capital leases.
(u) "CLAIM" means any claim, lawsuit, demand, suit, litigation,
proceeding, arbitration, or other dispute, whether civil, criminal,
administrative or otherwise, or any hearing, investigation or notice
of a violation or order by an Authority.
(v) "CLOSING" AND "CLOSING DATE" mean the event and date of the sale of
the Assets specified in Section 18.1.
(w) "COLLECTIVE AGREEMENT" means, collectively, the agreements set forth
in Schedule 11.12.
(x) "COMPETITION ACT" shall have the meaning ascribed to it in Section
15.2.
(y) "CONTRACT" means any agreement, contract, option, commitment, lease or
other binding arrangement.
(z) "DISPUTED ACTUARIAL MATTERS" shall have the meaning ascribed to it in
Section 13.7.
(aa) "DISPUTED ADJUSTMENT MATTERS" shall have the meaning ascribed to it in
Section 6.1.
(bb) "DONALD FACILITY" means Evans' lands, premises and operations located
at Donald, British Columbia as more particularly described in Schedule
3.4.
(cc) "DONALD J-BAR SORTER" means the J-Bar sorter formerly used in the
Operations and located at the Donald Facility.
(dd) "ENVIRONMENTAL LAW" means any Regulation, Order or judgment in effect
as of the Closing Date, which relates to or otherwise imposes
liability or standards of conduct concerning discharges, emissions,
releases or threatened releases of noise, odours or any pollutants,
contaminants, waste, or hazardous substances or materials, whether or
not as matter or energy, into air, water, or land, or otherwise
relating to the manufacture, processing,
<PAGE>
10 PART A
generation, distribution, use, treatment, storage, disposal, cleanup,
transport or handling of pollutants, contaminants, or wastes,
hazardous substances or materials, including but not limited to the
WASTE MANAGEMENT ACT and the TRANSPORTATION OF DANGEROUS GOODS ACT and
any other similar federal or provincial statutes or municipal by-laws.
(ee) "ENVIRONMENTAL PERMIT" means any permit, license, approval, consent or
other authorization required by or pursuant to any applicable
Environmental Law.
(ff) "ESCROW AGENT" means Russell & DuMoulin.
(gg) "ESCROW AGREEMENT" shall have the meaning ascribed to it in Section
5.5.
(hh) "ESTIMATED RESIDUAL EVANS ASSETS PURCHASE PRICE" shall have the
meaning ascribed to it in Section 5.3.
(ii) "ESTIMATED RESIDUAL EVANS ASSETS STATEMENT OF ADJUSTMENTS" shall have
the meaning ascribed to it in Section 5.3.
(jj) "EVANS" means Evans Forest Products Limited.
(kk) "EVANS ACTUARY" means Watson Wyatt & Co.
(ll) "EVANS ASSETS" shall have the meaning ascribed to it in Section 3.2.
(mm) "EVANS ASSETS PURCHASE PRICE ALLOCATION STATEMENT" shall have the
meaning ascribed to it in Section 3.5.
(nn) "EVANS EQUIPMENT" has the meaning ascribed to it in Section
3.2(c)(iii).
(oo) "EVANS EQUIPMENT ACQUISITION ADJUSTMENT" shall have the meaning
ascribed to it in Section 4.2(a).
(pp) "EVANS EQUIPMENT DAMAGE ADJUSTMENT" shall have the meaning ascribed to
it in Section 4.2(c).
(qq) "EVANS EQUIPMENT DISPOSAL ADJUSTMENT" shall have the meaning ascribed
to it in Section 4.2(b).
(rr) "EVANS EQUIPMENT PURCHASE PRICE ADJUSTMENTS" shall have the meaning
ascribed to it in Section 4.2.
(ss) "EVANS EQUIPMENT STATEMENT OF ADJUSTMENTS" shall have the meaning
ascribed to it in Section 4.3.
(tt) "EVANS INDEMNIFIED PARTIES" shall have the meaning ascribed to it in
Section 13.13(b).
(uu) "EVANS' SOLICITORS" means Lawson Lundell Lawson & McIntosh.
(vv) "EXCLUDED EVANS ASSETS" shall have the meaning ascribed to it in
Section 3.4.
<PAGE>
11 PART A
(ww) "FINAL RESIDUAL EVANS ASSETS STATEMENT OF ADJUSTMENTS" shall have the
meaning ascribed to it in Section 5.7.
(xx) "FINANCIAL STATEMENTS" means the audited financial statements of Evans
for the year ended December 31, 1998, a copy of which is attached as
Schedule 11.18.
(yy) "FIXED ASSETS" shall have the meaning ascribed to it in Section
3.2(c).
(zz) "FOREST TENURES" means all agreements and other rights held by Evans
entitling it to cut or otherwise harvest lumber, including Golden and
Okanagan forest licences A17645 and A18669, Revelstoke Tree Farm
Licence No. 55 and the following timber licences:
(i) Timber Licence No. T0541;
(ii) Timber Licence No. T0550;
(iii) Timber Licence No. T0588;
(iv) Timber Licence No. T0587;
(v) Timber Licence No. T0606;
(vi) Timber Licence No. T0630; and
(vii) Timber Licence No. T0759 (amendment of Timber Licence No.
T0621).
(aaa) "GAAP" shall mean generally accepted accounting principles as in
effect in Canada.
(bbb) "GOLDEN FACILITY" means Evans' operations located at Golden, British
Columbia more particularly described in Schedule 3.2(c)(i).
(ccc) "GUARANTEE" means any guarantee or other contingent liability (other
than any endorsement for collection or deposit in the ordinary course
of business), direct or indirect, with respect to any obligations of
another Person, through an agreement or otherwise, including, without
limitation:
(i) any endorsement or discount recourse with or undertaking
substantially equivalent to or having economic effect similar to
a guarantee in respect of any such obligations; and
(ii) any Contract (i) to purchase, or to advance or supply funds for
the payment or purchase of, any such obligations, (ii) to
purchase, sell or lease property, products, materials or
supplies, or transportation or services, to enable such other
Person to pay any such obligation or to assure the owner thereof
against loss regardless of the delivery or nondelivery of the
property, products, materials or supplies or transportation or
services or (iii) to make any loan, advance or capital
<PAGE>
12 PART A
contribution to or other investment in, or to otherwise provide
funds to or for, such other Person to enable such Person to
satisfy an obligation (including any liability for a dividend,
stock liquidation payment or expense) or to assure a minimum
equity, working capital or other balance sheet condition for any
such obligation.
(ddd) "HSR ACT" shall have the meaning ascribed to it in Section 15.1.
(eee) "INDEMNITY HOLDBACK" shall have the meaning ascribed to it in Section
5.6.
(fff) "INDEMNITY PERIOD" shall have the meaning ascribed to it in Section
13.13(d).
(ggg) "INDEPENDENT ACCOUNTANT" means the Managing Partner of the Vancouver
Office of KPMG LLP, Chartered Accountants or his or her delegate;
(hhh) "INTANGIBLE ASSETS" shall have the meaning ascribed to it in Section
3.2(b).
(iii) "LANDS" shall have the meaning ascribed to it in Section 3.2(c)(i).
(jjj) "LIEN" means any security interest, lien, mortgage, pledge,
hypothecation, encumbrance, easement, restriction or interest of
another Person of any kind or nature.
(kkk) "LOAN" shall have the meaning ascribed to it in Section 13.14.
(lll) "L-P CANADA" means Louisiana-Pacific Canada Ltd.
(mmm) "L-P DAWSON CREEK" means Louisiana-Pacific Canada Dawson Creek Ltd.
(nnn) "L-P ENGINEERED WOOD" means Louisiana-Pacific Canada Engineered Wood
Products Ltd.
(ooo) "LVL" means laminated veneer lumber.
(ppp) "MALAKWA FACILITY" means Evans' operations located at Malakwa,
British Columbia more particularly described in Schedule 3.2(c)(i).
(qqq) "MATERIAL" means in excess of Cdn. $25,000.
(rrr) "MATERIAL ADVERSE EFFECT" means any material adverse effect on the
Evans Assets, the SLEC Assets or the Operations as conducted on the
date of this Agreement which has resulted from any circumstances,
state of facts or matters.
(sss) "NOTICE OF ACTUARIAL DISAGREEMENT" shall have the meaning ascribed to
it in Section 13.7.
(ttt) "NOTICE OF ADJUSTMENT DISAGREEMENT" shall have the meaning ascribed
to it in Section 6.1.
(uuu) "OPERATIONS" shall have the meaning ascribed to it in Recital A.
<PAGE>
13 PART A
(vvv) "ORDER" means any decree, order, judgment, injunction, rule,
requirement or consent of or by an Authority.
(www) "PENSION PLAN" shall have the meaning ascribed to it in Section
11.14.
(xxx) "PERMITS" shall have the meaning ascribed to it in Section
3.2(c)(ii).
(yyy) "PERMITTED ENCUMBRANCES" shall have the meaning ascribed thereto in
Schedule 2.1(by) and shall also include any other liens or
encumbrances affecting the Evans Assets which have been disclosed to
and accepted in writing by L-P Engineered Wood or affecting the SLEC
Assets which have been disclosed to and accepted in writing by L-P
Dawson Creek.
(zzz) "PERSON" means any corporation, partnership, joint venture,
organization, entity, Authority or natural person.
(aaaa) "PREFERRED SHARES" shall have the meaning ascribed to it in Section
4.4.
(bbbb) "PREPAID EXPENSES" means those prepaid expenses of Evans for goods
or services to be received in the future or any deposits to be
returned to, or otherwise applied for the benefit of, the Operations
in the future, which are of the nature set out in Schedule 3.2(a).
(cccc) "PROMISSORY NOTE" shall have the meaning ascribed to it in Section
13.14.
(dddd) "PURCHASERS" means L-P Engineered Wood and L-P Dawson Creek
together.
(eeee) "PURCHASERS INDEMNIFIED PARTIES" shall have the meaning ascribed to
it in Section 13.13.
(ffff) "PURCHASERS' SOLICITORS" means Russell & DuMoulin.
(gggg) "REGULATION" means any rule, law, statute, regulation, ordinance,
requirement or other binding action of or by an Authority including
the common law and the law of equity.
(hhhh) "RESIDUAL EVANS ASSETS" means all of the Evans Assets other than the
Evans Equipment.
(iiii) "RESIDUAL EVANS ASSETS ACQUISITION ADJUSTMENT" shall have the
meaning ascribed to it in Section 5.2(a).
(jjjj) "RESIDUAL EVANS ASSETS ADJUSTMENT PAYMENT" shall have the meaning
ascribed to it in Section 5.8.
(kkkk) "RESIDUAL EVANS ASSETS DAMAGE ADJUSTMENT" shall have the meaning
ascribed to it in Section 5.2(c).
(llll) "RESIDUAL EVANS ASSETS DISPOSAL ADJUSTMENT" shall have the meaning
ascribed to it in Section 5.2(b).
<PAGE>
14 PART A
(mmmm) "RESIDUAL EVANS ASSETS PURCHASE PRICE ADJUSTMENTS" shall have the
meaning ascribed to it in Section 5.2.
(nnnn) "ROAD COSTS" means the cost to Evans of logging roads acquired or
constructed by Evans less amortization, as recorded in the
accounting records of Evans in accordance with GAAP.
(oooo) "ROAD COSTS ADJUSTMENT" shall have the meaning ascribed to it in
Section 5.2(g).
(pppp) "SILVICULTURE ADJUSTMENT" shall have the meaning ascribed to it in
Section 5.2(i).
(qqqq) "SILVICULTURE OBLIGATIONS" means the current and long-term
obligations of Evans for silviculture under the Forest Tenures.
(rrrr) "SLEC" means St. Laurent Evans Canada Corp.
(ssss) "SLEC ASSETS" means those assets which, at the date of this
Agreement, are owned by SLEC and leased to Evans for use in the
Operations, including without limitation, those listed on Schedule
11.26.
(tttt) "SLEC ASSETS PURCHASE PRICE" shall have the meaning ascribed to it
in Section 9.1.
(uuuu) "SLEC CAPITAL LEASES" means the Capital Leases between Evans, as
lessee, and SLEC, as lessor, of the SLEC Assets which were in
existence on the Valuation Date.
(vvvv) "SOLICITORS OPINION" means an opinion to be delivered at Closing
either by the Evans' Solicitors to the Purchasers or by the
Purchasers' Solicitors to Evans, as the case may be, with respect to
the following matters, in form and content acceptable to the
solicitors for the other parties, acting reasonably:
(i) corporate existence and status;
(ii) corporate power and capacity;
(iii) authorization and execution;
(iv) absence of conflicts with constating documents; and
(v) absence of outstanding litigation (other than as disclosed in
this Agreement or in the Schedules hereto).
(wwww) "SOLVENCY DEFICIENCY" shall have the meaning ascribed to it in
Section 13.6.
(xxxx) "SOLVENCY DEFICIENCY VALUATION" shall have the meaning ascribed to
it in Section 13.6.
<PAGE>
15 PART A
(yyyy) "SUPPLEMENTAL PENSION" means the agreement of Evans to pay
Supplemental Pension Benefits to certain employees as described in
Schedule 11.13.
(zzzz) "SUPPLEMENTAL PENSION BENEFITS" means all benefits, other than
increased or additional benefits granted by the Purchasers after the
Closing Date, payable to the beneficiaries of the Pension Plan,
including those individuals who are designated on Schedule 11.13 as
"Executive Participants", in excess of the benefits to which such
beneficiaries would have been entitled under the plan except for the
restriction contained in Section XIX of the plan, or any similar
limitation applicable to the plan at the time, which reduces the
monthly pension to which such persons would otherwise have become
entitled under the Pension Plan.
(aaaaa) "SUPPLEMENTAL PENSION OBLIGATIONS" shall have the meaning ascribed
to it in Section 13.6.
(bbbbb) "TRADE RIGHTS" shall have the meaning ascribed to it in Section
11.16.
(ccccc) "TRUS JOIST SALES AGREEMENT" means the sales agreement between
Evans and Trust Joist MacMillan dated March 12, 1999.
(ddddd) "TRUS JOIST SCARFER" means the Raute scarfing line owned by Trus
Joist MacMillan which is currently in the possession of Evans and
used in the Operations pursuant to the Trus Joist Sales Agreement.
(eeeee) "VACATION PAY ADJUSTMENT" shall have the meaning ascribed to it in
Section 5.2(h).
(fffff) "VALUATION DATE" means April 30, 1999.
(ggggg) "WORKING CAPITAL" means Working Capital Assets less Working Capital
Liabilities, and may be a negative number.
(hhhhh) "WORKING CAPITAL ADJUSTMENT" shall have the meaning ascribed to it
in Section 5.2(d).
(iiiii) "WORKING CAPITAL ASSETS" shall have the meaning ascribed to it in
Section 3.2(a).
(jjjjj) "WORKING CAPITAL LIABILITIES" means all current liabilities of
Evans of the nature and type listed on Schedule 3.2(a) attached,
including, without limitation, accounts payable, accrued
liabilities, stumpage payable and waste assessment, but excluding
Silviculture Obligations and "Excluded Working Capital
Liabilities" as described in Schedule 3.2(a).
2.2. SCHEDULES. The Schedules to this Agreement are as follows:
<TABLE>
<S> <C>
Schedule 2.1(by) Permitted Encumbrances
Schedule 3.2(a) Working Capital Assets and Liabilities
Schedule 3.2(b) Intangible Assets
<PAGE>
16 PART A
Schedule 3.2(c)(i) Lands
Schedule 3.2(c)(ii) Permits
Schedule 3.2(c)(iii) Evans Equipment
Schedule 3.4 Excluded Evans Assets
Schedule 4.2(a)(i) Evans Equipment Acquired between Valuation Date and Date of Agreement
Schedule 4.2(b)(i) Evans Equipment Disposed of between Valuation Date and Date of Agreement
Schedule 4.4 Rights and Restrictions of Preferred Shares
Schedule 5.2(a)(i) Fixed Assets other than Evans Equipment Acquired between Valuation Date and Date of Agreement
Schedule 5.2(b)(i) Fixed Assets other than Evans Equipment Disposed of between Valuation Date and Date of Agreement
Schedule 5.5 Escrow Agreement
Schedule 7.1 Assumption and Indemnity Agreements
Schedule 7.1(b) Assumed Evans Liabilities
Schedule 8.3 Allocation of the SLEC Assets Purchase Price
Schedule 11.2 Evans Consents
Schedule 11.3(a) Contracts:
Part 1 - Assumed Contracts
Part 2 - Contracts Not Assumed by L-P Engineered Wood
Schedule 11.4(d) Aboriginal Land Claims
Schedule 11.5 Capital Leases:
Part 1 - Assumed Valuation Date Capital Leases
Part 2 - Capital Leases as at Valuation Date Not
Assumed by L-P Engineered Wood
Part 3 - Capital Leases between Valuation
Date and Date of Agreement
Assumed by L-P Engineered Wood
Part 4 - Capital Leases between Valuation Date and
Date of Agreement Not Assumed by L-P
Engineered Wood
Part 5 - SLEC Capital Leases
Schedule 11.6 Evans Litigation
Schedule 11.7 Evans Non-Compliance with Laws and Regulations
Schedule 11.8 Environmental Disclosures
Part 1 - Disclosures for which L-P Engineered Wood Assumes Liability
Part 2 - Disclosures for which L-P Engineered Wood
Does Not Assume Liability
Schedule 11.8(c) Environmental Permits
Schedule 11.10 Condition of Assets
Schedule 11.12 Labour Relations
Schedule 11.13 Salaried Employees
Schedule 11.14 Employee Plans
Schedule 11.15 Employment Obligations
Schedule 11.17 Year 2000 Compliance
Schedule 11.18 Financial Statements
Schedule 11.26 SLEC Assets
Schedule 13.14 Promissory Note
</TABLE>
<PAGE>
17 PART A
[The Schedules listed above are not being filed with this Agreement. A copy of
any such Schedule will be furnished supplementally to the Commission upon
request.]
<PAGE>
18 PART B
PART B - SALE OF EVANS ASSETS BY EVANS TO L-P ENGINEERED WOOD
3. SALE AND PURCHASE OF EVANS ASSETS
3.1. SALE OF EVANS ASSETS. Subject to and upon the terms and conditions set
forth in this Agreement, Evans shall sell, transfer, convey and assign to L-P
Engineered Wood, and L-P Engineered Wood shall purchase or acquire from Evans at
the Closing all of Evans' right, title and interest in and to the Evans Assets
as at the Closing Date free and clear of all Liens save as provided in Section
3.3, for an aggregate purchase price of US $68,592,000 (the "Aggregate Basic
Evans Purchase Price"), subject to adjustment as provided herein.
3.2. EVANS ASSETS. The Evans Assets shall consist of the entire right,
title and interest of Evans in and to all those items used by Evans in carrying
on the Operations, other than the Excluded Evans Assets and the SLEC Assets.
Without limiting the generality of the foregoing, the Evans Assets include:
(a) WORKING CAPITAL ASSETS. Being all current assets of Evans of the
nature and type listed on Schedule 3.2(a) attached, including, without
limitation:
(i) All inventories and supplies of Evans;
(ii) All accounts receivable of Evans;
(iii) All Prepaid Expenses;
(iv) All cash and other securities of Evans; and
(v) Recoverable forestry.
(b) INTANGIBLE ASSETS. All intangible assets of Evans of every nature and
type used by Evans in connection with the Operations including without
limitation all Canadian and foreign trademarks, service marks, trade
names, know how, shop rights, brand names, copyrights, including
registrations and applications, patents and patent applications and
employee covenants and agreements with respect to intellectual
property including without limitation those listed on Schedule 3.2(b)
attached (the "Intangible Assets").
(c) FIXED ASSETS. All fixed assets of Evans other than the Excluded Evans
Assets and the SLEC Assets (the "Fixed Assets") and including, without
limitation:
(i) All Evans' right, title and interest in and to all lands and
premises owned, leased or used in the Operations, including all
logging roads, easements and rights-of-way (other than the Donald
Facility), including those listed in Schedule 3.2(c)(i) hereto
(the "Lands");
(ii) All governmental licenses, permits, approvals, license
applications, license amendment applications and product
registrations necessary or desirable for the running of the
Operations, including the
<PAGE>
19 PART B
Environmental Permits and the other items described in Schedule
3.2(c)(ii) hereto (collectively, the "Permits"); and
(iii) All machinery, equipment, vehicles, furniture, computers,
software, furnishings, tools, dies, molds, parts and similar
assets wherever located, and all manuals and other materials
necessary for the operation of the Assets or used in the running
of the Operations (collectively, the "Evans Equipment")
including without limitation those assets described on Schedule
3.2(c)(iii) attached, which schedule includes the Trus Joist
Scarfer.
(d) CAPITAL LEASES. The entire right, title and interest of Evans in the
Assumed Capital Leases and in the assets which are the subject matter
of such Capital Leases.
(e) ASSUMED CONTRACTS. All of the rights of Evans in the Assumed
Contracts.
(f) FOREST TENURES. All of Evans' rights, title and interest in and to the
Forest Tenures.
(g) BOOKS AND RECORDS. Copies of all books and records relating to the
Assets and the Operations, including customer lists, lists of
suppliers, employee records, financial records and product or service
warranties and manuals (the "Books and Records"), but excluding tax
returns and all books and records relating to the Excluded Evans
Assets.
3.3. LIENS. The Evans Assets to be transferred or otherwise conveyed to L-P
Engineered Wood at the Closing Date pursuant to Section 3.1 shall be free and
clear of all Liens, excepting only the Assumed Evans Liabilities, the Assumed
Evans Obligations, the Working Capital Liabilities and the Permitted
Encumbrances.
3.4. EXCLUDED EVANS ASSETS. Evans shall retain and not transfer and L-P
Engineered Wood shall not purchase or acquire from Evans the assets described on
Schedule 3.4 hereto (the "Excluded Evans Assets").
3.5. ALLOCATION OF THE PURCHASE PRICE. As soon as possible after the date of
this Agreement but in any event by October 11, 1999, L-P Engineered Wood, acting
reasonably, shall prepare and deliver to Evans a statement (the "Evans Assets
Purchase Price Allocation Statement") allocating the Aggregate Basic Evans
Purchase Price amongst the Evans Assets, or classes of the Evans Assets and such
statement shall be binding upon the parties. Such allocation shall automatically
be varied as required to reflect the Evans Equipment Purchase Price Adjustments,
if any, and the Residual Evans Assets Purchase Price Adjustments, if any.
3.6. PAYMENT OF TAXES, FEES AND COSTS. L-P Engineered Wood shall be wholly
responsible for all sales and transfer taxes payable in respect of the
conveyance of the Evans Assets under the Agreement, including without limitation
goods and services tax under the EXCISE TAX ACT (Canada), property transfer tax
under the PROPERTY TRANSFER TAX ACT (British Columbia) and social services tax
under the SOCIAL SERVICE TAX ACT (British Columbia). Evans and L-P Engineered
Wood shall make and file a joint election under section 167 of the EXCISE TAX
ACT (Canada) in respect of goods and services tax and shall do all things and
execute and deliver all documents necessary to make such election effective. To
the extent that social
<PAGE>
20 PART B
services tax applies to the transfer of the Evans Assets, L-P Engineered Wood
shall promptly pay to Evans all amounts required to be collected and remitted by
Evans in respect thereof and Evans shall remit such amounts to the British
Columbia Consumer Taxation Branch as required.
3.7. ADDITIONAL PREPAID EXPENSES. In the event that, at the Closing Date, Evans
has prepaid expenses which are not Prepaid Expenses (similar in nature to those
set out in Schedule 3.2(a)), L-P Engineered Wood shall have the right, but not
the obligation, to purchase such prepaid expenses from Evans on the Closing Date
at the fair market value thereof.
4. PAYMENT AND ADJUSTMENT OF EVANS EQUIPMENT PURCHASE PRICE
4.1. BASIC EVANS EQUIPMENT PURCHASE PRICE. The consideration for the purchase of
the Evans Equipment shall be the sum allocated to the Evans Equipment according
to the Evans Assets Purchase Price Allocation Statement (the "Basic Evans
Equipment Purchase Price"), as adjusted under Section 4.2 and Section 4.3.
4.2. EVANS EQUIPMENT PURCHASE PRICE ADJUSTMENTS AT CLOSING. The following
adjustments, without duplication, shall be made to the Basic Evans Equipment
Purchase Price:
(a) EVANS EQUIPMENT ACQUISITION ADJUSTMENT. Add the cost (less
depreciation at customary rates from the date of acquisition to the
Closing Date) of any Evans Equipment acquired by Evans:
(i) from May 1, 1999 to the date of the execution of this Agreement,
as identified on Schedule 4.2(a)(i); and
(ii) after the execution of this Agreement and prior to the Closing
Date:
A. with the prior written approval of L-P Engineered Wood,
which shall not be unreasonably withheld; or
B. in the ordinary course of business of Evans, at no more
than the fair market value thereof and the cost of
which is not Material;
(the "Evans Equipment Acquisition Adjustment");
(b) EVANS EQUIPMENT DISPOSAL ADJUSTMENT. Deduct an amount equal to the
actual proceeds received by Evans from the disposition of any of the
Evans Equipment:
(i) from May 1, 1999 to the date of this Agreement, as identified on
Schedule 4.2(b)(i); and
(ii) after the date of this Agreement and prior to the Closing Date:
A. with the prior written approval of L-P Engineered Wood,
which shall not be unreasonably withheld; or
B. in the ordinary course of business of Evans, at no less
than the fair market value thereof and the proceeds for
which
<PAGE>
21 PART B
are not Material;
(the "Evans Equipment Disposal Adjustment");
(c) EVANS EQUIPMENT DAMAGE ADJUSTMENT. Deduct an amount equal to the
actual cost to repair or replace any Evans Equipment which has
suffered any damage or loss (other than ordinary wear and tear)
between the Valuation Date and the Closing Date to the extent that
such damage or loss is not:
(i) repaired by the Closing Date; or
(ii) covered by insurance proceeds which are assigned to L-P
Engineered Wood at Closing and which are not included in the
Working Capital Assets; or
(iii) included in the Working Capital Liabilities or the Assumed Evans
Liabilities;
(the "Evans Equipment Damage Adjustment");
(the Evans Equipment Acquisition Adjustment, the Evans Equipment Disposal
Adjustment and the Evans Equipment Damage Adjustment collectively, are referred
to herein as the "Evans Equipment Purchase Price Adjustments").
4.3. ADJUSTED EVANS EQUIPMENT PURCHASE PRICE. No less than 10 days before the
Closing Date, Evans, acting reasonably, shall prepare and provide to L-P
Engineered Wood for approval, acting reasonably, a statement of the Evans
Equipment Purchase Price Adjustments (the "Evans Equipment Statement of
Adjustments") in which the amount of the Evans Equipment Purchase Price
Adjustments shall be estimated and applied to the Basic Evans Equipment Purchase
Price so as to provide the parties with an adjusted purchase price for the Evans
Equipment (the "Adjusted Evans Equipment Purchase Price").
4.4. PAYMENT OF ADJUSTED EVANS EQUIPMENT PURCHASE PRICE. The Adjusted Evans
Equipment Purchase Price shall be payable by the allotment, issuance and
delivery by L-P Engineered Wood to Evans of a number of Preferred Shares having
an aggregate par value and redemption price equal to the Adjusted Evans
Equipment Purchase Price and having attached thereto the rights and restrictions
set forth in Schedule 4.4 (the "Preferred Shares"), at an issue price of US
$1,000.00 per share.
5. PAYMENT AND ADJUSTMENT OF RESIDUAL EVANS ASSETS PURCHASE PRICE
5.1. RESIDUAL EVANS ASSETS PURCHASE PRICE. The consideration for the purchase of
the Residual Evans Assets shall be the sum allocated to the Residual Evans
Assets according to the Evans Assets Purchase Price Allocation Statement (the
"Basic Residual Evans Assets Purchase Price"), as adjusted in accordance with
this Section 5.
5.2. RESIDUAL EVANS ASSETS PURCHASE PRICE ADJUSTMENTS AT CLOSING. The following
adjustments, without duplication, shall be made to the Basic Residual Evans
Assets Purchase Price:
<PAGE>
22 PART B
(a) RESIDUAL EVANS ASSETS ACQUISITION ADJUSTMENT. Add the cost (less
depreciation at customary rates from the date of acquisition to the
Closing Date) of any Fixed Assets, other than Evans Equipment,
acquired by Evans:
(i) from May 1, 1999 to the date of the execution of this Agreement,
as identified on Schedule 5.2(a)(i) and approved by L-P
Engineered Wood, which approval shall not be unreasonably
withheld; and
(ii) after the execution of this Agreement and prior to the Closing
Date:
A. with the prior written approval of L-P Engineered Wood,
which shall not be unreasonably withheld; or
B. in the ordinary course of business of Evans, at no more
than the fair market value thereof and the cost of
which is not Material;
(the "Residual Evans Assets Acquisition Adjustment");
(b) RESIDUAL EVANS ASSETS DISPOSAL ADJUSTMENT. Deduct an amount equal to
the actual proceeds received by Evans from the disposition of any of
the Fixed Assets other than Evans Equipment;
(i) from May 1, 1999 to the date of this Agreement, as identified on
Schedule 5.2(b)(i) and approved by L-P Engineered Wood, which
approval shall not be unreasonably withheld; and
(ii) after the date of this Agreement and prior to the Closing Date:
A. with the prior written approval of L-P Engineered Wood,
which shall not be unreasonably withheld; or
B. in the ordinary course of business of Evans, at no less
than the fair market value thereof and the proceeds for
which are not Material;
(the "Residual Evans Assets Disposal Adjustment");
(c) RESIDUAL EVANS ASSETS DAMAGE ADJUSTMENT. Deduct an amount equal to the
actual cost to repair or replace any of the Fixed Assets, other than
Evans Equipment, which shall suffer any damage or loss (other than
normal wear and tear) between the Valuation Date and the Closing Date
to the extent that such damage or loss is not:
(i) repaired by the Closing Date; or
(ii) covered by insurance proceeds which are assigned to L-P
Engineered Wood at Closing and which are not included in the
Working Capital Assets; or
<PAGE>
23 PART B
(iii) included in the Working Capital Liabilities or the Assumed Evans
Liabilities;
(the "Residual Evans Assets Damage Adjustment");
(d) WORKING CAPITAL ADJUSTMENT. Add an amount equal to the increase, if
any, or subtract an amount equal to the decrease, if any, in the
Working Capital from the Valuation Date to the Closing Date determined
in accordance with GAAP (the "Working Capital Adjustment");
(e) ASSUMED CAPITAL LEASES ADJUSTMENT. Deduct an amount equal to the
aggregate principal amount due after the Closing Date under the
Assumed Valuation Date Capital Leases (the "Assumed Capital Leases
Adjustment");
(f) ASSUMED EVANS LIABILITIES ADJUSTMENT. Deduct an amount equal to the
aggregate of the Assumed Evans Liabilities (the "Assumed Evans
Liabilities Adjustment");
(g) ROAD COSTS ADJUSTMENT. Add an amount equal to the increase, if any, or
subtract an amount equal to the decrease, if any, in the Road Costs
from the Valuation Date to the Closing Date (the "Road Costs
Adjustment");
(h) VACATION PAY ADJUSTMENT. Add an amount equal to the decrease, if any,
or subtract an amount equal to the increase, if any, in the vacation
pay obligations of Evans from the Valuation Date to the Closing Date
determined in accordance with GAAP (the "Vacation Pay Adjustment");
and
(i) SILVICULTURE ADJUSTMENT. Add an amount equal to the excess, if any, of
the amount expended by Evans in payment of Silviculture Obligations
from the Valuation Date to the Closing Date over the amount accrued by
Evans since the Valuation Date as Silviculture Obligations, or
subtract an amount equal to the deficiency, if any, by which the
amount accrued by Evans from the Valuation Date to the Closing Date as
Silviculture Obligations exceeds the amount expended by Evans in
payment of Silviculture Obligations since the Valuation Date (the
"Silviculture Adjustment");
(the Residual Fixed Asset Acquisition Adjustment, the Residual Fixed Asset
Disposal Adjustment, the Residual Fixed Asset Damage Adjustment, the Working
Capital Adjustment, the Assumed Capital Leases Adjustment, the Assumed Evans
Liabilities Adjustment, the Road Costs Adjustment, the Vacation Pay Adjustment
and the Silviculture Adjustment are, collectively, referred to herein as the
"Residual Evans Assets Purchase Price Adjustments").
5.3. ESTIMATED RESIDUAL EVANS ASSETS PURCHASE PRICE AT CLOSING. No less than 10
days before the Closing Date, Evans, acting reasonably, shall prepare and
provide to L-P Engineered Wood for approval, acting reasonably an estimated
statement of the Residual Evans Assets Purchase Price Adjustments (the
"Estimated Residual Evans Assets Statement of Adjustments") in which the amount
of the Residual Evans Assets Purchase Price Adjustments shall be estimated and
applied to the Basic Residual Evans Assets Purchase Price so as to provide the
parties with an estimated purchase price for the Residual Evans Assets (the
"Estimated Residual Evans Assets Purchase Price").
<PAGE>
24 PART B
5.4. PAYMENT OF ESTIMATED RESIDUAL EVANS ASSETS PURCHASE PRICE. The Estimated
Residual Evans Assets Purchase Price, less the Adjustment Holdback as set out in
Section 5.5 and the Indemnity Holdback as set out in Section 5.6 (both of which
shall be delivered by L-P Engineered Wood directly to the Escrow Agent), shall
be payable by L-P Engineered Wood to Evans on the Closing Date by bank draft or
certified cheque.
5.5. HOLDBACK FOR ADJUSTMENT TO RESIDUAL EVANS ASSETS PURCHASE PRICE. L-P
Engineered Wood shall deduct from the Estimated Residual Asset Purchase Price
and deliver to the Escrow Agent five (5%) percent of the sum of the SLEC Assets
Purchase Price and the Aggregate Estimated Evans Purchase Price (the "Adjustment
Holdback") to be held in trust by the Escrow Agent in accordance with the terms
of an Escrow Agreement in the form of Schedule 5.5 to be entered into among L-P
Engineered Wood, L-P Dawson Creek, Evans and the Escrow Agent at Closing (the
"Escrow Agreement"). Interest on the Adjustment Holdback shall be for the
account of the ultimate recipient of such monies, such interest to be paid in
whole or in part in proportion to the portion of the Adjustment Holdback paid to
each respective recipient.
5.6. INDEMNITY HOLDBACK. L-P Engineered Wood shall deduct from the Estimated
Residual Evans Asset Purchase Price and deliver to the Escrow Agent the sum of
US $1,000,000 (the "Indemnity Holdback") to be held by the Escrow Agent pursuant
to the Escrow Agreement.
5.7. POST-CLOSING RESIDUAL EVANS ASSETS PURCHASE PRICE ADJUSTMENT PROCEDURE.
Forthwith, and in any event within thirty (30) days following Closing, L-P
Engineered Wood shall prepare, in a manner consistent with that of the Estimated
Residual Evans Assets Statement of Adjustments a statement of the adjustments to
the Basic Residual Evans Assets Purchase Price as of the Closing Date (the
"Final Residual Evans Assets Statement of Adjustments") showing the actual
amount of each of the Residual Evans Assets Purchase Price Adjustments as well
as the Basic Residual Evans Assets Purchase Price as adjusted by the actual
Residual Evans Assets Purchase Price Adjustments (the "Adjusted Residual Evans
Assets Purchase Price"), for the review and approval of Evans. L-P Engineered
Wood shall furnish such access to the financial working papers of the Operations
after the Closing Date as Evans shall reasonably require to review the Final
Residual Evans Assets Statement of Adjustments. The Final Residual Evans Assets
Statements of Adjustments shall be deemed to be approved by Evans and to become
final and binding upon the parties unless Evans delivers a Notice of Adjustment
Disagreement to L-P Engineered Wood pursuant to Section 6.1.
5.8. POST-CLOSING RESIDUAL EVANS ASSETS PURCHASE PRICE ADJUSTMENT PAYMENT. The
amount of any adjusting payment required between the parties for the Residual
Evans Assets shall be the difference between the Estimated Residual Evans Assets
Purchase Price, as shown on the Estimated Residual Evans Assets Statement of
Adjustments, and the Adjusted Residual Evans Assets Purchase Price, as shown in
the Residual Evans Assets Statement of Adjustments (the "Residual Evans Assets
Adjustment Payment"), and shall be paid as follows:
(a) where the Adjusted Residual Evans Assets Purchase Price exceeds the
Estimated Residual Evans Assets Purchase Price, the Adjustment
Holdback shall be paid to Evans and L-P Engineered Wood shall pay the
Residual Evans Assets Adjustment Payment to Evans; or
(b) where the Adjusted Residual Evans Assets Purchase Price is less than
the Estimated Residual Evans Assets Purchase Price and greater than
ninety-
<PAGE>
25 PART B
five (95%) percent of the Estimated Residual Evans Assets Purchase
Price, L-P Engineered Wood shall receive the amount of the Residual
Evans Assets Adjustment Payment out of the Adjustment Holdback, and
the balance of the Adjustment Holdback shall be paid to Evans; or
(c) where the Adjusted Residual Evans Assets Purchase Price is less than
ninety-five (95%) percent of the Estimated Residual Evans Assets
Purchase Price, the Adjustment Holdback shall be paid to L-P
Engineered Wood and the balance of the Residual Evans Assets
Adjustment Payment shall be paid to L-P Engineered Wood by Evans; and
the Residual Evans Assets Adjustment Payment shall be paid forthwith after
approval of the Residual Evans Assets Statement of Adjustments by the parties or
the date the Residual Evans Assets Statement of Adjustments becomes final and
binding pursuant to Section 6.1, whichever is later.
5.9. RESIDUAL EVANS ASSETS ADJUSTMENT PAYMENT NOT SUBJECT TO MINIMUM. The
payment of the Residual Evans Assets Adjustment Payment shall not be subject to
the indemnity claim minimum set out in Section 13.13(c).
6. DISPUTE OF STATEMENTS OF ADJUSTMENTS
6.1. NOTICE OF ADJUSTMENT DISAGREEMENT. If Evans disagrees with the Final
Residual Evans Assets Statements of Adjustments, Evans shall give written notice
of its disagreement ("Notice of Adjustment Disagreement") to L-P Engineered Wood
within fifteen (15) business days following receipt thereof. If a Notice of
Adjustment Disagreement is received by L-P Engineered Wood in a timely manner,
then the Final Residual Evans Assets Statement of Adjustments shall become final
and binding upon the parties on the earlier of:
(a) the date the parties resolve in writing all matters specified in the
Notice of Adjustment Disagreement; or
(b) the date any Disputed Adjustment Matters are finally resolved in
writing by the Independent Accountant.
Any such Notice of Adjustment Disagreement shall state in reasonable
detail the nature of any disagreement so asserted. During a period of ten (10)
business days following receipt by L-P Engineered Wood of the Notice of
Adjustment Disagreement L-P Engineered Wood and Evans shall attempt to resolve
in writing any differences that they may have with respect to any matter
specified in the Notice of Adjustment Disagreement. If at the end of such ten
(10) business day period, L-P Engineered Wood and Evans have failed to reach
written agreement with respect to all of such matters, then all such matters as
are specified in any Notice of Adjustment Disagreement and as to which such
written agreement has not been reached (the "Disputed Adjustment Matters") shall
be submitted to and reviewed by the Managing Partner of the Independent
Accountant. The Independent Accountant shall resolve all Disputed Adjustment
Matters within sixty (60) days of his or her appointment and his or her decision
with respect to all Disputed Adjustment Matters shall be final and binding upon
L-P Engineered Wood and Evans.
<PAGE>
26 PART B
6.2. FEES OF INDEPENDENT ACCOUNTANT. The fees and expenses of the Independent
Accountant in respect of the Disputed Adjustment Matters shall be paid equally
by L-P Engineered Wood and Evans.
7. ASSUMPTION OF LIABILITIES
7.1. LIABILITY ASSUMPTION. Subject to the other terms and conditions in this
Agreement, at the Closing L-P Engineered Wood shall assume and agree to pay,
honour and discharge:
(a) all of the Working Capital Liabilities;
(b) all of the liabilities of Evans identified in Schedule 7.1(b) (the
"Assumed Evans Liabilities"); and
(c) all of the obligations, covenants and agreements of Evans under the
Assumed Contracts, the Forest Tenures, the Permits, the Silviculture
Obligations and the Assumed Capital Leases (collectively, the "Assumed
Evans Obligations") and the Permitted Encumbrances;
which are assigned to and assumed by L-P Engineered Wood pursuant to this
Agreement, by executing and delivering to Evans one or more assumption and
indemnity agreements substantially in the form attached as Schedule 7.1. L-P
Engineered Wood shall not assume any of the liabilities, obligations or
commitments of Evans except those arising from the Permitted Encumbrances, the
Working Capital Liabilities, the Assumed Evans Liabilities and the Assumed Evans
Obligations. All other liabilities, obligations or commitments of Evans shall
remain with Evans and are excluded from this transaction. L-P Canada shall
execute the assumption and indemnity agreements to guarantee the obligations of
L-P Engineered Wood thereunder.
<PAGE>
27 PART C
PART C - SALE OF SLEC ASSETS BY EVANS TO L-P DAWSON CREEK
8. SALE AND PURCHASE OF SLEC ASSETS
8.1. SALE OF SLEC ASSETS. Subject to and upon the terms and conditions set forth
in this Agreement, Evans shall sell, transfer, convey and assign to L-P Dawson
Creek, and L-P Dawson Creek shall purchase or acquire from Evans at the Closing
all of Evans' right, title and interest in and to the SLEC Assets as at the
Closing Date free and clear of all Liens save as provided in Section 8.2.
8.2. LIENS. The SLEC Assets to be transferred or otherwise conveyed to L-P
Dawson Creek at the Closing Date pursuant to Section 8.1 shall be free and clear
of all Liens, excepting only the Permitted Encumbrances.
8.3. ALLOCATION OF THE PURCHASE PRICE. The SLEC Assets Purchase Price shall be
allocated amongst the SLEC Assets, or classes of the SLEC Assets, as provided in
Schedule 8.3.
9. PAYMENT OF SLEC ASSETS PURCHASE PRICE
9.1. SLEC ASSETS PURCHASE PRICE. The consideration for the purchase of the SLEC
Assets shall be US $27,000,000 (the "SLEC Assets Purchase Price").
9.2. PAYMENT OF SLEC ASSETS PURCHASE PRICE. The SLEC Assets Purchase Price shall
be payable by L-P Dawson Creek to Evans on the Closing Date by bank draft or
certified cheque.
9.3. PAYMENT OF TAXES, FEES AND COSTS. L-P Dawson Creek shall be wholly
responsible for all sales and transfer taxes payable in respect of the
conveyance of the SLEC Assets under the Agreement, including without limitation
goods and services tax under the EXCISE TAX ACT (Canada) and social services tax
under the SOCIAL SERVICE TAX ACT (British Columbia). Evans and L-P Dawson Creek
shall cooperate reasonably to ensure that any taxes payable by L-P Dawson Creek
under the EXCISE TAX ACT (Canada) in respect of goods and services tax shall be
minimized. To the extent that social services tax applies to the transfer of the
SLEC Assets, L-P Dawson Creek shall promptly pay to Evans all amounts required
to be collected and remitted by Evans in respect thereof and Evans shall remit
such amounts to the British Columbia Consumer Taxation Branch as required.
10. ASSUMPTION OF OBLIGATIONS
10.1. OBLIGATION ASSUMPTION. Subject to the other terms and conditions in this
Agreement, at the Closing L-P Dawson Creek shall assume and agree to pay, honour
and discharge all of Evans' obligations under the Permitted Encumbrances
affecting the SLEC Assets by executing and delivering to Evans one or more
assumption and indemnity agreements substantially in the form attached as
Schedule 7.1. L-P Dawson Creek shall not assume any of the liabilities,
obligations or commitments of Evans except the obligations of Evans under the
Permitted Encumbrances affecting the SLEC Assets. All other liabilities,
obligations or commitments of Evans shall remain with Evans and are excluded
from this transaction. L-P Canada shall execute the assumption and indemnity
agreements to guarantee the obligations of L-P Dawson Creek thereunder.
<PAGE>
28 PART D
PART D - REPRESENTATIONS, WARRANTIES AND COVENANTS
11. REPRESENTATIONS AND WARRANTIES OF EVANS
In order to induce the Purchasers and L-P Canada to enter into and to
consummate the transactions contemplated by this Agreement, Evans represents and
warrants to the Purchasers and L-P Canada that, save as disclosed herein or
approved in writing by the Purchasers or L-P Canada, the following
representations and warranties are true and correct as at the date hereof,
notwithstanding any investigation that may be made by the Purchasers or L-P
Canada:
11.1. CORPORATE ORGANIZATION, ETC.
(a) Evans is a corporation duly organized, validly existing and in good
standing with respect to filing of annual reports, all under the laws
of the Province of British Columbia, with full corporate power,
authority and capacity to carry on the Operations as now being
conducted, and to own, operate and lease the Assets.
(b) Evans has complied in all material respects with all applicable
Regulations and Orders in connection with the execution, delivery and
performance of this Agreement and the transactions contemplated. The
transactions contemplated by this Agreement have been duly and validly
authorized by all necessary Evans, shareholder and director action.
This Agreement, upon signature by the parties, shall be a valid and
binding obligation of Evans enforceable in accordance with its terms,
except as the enforceability may be limited by public policy and
bankruptcy, insolvency, reorganization, moratorium or other laws and
principles of equity affecting the enforcement of creditors rights
generally.
11.2. NO VIOLATION. Except as otherwise provided in Schedule 11.2, the
execution, delivery and performance by Evans of this Agreement, and the
fulfilment of and compliance with its terms shall not:
(a) conflict with or result in a breach of the terms, conditions or
provisions of;
(b) constitute a default or event of default under (with due notice, lapse
of time or both);
(c) result in the creation of any Lien upon the Assets pursuant to;
(d) give any third party the right to accelerate any obligation under;
(e) result in a violation of; or
(f) except for consents required under the FOREST ACT and as provided in
Sections 15 and 16, require any authorization, consent, approval,
exemption or other action by, notice to, or filing with any Authority
pursuant to,
the articles of incorporation of Evans, or any applicable Regulation, Order or
Contract to which Evans or the Assets are subject.
<PAGE>
29 PART D
11.3. CONTRACTS.
(a) The list of Contracts set out in Schedule 11.3(a) is a true and
complete list of all present and outstanding Contracts entered into by
Evans prior to the date of this Agreement, other than:
(i) those entered into in the ordinary course of Evans' business
which require an expenditure by Evans or L-P Engineered Wood of
not more than US $100,000 and which either:
A. will be terminated by Evans before Closing; or
B. are terminable by L-P Engineered Wood without penalty
not more than 12 months after the Closing Date; or
C. shall be fully performed within 12 months after the
Closing Date; or
(ii) those which shall be fully performed prior to the Closing Date;
(b) To Evans' knowledge, Evans has performed in all material respects all
obligations required to be performed by it and is not in default in
any material respect under, or in breach of, nor in receipt of any
claim of default or breach under, any Contract and no event has
occurred which, with the passage of time or the giving of notice or
both, would result in a default or breach having a Material Adverse
Effect; and
(c) Copies of Contracts and documents delivered and to be delivered by
Evans are and shall be true and complete copies of such Contracts and
documents.
11.4. ASSETS AND TITLE.
(a) With the exception of the Trus Joist Scarfer, Evans has, or will have
on the Closing Date, good and valid title to the Assets to be
transferred by it pursuant to this Agreement free and clear of all
Liens, Claims and restrictions on transfer, other than Permitted
Encumbrances;
(b) save as disclosed in Schedules 4.2(b)(i) and 5.2(b)(i), Evans has not,
between the Valuation Date and the date of this Agreement, sold,
transferred, conveyed, assigned or otherwise disposed of any of the
Assets other than in the normal course of business of Evans and at the
fair market value thereof and none of the Assets are or shall be on
the Closing Date subject to any contracts of sale or lease except
contracts in the ordinary course of business of Evans and at the fair
market value thereof;
(c) the Assets and the Excluded Evans Assets comprise all of the assets
customarily used by Evans in carrying on the Operations; and
(d) except as disclosed in Schedule 11.4(d), including the map attached
thereto, to the best of the knowledge of Evans, there have been no
claims or rights, titles or jurisdictions asserted or established by
any aboriginal peoples by
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30 PART D
virtue of their status as aboriginal peoples to, over or affecting any
of the Assets or Operations.
11.5. THE CAPITAL LEASES.
(a) The Capital Leases listed in Schedule 11.5 are all of the Capital
Leases in effect on the date of this Agreement;
(b) To Evans' knowledge, Evans has performed in all material respects all
obligations required to be performed by it and is not in default in
any material respect under, or in breach of, nor in receipt of any
claim of default or breach under, the Assumed Capital Leases and no
event has occurred which, with the passage of time or the giving of
notice or both, would result in a default or breach having a Material
Adverse Effect; and
(c) Copies of the Assumed Capital Leases delivered and to be delivered by
Evans to L-P Engineered Wood are and shall be true and complete copies
of such Capital Leases.
11.6. LITIGATION. Except as set forth in Schedule 11.6, there is no Claim,
investigation or governmental inquiry in progress, or to Evans' knowledge
pending or threatened, against Evans, which, if adversely determined, could have
a Material Adverse Effect, nor is there presently outstanding any Order, adverse
judgment, settlement or other similar directive or agreement evidencing a
dispute which could have a Material Adverse Effect.
11.7. COMPLIANCE WITH LAWS AND REGULATIONS. Except as disclosed in Schedule
11.7, to Evans' knowledge, Evans is presently in compliance in all material
respects with regard to the Lands and its Operations, practices, plants,
structures, machinery, equipment and other property, and all other aspects of
its business relating to the Assets, with all applicable federal, provincial and
municipal Regulations and Orders. Except as set forth in Schedule 11.7, to
Evans' knowledge there are no Claims pending, or threatened, nor has Evans
received any written notice, alleging any violations of any Regulations and
Orders relating to the Assets from any Authority claiming jurisdiction over
Evans.
11.8. ENVIRONMENTAL MATTERS. Except as disclosed on Schedule 11.8, to the best
of Evans' knowledge:
(a) the Operations do not violate any applicable Environmental Law now in
effect in any material respect;
(b) Evans possesses and shall possess on the Closing Date all material
Environmental Permits now required or which shall be required on the
Closing Date for the conduct of the Operations (or any part), and
Evans is in material compliance with all of the requirements and
limitations included in such Environmental Permits;
(c) all Environmental Permits possessed by Evans are listed on Schedule
11.8(c);
(d) Evans does not store or use any pollutants, contaminants or hazardous
or toxic wastes, substances or materials on or at any of the Lands or
facilities
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31 PART D
except for inventories of chemicals which are used or to be used in
the ordinary course of Evans' business (which inventories have been
stored or used in material accordance with all applicable
Environmental Permits and all Environmental Laws);
(e) Evans has not received any notice from any Authority or any private
Person or entity that Evans' business or the operation of any of its
facilities is in violation of any Environmental Law or any
Environmental Permit or that it is responsible (or potentially
responsible) for the clean up of any pollutants, contaminants, or
hazardous or toxic wastes, substances or materials at, on or beneath
any of the Lands, or at, on or beneath any land adjacent thereto or in
connection with any waste or contamination site;
(f) Evans is not the subject of federal, provincial, municipal or private
litigation or proceedings involving a demand for damages or other
potential liability with respect to violations of Environmental Laws;
(g) Evans has not buried, dumped, disposed of, or spilled or released
material quantities of any pollutants, contaminants or hazardous
wastes, substances or materials on, beneath or adjacent to any of the
Lands or any property adjacent thereto;
(h) no by-products of any manufacturing process employed in the operation
of Evans' business which may be pollutants, contaminants or hazardous
or toxic wastes, substances or materials as defined under any
Environmental Law are currently stored or otherwise located in a
material quantity on any of the Lands or leaseholds in a manner
prohibited by any Environmental Laws;
(i) Evans has timely filed all reports required to be filed with respect
to all of the Lands, leaseholds and facilities and has generated and
maintained all required data, documentation and records under all
applicable Environmental Laws in all material respects;
(j) there are no underground storage tanks on or beneath the Golden
Facility or the Malakwa Facility;
(k) no pollutants, contaminants or hazardous or toxic wastes, substances
or materials as defined under any Environmental Law are migrating to
or from any of the Lands or any property adjacent thereto;
(l) none of the Assets to be sold to the Purchasers contain any asbestos,
PCBs or any other toxic, dangerous or hazardous substance in any
material quantity; and
(m) Evans has provided to L-P Engineered Wood true copies of all
environmental studies or assessments prepared or obtained by Evans
with respect to any of the Lands.
11.9. DISCLOSURE. To Evans' knowledge, neither this Agreement nor any of the
Schedules, attachments, written statements, documents, certificates or other
items prepared for or supplied to the Purchasers or any of their Affiliates by
or on behalf of Evans with respect to
<PAGE>
32 PART D
the transactions contemplated herein contains any untrue statement of a material
fact or omits a material fact necessary to make each statement not misleading.
There is no fact which Evans has not disclosed to the Purchasers or any of their
Affiliates and of which Evans or any of its officers, directors or executive
employees is aware which would have a Material Adverse Effect.
11.10. CONDITION OF EVANS ASSETS AND SLEC ASSETS. Except as disclosed on
Schedule 11.10 and excepting the Donald J-Bar Sorter which is being purchased by
L-P Engineered Wood on an as is where is basis, the Evans Assets and the SLEC
Assets are in good working condition and suitable for their current use.
11.11. TAX MATTERS.
(a) There are no income or other taxes payable by Evans at or prior to
Closing which might, now or hereafter, constitute or be capable of
forming an encumbrance, other than a Permitted Encumbrance, upon any
of the Assets or the Operations;
(b) Evans is registered under Part IX of the EXCISE TAX ACT (Canada) with
registration number 101700722RT;
(c) Evans is not a non-resident person within the meaning of section 116
of the INCOME TAX ACT (Canada);
11.12. LABOUR RELATIONS. Except as set forth in Schedule 11.12 Evans has no
collective bargaining agreements and there have been no strikes, work stoppages
nor any demand for collective bargaining by any union or labour organization at
the Operations since January 1, 1997. There is no dispute or controversy with
any union or other organization of Evans' employees and no arbitration
proceedings pending or, to Evans' knowledge, threatened involving a dispute or
controversy affecting Evans which would have a Material Adverse Effect.
11.13. SALARIED EMPLOYEES. Schedule 11.13 accurately and completely sets out the
names and titles of personnel employed or engaged in the Operations by Evans and
paid on a salaried basis together with particulars of the material terms and
conditions of employment or engagement of such persons, including rates of
remuneration, term of employment, title, benefits, positions held and
particulars of any agreement or understanding concerning notice or severance in
the event of termination of employment. Each such employee has been paid all
wages, income, benefits and any other sums owing to him or her by Evans to the
end of the most recent pay period. All amounts required to be deducted from the
employees' salaries and paid to any governmental body pursuant to any Regulation
have been withheld and paid. Evans has provided to L-P Engineered Wood prior to
the execution of this Agreement the terms of any oral contract of employment and
a copy of the written contracts of employment with such persons where such oral
or written contracts exist.
11.14. EMPLOYEE PLANS. Except in connection with the Evans Forest Products
Limited Salaried Employees Pension Plan described in Schedule 11.14 (the
"Pension Plan"), and the Supplemental Pension and the other plans disclosed in
Schedule 11.14, Evans does not maintain, contribute to or have any liability
under or with respect to any:
(a) employee pension benefit plan including, without limitation, any
pension, profit sharing, defined contribution, retirement,
multi-employer or multiple employer plan;
<PAGE>
33 PART D
(b) employee welfare benefit plan including, without limitation, any
medical, hospitalization, vision, dental, life insurance, disability
or retiree welfare benefit plan, program or arrangement;
(c) bonus, incentive, deferred compensation, severance, vacation, sick
leave, fringe benefit or other employment agreement, plan or
arrangement;
with respect to any of its employees and former employees. Evans has delivered
to L-P Engineered Wood true, correct and complete copies of all employee plans
described in this Section which Evans maintains or to which Evans contributes.
Evans has made all contributions required of it with respect to the IWA Forest
Industry Pension Plan described in Schedule 11.14.
11.15. EMPLOYMENT OBLIGATIONS. Schedule 11.15 lists all individuals who are, as
at the date of this Agreement:
(a) in receipt of benefits from a short term or long term disability
program sponsored by Evans or in which Evans participates;
(b) in receipt of Worker's Compensation benefits on account of their
employment by Evans;
(c) on an authorized unpaid leave of absence (including maternity or
parental leave or unpaid sick leave) from Evans;
(d) on layoff from Evans with an existing right of recall pursuant to the
Collective Agreement; or
(e) entitled to post-retirement or other benefits provided through a
benefit program sponsored by Evans or in which Evans participates;
and particulars of the rights and benefits of such individuals in respect
thereof.
11.16. PATENTS, TRADEMARKS, ETC. Schedule 3.2(b) lists all Canadian and foreign
trademarks (including trademarks for which application is pending), service
marks, trade names, brand names, copyrights, including registrations and
applications, patent and patent applications, and employee covenants and
agreements respecting intellectual property ("Trade Rights") in which Evans now
has any interest, if any, specifying whether such Trade Rights are owned,
controlled, used or held (under license or otherwise) by Evans and also
indicating which of such Trade Rights are registered. All of Evans' Trade Rights
registrations and all pending registrations and applications have been properly
made and filed and all annuity, maintenance, renewal and other fees relating to
registrations or applications are current. Evans does not require any Trade
Rights that it does not already have to conduct its businesses, including the
operation of the SLEC Assets. To the best of the knowledge of Evans, Evans is
not infringing and has not infringed on any Trade Rights of another in the
operation of its businesses, nor is any other person infringing on the Trade
Rights of Evans. Evans has not granted any license or made any assignment of any
Trade Right and no other person has any right to use any Trade Right owned or
held by Evans. Except for fees paid pursuant to the agreement with the Interior
Lumber Manufacturers' Association referred to in Schedule 3.2(b), Evans does not
pay any royalties or other consideration for the right to use any Trade Rights
of others. To the best of Evans' knowledge there are no inquiries,
investigations or claims or litigation challenging or
<PAGE>
34 PART D
threatening to challenge the right, title and interest of Evans with respect to
its continued use and right to preclude others from using any Trade Rights. To
the best of Evans' knowledge all of Evans' Trade Rights are valid, enforceable
and in good standing, and there are no equitable defenses to enforcement based
on any act or omission of Evans.
11.17. YEAR 2000 COMPLIANCE. Except with respect to the deficiencies listed in
Schedule 11.17, all of which will be corrected prior to the Closing Date, to the
best of the knowledge of Evans, it has taken all reasonable steps to ensure that
the Evans Assets and the SLEC Assets are designed to be used prior to, during,
and after the calendar year 2000 A.D. and, during each such period, will
properly and effectively function and will properly and effectively process,
manage and manipulate data containing two and four digit year dates, without any
error or abnormal ending and without generating any incorrect value or invalid,
inaccurate or erroneous result.
11.18. FINANCIAL STATEMENTS. The Financial Statements of Evans attached as
Schedule 11.18 have been prepared in accordance with GAAP consistently applied
and maintained and fairly present in all material respects, the financial
condition of Evans as of the date indicated and the results of its operations
for the period covered.
11.19. ROAD COSTS. As of April 30, 1999, the Road Costs were Cdn. $12,493,000.00
as calculated in accordance with GAAP consistently applied and maintained.
11.20. ACCOUNTS RECEIVABLE. All Evans' accounts receivable represent arm's
length sales actually made in the ordinary course of business. Evans' accounts
receivable which shall be included as a Working Capital Asset in the calculation
of the Adjusted Residual Evans Assets Purchase Price shall be collectible at the
amount therein recorded, which shall be net of the reserves determined by Evans,
in the ordinary course of business. Evans has given L-P Engineered Wood a
complete and correct aging schedule of the accounts receivable included in
Evans' most recent balance sheet.
11.21. INVENTORY. Evans' inventories held for sale are of a quality saleable in
the ordinary course of business of Evans, inventories of raw materials are of a
quality usable in the ordinary course of business of Evans, and the inventories
to be included as a Working Capital Asset in the calculation of the Adjusted
Residual Evans Assets Purchase Price shall have, in the aggregate, a net
realizable value at least equal to the aggregate value so recorded, and shall be
valued in accordance with GAAP at the lower of cost (on a FIFO basis) or market.
11.22. INSURANCE. Evans maintains such policies of insurance as are appropriate
to its business, properties and assets, in such amounts and against such risks
as are customarily carried and insured against by owners of comparable
businesses, properties and assets.
11.23. FOREST TENURES. With respect to the Forest Tenures:
(a) the Forest Tenures are recorded on the records of the Ministry of
Forests of the Province of British Columbia in the name of Evans and
are validly subsisting;
(b) all rentals, stumpage, royalty and scale accounts and other taxes,
assessments and other costs payable up to the Closing Date in respect
of the Forest Tenures have been or will have been paid on the Closing
Date other
<PAGE>
35 PART D
than those which constitute costs, accrued or accruing, in respect of
silviculture or other reforestation obligations thereunder;
(c) Evans has, in all material respects, observed and performed all
covenants and agreements on its part to be observed or performed under
the provisions of the Forest Tenures, the FOREST ACT (British
Columbia) and the regulations thereunder in accordance with normal
forest industry practice in the Province of British Columbia; and
(d) Evans is not aware of, and has not received any notice of, any breach
of the Forest Tenures which would have a Material Adverse Effect and
has received no notice of any fact or event likely to reduce, suspend
or terminate the Forest Tenures, or any of them, or any privileges
attached thereto.
11.24. PROMISSORY NOTE. The Promissory Note, when issued and delivered by Evans
to L-P Canada pursuant to Section 13.14, shall be duly and validly authorized
and issued.
11.25. SLEC CAPITAL LEASES. The SLEC Capital Leases disclosed in Part 5 of
Schedule 11.5 are all of the SLEC Capital Leases.
11.26. SLEC ASSETS. The assets listed in Schedule 11.26 are all of the assets
which are the subject matter of the SLEC Capital Leases.
11.27. SURVIVAL. All representations and warranties contained in this Section 11
shall survive Closing and continue in effect until December 31, 2000. Upon
Evans' receipt of a Claim from L-P Engineered Wood during the survival period,
the appropriate representations and warranties shall remain in effect until the
claim is finally resolved.
12. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS AND L-P CANADA
In order to induce Evans to enter into and to consummate the
transactions contemplated by this Agreement, each of the Purchasers and L-P
Canada, jointly and severally, represent and warrant to Evans that the following
representations and warranties are true and correct as at the date hereof:
12.1. ORGANIZATION, STANDING AND POWER. Each of L-P Canada and the Purchasers is
a corporation duly organized, validly existing and in good standing with respect
to annual filings under the laws of British Columbia and has all requisite
corporate power, authority and capacity to own, lease and operate its properties
and to carry on its business as now being conducted.
12.2. AUTHORITY. The execution, delivery and performance by each of the
Purchasers or L-P Canada of this Agreement, and the fulfilment of and compliance
with its terms shall not: (a) conflict with or result in a breach of the terms,
conditions or provisions of; (b) constitute a default or event of default under
(with due notice, lapse of time or both); (c) result in the creation of any Lien
upon the Purchasers' or L-P Canada's assets pursuant to; (d) give any third
party the right to accelerate any obligation under; (e) result in a violation
of; or (f) require any authorization, consent, approval, exemption or other
action by, notice to, or filing with any Authority pursuant to, the articles of
incorporation of the Purchasers or L-P Canada, or any applicable Regulation,
Order or Contract to which the Purchasers or L-P Canada or their assets are
subject. The Purchasers and L-P Canada have complied in all material respects
with all applicable
<PAGE>
36 PART D
Regulations and Orders in connection with the execution, delivery and
performance of this Agreement and the transactions contemplated. The
transactions contemplated by this Agreement have been, or shall by the Closing
Date have been, duly and validly authorized by all necessary shareholder and
director action of the Purchasers and L-P Canada. This Agreement upon signature
by the parties shall be a valid and binding obligation of the Purchasers and L-P
Canada enforceable in accordance with its terms, except as the enforceability
may be limited by public policy and bankruptcy, insolvency, reorganization,
moratorium or other laws and principles of equity affecting the enforcement of
creditors rights generally.
12.3. PREFERRED SHARES. The Preferred Shares, when issued and delivered by L-P
Engineered Wood to Evans pursuant to Section 4.4, shall be duly and validly
issued, fully paid and non-assessable.
12.4. SLEC ASSETS. L-P Dawson Creek is purchasing the SLEC Assets for the
purpose only of leasing such assets to other persons and as such is exempt by
subsection 78(1) of the SOCIAL SERVICE TAX ACT (British Columbia) from tax
imposed by the SOCIAL SERVICE TAX ACT on such purchase.
12.5. ACCURACY OF EVANS' REPRESENTATIONS. The Purchasers and L-P Canada have
conducted an investigation of the Assets and Operations, which included the
preparation of an environmental audit. None of the Purchasers or L-P Canada has
any knowledge that any representation and warranty of Evans set forth in this
Agreement is not true and correct in all material respects, or is untrue in a
manner that has a Materially Adverse Effect.
12.6. SURVIVAL. All representations and warranties contained in this Section 12
shall survive Closing and continue in full force and effect until December 31,
2000. Upon the Purchasers' or L-P Canada's receipt of a Claim from Evans during
the survival period, the appropriate representations and warranties shall remain
in effect until the claim is finally resolved.
13. COVENANTS
13.1. CONDUCT OF BUSINESS. Following execution of this Agreement and prior to
the Closing, Evans shall maintain, keep and preserve the Assets in good
condition and repair, maintain insurance in accordance with present practices
and shall not:
(a) remove or dispose of any of the Assets to be transferred and conveyed
under this Agreement, except for inventory sold in the ordinary course
of business, without the prior written agreement of L-P Engineered
Wood;
(b) amend any of the Assumed Contracts except in the ordinary course of
business and where such amendment does not require a Material
expenditure on the part of L-P Engineered Wood, without the prior
written consent of L-P Engineered Wood, which consent shall not be
unreasonably withheld; or
(c) enter into any new Contract except in the ordinary course of business
and on terms which allow the assignment of such Contract to L-P
Engineered Wood at Closing (in which case Evans shall provide a copy
of any such new Contract to L-P Engineered Wood forthwith after
execution), without the prior written consent of L-P Engineered Wood.
Evans acknowledges that L-P
<PAGE>
37 PART D
Engineered Wood may, but need not, assume the rights and obligations
of Evans under any such new Contract at the time of Closing, provided
however, that L-P Engineered Wood shall assume at Closing all new
Contracts to which it consents.
13.2. STORAGE OF DONALD J-BAR SORTER. Evans agrees to provide L-P Engineered
Wood with storage for the Donald J-Bar Sorter at the Donald Facility for a
period of at least 180 days following the Closing Date, without cost, but at the
sole risk of L-P Engineered Wood. Evans agrees that L-P Engineered Wood and L-P
Engineered Wood's authorized representatives may have access at all reasonable
times to the Donald Facility for the purpose of inspecting, repairing or
removing the Donald J-Bar Sorter.
13.3. CONTRACT CONSENTS. Evans shall use commercially reasonable efforts to
obtain the consent of any party to any Contract with Evans where the consent of
such party is required to assign such Contract to L-P Engineered Wood.
13.4. FOREST TENURES CONSENTS. Evans and L-P Engineered Wood shall use all
commercially reasonable efforts to obtain:
(a) any consents necessary for the assignment to L-P Engineered Wood of
Evans' interest in the Forest Tenures; or
(b) if applicable, the re-issuance of any one or more of the Forest
Tenures in the name of L-P Engineered Wood;
and in the course of attempting to obtain such consents:
(c) Evans will not, without the prior written consent of L-P Engineered
Wood, agree to any amendment to any of the Forest Tenures; and
(d) L-P Engineered Wood will not, without the prior written consent of
Evans, agree to any amendment to any of the Forest Tenures which would
have effect prior to L-P Engineered Wood's assumption of the Forest
Tenures on the Closing Date.
13.5. EMPLOYEES. L-P Engineered Wood intends to operate the Golden Facility and
Malakwa Facility after the Closing and further intends to staff the Golden
Facility and Malakwa Facility primarily from Evans' current employees. L-P
Engineered Wood shall have the right, by written notice to Evans given at any
time after all conditions precedent to the completion of this Agreement have
been removed or satisfied, to direct Evans to terminate certain of the salaried
employees of Evans prior to the Closing Date at the cost of L-P Engineered Wood.
Subject to such terminations, Evans agrees to transfer and L-P Engineered Wood
agrees to accept the transfer of the employment of all of Evans' salaried
employees, effective from the Closing Date, on terms equal to or better than
those specified in Schedule 11.13, provided that it is agreed that the terms of
employment of such salaried employees need not include any Supplemental Pension
Benefits so long as the terms of employment of each such employee, taken as a
whole, are equal to or better than those specified in Schedule 11.13. If any
such employee declines to accept the transfer of employment to L-P Engineered
Wood any severance or other payment required to such employee shall be the
responsibility of Evans and not L-P Engineered Wood. If any employee accepts
such transfer of employment to L-P Engineered Wood, any subsequent severance or
other claim of such employee shall be the responsibility of L-P Engineered Wood
<PAGE>
38 PART D
and not Evans unless such claim relates to any action or inaction of Evans prior
to the Closing Date or the information contained in Schedule 11.13 was
inaccurate in any material manner. Effective from the Closing Date, L-P
Engineered Wood shall become bound by the Collective Agreement as a successor
employer and shall assume all of Evans' obligations and liabilities thereunder.
L-P Engineered Wood shall also assume all obligations and liabilities of Evans
in respect of disability, salary, and other benefits (including the right to
resume employment) for individuals who are, at the Closing Date:
(a) in receipt of benefits from a short term or long term disability
program sponsored by Evans or in which Evans participates;
(b) in receipt of Worker's Compensation benefits on account of their
employment by Evans;
(c) on an authorized unpaid leave of absence (including maternity or
parental leave or unpaid sick leave) from Evans;
(d) on layoff from Evans with an existing right of recall pursuant to the
Collective Agreement; or
(e) entitled to post-retirement or other benefits (other than Supplemental
Pension Benefits) provided through a benefit program sponsored by
Evans or in which Evans participates,
provided each such individual is disclosed on Schedule 11.15 and the liability
or obligation to such individual arises under a plan disclosed on Schedule
11.14, or arises in the ordinary course of business after the date of this
Agreement and prior to the Closing Date.
13.6. VALUATIONS. No less than 30 days prior to the Closing Date, Evans shall
cause the Evans Actuary to prepare and provide to L-P Engineered Wood for its
approval, acting reasonably:
(a) an actuarial valuation of the Pension Plan (the "Solvency Deficiency
Valuation") which specifies the sum which would be sufficient, in the
opinion of the Evans Actuary, to fully fund the obligations of the
Pension Plan on a plan termination or "solvency" basis as of the
Closing Date (the "Solvency Deficiency"); and
(b) an actuarial valuation of the amounts which, in the opinion of the
Evans Actuary, are required on the Closing Date to fully fund the
Supplemental Pension Benefits to which each of the Current Active
Executive Members specified in Schedule 11.13 would be entitled if his
employment terminated on the Closing Date (the "Supplemental Pension
Obligation").
Evans shall provide to L-P Engineered Wood such access to financial working
papers as L-P Engineered Wood shall reasonably require to review the Solvency
Deficiency Valuation and the Supplemental Pension Obligation calculation. The
Solvency Deficiency Valuation and the Supplemental Pension Obligation
calculation shall be deemed to be approved by L-P Engineered Wood unless L-P
Engineered Wood delivers a Notice of Actuarial Disagreement to Evans pursuant to
Section 13.7.
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39 PART D
13.7. NOTICE OF ACTUARIAL DISAGREEMENT. If L-P Engineered Wood disagrees with
the Solvency Deficiency Valuation or the Supplemental Pension Obligation
calculations, L-P Engineered Wood shall give written notice of its disagreement
("Notice of Actuarial Disagreement") to Evans within 10 days following its
receipt thereof. If a Notice of Actuarial Disagreement is received by Evans in a
timely manner, then the Solvency Deficiency Valuation or the Supplemental
Pension Obligation calculations, as the case may be, together with any
amendments thereto, if any, shall become final and binding upon the parties on
the earlier of:
(a) the date the parties resolve in writing all matters specified in the
Notice of Actuarial Disagreement; or
(b) the date any Disputed Actuarial Matters are finally resolved in
writing by the Independent Accountant.
Any such Notice of Actuarial Disagreement shall state in reasonable
detail the nature of any disagreement so asserted. During a period of 5 days
following receipt by Evans of the Notice of Actuarial Disagreement, Evans and
L-P Engineered Wood shall attempt to resolve in writing any differences that
they may have with respect to any matter specified in the Notice of Actuarial
Disagreement. If at the end of such 5 day period, Evans and L-P Engineered Wood
have failed to reach written agreement with respect to all of such matters, then
all such matters as are specified in any Notice of Actuarial Disagreement and as
to which such written agreement has not been reached (the "Disputed Actuarial
Matters") shall be submitted to and reviewed by the Independent Accountant. The
Independent Accountant shall resolve all Disputed Actuarial Matters within 10
days of his or her appointment and his or her decision with respect to all
Disputed Actuarial Matters shall be final and binding upon Evans and L-P
Engineered Wood. The fees and expenses of the Independent Accountant in respect
of the Disputed Actuarial Matters shall be paid equally by L-P Engineered Wood
and Evans.
13.8. FUNDING. On or before the Closing Date Evans shall:
(a) contribute to the Pension Plan an amount equal to the Solvency
Deficiency as set out in the agreed Solvency Deficiency Valuation; and
(b) either:
(i) deliver to L-P Engineered Wood releases in form and substance
satisfactory to L-P Engineered Wood executed by each of the
Current Active Executive Members specified in Schedule 11.13
acknowledging that they have received payment of all Supplemental
Pension Benefits which is or may in the future become owing to
them in respect of any employment prior to the Closing Date; or
(ii) pay to L-P Engineered Wood an amount equal to the aggregate
Supplemental Pension Obligations in respect of each of the
Current Active Executive Members specified in Schedule 11.13, in
which case, for greater certainty, L-P Engineered Wood will
assume all obligations under the Supplemental Pension to such
Current Active Executive Members;
<PAGE>
40 PART D
13.9. PENSION TRANSFER. Effective as of the Closing Date, Evans shall assign to
L-P Engineered Wood and L-P Engineered Wood shall assume all of Evans' rights,
duties and obligations under and in respect of the Pension Plan, other than any
obligations in respect of Supplemental Pension or the Supplemental Pension
Benefits, and the assets thereof. Without limitation, L-P Engineered Wood shall
assume all responsibility for all pension benefits accrued under the Pension
Plan prior thereto for all participants in the Pension Plan, other than any
obligations in respect of Supplemental Pension Benefits. Prior to the Closing
Date L-P Engineered Wood and Evans shall co-operate to make all amendments to
the Pension Plan (and related documentation) and all applications for
registration or regulatory approval as are required to implement the terms of
this Section.
13.10. CONTINUED ACCESS TO EMPLOYEES. L-P Engineered Wood shall grant Evans
reasonable access to its employees after the Closing Date to resolve outstanding
matters, provided that Evans shall reimburse L-P Engineered Wood for any
out-of-pocket expenses which L-P Engineered Wood incurs in connection with its
co-operation pursuant to this Section.
13.11. CONSISTENT USE OF GAAP. Between the date of this Agreement and the
Closing Date, Evans will accurately record the Road Costs and the Silviculture
Obligations in its accounting records in accordance with GAAP consistently
applied and maintained.
13.12. VALIDITY OF REPRESENTATIONS. Evans, the Purchasers and L-P Canada shall
not, between the date of this Agreement and the Closing Date, do anything which
would result in any of their respective representations or warranties set forth
in this Agreement not being true and correct in all material respects on the
Closing Date as if such representation and warranty were made on the Closing
Date, or in the case of Evans, being untrue in a manner that has a Materially
Adverse Effect.
13.13. INDEMNIFICATIONS.
(a) Evans agrees to indemnify and hold harmless the Purchasers, L-P Canada
and each of their directors, officers, employees and Affiliates (the
"Purchasers Indemnified Parties") from and against and to reimburse
the Purchasers Indemnified Parties with respect to any and all losses,
damages, liabilities, costs, expenses and deficiencies, including
interest, penalties and reasonable attorneys' fees incurred by the
Purchasers Indemnified Parties by reason of or arising out of or in
connection with:
(i) any representation or warranty made by Evans in this Agreement
or in any other agreement or document delivered pursuant hereto
which shall have been false or inaccurate in any material
respect as of the date in respect of which it is made;
(ii) the nonfulfillment of any covenant or agreement on the part of
Evans in or under this Agreement or any other agreement or
document delivered pursuant hereto;
(iii) any material misstatement and/or misrepresentation or omission
of facts or circumstances from this Agreement or a Schedule
hereto or in any certificate, document or other agreement
furnished or to be furnished by Evans or any of its
representatives hereunder;
<PAGE>
41 PART D
(iv) contract damages, personal injury damages, property damage caused
by or arising out of Evans' acts or omissions;
(v) any and all acts, liabilities and obligations of Evans not
expressly assumed by the Purchasers or L-P Canada in this
Agreement or any other agreement or document delivered pursuant
hereto;
(vi) all product liability, manufacturing or design defect claims
arising from products manufactured by Evans prior to the Closing;
and
(vii) all Claims under any Environmental Law where the alleged conduct
or inaction constituting the basis of such Claim occurred prior
to Closing, whether or not Evans had knowledge of such potential
Claim at the time of Closing. Provided that none of the
Purchasers or L-P Canada shall have any right to indemnification
hereunder in respect of the environmental matters specified in
Part 1 of Schedule 11.8.
(b) each of the Purchasers and L-P Canada, jointly and severally, agrees
to indemnify and hold harmless Evans and its directors, officers,
employees and Affiliates (collectively, "Evans Indemnified Parties")
from and against and to reimburse Evans Indemnified Parties with
respect to any and all losses, damages, liabilities, costs, expenses
and deficiencies, including interest, penalties and reasonable
attorneys' fees incurred by Evans Indemnified Parties by reason of or
arising out of or in connection with:
(i) any representation or warranty made by the Purchasers or L-P
Canada in this Agreement or in any other agreement or document
delivered pursuant hereto which shall have been false in any
material respect as of the date in respect of which it is made;
(ii) the nonfulfillment of any covenant or agreement on the part of
the Purchasers or L-P Canada in or under this Agreement or any
other agreement or document delivered pursuant hereto;
(iii) any material misstatement and/or misrepresentation or omission
from this Agreement or a Schedule hereto or any certificate,
document or other agreement furnished or to be furnished by the
Purchasers or L-P Canada or any of their representatives;
(iv) contract damages, personal injury damages and property damage,
arising from the Purchasers' or L-P Canada's acts or omissions
after the Closing;
(v) all product liability, manufacturing or design defect claims
arising from products manufactured by the Purchasers or L-P
Canada after the Closing;
(vi) all Claims for environmental matters for which the alleged
conduct constituting the basis of any such Claim or action
occurred after the Closing;
<PAGE>
42 PART D
(vii) all Claims for amounts required to be collected and remitted by
Evans to the British Columbia Consumer Taxation Branch pursuant
to the SOCIAL SERVICE TAX ACT in respect of the transfer of the
Assets hereunder in excess of the amount, if any, remitted to
Evans for this purpose at Closing;
(viii) all Claims in respect of benefits payable under the Pension
Plan.
(c) No claim for indemnity pursuant to Section 13.13(a)(i)-(vii) or
(b)(i)-(iii) may be made after December 31, 2000, unless written
notice of a bona fide Claim has been given prior to such date,
specifying with reasonable particularity (to the extent that the
information is available) the factual basis for the Claim and the
amount of the Claim to the extent then known. No payment in respect of
an indemnity need be made to the Purchasers Indemnified Parties unless
and until the aggregate loss or damage suffered by the Purchasers
Indemnified Parties from all matters which entitle such parties to
indemnity pursuant to Section 13.13(a) exceeds US $50,000 and
thereafter indemnity need only be paid for the amount in excess of US
$50,000. No payment on account of Claims for indemnity under this
Section need be made by Evans.
(d) The obligations to indemnify contained in Section 13.13(b)(iv), (v),
(vi), (vii) and (viii) shall survive Closing and remain in effect
indefinitely. All other obligations to indemnify contained in this
Section shall survive Closing and remain in effect up to and including
December 31, 2000 (the "Indemnity Period"). Upon receipt of a notice
of a Claim within the Indemnity Period the indemnity obligation of the
indemnifying party shall continue in effect until the Claim is finally
resolved.
(e) For greater certainty, the Purchasers and L-P Canada acknowledge that
no Claim for indemnity may be made by the Purchasers or L-P Canada
against Evans pursuant to this Section in respect of the environmental
matters specified in Part 1 of Schedule 11.8.
13.14. LOAN AND PROMISSORY NOTE. L-P Canada covenants to advance to Evans an
amount equal to the Adjusted Evans Equipment Purchase Price (the "Loan") by bank
draft or certified cheque and Evans covenants to issue and deliver to L-P Canada
a promissory note in the form attached hereto as Schedule 13.14 (the "Promissory
Note") at Closing.
13.15. SLEC ASSETS. On or before the Closing Date, Evans shall cause the SLEC
Capital Leases to be terminated and shall acquire good and valid title to the
SLEC Assets.
13.16. PERMITTED ENCUMBRANCES. Evans covenants that it has no liability in
respect of any of the security interests identified as Permitted Encumbrances on
Appendix A of Schedule 2.1(by) by (2) and that it shall use its best reasonable
efforts to obtain and register a discharge of each such security interest prior
to the Closing Date. On or before the Closing Date Evans shall obtain and
deliver to L-P Engineered Wood registrable discharges of the security interests
identified as Permitted Encumbrances on Appendix A of Schedule 2.1(by) by (1).
13.17. DEFENSE OF CLAIMS. Evans shall use reasonable best efforts to defend any
Claims which have been or will be made which might result in a Lien against the
Assets or Operations.
<PAGE>
43 PART D
13.18. LAND TITLE OFFICE DISCHARGES. At or prior to Closing, Evans shall obtain
and deliver to L-P Engineered Wood registrable discharges of all of the
encumbrances listed in Schedule 3.2(c)(i), other than Undersurface Rights #F408
and Restrictive Covenant #M6239.
13.19. JOB PROTECTION LIABILITIES. Evans shall, on or before the Closing Date,
pay to its employees, former employees, logging contractors and former logging
contractors all payments under logging contracts and all salary and wages and/or
benefits deferred pursuant to Economic Plans entered into by the Job Protection
Commissioner for the Province of British Columbia in relation to Evans.
13.20. CURRENCY CONVERSION. All conversions of Canadian currency to United
States currency or of United States currency to Canadian currency required to be
made pursuant to the terms of this Agreement on or after the Closing Date on
account of any adjustments to the aggregate purchase price hereunder, or any
part thereof, shall be made according to the preferred volume currency
conversion rates as declared by The Royal Bank of Canada at its Main Branch in
Vancouver, British Columbia on the last day prior to the Closing Date on which
such branch is open for business.
13.21. DELIVERIES. Each of Evans, L-P Engineered Wood and L-P Canada covenant
and agree with each of the others to make at Closing the deliveries required of
such party pursuant to Section 18 hereof.
<PAGE>
44 PART E
PART E - GENERAL TERMS GOVERNING PURCHASES
14. INDEMNITY HOLDBACK
14.1. DELIVERY OF INDEMNITY HOLDBACK. Pursuant to Section 5.6, upon Closing, L-P
Engineered Wood shall deliver the Indemnity Holdback to the Escrow Agent to be
held in accordance with the terms of the Escrow Agreement to satisfy any Claims
during the Indemnity Period by L-P Engineered Wood, L-P Dawson Creek or L-P
Canada against Evans under this Agreement.
14.2. LIMITATION ON LIABILITY. Notwithstanding any other provision of this
Agreement or of any other document or agreement delivered pursuant to this
Agreement, L-P Engineered Wood, L-P Dawson Creek and L-P Canada agree that their
sole recourse in the event that an indemnity is payable by Evans (whether for
breach of representation and warranty or otherwise) shall be to the balance of
the monies from time to time held by the Escrow Agent as part of the Indemnity
Holdback and in accordance with the terms of the Escrow Agreement and for
greater certainty, the liability of Evans to L-P Engineered Wood, L-P Dawson
Creek and L-P Canada under or in relation to this Agreement is limited to such
monies.
14.3. CLAIMS ON INDEMNITY HOLDBACK. If a Claim is to be made by a party entitled
to indemnification the party entitled to such indemnification shall give written
notice to the indemnifying party immediately after the party entitled to
indemnification becomes aware of any fact, condition or event which may give
rise to a matter for which indemnification may be sought; provided that the
failure of any indemnified party to give timely notice shall not affect the
rights to indemnification except to the extent that the indemnifying party
demonstrates actual damage caused by such failure. If any Claim arises against
any party entitled to the benefit of indemnity and if the indemnifying party
acknowledges in writing to the indemnified party that the indemnifying party is
obligated under the terms of its indemnity in connection with such Claim then
the indemnifying party shall be entitled, if it so elects, to take control of
the defense and investigation of such lawsuit, action or Claim with counsel of
its choice to handle and defend the same at the indemnifying party's expense
provided that the indemnifying party and its counsel shall proceed with
diligence and in good faith in the investigation, trial and defense of such
Claim and any appeal; provided, however, that the indemnified party may, at its
own cost, participate in the investigation, trial and defense of such lawsuit or
action and any appeal arising therefrom. If an indemnifying party acknowledges
the obligation to indemnify, an indemnified party shall not thereafter admit any
liability with respect to or settle, compromise, or discharge any Claim without
the consent of the indemnifying party.
14.4. RELEASE OF INDEMNITY HOLDBACK. Following the expiration of the Indemnity
Period, the remaining balance of the Indemnity Holdback, if any, after (i) the
payment of Claims by the Purchasers and (ii) the reservation of amounts required
to satisfy unresolved Claims as and to the extent provided in the Escrow
Agreement, shall be distributed by the Escrow Agent in accordance with the terms
of the Escrow Agreement.
14.5. INTEREST ON INDEMNITY HOLDBACK. Interest on the Indemnity Holdback shall
be for the account of Evans and shall be paid in accordance with the terms of
the Escrow Agreement.
<PAGE>
45 PART E
15. COMPETITION MATTERS
15.1. HART-SCOTT RODINO ACT. Evans and the Purchasers shall make and complete
all necessary filings under the HART-SCOTT RODINO ANTITRUST IMPROVEMENTS ACT OF
1976, as amended (the "HSR Act"). If the waiting period (which term includes the
extension period) under the HSR Act has not expired by the Closing Date, the
Closing Date shall be delayed until five business days after the expiration of
the waiting period, provided that either Evans or the Purchasers in their sole
discretion may terminate this Agreement if the waiting period has not expired or
been terminated within 90 calendar days following the date of this Agreement.
15.2. COMPETITION ACT. Evans and the Purchasers shall make and complete all
necessary filings under the COMPETITION ACT, R.S.C. 1985, as amended (the
"Competition Act"). If, by the Closing Date, either the Commissioner (as defined
in the Competition Act) has not notified the parties that the Commissioner does
not at that time intend to make an application under section 92 of the
Competition Act in respect of the proposed purchase or the applicable period of
time specified in section 123 (1) of the Competition Act during which the
purchase may not proceed has not expired, the Closing Date shall be delayed
until five business days after the receipt of such notice or the expiry of such
period, whichever shall first occur, provided that either Evans or the
Purchasers in their sole discretion may terminate this Agreement if such notice
has not been received or such period has not expired within 90 calendar days
following the date of this Agreement.
16. INVESTMENT CANADA ACT
16.1. PURCHASER TO MAKE FILINGS. The Purchasers shall make and complete all
necessary filings under the INVESTMENT CANADA ACT, R.S.C. 1985, in accordance
with the provisions of such Act.
17. CONDITIONS PRECEDENT TO THE CLOSING
17.1. CONDITIONS PRECEDENT TO THE PURCHASERS' AND L-P CANADA'S OBLIGATIONS. The
obligations of the Purchasers and L-P Canada under this Agreement to consummate
the transactions contemplated by this Agreement shall be subject to the
satisfaction, on or prior to the Closing Date, of the following conditions, any
of which may be waived at the option of the Purchasers or L-P Canada:
(a) There shall have been no material breach by Evans in the performance
of any of its covenants.
(b) The representations and warranties of Evans contained or referred to
in this Agreement shall be true and correct in all material respects
on the Closing Date as if made on the Closing Date (except for changes
contemplated or permitted by this Agreement and representations and
warranties made as of a specified date, which shall be true and
correct in all material respects as of such date).
(c) All corporate action necessary to authorize the execution, delivery
and performance of this Agreement by Evans and the consummation of the
transactions contemplated hereby shall have been duly and validly
taken, and a good standing certificate and certified copies of all
directors and shareholder resolutions authorizing the execution and
delivery of this
<PAGE>
46 PART E
Agreement and the consummation of the transactions contemplated hereby
shall be delivered to the Purchasers.
(d) All corporate and other proceedings in connection with the
transactions contemplated and all documents and instruments incident
to such transactions shall be reasonably satisfactory in substance and
form to the Purchasers' Solicitors, and Evans shall have made
available to the Purchasers for examination the originals or true,
complete and correct copies of all records and documents relating to
the Operations and the Assets which the Purchasers may reasonably
request.
(e) L-P Engineered Wood shall have received a private ruling from the
British Columbia Consumer Taxation Branch confirming the availability
of an exemption from the payment of social services taxes pursuant to
the SOCIAL SERVICE TAX ACT (British Columbia) in respect of the
conveyance of the Evans Equipment hereunder. L-P Engineered Wood
agrees that the ruling request will be made forthwith after the date
of this Agreement and that the Evans' Solicitors will be afforded an
opportunity to review and comment upon the form of the ruling request
before it is submitted.
(f) All consents or approvals required to be obtained by Evans or the
Purchasers or both for the purpose of selling, assigning or
transferring the Assets shall have been obtained with such consents
and/or approvals being on terms and conditions satisfactory to the
Purchasers.
(g) The Ministry of Forests shall have consented to the assignment of the
Forest Tenures and any requirements imposed by the Minister of Forests
for British Columbia as a condition of his consenting to the transfer
of the Forest Tenures to L-P Engineered Wood shall not, in L-P
Engineered Wood's opinion, acting reasonably, materially reduce the
value of the Forest Tenures or have a material adverse effect on the
Operations or on any other forest industry operations of L-P
Engineered Wood's or its Affiliates' in British Columbia, provided
that the following requirements shall be deemed not to materially
reduce the value of such tenures or have a Material Adverse Effect:
(i) the reduction by 5% of the allowable annual cut under the
replaceable licences included in the Forest Tenures as provided
in Section 56 of the FOREST ACT and the requirement to obtain and
submit an independent current appraisal of the value of the
timber within the timber licences included in the Forest Tenures
and payment to the Crown of 5% of the value of that timber as
provided in Section 56 of the FOREST ACT;
(ii) confirmation by L-P Engineered Wood of:
A. maintenance of cut control requirements under the
Forest Tenures;
B. continued operation of the timber processing facilities
included in the Assets;
<PAGE>
47 PART E
C. acceptance of all obligations of the licensee under the
Forest Tenures; and
D. participation in programs as required by, and
compliance with operational requirements of, the
Ministry of Forests for British Columbia applicable
generally to the forest industry.
(h) Consent shall have been received from the Minister of Foreign Affairs
to the transfer to L-P Engineered Wood of the softwood lumber quota
allocation associated with the Operations on terms satisfactory to L-P
Engineered Wood.
(i) L-P Engineered Wood shall have reached an agreement with both Messrs.
Len Pettman and Manson Galligan for employment with L-P Engineered
Wood, on terms and conditions satisfactory to L-P Engineered Wood.
(j) L-P Engineered Wood shall have received evidence satisfactory to it
that no liabilities or obligations arising out of any plans or
arrangements developed by the Job Protection Commission of the
Province of British Columbia, whether actual or contingent, exist or
may attach to the Assets or the Operations after the Closing Date.
(k) Evans shall have furnished the Purchasers with all documents and other
items required under Sections 18.2 together with such other and
further documents and certificates, including certificates of Evans'
officers and others, as the Purchasers shall reasonably request in
light of customary practice in transactions of this kind to evidence
compliance with the conditions in this Agreement.
(l) No material damage shall have occurred to any of the Assets to the
extent that such damage or loss is not:
(i) repaired by the Closing Date; or
(ii) covered by insurance proceeds which are assigned to the
Purchasers at Closing and which are not included in the Working
Capital Assets; or
(iii) included in the Working Capital Liabilities or the Assumed Evans
Liabilities.
(m) L-P Engineered is satisfied that all liabilities and obligations of
Evans in respect of the security interests identified as Permitted
Encumbrances on Appendix A of Schedule 2.1(by) by (2) and which remain
registered against any of the Assets at the time of Closing, if any,
have been fully paid and satisfied.
(n) L-P Engineered Wood is satisfied that it will have no liability after
Closing and that the Assets will be subject to no Lien after Closing
in respect of any Claim by Emerald Coast Timber Ltd., the Workers'
Compensation Board or the Employment Standards Branch.
<PAGE>
48 PART E
17.2. CONDITIONS PRECEDENT TO OBLIGATIONS OF EVANS. Evans' obligations under
this Agreement shall be subject to the satisfaction on or prior to the Closing
Date of the following conditions, any of which may be waived at the option of
Evans:
(a) There shall have been no material breach by the Purchasers or L-P
Canada in the performance of any of their covenants.
(b) The representations and warranties of the Purchasers and L-P Canada
contained or referred to in this Agreement shall be true and correct
in all material respects on the Closing Date as if made on the Closing
Date.
(c) All corporate action necessary to authorize the execution, delivery
and performance of this Agreement by the Purchasers and L-P Canada and
the consummation of the transactions contemplated shall have been duly
and validly taken.
(d) All corporate and other proceedings in connection with the
transactions contemplated hereby and all documents and instruments
incident to such transactions shall be reasonably satisfactory in
substance and form to Evans' Solicitors.
(e) The Purchasers and L-P Canada shall have furnished Evans with all
documents and other items required under Sections 18.3, 18.4 and 18.5
together with such other and further documents and certificates,
including certificates of the Purchasers' or L-P Canada's officers and
others, as Evans shall reasonably request in light of customary
practice in transactions of this kind to evidence compliance with the
conditions in this Agreement.
(f) L-P Engineered Wood shall have offered employment to salaried
employees of Evans and shall assume the obligations and liabilities of
Evans in respect of disability, salary and other benefits to the
specified individuals in accordance with Section 13.5.
(g) Other than requirements imposed on Evans to fulfil obligations of
Evans existing as at the date of this Agreement, no requirements
imposed by the Minister of Forests for British Columbia as a condition
of his or her consenting to the transfer of the Forest Tenures to L-P
Engineered Wood to the extent that they directly affect Evans, shall,
in Evans' opinion, acting reasonably, have a Material Adverse Effect.
17.3. MUTUAL CONDITIONS PRECEDENT TO THE PARTIES' OBLIGATIONS. The obligation of
each of the parties under this Agreement to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, on or prior
to the Closing Date, of the following conditions precedent, none of which may be
waived by any party hereto unless also waived by all other parties:
(a) No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the sale or any of the other
transactions contemplated by this Agreement shall be in effect. No
statute, rule, regulation, order, injunction or decree shall
<PAGE>
49 PART E
have been enacted, entered, promulgated or enforced by any Authority
which prohibits, restricts or makes illegal the proposed transaction.
(b) The applicable waiting period, including any extensions, under the HSR
Act and the Competition Act shall have expired or been terminated and
none of the Department of Justice (U.S.), the Federal Trade Commission
nor the Competition Tribunal shall have taken any action to enjoin or
delay the consummation of the transactions contemplated.
(c) Consent having been received from Trus Joist MacMillan to the
assignment by Evans to L-P Engineered Wood on the Closing Date of the
Trus Joist Sales Agreement, including without limitation, a covenant
from Trus Joist MacMillan to assign title to the Trus Joist Scarfer
directly to L-P Engineered Wood pursuant to the terms of the Trus
Joist Sales Agreement on April 30, 2000.
18. CLOSING PROCEDURE
18.1. THE CLOSING. The completion of the sale of the Evans Assets and the SLEC
Assets shall be consummated at the offices of the Purchasers' Solicitors at 10
o'clock in the forenoon, local time, on October 31, 1999, or at such other
place, date and/or time as the parties may agree, but in any case, after all
conditions to Closing have been met, including the conditions specified in
Sections 15 and 16 hereof (the "Closing Date").
18.2. EVANS' DELIVERIES AT CLOSING. Subject to the terms and conditions of this
Agreement, Evans shall deliver the following at or before the Closing:
(a) to the Purchasers and L-P Canada, in form satisfactory to the
Purchasers' Solicitors, acting reasonably:
(i) all transfers, bills of sale, assignments and other deeds which
are required to transfer the Assets and the Operations to L-P
Engineered Wood or as the Purchasers may direct and in
registrable form, where applicable;
(ii) executed consents to the transfer of the Assumed Contracts,
including the Assumed Capital Leases, and other agreements or
Permits to L-P Engineered Wood, where required;
(iii) all other instruments in such form as may be reasonably
requested by L-P Engineered Wood to vest in L-P Engineered Wood
fully all of Evans' right, title and interest in the Evans
Assets and the Operations;
(iv) a Solicitors Opinion from Evans' Solicitors;
(v) certified copies of resolutions of the directors of Evans and of
a special resolution of the members of Evans authorizing the
entering into of this Agreement and the sale of the Assets as
contemplated by this Agreement;
<PAGE>
50 PART E
(vi) a certificate of an officer of Evans as to the accuracy of
Evans' representations and warranties as of the Closing Date
and the performance of the covenants and agreements of Evans to
be performed at or before the Closing Date, with particulars of
any inaccuracy or non-performance;
(vii) physical possession of the Evans Assets and the SLEC Assets;
(viii) an executed copy of the Escrow Agreement;
(ix) the Books and Records;
(x) the executed Promissory Note;
(xi) all other instruments in such form as may be reasonably
requested by L-P Dawson Creek to vest in L-P Dawson Creek fully
all of Evans' right, title and interest in the SLEC Assets; and
(xii) all such other instruments as may be reasonably requested by
the Purchasers to consummate the transactions contemplated;
(b) to the Escrow Agent, an executed copy of the Escrow Agreement.
18.3. L-P ENGINEERED WOOD'S DELIVERIES AT CLOSING. Subject to the terms and
conditions of this Agreement, L-P Engineered Wood shall deliver the following at
the Closing:
(a) to Evans:
(i) a Solicitors Opinion from the Purchasers' Solicitors;
(ii) the Estimated Residual Evans Assets Purchase Price less the
Adjustment Holdback and the Indemnity Holdback;
(iii) the assumption and indemnity agreement(s) provided for in
Section 7.1 to confirm the assumption by L-P Engineered Wood
and L-P Canada of the Working Capital Liabilities, the Assumed
Evans Liabilities and the Assumed Evans Obligations;
(iv) the Preferred Shares required in accordance with Section 4.4;
(v) a certified copy of a resolution of the directors of L-P
Engineered Wood authorizing the purchase of the Evans Assets
and the assumption of the Assumed Evans Liabilities and the
Assumed Evans Obligations as contemplated by this Agreement;
(vi) an executed copy of the Escrow Agreement; and
(vii) all such other instruments as may be reasonably requested by
Evans to consummate the transactions contemplated;
(b) to the Escrow Agent:
<PAGE>
51 PART E
(i) the Adjustment Holdback;
(ii) the Indemnity Holdback; and
(iii) an executed copy of the Escrow Agreement.
18.4. L-P DAWSON CREEK'S DELIVERIES AT CLOSING. Subject to the terms and
conditions of this Agreement, L-P Dawson Creek shall deliver the following at
the Closing:
(a) to Evans:
(i) a Solicitors Opinion from the Purchasers' Solicitors;
(ii) the SLEC Purchase Price;
(iii) a certified copy of a resolution of the directors of L-P Dawson
Creek authorizing the purchase of the SLEC Assets as
contemplated by this Agreement;
(iv) an executed copy of the Escrow Agreement; and
(v) all such other instruments as may be reasonably requested by
Evans to consummate the transactions contemplated;
(b) to the Escrow Agent, an executed copy of the Escrow Agreement.
18.5. L-P CANADA'S DELIVERIES AT CLOSING. Subject to the terms and conditions of
this Agreement, L-P Canada shall deliver the following at the Closing:
(a) to Evans:
(i) a Solicitors Opinion from the Purchasers' Solicitors;
(ii) the assumption and indemnity agreement(s) provided for in
Section 7.1 to guarantee the assumption by L-P Engineered Wood
of the Working Capital Obligations, the Assumed Evans
Liabilities, the Assumed Liabilities and the Assumed Evans
Obligations;
(iii) a certified copy of a resolution of the directors of L-P Canada
authorizing the execution and delivery by L-P Canada of the
assumption and indemnity agreements and the making of the Loan
as contemplated by this Agreement;
(iv) the Loan; and
(v) all such other instruments as may be reasonably requested by
Evans to consummate the transactions contemplated.
<PAGE>
52 PART E
18.6. PUBLIC ANNOUNCEMENT. The Purchasers and Evans each shall have the right to
approve any press release or other public announcement by any of the parties
concerning the execution of this Agreement or the consummation of the
transactions contemplated by this Agreement, which approval shall not be
unreasonably withheld. For this reason, each party shall provide the other
parties with copies of any such proposed announcement at a reasonable time in
advance of the intended publication thereof. Evans and the Purchasers agree to
make a good faith effort to cause any such announcements to be made jointly.
19. TERMINATION
19.1. EVENTS OF TERMINATION. This Agreement may be terminated and abandoned at
any time prior to the Closing:
(a) By mutual written consent of the Purchasers and Evans;
(b) By any party if the Closing has not occurred prior to November 30,
1999 or such later date as the parties shall mutually approve and such
non-occurrence shall not be due to any failure of such party to
perform its obligations hereunder;
(c) By Evans or by the Purchasers if the other party shall have failed to
comply in any material respect with any of the provisions of this
Agreement for a period of twenty (20) days after the other party shall
have notified the noncomplying party of such failure to comply in
writing, or if there shall have occurred any event, development or
circumstance prior to the Closing which is beyond the control of the
parties and which has a Material Adverse Effect.
19.2. EFFECT OF TERMINATION. If this Agreement is terminated pursuant to Section
19.1, this Agreement shall become wholly void and of no force or effect, without
any liability or further obligation on the part of the Purchasers, Evans or L-P
Canada (or any of their respective directors, officers, employees, agents or
representatives); provided that such termination shall not relieve the
Purchasers, Evans or L-P Canada from any liability for any intentional breach of
any covenant or agreement contained in this Agreement.
19.3. SPECIFIC PERFORMANCE. The parties acknowledge that damages may be an
inadequate remedy for a breach of this Agreement and that the obligations of the
parties shall be specifically enforceable, but the availability of specific
performance shall in no way limit the availability of damages.
20. MISCELLANEOUS
20.1. NOTICES. All notices and other communications required or permitted
hereunder shall be in writing and, unless otherwise provided in this Agreement
shall be given or made (and shall be deemed to have been duly given or made upon
receipt) by delivery in person, by courier service, by telecopy or by registered
or certified mail (postage prepaid, return receipt requested) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) If to L-P Engineered Wood to:
<PAGE>
53 PART E
Louisiana-Pacific Canada
Engineered Wood Products Ltd.
111 S.W. Fifth Avenue
U.S Bancorp Tower
Portland, Oregon 97204
Attn: Director, Engineered Wood Products
Telecopy: (503) 796-0203
With a copy to:
Louisiana-Pacific Corporation
111 S.W. Fifth Avenue
U.S. Bancorp Tower
Portland, Oregon 97204
Attn: General Counsel
Telecopy: (503) 796-0323
and:
Russell & DuMoulin
Barristers & Solicitors
2100 - 1075 West Georgia Street
Vancouver, B.C. V6E 3G2
Attn: John S. McKercher
Telecopy: (604) 631-3232
(b) If to L-P Dawson Creek to:
Louisiana-Pacific Canada
Dawson Creek Ltd.
111 S.W. Fifth Avenue
U.S Bancorp Tower
Portland, Oregon 97204
Attn: Director, Engineered Wood Products
Telecopy: (503) 796-0203
With a copy to:
Louisiana-Pacific Corporation
111 S.W. Fifth Avenue
U.S. Bancorp Tower
Portland, Oregon 97204
Attn: General Counsel
Telecopy: (503) 796-0323
<PAGE>
54 PART E
and:
Russell & DuMoulin
Barristers & Solicitors
2100 - 1075 West Georgia Street
Vancouver, B.C. V6E 3G2
Attn: John S. McKercher
Telecopy: (604) 631-3232
(c) If to L-P Canada to:
Louisiana-Pacific Canada Ltd.
111 S.W. Fifth Avenue
U.S Bancorp Tower
Portland, Oregon 97204
Attn: Director, Engineered Wood Products
Telecopy: (503) 796-0203
With a copy to:
Louisiana-Pacific Corporation
111 S.W. Fifth Avenue
U.S. Bancorp Tower
Portland, Oregon 97204
Attn: General Counsel
Telecopy: (503) 796-0323
and:
Russell & DuMoulin
Barristers & Solicitors
2100 - 1075 West Georgia Street
Vancouver, B.C. V6E 3G2
Attn: John S. McKercher
Telecopy: (604) 631-3232
(d) If to Evans prior to Closing to:
Evans Forest Products Limited
P.O. Box 170
1221 - 10th Avenue North
Golden, B.C.
Canada VOA 1HO
Attn: President
Telecopy: (250) 344-8870
<PAGE>
55 PART E
If to Evans after Closing to:
Evans Forest Products Limited
c/o St. Laurent Evans Canada Corp.
120 NE 136th Avenue
Suite 200
Vancouver, WA 98684
U.S.A.
Attn: President
Telecopy: (360) 944-4699
In each case with a copy to:
Lawson Lundell Lawson & McIntosh
1600-925 West Georgia Street
Vancouver, B.C.
Canada V6C 3L2
Attn: Gordon Chambers
Telecopy: (604) 669-1620
or to such other address or addresses as any such party may from time to time
designate for itself by like notice.
20.2. THE PURCHASERS' CONSENTS. Any consent which Evans is required to obtain
from the Purchasers, or either of them, pursuant to this Agreement may be given
by Becky Barckley or any other nominee of the Purchasers designated in writing
to Evans by the Purchasers, or either of them.
20.3. EXPENSES. Except as otherwise expressly provided herein, each party shall
pay any expenses incurred by it incident to this Agreement and in preparing to
consummate the transactions provided for herein.
20.4. BROKERAGE. Each of the parties agrees to pay any brokerage fees,
commissions or finders' fees owing to any broker or finder which it has employed
in connection with the transactions contemplated by this Agreement.
20.5. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and enure to
the benefit of each of the parties hereto and their respective successors and
permitted assigns, but shall not be assignable or delegable in whole or in part
without the prior written consent of all parties, which shall not be
unreasonably withheld.
20.6. WAIVER. The parties, by written notice to the other parties, may (a)
extend the time for performance of any of the obligations or other actions of
the others under this Agreement, (b) waive any inaccuracies in the
representations or warranties of the others contained in this Agreement or in
any document delivered pursuant to this Agreement, (c) waive compliance with any
of the conditions or covenants of the others contained in this Agreement, or (d)
waive or modify performance of any of the obligations of the others under this
Agreement; provided, however, that no party may without the consent of the
others make or grant such extension of time, waiver of inaccuracies or
compliance, or waiver or modification of performance with respect to its own
obligations, representations, warranties, conditions, or
<PAGE>
56 PART E
covenants hereunder. Except as provided in the preceding sentence, no action
taken pursuant to this Agreement shall be deemed to constitute a waiver of
compliance with any other representations, warranties, covenants or agreements
contained in this Agreement and shall not operate or be construed as a waiver of
any subsequent breach, whether of a similar or dissimilar nature.
20.7. ENTIRE AGREEMENT. This Agreement, together with the Schedules, which are
expressly incorporated herein, supersedes any other agreement, whether written
or oral, that may have been made or entered into by the parties (or by any
director, officer or representative of such parties) relating to the matters
contemplated. This Agreement, together with the Schedules, which are expressly
incorporated herein, constitutes the entire agreement by and among the parties
relating to the matters contemplated, and there are no agreements,
representations or commitments, except as expressly set forth herein.
20.8. AMENDMENTS, SUPPLEMENTS. This Agreement may only be amended by the
parties' written agreement.
20.9. DISCLOSURE. The parties acknowledge and agree that disclosure of
information in any Schedule or other part of this Agreement constitutes
disclosure for all purposes of this Agreement.
20.10. EXCLUSIVE APPLICABLE LAW. This Agreement is entered into in the Province
of British Columbia and the legal relations among the parties shall be governed
by and construed in accordance with the laws of the Province of British Columbia
exclusively.
20.11. RECOVERY OF LITIGATION COSTS. If any legal action or other proceeding is
brought by any party against any other party(ies) for the enforcement of this
Agreement or because of an alleged dispute, default or misrepresentation in
connection with the provisions of this Agreement, the prevailing party shall be
entitled to recover from the such other party(ies) reasonable legal fees and
other costs it has incurred in that action or proceeding, or on any appeal in
addition to any other relief to which it may be entitled.
20.12. SEVERABILITY. If any provision of this Agreement shall be held or deemed
to be, or shall in fact be, illegal, inoperative or unenforceable, the same
shall not affect any other provision or render the same invalid, inoperative or
unenforceable to any extent whatsoever.
20.13. ACCESS TO INFORMATION. Between the date of this Agreement and the Closing
Date, Evans agrees that it shall give the Purchasers and the Purchasers'
authorized representatives access at all reasonable times to the Assets and the
Books and Records. In addition, Evans covenants and agrees that the Purchasers
and their authorized representatives may make such inspections as they may
reasonably require and the Evans shall furnish to the Purchasers and their
authorized representatives, as the case may be, such financial and operating
data and other information with respect to the Assets as the Purchasers and
their authorized representatives may reasonably request.
20.14. POST-CLOSING CO-OPERATION. After the Closing, upon reasonable notice, the
Purchasers shall give Evans' officers, attorneys, accountants and other
authorized representatives reasonable access, during normal business hours, to
the Books and Records and the Purchasers shall permit such persons to examine
and copy such Books and Records to the extent reasonably requested by Evans in
connection with the preparation of the Evans' tax and financial reporting
matters and other business purposes. After the Closing, the Purchasers
<PAGE>
57 PART E
shall cause their employees and agents to cooperate fully with Evans in
connection with such reasonable examination and copying of such Books and
Records.
20.15. DISPOSAL OF BOOKS AND RECORDS. The Purchasers agree that they shall
preserve and keep the Books and Records in the Purchasers' possession for a
period of at least six (6) years from the end of the fiscal year to which such
Books or Records pertain. At the end of each fiscal year in which the Purchasers
wish to dispose of any Books and Records, the Purchasers shall, at least 90 days
before disposing of any of such Books and Records, provide written notice to
such effect to Evans, and Evans shall be given an opportunity, at their cost and
expense, to remove and retain all or any part of such Books and Records as Evans
may select.
20.16. FURTHER ASSURANCES. Subject to the terms and conditions of this
Agreement, the parties shall use commercially reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Regulations to consummate and
make effective as promptly as possible the transactions contemplated by this
Agreement, and to cooperate with each other in connection with the foregoing,
including, without limitation, using all reasonable efforts to: (a) obtain all
necessary waivers, consents and approvals from other parties to leases and other
Contracts being assigned to the Purchasers hereunder; (b) obtain all necessary
consents, approvals and authorizations as are required to be obtained under any
federal, provincial or foreign law or Regulation including the consent of the
Minister of Forests under the FOREST ACT; (c) lift or rescind any injunction or
restraining order or other Order adversely affecting the ability of the parties
to consummate the transactions contemplated; (d) effect all necessary
registrations and filings; and (e) fulfil all conditions to the obligations of
the parties under this Agreement.
20.17. NO THIRD-PARTY BENEFICIARIES. This Agreement is for the sole benefit of
the parties hereto and their successors and permitted assigns and nothing
herein, express or implied, is intended to or shall confer upon any other Person
or entity any legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
20.18. COUNTERPARTS. This Agreement may be signed in as many counterparts as may
be necessary, each of which so signed shall be deemed to be an original, and
such counterparts together shall constitute one and the same instrument and
notwithstanding the date of execution shall be deemed to bear the date set forth
below. Executed copies of this Agreement may be delivered by facsimile
transmission and it shall not be necessary to confirm execution by delivery of
originally executed documents.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement by its duly authorized officers on the 23 day of August, 1999.
LOUISIANA-PACIFIC CANADA EVANS FOREST PRODUCTS LIMITED.
ENGINEERED WOOD PRODUCTS LTD.
By: /s/ William L. Hebert By: /s/ George St. Laurent
-------------------------- -----------------------------
Title: Vice President Title: Chairman
-------------------------- ---------------------------
<PAGE>
58 PART E
LOUISIANA-PACIFIC CANADA LOUISIANA-PACIFIC CANADA LTD.
DAWSON CREEK LTD.
By: /s/ William L. Hebert By: /s/ William L. Hebert
-------------------------- -----------------------------
Title: Vice President Title: Vice President
-------------------------- ---------------------------
<PAGE>
Exhibit 2.3
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
This Amending Agreement (the "Amending Agreement"), is made by
and among EVANS FOREST PRODUCTS LIMITED, a British Columbia company ("Evans"),
LOUISIANA-PACIFIC CANADA ENGINEERED WOOD PRODUCTS LTD., a British Columbia
company ("L-P Engineered Wood"), LOUISIANA-PACIFIC CANADA DAWSON CREEK LTD., a
British Columbia company ("L-P Dawson Creek") and LOUISIANA-PACIFIC CANADA LTD.,
a British Columbia company ("L-P Canada").
RECITALS
A. The parties hereto have entered into an asset purchase agreement (the "Asset
Purchase Agreement") dated August 23, 1999 providing for the acquisition by L-P
Engineered Wood and L-P Dawson Creek of certain Assets and Operations (as those
terms are defined in the Asset Purchase Agreement) of Evans on the terms and
subject to the conditions set out therein; and
B. The parties wish to amend the Asset Purchase Agreement as hereinafter
provided.
NOW, Therefor, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties hereby
agree as follows:
1. INTERPRETATION
1.1 DEFINED TERMS. Unless the context otherwise requires, all terms used in this
Amending Agreement which are defined in the Asset Purchase Agreement have the
respective meanings given to them in the Asset Purchase Agreement.
1.2 SECTION REFERENCES. All references in this Amending Agreement to a
particular Section, paragraph or Schedule shall be deemed to be references to a
particular Section, paragraph or Schedule of the Asset Purchase Agreement.
1.3 SCHEDULES. The Schedules to this Amending Agreement are as follows:
<TABLE>
<CAPTION>
<S> <C>
Schedule A Amended Schedule 3.2(a) - Working Capital Liabilities
Schedule B Amended Schedule 3.2(c)(i) - Lands
Schedule C Equipment Inventory
Schedule D New Schedule 13.24 - Employee Transfer Agreement
Schedule E New Appendix B to Schedule 2.1(b) - Foreign Encumbrances
</TABLE>
[The Schedules listed above are not being filed with this Amending Agreement. A
copy of any such Schedule will be furnished supplementally to the Commission
upon request.]
2. FOREST TENURES
2.1 AMENDMENT TO SECTION 2.1. Section 2.1(az)(iv) is amended by deleting the
number "T0587" and substituting therefor the number "T0597".
<PAGE>
-2-
2.2 AMENDMENT TO SCHEDULE 11.3(a). Schedule 11.3(a) is amended by deleting the
letters and numbers "FLA A18669" in each instance where they occur and
substituting therefor the letters and numbers "FLA 18669".
3. WORKING CAPITAL SCHEDULE
3.1 SCHEDULE 3.2(a) - WORKING CAPITAL ASSETS AND LIABILITIES. Schedule 3.2(a) is
deleted and the Schedule attached hereto as Schedule A is substituted therefor.
4. INTANGIBLE ASSETS SCHEDULE
4.1 Schedule 3.2(b) - Intangible Assets. Schedule 3.2(b) is amended by:
(a) deleting the reference to COFI ROOF & Design Certification Mark
registered in the United States under registration number 1,637,975 on
page 1; and
(b) deleting the words ", the only one of which is registered in the
Canadian Trademark Database or the U.S. Patent and Trademark Office is
"COFI FLOOR" on page 2.
The parties acknowledge and agree that the "CANPLY" Certification Mark referred
to in the last paragraph on page 3 of Schedule 3.2(b) was registered in Canada
on October 19, 1999 under registration number TMA518,115.
5. LANDS SCHEDULE
5.1 SCHEDULE 3.2(c)(i) - LANDS. Schedule 3.2(c)(i) is deleted and the Schedule
attached as Schedule B hereto substituted therefor.
6. SCHEDULE 3.2(C)(II)
6.1 Schedule 3.2(c)(ii) - Aquatic Lands Licenses. Schedule 3.2(c)(ii) is amended
by:
(a) the deletion of Aquatic Lands License No. 702846;
(b) the amendment of Aquatic Lands License No. 402757 to Aquatic Lands
License No. 402755;
(c) the amendment of Aquatic Lands License No. 401247 to Aquatic Lands
License No. 401747.
7. ALLOCATION OF PURCHASE PRICE
7.1 ALLOCATION OF THE PURCHASE PRICE. Section 3.5 is amended by deleting the
words "October 11, 1999" and substituting "November 24, 1999" therefor.
<PAGE>
-3-
8. PREFERRED SHARES
8.1 PAYMENT OF ADJUSTED EVANS EQUIPMENT PURCHASE PRICE. Section 4.4 is deleted
and the following substituted therefor:
"4.4 PAYMENT OF ADJUSTED EVANS EQUIPMENT PURCHASE PRICE . The
Adjusted Evans Equipment Purchase Price shall be payable by
the allotment, issuance and delivery by L-P Engineered Wood
to Evans of a number of Preferred Shares (the "Preferred
Shares") which:
(i) will be issued for a price equal to the Canadian Dollar
equivalent of US $1,000 per share;
(ii) have no par value;
(iii) have an aggregate redemption price equal to the
Adjusted Evans Equipment Purchase Price converted into
Canadian Dollars in accordance with Section 13.20; and
(iv) have attached thereto the rights and restrictions set
forth in Schedule 4.4."
8.2 SPECIAL RIGHTS AND RESTRICTIONS. Schedule 4.4 is amended by:
(a) deleting Section 27.1 and substituting the following therefor:
"27.1 DEFINITIONS
In this Part, "Class A Preferred Redemption Price"
means, with respect to a Class A Preferred Share, the Canadian
Dollar equivalent to One Thousand (US $1,000.00) U.S. Dollars
converted in accordance with the preferred volume currency
conversion rates as declared by the Royal Bank of Canada at
its Main Branch in Vancouver, British Columbia on the last day
prior to the issue date of such Class A Preferred Share or
which such branch is open for business.";
(b) in Section 27.5(a), adding the words "on or after the day which
is 8 months and one day after the date of issue of the Class A
Preferred Shares," after the word "time" in the 2nd line;
(c) deleting Section 27.5(f)(ii) and substituting the following
therefor:
"(ii) by delivery to the holders thereof of that promissory
note dated the date of issue of the Class A Preferred
Shares and issued by Evans Forest Products Limited
(as the borrower) to Louisiana-Pacific Canada Ltd.
(as the lender), in an amount equal to the aggregate
Class A Preferred Redemption Price of all of the
Class A Preferred Shares outstanding on the date of
issue of such promissory note, duly endorsed by the
lender for assignment, without recourse, to the
holders, in which case such delivery shall discharge
all liability of the Company for the Class A
Preferred Redemption Price.";
(d) deleting Section 27.6(a) and substituting the following therefor:
<PAGE>
-4-
"(a) The holders of all of the issued Class A Preferred
Shares may, at the holders' option, at any time on or
after the day which is 8 months and one day after the
date of issue of the Class A Preferred Shares, upon
giving notice as provided in Article 27.6(b), require
the Company to redeem at any time the whole, but not
part, of the issued Class A Preferred Shares by
payment of the Class A Preferred Redemption Price for
each share to be redeemed."; and
(e) deleting Section 27.6(e)(ii) and substituting the following
therefor:
"(ii) by delivery to the holders thereof of that promissory
note dated the date of issue of the Class A Preferred
Shares and issued by Evans Forest Products Limited
(as the borrower) to Louisiana-Pacific Canada Ltd.
(as the lender), in an amount equal to the aggregate
Class A Preferred Redemption Price of all of the
Class A Preferred Shares outstanding on the date of
issue of such promissory note, duly endorsed by the
lender for assignment, without recourse, to the
holders, in which case such delivery shall discharge
all liability of the Company for the Class A
Preferred Redemption Price."
9. PAYMENT FOR EQUIPMENT INVENTORY
9.1 PAYMENT OF EQUIPMENT INVENTORY PURCHASE PRICE. Notwithstanding the
provisions of the Asset Purchase Agreement, L-P Engineered Wood shall pay the
purchase price (the "Equipment Inventory Purchase Price") for the "Inventory"
listed on the attached Schedule C hereto (the "Equipment Inventory"), being Cdn.
$2,666,000, by the issuance of additional Preferred Shares pursuant to Section
4.4, and accordingly:
(a) the Equipment Inventory Purchase Price shall be subtracted from
the payment due by L-P Engineered Wood to Evans on account of the
Estimated Residual Evans Assets Purchase Price pursuant to
Section 5.4;
(b) the number of Preferred Shares issued pursuant to Section 4.4
shall be increased by a number of Preferred Shares having an
aggregate Class A Redemption Price (as defined in Schedule 4.4)
equal to the Equipment Inventory Purchase Price;
(c) the amount of the Loan granted by L-P Canada to Evans pursuant to
Section 13.14 shall be increased by the U.S. equivalent to the
Equipment Inventory Purchase Price; and
(d) the amount of the Promissory Note to be issued by Evans to L-P
Canada pursuant to Section 13.14 shall be increased by the amount
of the Equipment Inventory Purchase Price.
10. CONTRACTS AND CONSENTS
10.1 SCHEDULE 11.2 - EVANS CONSENTS. Schedule 11.2 is amended by the addition
under the heading "CONSENTS TO BE OBTAINED" of the following items 23 and 24:
<PAGE>
-5-
"23 Consent of Forest Renewal BC to the assignment to L-P
Engineered Wood of the Multi-Year Agreements between
Forest Renewal BC and Evans dated June 19, 1998, as
amended, and May 29, 1998.
24 Consent of Beaumont Timber Company Ltd. to the
assignment to L-P Engineered Wood of the Road use
License agreement dated as of May 15, 1996."
10.2 SCHEDULE 11.2 - EVANS CONSENTS. Schedule 11.2 is further amended by the
change of number "23" to number "25" under the heading "CONSENTS WHICH WILL NOT
BE OBTAINED".
10.3 SCHEDULE 11.3(a) - CONTRACTS. Schedule 11.3(a) is amended by the addition
under the heading "PART 1 - ASSUMED CONTRACTS, MISCELLANEOUS AGREEMENTS" of the
following items 8, 9 and 10:
"8 Multi-Year Agreement number 0000077 between Forest
Renewal BC and Evans dated June 19, 1998, as amended
June 25, 1998, September 28, 1998 and September 15,
1999.
9 Multi-Year Agreement number 0000207 between Forest
Renewal BC and Evans dated May 29, 1998.
10 Road Use License granted by Beaumont Timber Company
Ltd. to Evans and dated as of May 15, 1996."
11. PENSION PLAN AND SUPPLEMENTAL PENSION
11.1 EFFECTIVE DATE OF VALUATIONS. Section 13.6 is amended by:
(a) deleting the words "the Closing Date" in the fourth line of
paragraph (a) and substituting therefor "August 31, 1999"; and
(b) deleting the words "the Closing Date" in the fifth line of
paragraph (b) and substituting therefor "August 31, 1999".
11.2 PENSION TRANSFER. Section 13.9 is amended by:
(a) deleting the words "the Closing Date" in the first line of
Section 13.9 and substituting therefor "January 1, 2000 at 12:00
a.m.";
(b) inserting the words "as of January 1, 2000 at 12:00 a.m."
immediately following the word "limitation" in the fifth line of
Section 13.9; and
(c) deleting the last sentence of Section 13.9 and substituting
therefor:
"On the Closing Date, Evans and L-P Engineered Wood shall
execute all documents as are necessary to amend and transfer
the Pension Plan to L-P Engineered Wood and shall forthwith
make all such applications for registration or regulatory
approval as are required to implement the terms of
<PAGE>
-6-
this Section. Evans and L-P Engineered Wood shall use
reasonable efforts to ensure that all such regulatory
approvals are obtained."
11.3 INVESTMENTS CONSISTENT WITH PAST PRACTICE. The following is added as
Section 13.23:
"13.23 INVESTMENTS CONSISTENT WITH PAST PRACTICE. Between
August 31, 1999 and the Closing Date, Evans shall make all
investment decisions in respect of the Pension Plan and the
Supplemental Pension in a manner which is consistent with the
past practice of Evans."
11.4 CONDITION PRECEDENT REGARDING PENSION PLAN INVESTMENTS. Section 17.1 is
amended by adding the following as paragraph (o):
"(o) Between August 31, 1999 and the Closing Date, Evans shall
not, in the opinion of L-P Engineered Wood, acting
reasonably, have made any investment decisions in respect of
the Pension Plan or the Supplemental Pension which are
inconsistent with the past practice of Evans and which have
not been approved by L-P Engineered Wood in writing. In the
event that the parties do not, on the Closing Date, agree on
whether any particular investment decision is consistent
with the past practice of Evans, the matter shall be
referred to the Independent Accountant who shall make a
final and binding determination within 14 days of the
referral and whose fees and expenses shall be paid equally
by Evans and L-P Engineered Wood. In the event that a matter
is referred to the Independent Accountant pursuant to this
Paragraph, the Closing Date shall be delayed until the
Independent Accountant's decision is rendered."
12. LOAN AND PROMISSORY NOTE
12.1 LOAN AND PROMISSORY NOTE IN CANADIAN CURRENCY. Section 13.14 is deleted and
the following substituted therefor:
"13.14 LOAN AND PROMISSORY NOTE. L-P Canada covenants to
advance to Evans an amount, in US Dollars, equal to the
Adjusted Evans Equipment Purchase Price (the "Loan") by bank
draft or certified cheque and Evans covenants to issue and
deliver to L-P Canada at Closing a promissory note in the form
attached hereto as Schedule 13.14 (the "Promissory Note")
representing the amount of the Loan converted into Canadian
Dollars in accordance with Section 13.20."
12.2 AMENDMENT TO PROMISSORY NOTE. Schedule 13.14 is amended by deleting "US"
wherever it appears and substituting "Cdn." therefor.
13. EVANS NAME
13.1 CHANGE OF NAME. The following is added as Section 13.22:
<PAGE>
-7-
"13.22 CHANGE OF NAME. Forthwith after the Closing Date Evans
shall change its corporate name to a name which does not
include any of the words "Evans Forest Products" and shall, on
the Closing Date, specifically authorize L-P Engineered Wood
to carry on business under all or any of the words "Evans
Forest Products".
14. EMPLOYEE TRANSFER
14.1 DEFINITION OF AGREEMENT. Section 2.1 is amended by adding the following as
Paragraph (dk):
"(dk) "EMPLOYEE TRANSFER AGREEMENT" shall have the meaning
ascribed to it in Section 13.24."
14.2 TRANSFER OF EMPLOYEES. Section 13.5 is amended by:
(a) deleting the words "the Closing Date" in the 6th, 9th and 20th
lines and substituting therefor "January 1, 2000"; and
(b) adding the words "As of January 1, 2000 and in accordance with
the Employee Transfer Agreement," at the beginning of the
sentence commencing in the third to last line of the first
paragraph.
14.3 EMPLOYEE TRANSFER AGREEMENT. The following is added as Section 13.24:
"13.24 EMPLOYEE TRANSFER AGREEMENT. On the Closing Date, L-P
Engineered Wood and Evans shall enter into an Employee
Transfer Agreement in the form attached hereto as Schedule
13.24 (the "Employee Transfer Agreement") whereby Evans shall
agree to provide L-P Engineered Wood with the services of
Evans' employees for the period from the Closing Date to
December 31, 1999 for the purpose of running the Assets and
Operations."
14.4 ADDITION OF SCHEDULE 13.24. The Employee Transfer Agreement attached as
Schedule D hereto is added as Schedule 13.24 to the Asset Purchase Agreement.
14.5 DELETION OF CONDITION PRECEDENT. Section 17.2(f) is deleted in its
entirety.
14.6 EVANS CLOSING DELIVERIES. The closing deliveries of Evans set out in
Section 18.2(a) are amended by:
(a) deleting the word "and" in paragraph (xi);
(b) adding as paragraph (xii), "an executed copy of the Employee
Transfer Agreement; and"; and
(c) renumbering paragraph (xii) as paragraph (xiii).
14.7 L-P ENGINEERED WOOD CLOSING DELIVERIES. The closing deliveries of L-P
Engineered Wood set out in Section 18.3(a) are amended by:
(a) deleting the "and" in paragraph (vi);
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(b) adding as paragraph (vii), "an executed copy of the Employee
Transfer Agreement; and"; and
(c) renumbering paragraph (vii) as paragraph (viii).
15. PERMITTED ENCUMBRANCES
15.1 AMENDMENT TO SCHEDULE 2.1(by). Paragraph (k) in Schedule 2.1(by) is amended
by inserting "and Appendix B" immediately after the words "Appendix A";
15.2 SCHEDULE OF FOREIGN ENCUMBRANCES. The Appendix of foreign personal property
security registrations attached as Schedule E hereto is added as Appendix B to
Schedule 2.1(by).
15.3 DISCHARGE OF FOREIGN ENCUMBRANCES. Section 13.16 is amended by adding the
following at the end of the Section:
"Evans covenants to obtain and register discharges of all
security interests affecting the Assets or Operations which
are registered outside of British Columbia (the "Foreign
Encumbrances"), including without limitation those security
interests set out in Appendix B of Schedule 2.1(by)."
15.4 AMENDMENT TO APPENDIX A OF SCHEDULE 2.1(by). Appendix A of Schedule 2.1(by)
is amended by deleting the designation (2) preceding item 25;
16. COMPETITION MATTERS
16.1 DELETION OF SECTION 1.1(bd). Section 1.1(bd) is deleted.
16.2 DELETION OF SECTION 15.1. Section 15.1 is deleted.
16.3 COMPETITION ACT. Section 15.2 is amended by deleting the words and figures
"90 calendar days" and substituting therefor "120 calendar days".
16.4 AMENDMENT TO SECTION 17.3(b). Section 17.3(b) is deleted and the following
substituted therefor:
"17.3 MUTUAL CONDITIONS PRECEDENT TO PARTIES' OBLIGATIONS. The
applicable waiting period, including any extensions, under the
Competition Act shall have expired or been terminated and the
Competition Bureau shall not have taken any action to enjoin
or delay the consummation of the transactions contemplated."
17. CLOSING DATE
17.1 CLOSING DATE. Section 18.1 is amended by deleting the date "October 31,
1999" and substituting "November 30, 1999" therefor.
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18. TERMINATION
18.1 EVENTS OF TERMINATION. Section 19.1(b) is amended by deleting the date
"November 30, 1999" and substituting therefor "December 30, 1999".
19. CONTINUANCE OF EVANS IN NORTHWEST TERRITORIES
19.1 CONTINUANCE. The following is added as Section 20.19:
"20.19 CONTINUANCE. The Purchasers and L-P Canada acknowledge
and agree that Evans may continue into the Northwest
Territories after the Closing Date and shall not be in breach
of any of the terms of the Asset Purchase Agreement as a
result thereof provided that Evans is duly organized, validly
existing and in good standing under the laws of the Northwest
Territories."
20. BOOKS AND RECORDS
20.1 DISPOSAL OF BOOKS AND RECORDS. Section 20.15 is deleted and the following
substituted therefor:
"20.15 DISPOSAL OF BOOKS AND RECORDS. The Purchasers agree
that they shall, unless otherwise required by order of a court
or regulatory authority having jurisdiction or unless
prevented by any act beyond their reasonable control, keep all
of the accounting and financial books and records and employee
books and records of Evans (the "Financial Records") that are
in existence as at the Closing Date in their possession at the
Golden Facility and/or the Malakwa Facility and/or at any
other facility in the Province of British Columbia for a
period of 7 years after the Closing Date and, subject to the
terms of this Section, shall use reasonable efforts to
maintain the confidentiality of the Financial Records. The
Purchasers will allow access to the Financial Records to Evans
(or any successor thereto), SLEC and to those persons who are
authorized by written notice from either Evans (or any
successor thereto) or SLEC to have access to the Financial
Records, provided that, subject to the terms of Section 20.14,
such access is only for the purpose of preparing or amending
financial statements or reports of Evans or of responding to
requests, demands, actions or claims made against Evans by any
person or regulatory authority, including the Department of
National Revenue. The Purchasers shall not destroy any of the
Financial Records within a period of 7 years following the
Closing Date without giving to Evans at least 90 days written
notice of its intention to destroy and Evans shall be
entitled, at its cost, to remove and retain all or any part of
such Financial records as Evans may select. Each of the
Purchasers jointly and severally agree to indemnify the Evans
Indemnified Parties with respect to any and all losses,
damages, liabilities, costs, expenses and deficiencies
including interest, penalties and reasonable attorney's fees
incurred by Evans Indemnified Parties by reason of or arising
out of the breach or non-fulfilment of the terms of this
Section. Such obligation to indemnify is to terminate with
respect to such Financial Records that are
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either acquired by Evans or destroyed by the Purchasers in
accordance with this Section, on the date of such acquisition
or destruction, but otherwise is to survive the Closing and to
remain in effect for a period of 7 years after the Closing
Date notwithstanding Section 13.13(d)." Notwithstanding the
terms of this Section, Evans and SLEC shall upon giving
reasonable prior written notice to the Purchasers, be entitled
at their own cost to obtain copies of any of the Financial
Records for any purpose whatsoever.
21. SALE OF SLEC ASSETS
21.1 AMENDMENT TO SECTION 8.1. Section 8.1 is deleted and the following
substituted therefor:
"8.1 SALE OF SLEC ASSETS. Subject to and upon the terms and
conditions set forth in this Agreement, on the Closing Date
but after the sale by Evans to L-P Engineered Wood of the
Evans Assets, Evans shall sell, transfer, convey and assign to
L-P Dawson Creek, and L-P Dawson Creek shall purchase or
acquire from Evans all of Evans' right, title and interest in
and to the SLEC Assets as at the Closing Date free and clear
of all Liens save as provided in Section 8.2."
21.2 AMENDMENT TO SECTION 8.2. Section 8.2 is deleted and the following
substituted therefor:
"The SLEC Assets to be transferred or otherwise conveyed to
L-P Dawson Creek at the Closing Date pursuant to Section 8.1
shall be free and clear of all Liens, excepting only the
Permitted Encumbrances affecting the SLEC Assets to be
assigned to L-P Dawson Creek at the Closing Date."
22. BOILER ADJUSTMENT
22.1 Evans covenants and agrees to reimburse L-P Engineered Wood with respect to
the cost and loss incurred by L-P Engineered Wood in repairing the boiler in the
power house at the Golden Facility (the "Boiler") as a result of damage which
occurred November 18, 1999 by failed refractory causing a tube failure in the
Boiler with consequent damage to the roof of the power house and insulation
(the"Damage"). For purposes of this covenant, the Parties acknowledge and agree
that the cost and loss incurred by L-P Engineered Wood in connection with such
repairs shall be deemed to be equal to the aggregate of:
(a) the actual out of pocket costs incurred by L-P Engineered Wood in
repairing the Damage; and
(b) the sum of Cdn. $55,000 per day for each day or part of a day
that the Boiler is out of service for the purpose of effecting
such repairs.
22.2 L-P Engineered Wood covenants and agrees with Evans that it will use
reasonable efforts to ensure that the repairs to the Damage are made at a time
when the Boiler is shut down for normal overhaul, that the repairs are made in
an expeditious manner and that all repairs are made by qualified personnel. L-P
Engineered Wood shall give not less than 10
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days written notice to Evans of its intention to commence the repairs and will
provide to Evans all such information in connection with the repairs as Evans
may reasonably request for the purpose of satisfying itself that both the
repairs done and the time required were reasonable in relation to the Damage. To
the extent that the repairs to the Damage are made during a normal overhaul
period and while such normal overhaul work is being performed and to the extent
that any subsequent period of normal overhaul is avoided as a result of other
maintenance work which is completed while the Damage is being repaired, such
periods of time will not be included in the calculation of the amounts owing
pursuant to section 22.1(b) above.
22.3 At Closing, L-P Engineered Wood shall deduct from the Estimated Residual
Evans Assets Purchase Price the sum of Cdn $575,000 (the "Boiler Holdback"). The
Boiler Holdback shall be delivered to the Escrow Agent with joint instructions
from Evans and L-P Engineered Wood to the Escrow Agent to hold the Boiler
Holdback and interest accrued thereon, in trust, on the terms set forth in the
Escrow Agreement with respect to the Indemnity Holdback and the Adjustment
Holdback, MUTATIS MUTANDIS, save as provided below:
(a) The Escrow Agent shall disburse the Boiler Holdback and interest
accrued thereon only in accordance with the following:
(i) a written direction given to the Escrow Agent jointly by L-P
Engineered Wood and Evans; or
(ii) on or before November 1, 2000, upon receipt by the Escrow
Agent of a certificate (the "Boiler Certificate") signed by
a director or officer of L-P Engineered Wood certifying
that:
A. a payment is required to be made by Evans to L-P
Engineered Wood pursuant to section 22.1 of this
Amending Agreement, and
B. a copy of such certificate has been delivered to Evans;
on the tenth Business Day following receipt by the Escrow
Agent of a Boiler Certificate (the "Payment Date"), the
Escrow Agent shall pay to L-P Engineered Wood out of the
Boiler Holdback, the amount of the payment referred to in
such Boiler Certificate and shall pay to Evans the remainder
of the Boiler Holdback and interest accrued thereon. If on
any Payment Date sufficient funds are not available in the
Boiler Holdback to make any payment required in accordance
with the foregoing (due to the inability of the Escrow Agent
to liquidate any investment in which the Boiler Holdback is
then held), such payment shall be made forthwith upon
sufficient funds becoming available for such payment; or
(iii) on November 15, 2000, the Escrow Agent shall pay to Evans,
or as Evans may direct, the full amount of the Boiler
Holdback and interest accrued thereon.
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23. FOREST RENEWAL BC
23.1 REPRESENTATION AND WARRANTIES OF EVANS. The following is added as Section
11.28:
"11.28. FOREST RENEWAL BC. Evans has performed all obligations
required to be performed by it and is not in default under, or
in breach of, nor in receipt of any claim of default or breach
under, either of its contracts with Forest Renewal BC and no
event has occurred which, with the passage or time or the
giving of notice or both, would result in a default or breach.
In particular, Evans' has fully complied with all of its
obligations and duties specified in section 6 of such
contracts."
23.2 COVENANTS. The following is added as Section 13.25:
"13.25. FOREST RENEWAL BC. Evans covenants and agrees with
the Purchasers:
(a) to deliver to L-P Engineered Wood within 5 Business Days
following receipt by Evans from L-P Engineered Wood of
written notice of the establishment by L-P Engineered Wood
of an appropriate bank account, all monies received by Evans
from Forest Renewal BC and held by it for the purpose of
paying for work performed under its contracts with Forest
Renewal BC, either to itself or to others;
(b) to deliver to L-P Engineered Wood, in sufficient time and
sufficient detail to allow L-P Engineered Wood to perform
its obligations under contracts to report to Forest Renewal
BC, such information and materials with respect to the work
performed under such contracts prior to the Closing Date as
may be required;
(c) that the balance of the monies held by it and to be
delivered to L-P Engineered Wood in accordance with this
Agreement are sufficient to pay:
A. all costs and expenses remaining unpaid in respect of
work performed under such contracts prior to the
Closing Date; and
B. the costs of all work for which such funding was
provided and which remains to be performed."
24. PAYMENT OF GST
24.1 Pursuant to Section 9.3 L-P Dawson Creek is responsible for the payment of
any goods and services tax ("GST") payable in respect of the conveyance of the
SLEC Assets to L-P Dawson Creek and, in the event that the joint election
referred to in Section 3.6 is not made, pursuant to Section 3.6 L-P Engineered
Wood is responsible for any GST which may be
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payable in respect of the conveyance of the Evans Assets to L-P Engineered Wood
under the Agreement (collectively the "Preliminary GST Amount").
24.2 If on the date on which the Residual Evans Assets Adjustment Payment is
required to be paid as provided elsewhere in this Agreement the Adjusted
Residual Evans Assets Purchase Price exceeds the Estimated Residual Evans Assets
Purchase Price, then pursuant to Section 3.6 L-P Engineered Wood is responsible
for any GST payable as a consequence of the increase in the purchase price for
the Residual Evans Assets (the "Additional GST Amount").
24.3 Forthwith after the Closing (and at the election and the cost of the
Purchasers), Evans, Evans Solicitors and the Purchasers and the Purchasers'
Solicitors or other tax advisors of the Purchasers, shall jointly make
application to the Canada Customs and Revenue Agency for a waiver (the"Waiver"),
in form and substance satisfactory to Evans and Evans' Solicitors, of the
obligation of Evans to collect and remit the Preliminary GST and the Additional
GST Amount (collectively the "Aggregate GST Amount").
24.4 Notwithstanding any other provision of this Agreement, the Escrow Agent
shall hold the Indemnity Holdback, the Adjustment Holdback and the Boiler
Holdback (collectively the "Holdbacks"), in trust, as provided below:
(a) Prior to December 28, 1999, the Escrow Agent shall disburse the
Holdbacks and interest accrued thereon only in accordance with
the following:
(i) a written direction given to the Escrow Agent jointly by
Evans and the Purchasers; or
(ii) on December 27, 1999, to pay to Evans the Aggregate GST
Amount if, prior to that date, the Purchasers have not paid
to Evans the Aggregate GST Amount or the Escrow Agent has
not received a certificate (the "GST Certificate") signed by
a director or officer of each of the Purchasers attaching a
copy of the Waiver together with a written confirmation from
Evans' Solicitors that the Waiver is in form and substance
satisfactory to Evans and Evans' Solicitors.
(b) After the earlier of December 28, 1999, the date the Purchasers
pay to Evans the Aggregate GST Amount and the date on which the
Escrow Agent receives the GST Certificate, the Escrow Agent shall
hold and disburse the Holdbacks as provided elsewhere in this
Agreement.
24.5 If the funds held by the Escrow Agent and paid to Evans are less that the
Aggregate GST Amount, the Purchasers shall forthwith upon demand pay to Evans
such sum as is required to equal the Aggregate GST Amount.
24.6 Forthwith after any payment being made by the Escrow Agent to Evans
pursuant to Section 24.4(a)(i) or (ii), L-P Engineered Wood and L-P Dawson Creek
shall pay to the Escrow Agent an amount equal to the payment so made, which
funds shall thereafter be held and disbursed by the Escrow Agent as the
Holdbacks.
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25. GENERAL
25.1 COUNTERPARTS. This Amending Agreement may be signed in as many counterparts
as may be necessary, each of which so signed shall be deemed to be an original,
and such counterparts together shall constitute one and the same instrument and
notwithstanding the date of execution shall be deemed to bear the date set forth
below. Executed copies of this Amending Agreement may be delivered by facsimile
transmission and it shall not be necessary to confirm execution by delivery of
originally executed documents.
IN WITNESS WHEREOF each of the parties hereto have executed
this Agreement by its duly authorized officers on the 30th day of November,
1999.
LOUISIANA-PACIFIC CANADA EVANS FOREST PRODUCTS LIMITED.
ENGINEERED WOOD PRODUCTS LTD.
By: William L. Hebert By: George St. Laurent
--------------------------------- ---------------------------
Title: Vice President Title: Chairman
------------------------------ ------------------------
LOUISIANA-PACIFIC CANADA LOUISIANA-PACIFIC CANADA LTD.
DAWSON CREEK LTD.
By: William L. Hebert By: William L. Hebert
---------------------------------- ---------------------------
Title: Vice President Title: Vice President
------------------------------ ------------------------
