<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 30, 1998
------------------
BOWATER INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 1-8712 62-0721803
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
55 East Camperdown Way
P.O. Box 1028
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (864) 271-7733
--------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 30, 1998, Bowater Pulp and Paper Canada Inc. ("BPPCI"),
an indirect subsidiary of Bowater Incorporated ("Bowater"), sold its Dryden,
Ontario pulp and paper mill and related assets to Weyerhaeuser Canada Ltd.
("Weyerhaeuser Canada") and its parent company Weyerhaeuser Company
("Weyerhaeuser"). The sale was made pursuant to an Asset Purchase Agreement
dated August 4, 1998, by and between BPPCI, Bowater, Weyerhaeuser Canada and
Weyerhaeuser. The aggregate consideration of C$790 million (approximately US
$520 million) was determined by arms-length negotiation between the parties.
The transaction included BPPCI's Dryden, Ontario uncoated free sheet paper
mill, Dryden kraft pulp mill, Dryden studmill, Ear Falls, Ontario sawmill and
related sales offices. Related timber-cutting rights were transferred along
with the production facilities.
A copy of the related press release issued by Bowater on September 30,
1998, is attached hereto as Exhibit 99.1 and is incorporated herein by
reference.
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired:
Not applicable.
(b) Pro forma financial information:
The required pro forma financial information is filed herewith.
(c) Exhibits
Exhibit No. Description
2.1 Asset Purchase Agreement dated August 4, 1998, by
and between Bowater Pulp and Paper Canada Inc.,
Bowater Incorporated, Weyerhaeuser Canada Ltd. and
Weyerhaeuser Company. Schedules have been omitted
but will be furnished supplementally to the
Commission upon request.
2.1.1 Amending Agreement made September 30, 1998, by and
between Bowater Pulp and Paper Canada Inc., Bowater
Incorporated, Weyerhaeuser Canada Ltd. and
Weyerhaeuser Company.
99.1 Press release dated September 30, 1998.
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 15, 1998
BOWATER INCORPORATED
(Registrant)
By: /s/ Michael F. Nocito
-----------------------------------
Name: Michael F. Nocito
Title: Vice President and Controller
<PAGE> 5
EXHIBIT INDEX
The following exhibits are filed herewith:
Exhibit No. Description
2.1 Asset Purchase Agreement dated August 4, 1998, by
and between Bowater Pulp and Paper Canada Inc.,
Bowater Incorporated, Weyerhaeuser Canada Ltd. and
Weyerhaeuser Company. Schedules have been omitted
but will be furnished supplementally to the
Commission upon request.
2.1.1 Amending Agreement made September 30, 1998, by and
between Bowater Pulp and Paper Canada Inc., Bowater
Incorporated, Weyerhaeuser Canada Ltd. and
Weyerhaeuser Company.
99.1 Press release dated September 30, 1998.
<PAGE> 6
BOWATER INCORPORATED
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements give
effect to the Transactions (i.e. the acquisition of Avenor and the disposition
of Avenor's Dryden, Ontario mill). The acquisition was accounted for using the
purchase method of accounting, whereby the total cost of the acquisition was
allocated to the tangible and intangible assets acquired and liabilities
assumed based upon their respective fair values at the effective date of the
acquisition. Since management's plans for the combined company included selling
certain assets of the Dryden, Ontario mill upon closing, these amounts were
classified as assets held for sale in these unaudited pro forma condensed
combined financial statements, and the disposition of these assets resulted in
no gain or loss recognition. For purposes of the unaudited pro forma condensed
combined financial statements, allocations have been made based upon
management's estimates. Accordingly, the allocations of the purchase price
included in the unaudited pro forma condensed combined financial statements are
preliminary.
The unaudited pro forma condensed combined statements of operations were
prepared as if the Transactions occurred as of the beginning of the periods
presented (i.e. January 1, 1997), and the unaudited pro forma condensed
combined balance sheet was prepared as if the Transactions occurred as of June
30, 1998. These statements do not purport to represent what the results of
operations or financial position of Bowater would actually have been if the
Transactions had in fact occurred on the applicable date. In addition, these
statements do not project the results of operations or financial position of
Bowater for any future date or period and do not reflect the benefits expected
to be realized or any restructuring charges resulting from the Transactions.
The unaudited pro forma condensed combined financial statements should be read
together with the historical consolidated financial statements and related
notes of Bowater and Avenor.
1
<PAGE> 7
BOWATER INCORPORATED
PRO FORMA CONDENSED COMBINED BALANCE SHEET - UNAUDITED
June 30, 1998
(in millions of US$)
<TABLE>
<CAPTION>
Pro Forma Adjustments Pro Forma
Bowater Avenor (2) Increases Decreases Combined
------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents.... $ 420.5 108.9 -- 168.0 (3) 361.4
Marketable securities........ 25.3 -- -- 25.3
Accounts receivable, net..... 201.0 207.7 -- 32.5 (4) 376.2
Inventories.................. 104.8 130.5 -- 42.1 (4) 193.2
Other current assets......... 16.6 2.4 -- 0.2 (4) 18.8
----------- -------- --------- ------- ---------
Total current assets.. 768.2 449.5 -- 242.8 974.9
Timber and timberlands.......... 382.1 18.5 75.0 (3) 475.6
Fixed assets.................... 1,541.7 1,155.8 424.7 (3) 306.0 (4) 2,816.2
Assets held for sale............ -- -- 162.4 (3) 520.0 (4) --
357.6 (4) -- --
Intangible assets............... -- -- 767.4 (3) -- 767.4
Investment in subsidiary........ -- 20.7 -- -- 20.7
Deferred tax asset.............. -- 14.5 -- -- 14.5
Other assets.................... 80.2 61.4 -- 5.9 (4) 135.7
----------- --------- -------- ------- ---------
Total assets.......... $ 2,772.2 1,720.4 1,787.1 1,074.7 5,205.0
=========== ========= ======== ======= =========
Liabilities & Shareholders' Equity
Current liabilities
Short-term borrowings........ $ -- 20.7 625.0 (3) 520.0 (4) 125.7
Current installments of long-
term debt................. 1.8 5.6 -- -- 7.4
Accounts payable and accrued
liabilities............... 175.1 162.0 30.0 (3) 28.6 (4) 338.5
Other current liabilities.... 16.4 5.7 -- -- 22.1
----------- --------- -------- ----- ---------
Total current liabilities 193.3 194.0 655.0 548.6 493.7
Long-term debt, net of current
installments................. 756.2 748.9 200.0 (3) -- 1,705.1
Other long-term liabilities..... 169.2 160.1 -- 0.5 (4) 328.8
Deferred income taxes........... 348.7 42.9 175.6 (3)(5) -- 567.2
----------- --------- -------- -------- ---------
Total liabilities..... 1,467.4 1,145.9 1,030.6 549.1 3,094.8
Minority interests in subsidiaries 115.9 23.2 -- -- 139.1
Commitment and contingencies.... -- -- -- -- --
Shareholders' Equity
Preferred stock.............. 25.5 -- -- -- 25.5
Common stock................. 45.2 595.4 12.3 (3) 595.4 (3) 57.5
Exchangeable shares.......... - - 183.6 (3) -- 183.6
Additional paid-in capital... 571.9 342.5 586.3 (3) 342.5 (3) 1,158.2
Retained earnings............ 743.3 (386.6) 386.6 (3) -- 743.3
Equity adjustments........... (20.8) -- -- -- (20.8)
Treasury stock............... (176.2) -- -- -- (176.2)
----------- --------- ------- -------- --------
Total shareholders' equity 1,188.9 551.3 1,168.8 937.9 1,971.1
Total liabilities and ----------- --------- ------- -------- --------
shareholders' equity $ 2,772.2 1,720.4 2,199.4 1,487.0 5,205.0
=========== ========= ======= ======== ========
</TABLE>
See accompanying Notes to Pro Forma Condensed Combined Financial Statements.
2
<PAGE> 8
BOWATER INCORPORATED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS - UNAUDITED
For the Year Ended December 31, 1997
(in millions of US$, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma Adjustments Pro Forma
Bowater Avenor (2) Increases Decreases Combined
---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales ...................... $ 1,484.5 1,385.3 -- 263.1 (4) 2,606.7
Cost of sales ...................... 1,106.8 1,147.3 -- 218.6 (4) 2,035.5
Depreciation, amortization and
cost of timber harvested........ 169.8 123.3 44.2 (6) 22.3 (4) 315.0
Restructuring/impairment charges.... -- 207.8 - -- 207.8
---------- ---------- --------- --------- ---------
Gross profit (loss).......... 207.9 (93.1) (44.2) 22.2 48.4
Selling and administrative expense.. 72.2 56.1 - 5.5 (4) 122.8
---------- ---------- --------- --------- ---------
Operating income (loss)...... 135.7 (149.2) (44.2) 16.7 (74.4)
Other expense (income):
Interest income................. (21.5) -- -- (7.2)(7) (14.3)
Interest expense................ 67.5 90.4 0.9 (4) 12.6 (6) 152.5
...................... 6.3 (7)
Gain on sale of assets.......... (0.8) (146.0) -- -- (146.8)
Equity interest in unconsolidated
subsidiary................... -- 1.4 -- -- 1.4
Other, net...................... 1.0 88.2 7.8 (4) -- 97.0
---------- ---------- --------- --------- ---------
Income (loss) before income
taxes, minority interests
and extraordinary charges 89.5 (183.2) (59.2) 11.3 (164.2)
Income tax expense (benefit).... 33.1 (31.3) -- 3.1 (6) (16.0)
9.6 (4)
5.1 (7)
Minority interests in net income of
subsidiaries................. 2.7 2.4 -- -- 5.1
---------- ---------- --------- --------- ---------
Income (loss) before
extraordinary charges..... $ 53.7 (154.3) (59.2) (6.5) (153.3)
========== ========== ========= ========= =========
Per share amounts:
Basic average common shares
outstanding.................. 40.3 16.1 (3) 56.4
========== ========= =========
Basic income (loss) before
extraordinary charges (9).... $ 1.26 $ (2.77)
========== =========
Diluted average common and
common equivalent shares
outstanding.................. 40.8 16.1 (3)(8) 0.5 (8) $ 56.4
========== ========= ========= =========
Diluted income (loss) before
extraordinary charges (9).... $ 1.25 $ (2.77)
========== =========
</TABLE>
See accompanying Notes to Pro Forma Condensed Combined Financial Statements.
3
<PAGE> 9
BOWATER INCORPORATED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS - UNAUDITED
For the Six Months Ended June 30, 1998
(in millions of US$, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma Adjustments Pro Forma
Bowater Avenor (2) Increases Decreases Combined
--------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales ...................... $ 778.9 601.1 -- 151.8 (4) 1,228.2
Cost of sales ...................... 554.8 451.7 -- 122.8 (4) 883.7
Depreciation, amortization and
cost of timber harvested........ 88.3 48.1 22.1 (6) 15.6 (4) 142.9
Restructuring/impairment charges.... -- --
--------- ------- --------- --------- ---------
Gross profit (loss).......... 135.8 101.3 (22.1) 13.4 201.6
Selling and administrative expense.. 31.1 15.3 2.6 (4) 43.8
--------- ------- --------- --------- ---------
Operating income (loss)...... 104.7 86.0 (22.1) 10.8 157.8
Other expense (income):
Interest income................. (12.7) -- -- (4.4)(7) (8.3)
Interest expense................ 33.2 35.0 3.2 (7) 6.3 (6) 65.1
Gain on sale of assets.......... (21.1) -- -- -- (21.1)
Equity interest in unconsolidated
subsidiary................... -- (1.9) -- -- (1.9)
Other, net...................... 21.1 39.6 -- -- 60.7
Income (loss) before income
taxes, minority interests
--------- ------- --------- --------- ---------
and extraordinary charges. 84.2 13.3 (25.3) 8.9 63.3
Income tax expense (benefit).... 32.0 12.0 -- 4.1 (4) 35.4
...................... 1.6 (6)
...................... 2.9 (7)
Minority interests in net income of
subsidiaries................. 8.6 (0.4) -- -- 8.2
--------- ------- --------- --------- ---------
Income (loss) before
extraordinary charges..... $ 43.6 1.7 (25.3) 0.3 19.7
========= ====== ========= ========= =========
Per share amounts:
Basic average common shares
outstanding.................. 40.5 16.1 (3) 56.6
========= ========= =========
Basic income (loss) before
extraordinary charges (9).... $ 1.05 $ .33
========= =========
Diluted average common and
common equivalent shares
outstanding.................. 41.2 16.1 (3)(8) $ 57.3
========= ========= =========
Diluted income (loss) before
extraordinary charges (9).... $ 1.03 $ .32
========= =========
</TABLE>
See accompanying Notes to Pro Forma Condensed Combined Financial Statements.
4
<PAGE> 10
BOWATER INCORPORATED
Notes to Pro Forma Condensed Combined Financial Statements
(in millions of U.S. $, unless otherwise noted)
1. Major Assumptions
These unaudited pro forma condensed combined financial statements
present results of operations as if the acquisition of Avenor and the
disposition of the Dryden, Ontario mill (the Transactions) occurred as
of January 1, 1997 and financial position as if the Transactions
occurred June 30, 1998. Major assumptions embodied within these
statements are as follows:
- Bowater acquired all of the outstanding common stock of Avenor at
C$35 per share, which was paid 50% in cash, 38% in Bowater Common
Stock, and 12% in Exchangeable Shares.
- The price per share of Bowater's common stock and exchangeable shares
was $48.6636.
- The currency conversion rates for the cash and stock portions
applicable to the Avenor acquisition were C$1.4719 to US$1 and
C$1.4920 to US$1, respectively.
- Dryden was sold for $520 million in cash.
5
<PAGE> 11
BOWATER INCORPORATED
Notes to Pro Forma Condensed Combined Financial Statements
2. Conversion of Avenor's Historical Financial Statements
The pro forma condensed combined financial statements are presented in
U.S. dollars and in accordance with accounting principles generally
accepted in the United States (U.S. GAAP). Thus, the Avenor statements
of operations for the year ended December 31, 1997 and for the six
months ended June 30, 1998 were converted from C$ to US$ using an
average exchange rate for each period (US$.7219 per C$1 and US$.6955 per
C$, respectively). The balance sheet of Avenor was converted from C$ to
US$ using the exchange rate effective on the balance sheet date
(US$.6817 per C$1). Certain adjustments were necessary to convert
Avenor's historical financial statements, which were prepared in
accordance with Canadian GAAP, to U.S. GAAP. No adjustments were made to
restate Avenor's results to U.S. dollar functional currency. The pro
forma combined financial statements were prepared using the historical
accounting policies of both Avenor and Bowater, as applicable. The
material adjustments are summarized below.
<TABLE>
<CAPTION>
Canadian Canadian U.S.
GAAP GAAP GAAP
C$ US$ US$
- -- ---
<S> <C> <C> <C>
As of June 30, 1998:
ASSETS
Cash and equivalents (A) $ 160.8 109.6 108.9
Accounts receivable, net (A) 311.8 212.6 207.7
Inventories (A) 191.5 130.5 130.5
Other current assets (A) 7.3 5.0 2.4
---------- ------- -------
Total current assets 671.4 457.7 449.5
Timber and timberlands, net 27.2 18.5 18.5
Fixed assets, net (A) 1,827.6 1,245.9 1,155.8
Investment in subsidiary (A) -- -- 20.7
Deferred tax asset (B-D) (G-J) -- -- 14.5
Other assets (B) (G) (J) 185.3 126.3 61.4
---------- ------- -------
Total assets $ 2,711.5 1,848.4 1,720.4
========== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ 30.3 20.7 20.7
Current installments of long-term debt (A) 20.4 13.9 5.6
Accounts payable and accrued liabilities (A) 243.8 166.2 162.0
Other current liabilities 8.4 5.7 5.7
---------- ------- -------
Total current liabilities 302.9 206.5 194.0
Long-term debt (A) (K) 1,077.2 734.3 748.9
Other long-term liabilities (C-D) (J) 32.9 22.4 160.1
Deferred income taxes (B-D) (G-J) 165.9 113.1 42.9
Minority interests 34.1 23.2 23.2
Common stock (H) 993.7 677.4 595.4
Additional paid-in capital 502.4 342.5 342.5
Retained earnings (B-K) (397.6) (271.0) (386.6)
---------- ------- -------
Total liabilities and stockholders' equity $ 2,711.5 1,848.4 1,720.4
========== ======= =======
</TABLE>
6
<PAGE> 12
BOWATER INCORPORATED
Notes to Pro Forma Condensed Combined Financial Statements
2. Conversion of Avenor's Historical Financial Statements, Continued
<TABLE>
<CAPTION>
Canadian Canadian U.S.
GAAP GAAP GAAP
C$ US$ US$
-- --- ---
<S> <C> <C> <C>
For the year ended December 31, 1997:
Net sales (A) $ 1,991.7 1,437.8 1,385.3
Cost of sales (A) (D) (G) 1,634.2 1,179.7 1,147.3
Depreciation, amortization and cost of
timber harvested (A) 181.1 130.8 123.3
Restructuring charges 287.8 207.8 207.8
---------- ------- -------
GROSS LOSS (111.4) (80.5) (93.1)
Selling and administrative 77.8 56.1 56.1
---------- ------- -------
OPERATING LOSS (189.2) (136.6) (149.2)
Other expense (income):
Interest expense, net (A) (H) 125.2 90.4 90.4
Gain on sales of assets (E) (186.2) (134.4) (146.0)
Loss on early extinguishment of debt (F) 45.3 32.7 --
Equity interest in unconsolidated subsidiary (A) -- -- 1.4
Other expense (income) (B-C) 40.8 29.5 88.2
---------- ------- -------
LOSS BEFORE TAXES AND MINORITY INTEREST (214.3) (154.8) (183.2)
Income tax benefit (I) (5.1) (3.7) (31.3)
Minority interests 3.3 2.4 2.4
---------- ------- -------
LOSS BEFORE EXTRAORDINARY CHARGES $ (212.5) (153.5) (154.3)
========== ======= =======
For the six months ended June 30, 1998:
Net sales (A) $ 901.6 627.1 601.1
Cost of sales (A) (D) (G) 676.0 470.2 451.7
Depreciation, amortization and cost of
timber harvested (A) 74.6 51.9 48.1
Restructuring charges -- -- --
---------- ------- -------
GROSS PROFIT 151.0 105.0 101.3
Selling and administrative 22.4 15.6 15.3
---------- ------- -------
OPERATING INCOME 128.6 89.4 86.0
Other expense (income):
Interest expense, net (A) (H) 50.1 34.8 35.0
Equity interest in unconsolidated subsidiary (A) -- -- (1.9)
Other expense (income) (B-C) (8.4) (5.8) 39.6
---------- ------- -------
INCOME BEFORE TAXES AND MINORITY INTEREST 86.9 60.4 13.3
Income tax expense (I) 35.3 24.6 12.0
Minority interests (0.6) (0.4) (0.4)
---------- ------- -------
Income before extraordinary charges $ 52.2 36.2 1.7
========== ======= =======
</TABLE>
7
<PAGE> 13
BOWATER INCORPORATED
Notes to Pro Forma Condensed Combined Financial Statements
(A) Under Canadian GAAP, Avenor's 40 percent interest in Ponderay
Newsprint Company was recorded using the proportional method of
consolidation. Under U.S. GAAP, this investment is recorded using
the equity method of accounting.
(B) Under Canadian GAAP, unrealized exchange gains and losses arising
from the translation of long-term debt denominated in foreign
currencies were deferred and amortized over the remaining life of
the related debt. Under U.S. GAAP, such exchange gains and losses
would have been included in earnings in the period in which they
arose and consequently, no amount would have been deferred in the
consolidated balance sheet under the item "Other Assets".
(C) Canadian GAAP requires gains and losses on forward exchange and
range forward contracts which hedge anticipated future sales to
be included in earnings in the same period the sale is
recognized. Under U.S. GAAP, such gains and losses would have
been included in earnings in the period in which they arose.
(D) Under Canadian GAAP, costs of providing life insurance and health
care benefits to substantially all employees after retirement
were recognized as paid. Costs of providing benefits to former or
inactive employees after employment but before retirement were
also recognized as paid under Canadian GAAP. Under U.S. GAAP,
these costs would have been accrued during the employees' years
of active service.
(E) A permanent difference existing under Canadian GAAP would have
been treated as a temporary difference under U.S. GAAP, thereby
creating a deferred tax liability in the books of the subsidiary
that was sold. As a result, net assets of the subsidiary at the
date of sale would have been lower, and consequently, the gain
recorded on the sale would have been higher under U.S. GAAP. In
addition, as a result of the sale, postretirement obligations
previously recognized under U.S. GAAP were settled, thereby
increasing the gain from sale which would have been recognized
under U.S. GAAP.
(F) The cost of early redemption of long-term debt was included in
earnings (loss) before taxes and non-controlling interest in
accordance with Canadian GAAP. Under U.S. GAAP, it would have
been presented as an extraordinary item, net of taxes.
(G) Under Canadian GAAP, certain start-up costs were deferred and
amortized. Under U.S. GAAP, such costs would have been included
in net earnings as incurred.
8
<PAGE> 14
BOWATER INCORPORATED
Notes to Pro Forma Condensed Combined Financial Statements
2. Conversion of Avenor's Historical Financial Statements, Continued
(H) Under Canadian GAAP, the equity element of the convertible
debentures was increased over the term of the debenture through
periodic charges to retained earnings (deficit) of the difference
between the principal amount and the initial carrying amount. The
discount related to the liability element of the convertible
debentures was charged to net earnings. Under U.S. GAAP, since no
separate presentation of equity element of the convertible
debentures would have been made, interest would have been accrued
and charged to net earnings (loss) in accordance with the terms
of the debentures.
(I) For Canadian GAAP reporting purposes, income taxes were provided
on the deferral method basis, whereas for U.S. GAAP deferred tax
assets and liabilities would have been recognized based on
differences between the financial statement and tax bases of
assets and liabilities using presently enacted rates. In
addition, under U.S. GAAP, a valuation allowance must be
established for deferred tax assets when it is more likely than
not that they will not be realized.
(J) Accounting for pension costs under U.S. GAAP differs from Canadian
GAAP principally with respect to the choice of the discount rate
used to calculate the projected benefit obligation and to the
valuation of assets and related effects on pension expense.
There was no significant difference in pension expense for 1997
or the six-months ended June 30, 1998. In addition, under U.S.
GAAP, Avenor would have recorded an additional minimum liability
for underfunded plans representing the excess of the accumulated
benefit obligation over the pension plan assets, less the
pension liability already recognized and the net unamortized
prior service cost. Under U.S. GAAP, the additional minimum
liability at December 31, 1997 of $24.0 million would be
reported and offset by an intangible asset of $23.5 million and
a reduction of shareholders' equity of $0.3 million, net of a
tax benefit of $0.1 million. These amounts did not materially
change as of June 30, 1998.
(K) Canadian GAAP requires the separate presentation on the balance
sheet of the liability and equity elements of convertible
debentures. U.S. GAAP does not permit the separate presentation
of the convertible debentures which must be classified as debt.
9
<PAGE> 15
BOWATER INCORPORATED
Notes to Pro Forma Condensed Combined Financial Statements
(L) The following are the significant presentation differences between
Canadian GAAP and U.S. GAAP.
<TABLE>
<CAPTION>
Canadian U.S.
GAAP GAAP
---- ----
<S> <C>
1) "Amortization" "Depreciation, amortization and cost of
timber harvested"
2) "Unusual items" included after "Restructuring/impairment charges" included
gross profit, but before in calculation of gross profit
operating earnings (loss)
3) "Loss on early repayment of "Extraordinary item" not included on pro
long-term debt" included after forma presentation of income (loss) before
operating earnings (loss), but extraordinary charges.
before earnings (loss) before
taxes and non-controlling
interests.
4) "Costs related to an unrealized "Other expense"
acquisition project"
5) "Non-controlling interest" "Minority interests in net income of
subsidiaries"
</TABLE>
10
<PAGE> 16
BOWATER INCORPORATED
Notes to Pro Forma Condensed Combined Financial Statements
3. Purchase Price Allocation
The purchase price to Avenor shareholders of $1,575.2 million was
calculated as follows:
<TABLE>
<CAPTION>
(in millions of US$)
------------------
<S> <C>
Cash from cash and cash equivalents $ 168.0
Proceeds from $1 billion short-term credit facility 625.0
Issuance of 12.3 million Bowater shares at $48.6636 per share 598.6
Issuance of 3.8 million shares exchangeable into Bowater shares
at US$48.6636 per share 183.6
--------------
$ 1,575.2
==============
</TABLE>
The purchase price to Avenor shareholders, plus transaction costs, the
excess of fair value of liabilities assumed over the historical book
value, and the deferred tax effect of applying purchase accounting at
June 30, 1998, over the historical net assets of Avenor was calculated
as follows:
<TABLE>
<CAPTION>
(in millions of US$)
------------------
<S> <C>
Purchase price to Avenor shareholders $ 1,575.2
Estimated transaction costs 30.0
Excess of fair value of long-term debt assumed over historical value 150.0
Excess of fair value of convertible debt over historical value 50.0
Deferred tax effect of applying purchase accounting 175.6
Less historical net assets (551.3)
--------------
$ 1,429.5
==============
</TABLE>
The excess purchase price was allocated as follows:
<TABLE>
<CAPTION>
(in millions of US$)
------------------
<S> <C>
Timber and timberlands $ 75.0
Assets held for sale 162.4
Fixed assets 424.7
Goodwill 767.4
--------------
$ 1,429.5
==============
</TABLE>
As described in Footnote 6, the excess purchase price will be
depreciated/amortized over various time periods and will be offset by
the amortization of the debt premium and deferred tax benefits.
11
<PAGE> 17
BOWATER INCORPORATED
Notes to Pro Forma Condensed Combined Financial Statements
4. Sale of Dryden, Ontario Mill
Upon acquisition, the Dryden, Ontario mill was held for sale and Dryden's
assets, net of liabilities assumed, of approximately $357.6 million, were
reclassified as assets held for sale. Excess purchase price in the
acquisition was allocated in part to Dryden, increasing the value of the
assets by $162.4 million.
Bowater sold the assets of Avenor's Dryden, Ontario mill for $520.0
million. The effect of Dryden's earnings were eliminated from the
statements of operations for the year ended December 31, 1997 and the
six months ended June 30, 1998.
5. Income Tax Adjustments
The increase in deferred tax liabilities of $175.6 million relates to
the tax effect of the increase to fair market value of assets acquired
and liabilities assumed.
6. Depreciation, Amortization and Reduction of Deferred Tax Liability
Additional depreciation on the increase in fair market value of fixed
assets has been calculated on a straight-line basis over 20 years.
Additional amortization on the increase in goodwill has been calculated
on a straight-line basis over 40 years. The pro forma adjustment to
depreciation and amortization was $44.2 million in 1997 and $22.1
million for the six months ended June 30, 1998. The increase in fair
market value of debt assumed will be amortized using the interest method
over the remaining life of the debt. The pro forma adjustment to reduce
interest expense was $12.6 million for 1997 and $6.3 million for the six
months ended June 30, 1998. A deferred tax benefit of $3.1 million and
$1.6 million resulted from the above charges in 1997 and for the six
months ended June 30, 1998, respectively.
These purchase accounting adjustments resulted in an after-tax charge to
the 1997 statement of operations of $28.5 million. The after-tax charges
anticipated for years 1998, 1999, and 2000 are $28.1 million, $27.6
million, and $27.2 million, respectively. The aggregate amount of
amortization and depreciation less the interest expense reduction and
deferred tax benefits for years 1997 through 2036 is anticipated to be
approximately $1,022.8 million.
7. Interest Costs
Although the Company initially borrowed $625.0 million from its
short-term credit facility, it is assumed to have been repaid in part
with proceeds from the Dryden sale. Interest expense therefore increased
$6.3 million for 1997 and $3.2 million for the six months ended June 30,
1998, based on a calculation of 6.0% on $105 million borrowed. In
addition, pro forma interest income has been reduced to reflect the use
of $168 million of cash as part of the purchase consideration. Rates
commensurate with the Company's earnings on marketable securities result
in adjustments of $7.2 million for 1997 and $4.4 million for the six
months ended June 30, 1998. The tax effect of reducing interest income
and increasing interest expense provides a benefit of $5.1 million for
1997 and $2.9 million for the six months ended June 30, 1998.
12
<PAGE> 18
BOWATER INCORPORATED
Notes to Pro Forma Condensed Combined Financial Statements
8. Antidilution
In order to present no dilution in loss per share for 1997, diluted
shares outstanding were adjusted to basic shares outstanding and were not
adjusted to reflect the conversion of the C$125.5 million principal
amount of 7.5% Convertible Debentures of Avenor.
In order to present no dilution in income per share in 1998, diluted
shares outstanding were not adjusted to reflect the conversion of the
C$125.5 million principal amount of 7.5% Convertible Debentures of
Avenor.
9. Preferred Dividends
Income (loss) before extraordinary charges was reduced by $2.9 million
for 1997 and $1.1 million for the six months ended June 30, 1998, for
Bowater preferred stock dividends in calculating basic and diluted
income (loss) before extraordinary charges per share for Bowater
historical and pro forma combined amounts.
13
<PAGE> 1
EXHIBIT 2.1
DATED: August 4, 1998
BOWATER PULP AND PAPER CANADA INC.
BOWATER INCORPORATED
WEYERHAEUSER CANADA LTD.
WEYERHAEUSER COMPANY
-------------------------
ASSET PURCHASE AGREEMENT
-------------------------
FRASER & BEATTY
P.O. Box 100
One First Canadian Place
Toronto, Ontario
M5X 1B2
McCARTHY TETRAULT
Suite 4700
Toronto-Dominion Bank Tower
Toronto Dominion Centre
Toronto, Ontario
M5K 1A2
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1
INTERPRETATION
1.1 Definitions..........................................................2
1.2 Gender and Number...................................................13
1.3 Currency............................................................13
1.4 Accounting Principles...............................................13
1.5 Headings............................................................14
1.6 Contra Proferentum..................................................14
1.7 Tax Definitions.....................................................14
ARTICLE 2
SCHEDULES
2.1 Description of Schedules............................................15
ARTICLE 3
AGREEMENT OF PURCHASE AND SALE
3.1 Property and Assets to be Purchased and Sold........................16
3.2 Excluded Assets.....................................................19
3.3 Non-Transferable Assets.............................................20
3.4 Cutpaper Agreement..................................................22
3.5 Guarantee of Weyerhaeuser...........................................22
3.6 Guarantee of Bowater................................................23
ARTICLE 4
PURCHASE PRICE
4.1 Purchase Price......................................................24
4.2 Preparation of Closing Working Capital Amount Calculation...........24
4.3 Payment of Working Capital Adjustment to the Purchase Price.........26
4.4 Transfer Taxes......................................................27
ARTICLE 5
LIABILITIES OF VENDOR
5.1 Assumed Liabilities and Excluded Liabilities........................27
5.2 Third Party Fibre Supply Obligations................................29
5.3 Inter-Division Accounts.............................................30
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE VENDOR
6.1 Representations and Warranties of the Vendor........................30
6.2 Survival of Representations and Warranties of the Vendor............30
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
7.1 Representations and Warranties of the Purchaser and Weyerhaeuser....31
7.2 Survival of Representations and Warranties of the
Purchaser and Weyerhaeuser..........................................31
ARTICLE 8
ACTIVITIES OF THE VENDOR PRIOR TO THE CLOSING DATE
8.1 Operation of Business...............................................32
8.2 Union Negotiations..................................................34
<PAGE> 3
ii.
8.3 Notice of Change....................................................35
8.4 Fulfilment of Conditions............................................35
8.5 Amendment of Disclosure Statement...................................35
8.6 Access to Management................................................35
8.7 Avenor America Inc..................................................36
8.8 Realty Taxes........................................................36
8.9 Future Investigations...............................................36
8.10 Applications Under the Land Titles Act..............................37
8.11 Employee List.......................................................37
ARTICLE 9
ACTIVITIES OF THE PURCHASER PRIOR TO CLOSING DATE
9.1 Notice of Change....................................................37
9.2 Fulfilment..........................................................38
9.3 Confidentiality.....................................................38
ARTICLE 10
ENVIRONMENTAL
10.1 Environmental Investigations........................................38
10.2 Draft Report........................................................39
10.3 Access to Real Property.............................................39
10.4 Conduct of the Work.................................................39
10.5 Cost Sharing........................................................40
10.6 Dispute Resolution..................................................41
10.7 Environmental Indemnity.............................................42
ARTICLE 11
EMPLOYEE AND PENSION MATTERS
11.1 Employees...........................................................42
11.2 Employee Benefit Plans..............................................44
11.3 Pension and Retirement Plans........................................44
11.4 U.S. Employees......................................................51
ARTICLE 12
BULK SALES ACT; INVESTMENT CANADA ACT; COMPETITION ACT;
HART-SCOTT-RODINO ANTITRUST ACT
12.1 Bulk Sales Act Waiver...............................................52
12.2 Investment Canada Act...............................................52
12.3 Competition Act (Canada)............................................53
12.4 Hart-Scott-Rodino Antitrust Act.....................................53
ARTICLE 13
PURCHASER'S CONDITIONS OF CLOSING
13.1 Conditions for the Benefit of the Purchaser.........................54
13.1.1 Truth of Representations and Warranties of the Vendor...............55
13.1.2 Performance of Covenants, etc. by the Vendor........................56
13.1.3 Corporate Consents, etc.............................................56
13.1.4 No Action Taken Restricting Sale....................................57
13.1.5 Forestry Consents...................................................57
13.1.6 Fibre Supply Agreements.............................................57
13.1.7 Shared Services Agreement...........................................58
13.1.8 No Material Adverse Change..........................................58
13.1.9 Planning Act........................................................58
13.1.10 Retail Sales Tax Act................................................59
13.1.11 Form of Documents...................................................59
13.1.12 Transfer of Real Property...........................................59
<PAGE> 4
iii.
13.2 Non-Fulfilment of Conditions, etc. for the Benefit of the Purchaser.60
ARTICLE 14
VENDOR'S CONDITIONS OF CLOSING
14.1 Conditions for the Benefit of the Vendor............................61
14.1.1 Truth of Representations and Warranties of the Purchaser............61
14.1.2 Performance of Covenants, etc. by the Purchaser.....................62
14.1.3 Consents, etc.......................................................62
14.1.4 No Action Taken Restricting Sale....................................63
14.1.5 Fibre Supply Agreements.............................................63
14.1.6 Pulp Supply Agreement...............................................63
14.1.7 Form of Documents...................................................63
14.2 Non-Fulfilment of Conditions etc. for the Benefit of the Vendor.....63
ARTICLE 15
CLOSING ARRANGEMENTS
15.1 Date, Time and Place of Closing.....................................64
15.2 Closing Arrangements................................................64
15.2.1 Purchase and Sale of Purchased Business and Purchased Assets........65
15.2.2 Delivery of Closing Documents.......................................65
15.2.3 Actual Possession...................................................65
15.2.4 Payments............................................................66
15.2.5 Tender..............................................................66
ARTICLE 16
RISK OF LOSS
16.1 Risk of Loss........................................................66
16.2 Expropriation.......................................................67
ARTICLE 17
CONDUCT AFTER CLOSING
17.1 Taxes...............................................................68
17.2 Maintenance and Access to Records...................................68
17.3 Intentionally Deleted...............................................68
17.4 Non-Competition.....................................................69
17.5 License to Use Avenor Name..........................................69
17.6 Reservation to Easement to Mercury Parcel...........................70
ARTICLE 18
INDEMNIFICATION
18.1 By Vendor...........................................................71
18.2 By Purchaser........................................................72
18.3 Limitation of Indemnity.............................................72
18.4 Notice and Defense; Costs of Defense................................73
18.5 Other...............................................................75
ARTICLE 19
MISCELLANEOUS
19.1 Brokerage, Commissions, etc.........................................75
19.2 Further Assurances..................................................76
19.3 Dispute Resolution..................................................76
19.4 Announcements.......................................................79
19.5 Notices.............................................................80
19.6 Time of the Essence.................................................82
19.7 Costs and Expenses..................................................82
19.8 Applicable Law......................................................82
<PAGE> 5
iv.
19.9 Entire Agreement....................................................82
19.10 Assignment..........................................................83
19.11 Parties in Interest.................................................83
19.12 Third Parties.......................................................83
19.13 Counterparts and Facsimile..........................................84
<PAGE> 6
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made this 4th day of August, 1998 by
and between BOWATER PULP AND PAPER CANADA INC., a corporation incorporated under
the laws of Canada (formerly known as Avenor Inc.) (hereinafter called the
"Vendor"), BOWATER INCORPORATED, a corporation incorporated under the laws of
Delaware (hereinafter "Bowater"), WEYERHAEUSER CANADA LTD., a corporation
incorporated under the laws of the Province of British Columbia (hereinafter
called the "Purchaser") and WEYERHAEUSER COMPANY, a corporation incorporated
under the laws of Washington (hereinafter called "Weyerhaeuser").
BACKGROUND
WHEREAS the Vendor carries on, among other businesses, the business of
manufacturing and selling uncoated free sheet paper, kraft pulp and softwood
lumber;
AND WHEREAS the Purchaser desires to purchase and the Vendor desires to
sell substantially all the property and assets owned by the Vendor or any of its
Affiliates and used by or in connection with the Business (as hereinafter
defined) for the purchase price and, the assumption of certain of the Vendor's
liabilities set forth below, subject to the terms and conditions hereinafter set
forth;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
covenants, agreements, warranties and payments hereinafter set forth, the
parties hereto agree as follows:
<PAGE> 7
2.
ARTICLE 1
INTERPRETATION
1.1 Definitions
Whenever used in this Agreement, unless there is something in the subject matter
or context inconsistent therewith, the following words and phrases shall have
the respective meanings ascribed to them as follows:
"Access Agreement" has the meaning ascribed to such term in Article 10.
"Accounting Referee" has the meaning ascribed to such term in Section 4.2.
"Accounts Receivable" has the meaning ascribed to such term in Paragraph 3.1(v).
"Adjusted Purchase Price" has the meaning ascribed to such term in Section 4.1.
"Affiliate" means with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with, such Person.
"Agreement" means this asset purchase agreement including the schedules to this
Agreement and any instrument amending this Agreement as referred to in Section
19.9; "hereof", "hereto", "hereunder" and similar expressions mean and refer to
this Agreement and not to a particular article or section or paragraph or
schedule; and the expression "Article" or "Section" or "Paragraph" or "Schedule"
followed by a number means and refers to the specified article or section or
paragraph or schedule of this Agreement.
"Articles of Incorporation" means the original or restated articles of
incorporation, articles of amalgamation, articles of arrangement, articles of
continuance, articles of reorganization, articles of revival, letters patent,
memorandum of agreement, special act or statute and any other instrument or
constating document by or pursuant to which a corporation is incorporated or
comes into existence; and "Articles of Amendment" has a corresponding meaning.
<PAGE> 8
3.
"Assumed Liabilities" has the meaning ascribed to such term in Section 5.1.
"Avenor Marks" has the meaning ascribed to such term in Section 17.5.
"Balance Sheet" means the unaudited statement of net assets included in the
Interim Financial Statements.
"Bulk Sales Act" means the Bulk Sales Act (Ontario).
"Business" means the following businesses currently carried on by the Vendor:
(a) the manufacturing and sale of uncoated free sheet paper,
including cut-size, folio and rolls, from a paper mill located
in Dryden, Ontario;
(b) the manufacturing and sale of pulp from a kraft pulp mill
located in Dryden, Ontario;
(c) the manufacturing and sale of lumber and by-products,
including without limitation, sawdust, woodchips and shavings
from a studmill located in Dryden, Ontario;
(d) the manufacturing and sale of lumber and by-products,
including without limitation, sawdust, woodchips and shavings
from a sawmill located in Ear Falls, Ontario;
(e) the growing and harvesting of timber and operations associated
therewith on timberlands owned or licensed by the Vendor; and
(f) the White Paper Group office located in Brampton, Ontario and
other white paper group sales offices.
"Business Day" means a day other than a Saturday, Sunday or any other day on
which the principal banks located at the city of New York are not open for
business during normal banking hours.
"Claim" means any written demand, claim, counterclaim, crossclaim, suit, action,
cause of action or proceeding by any Person which has been delivered to the
intended recipient.
<PAGE> 9
4.
"Claim Notice" means written notification as to which indemnity for a Claim or
Loss under Article 18 is sought by an Indemnified Party, enclosing a copy of all
papers served, if any, and describing in reasonable detail the nature of and
basis for such Claim or Loss, together with the amount or, if not then
reasonably ascertainable, the estimated amount, determined in good faith by the
party giving such written notification, of such Claim or Loss.
"Closing" means the completion of the transaction herein contemplated, including
the sale to and purchase by the Purchaser of the Purchased Assets hereunder as
herein contemplated.
"Closing Date" means the last day of a calendar month during which all
conditions set forth in this Agreement are satisfied or have been waived in
accordance with the terms of this Agreement but not later than November 30, 1998
unless unanimously agreed upon by all parties hereto, and on which Closing
occurs.
"Closing Working Capital Amount" means the Working Capital of the Business as
calculated in accordance with Section 4.2.
"Confidentiality Agreement" means the confidentiality agreement entered into by
Bowater and Weyerhaeuser on June 12, 1998.
"Contract" has the meaning ascribed to such term in Paragraph 3.1(vii).
"Current Assets" means the amount, determined in accordance with GAAP, of the
following items which are shown on the applicable balance sheet relating to the
Business: Accounts Receivable; Inventories; and other current assets.
"Current Liabilities" means the amount, determined in accordance with GAAP, of
the following items which are shown on the applicable balance sheet relating to
the Business: accounts payable, accrued liabilities and other current
liabilities.
"Cutpaper Agreement" means the agreement known as such to the parties.
<PAGE> 10
5.
"Disabled Non-Union Employees" means Employees, excluding Union Employees, who
are, as at the Closing Date, in receipt of or entitled to receive short or long
term disability benefits under benefit plans of the Vendor or pursuant to
workers' compensation legislation.
"Disclosure Statement" means the statement setting forth a description of
various Purchased Assets, Excluded Assets, Assumed Liabilities, Excluded
Liabilities, Contracts, Leases and exceptions to the representations and
warranties prepared by the Vendor and delivered by the Vendor to the Purchaser
on the date hereof.
"Draft Report" has the meaning ascribed to such term in Article 10.
"Ear Falls Plan" has the meaning ascribed to such term in Paragraph 11.3(a).
"Effective Time" means 12:01 a.m. on the Closing Date.
"Eligible Environmental Cost(s)" means any cost or expense expended, incurred or
assumed that meets the criteria provided below:
(a) The cost or expense of the Environmental Investigation,
provided that Eligible Environmental Cost shall not include
any cost or expense in excess of $250,000 relating to the
Environmental Investigation;
(b) The cost or expense of planning, engineering, monitoring,
testing and analysis, construction, equipment or goods
necessary to allow the Purchased Assets to operate in
compliance with or to meet applicable Environmental Laws that
are in lawful effect on the Closing Date.
(c) Costs incurred by reason of an act or omission which occurred
prior to the Effective Time including, by way of example but
not of limitation:
(i) remediation, restoration and replacement of
contaminated soil;
(ii) ground or surface water withdrawal, treatment and
discharge;
<PAGE> 11
6.
(iii) treatment or disposal of PCBs and PCB-containing
equipment; and
(iv) purchase or installation of equipment to reduce or
alter or re-direct pollutants in exhaust gas streams
emitted or discharged from manufacturing or
production equipment or systems or units.
(d) The Voluntary Abatement Program outlined in the letter dated
June 24, 1998 from the Vendor to the Ministry of the
Environment.
(e) Fees for legal services incurred to respond to Enviromental
Laws applicable for the purpose of incurring Eligible
Environmental Costs.
"Employee Benefits" means:
(i) salaries, supplementary unemployment benefits, wages,
bonuses, vacation entitlements, commissions, fees,
stock option plans, stock purchase plans, incentive
plans, deferred compensation plans, profit-sharing
plans and other similar benefits, plans or
arrangements; and
(ii) insurance, health, welfare, disability, pension,
retirement, travel, hospitalization, medical, dental,
legal, counselling, vision care and other similar
benefits, plans or arrangements.
"Employees" means all those employees who are employed by the Vendor in the
Business on the Closing Date.
"Encumbrance" means any mortgage, hypothec, security interest, servitude,
pledge, privilege, assignment, lien, charge, whether fixed or floating,
easement, adverse claim, conditional sale agreement, security agreement or other
encumbrance or other security arrangement of any kind or nature whatsoever
(including, without limitation, any title retention agreement or any financing
lease) whether or not filed, recorded or otherwise perfected under the
applicable laws of any jurisdiction.
<PAGE> 12
7.
"Environmental Consultant" and "Environmental Investigation" shall have the
respective meanings ascribed to such terms in Article 10.
"Environmental Laws" means all federal, provincial, local or municipal laws,
regulations, notices, directives, criteria, demands, codes, standards, orders,
permits, licenses, certificates, or approvals, domestic or foreign of any
government authorities or rule of common law, relating to environmental matters.
"Estimate" has the meaning ascribed to such term in Article 10.
"Excluded Assets" means the property and assets referred to in Section 3.2.
"Excluded Employees" means those certain Employees to be designated by the
Purchaser during the Interim Period, not to exceed twenty (20) in number.
"Excluded Liabilities" means all liabilities of the Vendor and its Affiliates,
whether contingent or absolute, known or unknown, disclosed or undisclosed,
which are not Assumed Liabilities.
"Final Working Capital Amount" means the Closing Working Capital Amount (i) as
shown in the Purchaser's calculations delivered pursuant to Section 4.2 if no
notice or disagreement with respect thereto is delivered pursuant to Section
4.2; or (ii) if such a notice of disagreement is delivered, (A) as agreed by the
Purchaser and the Vendor pursuant to Section 4.2 or (B) in the absence of such
agreement, as shown in the Accounting Referee's calculation delivered pursuant
to Section 4.2.
"Financial Year End" means December 31, 1997.
"Former Employees" means individuals who were employed in the Business, and who
are no longer Employees.
"Hazardous Materials" means any pollutant, contaminant, waste of any nature,
hazardous substance, hazardous material, toxic substance, dangerous substance or
dangerous good as defined, judicially interpreted or identified in any
Environmental Law.
<PAGE> 13
8.
"Hazardous Substances" means all substances (whether a gas, solid or liquid),
waste, raw materials, finished products, toxic substances, pollutants,
contaminants, including without limitation, a contaminant as defined under
Ontario's Environmental Protection Act, R.S.O. 1990 c.E. 19 (as amended from
time to time), dangerous substances or dangerous goods or any other material or
article whether hazardous or non-hazardous which is regulated or identified by
or forms the basis of liability under any Environmental Law including without
limitation, petroleum, any by-products or fractions thereof, polychlorinated
biphenyls (PCBs), urea formaldehyde foam insulation, asbestos, radon, other
radioactive substances, poly-aromatic hydrocarbons, pesticides, metals and
defoliants.
"Hostile Acquiror" has the meaning ascribed to such term in Section 17.4.
"HSR Act" means Section 7A of the Clayton Act (Title II of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended) and the rules and regulations
promulgated thereunder.
"Indemnified Party" and "Indemnifying Party" mean either the Vendor or the
Purchaser, depending upon which party is obligated to indemnify and which party
is entitled to be indemnified under the terms of this Agreement.
"Ineligible Environmental Cost" means any cost or expense expended, incurred or
assumed to the extent that it meets the criteria provided below:
(a) a cost or expense that does not meet the criteria that define
Eligible Environmental Cost; or
(b) A cost or expense that does meet the criteria that define
Eligible Environmental Cost and meets the criteria provided
below:
(i) a cost or expense incurred to achieve a level or
environmental performance or an environmental
condition that is higher or more stringent than
required to meet applicable Environmental Laws in
effect at the Effective Time;
<PAGE> 14
9.
(ii) a cost or expense arising from unnecessary
duplication, errors, omissions, material deviations
from plans and specifications, negligence, or damage
or destruction of property during the remediation
work;
(iii) a cost or expense to the extent reimbursed by
insurance;
(iv) indirect or consequential Losses, costs, damages or
damages for loss of profit;
(v) financing costs or charges incurred by the Purchaser
in connection with the operation of the Purchased
Assets or the remediation of the Real Property;
(vi) legal fees other than those specifically described as
Eligible Environmental Costs; and
(vii) costs pertaining to arbitration pursuant to Section
19.3 hereof and overhead, administration or
supervision costs internal to the Purchaser.
In the event that part, but not all, of an Eligible Environmental Cost meets the
criteria for Ineligible Environmental Cost, that part shall be segregated if
reasonably possible so the part that is an Eligible Environmental Cost shall be
treated as an Eligible Environmental Cost.
"Intellectual Property Rights" has the meaning ascribed to such term in
Paragraph 3.1 (viii).
"Interest Rate" has the meaning ascribed to such term in Section 4.3.
"Interim Financial Statements" means the unaudited statement of net assets
relating to the Business as of May 31, 1998, and unaudited combined income
statement for the period then ended.
"Interim Period" means the period between the date of this Agreement and the
Time of Closing.
"Inventories" has the meaning ascribed to such term in Paragraph 3.1 (iv).
<PAGE> 15
10.
"Leased Property" means all the right, title and interest of the Vendor in and
to the subject matter (whether realty or personalty) of the Leases.
"Leases" means the personal property leases, real property leases and other
rights of occupancy (other than rights in the nature of easements) relating to
real property, including without limitation the leases disclosed in Schedule
6.15 to the Disclosure Statement, including the right, if any, to leasehold
improvements thereunder to which the Vendor is a party to or bound by or subject
to, whether as landlord or tenant, and in connection with the Business except to
the extent that any of such personal or real property leases including the
right, if any, to leasehold improvements thereunder or other rights of occupancy
are or relate to Excluded Assets; and real property leases to which any
Affiliate of the Vendor is a party to or bound by or subject to exclusively in
connection with the Business, including without limitation the leases disclosed
in Schedule 6.15 to the Disclosure Statement.
"Legal Proceeding" means any litigation, action, suit, investigation, hearing,
claim, complaint, grievance, arbitration proceeding or other proceeding and
includes any appeal or review and any application for same.
"Licenses" has the meaning ascribed to such term in Paragraph 3.1(ix).
"Loss" means any and all direct damages (excluding indirect, consequential,
special and punitive damages), losses, obligations, liabilities, penalties,
fines, or expenses (including interest, legal and consulting fees).
"Mercer 1996 Staff Plan Report" has the meaning ascribed thereto in Paragraph
11.3(b).
"Mercury Parcel" means the site referred to by the parties hereto as the
off-site engineered mercury waste disposal site located west of Gordon Road and
all treatment, monitoring, containment and inspection facilities appurtenant
thereto.
"New Group Annuities" has the meaning ascribed thereto in Paragraph
11.3(b)(xiii).
"Non-Transferable Asset" has the meaning ascribed to such term in Section 3.3.
<PAGE> 16
11.
"Non-union Transferred Employees" has the meaning ascribed to such term in
Paragraph 11.1(a).
"Ordinary course", when used in relation to the conduct by the Vendor of the
Business, means any transaction which constitutes an ordinary day-to-day
business activity in respect of the Business.
"Other Purchased Assets" means the Purchased Assets other than the Real
Property.
"Pension Referee" has the meaning ascribed to such term in Paragraph 11.3(b).
"Pension Transfer Amounts" has the meaning ascribed to such term in Paragraph
11.3(b).
"Person" means any individual, corporation, firm, partnership, sole
proprietorship, syndicate, joint venture, trustee, trust and any unincorporated
organization or association, and any Tribunal; and pronouns have a similar
extended meaning.
"Purchase Price" has the meaning ascribed to such term in Section 4.1.
"Purchased Assets" means the property and assets described in Section 3.1.
"Purchaser's Indemnified Parties" and "Purchaser's Indemnified Party" have the
respective meanings ascribed to such terms in Section 18.1.
"Purchaser's Representatives" means the directors, officers, employees,
auditors, legal counsel and fiscal and tax advisors of the Purchaser and any
other Person authorized in writing by the Purchaser to represent the Purchaser
for purposes of Section 8.9.
"Purchaser's Staff Plan" and "Purchaser's Supervisory Plan" have the respective
meanings ascribed to such terms in Paragraph 11.3(b).
"Real Property" has the meaning ascribed to such term in Paragraph 3.1(i).
"Required Contracts" means (i) contract number 20 under the Dryden Mill heading;
and (ii) contract number 1 under the Ear Falls heading, on Schedule 6.10 to the
Disclosure Statement.
<PAGE> 17
12.
"Staff Plan Transfer Amount" and "Supervisory Plan Transfer Amount" have the
respective meanings ascribed thereto in Paragraph 11.3(b)(v).
"Standard Life Group Annuities" has the meaning ascribed to such term in
Paragraph 11.3(b)(xiii).
"Target" has the meaning ascribed to such term in Section 17.4.
"Time of Closing" means 2:00 p.m. on the Closing Date or such other time on the
Closing Date as the parties may agree as the time at which the Closing shall
take place.
"Transfer Reports" has the meaning ascribed to such term in Paragraph 11.3(b).
"Tribunal" means:
(i) any court (including a court of equity);
(ii) any federal, provincial, state, county, municipal or
other government or governmental department,
ministry, commission, board, bureau, agency or
instrumentality;
(iii) any securities commission, stock exchange or other
regulatory or self-regulatory body;
(iv) any board of trade, chamber of commerce or other
business or professional organization or association;
(v) any arbitrator or arbitration tribunal; and
(vi) any other tribunal;
whether domestic or foreign.
"Union Employees" shall mean each of the Employees who are represented by a
labour union(s) or an employee association(s).
<PAGE> 18
13.
"Vendor's Actuary", "Vendor's 1976 Staff Plan", "Vendor's 1976 Supervisory
Plan", "Vendor's 1981 Union Plan", "Vendor's Plans", "Vendor's Supplemental Plan
for Grade 12 and Over" and "Vendor's Supplemental Plan for Grade 11 and Under"
have the respective meanings ascribed to such terms in Section 11.3.
"Vendor's Indemnified Parties" and "Vendor's Indemnified Party" have the
respective meanings ascribed to such terms in Section 18.2.
"Working Capital" means Current Assets less Current Liabilities.
1.2 Gender and Number
In this Agreement words importing a specific gender include all genders and
words importing the singular include the plural and vice versa.
1.3 Currency
Unless otherwise indicated all dollar amounts referred to in this Agreement,
including the symbol $, refer to lawful money of Canada.
1.4 Accounting Principles
Wherever in this Agreement reference is made to generally accepted accounting
principles or GAAP such reference shall be deemed to be to the generally
accepted accounting principles from time to time approved by the Canadian
Institute of Chartered Accountants, or any successor entity, applicable as at
the date on which such principles are applied.
<PAGE> 19
14.
1.5 Headings
The division of this Agreement into Articles and Sections and the use of a table
of contents and headings are for convenience of reference only and shall not
affect the interpretation of this Agreement.
1.6 Contra Proferentum
Each of the parties hereto acknowledges that its respective legal counsel have
participated in the drafting of this Agreement and that the rule of contra
proferentum shall not apply with respect to the interpretation of this
Agreement.
1.7 Tax Definitions
Whenever used in this Agreement, the following words and phrases shall have the
respective meanings ascribed to them as follows:
"GST" means taxes, interest, penalties and fines imposed under Part IX of the
Excise Tax Act (Canada) and the regulations made thereunder (collectively the
"GST Legislation").
"Income Tax Act (Canada)" means, collectively, the Income Tax Act (Canada) and
the Income Tax Regulations, all as amended to date and, where a reference is
made to a provision under the Income Tax Act (Canada), it shall be deemed to
include, where applicable, the Income Tax Application Rules, the Income Tax
Regulations, any Notice of Ways and Means Motion or Bill tabled in the House of
Commons or any press release or publicly disseminated statement by the Minister
of Finance as of the date hereof, which may result in an amendment to the Income
Tax Act (Canada), the Income Tax Application Rules or the Income Tax
Regulations.
"Tax Legislation" means, collectively, the Income Tax Act (Canada) and the
statute law, rules, regulations, interpretation bulletins and releases, orders
and decrees of any other jurisdiction, domestic or foreign which may impose a
tax of any kind.
<PAGE> 20
15.
"Tax" and "Taxes" means all taxes payable under any applicable Tax Legislation,
including, without limitation, income taxes, excise taxes, sales taxes, goods
and services taxes, transfer taxes, property and municipal and school taxes,
capital taxes, import and customs, duties and other governmental charges and
assessments, workers' compensation assessments and includes additions by way of
penalties, interest, fines and other amounts with respect thereto.
"Tax Returns" means all tax returns required to be filed under the provisions of
any applicable Tax Legislation and any tax forms required to be filed, whether
in connection with a Tax Return or not, under any provisions of any applicable
Tax Legislation.
ARTICLE 2
SCHEDULES
2.1 Description of Schedules
The following are the Schedules attached to and incorporated in this Agreement
by reference and deemed to be a part hereof:
Schedule 3.2 - Excluded Assets
Schedule 6.1 - Representations and Warranties of the Vendor
(Section 6.1)
Schedule 7.1 - Representations and Warranties of the
Purchaser and Weyerhaeuser (Section 7.1)
Schedule 10.1 - Access Agreement (Section 10.1)
Schedules 13.1.6A/B - Fibre Supply Agreements (Sections 13.1.6 and
14.1.5)
Schedule 13.1.7 - Shared Services Agreement (Section 13.1.7)
Schedule 14.1.6 - Pulp Supply Agreement (Section 14.1.6)
<PAGE> 21
16.
ARTICLE 3
AGREEMENT OF PURCHASE AND SALE
3.1 Property and Assets to be Purchased and Sold
Subject to the terms and conditions hereof, the Vendor agrees to sell, assign
and transfer to the Purchaser and the Purchaser agrees to purchase as, at and
from the Effective Time the following property and assets of the Business:
(i) Real Property - all of the interests of the Vendor (or an
Affiliate, in the case of certain Leases) in and to real and
immovable properties owned by the Vendor or leased by the
Vendor (or an Affiliate) pursuant to Leases and used
exclusively in connection with the Business, including without
limitation the real property disclosed in Schedule 6.14 to the
Disclosure Statement, except to the extent that any of such
real and immovable property is or relates to Excluded Assets,
and including all easements and rights of way appurtenant
thereto, plant, buildings, structures, erections,
improvements, appurtenances and fixtures situate thereon or
forming part thereof owned by the Vendor ("Real Property");
(ii) Machinery and Equipment - all machinery, equipment (including,
without limitation, manufacturing and quality control
equipment and office equipment, including computer equipment),
jigs, dies, tools, handling equipment, furniture, furnishings
and accessories and supplies of all kinds, wherever located,
owned by the Vendor and used exclusively in connection with
the Business;
(iii) Motor Vehicles - all trucks, cars and other vehicles, wherever
located, owned by the Vendor and used exclusively in
connection with the Business;
(iv) Inventories - all inventories of every kind and nature,
wherever located, which are owned by the Vendor relating to
the Business (except to the extent that any of such
inventories are or relate to Excluded Assets) including
without limitation, all finished goods, work in process, raw
materials, new and unused production and shipping
<PAGE> 22
17.
supplies and new and unused major maintenance items, and all
other materials and supplies on hand to be used or consumed in
the production of products of the Business ("Inventories");
(v) Accounts Receivable - all accounts receivable, trade accounts,
notes receivable, book debts and other debts due or accruing
due to the Vendor relating to the Business and the full
benefit of all securities for such accounts, notes or debts
and interest thereon refundable to the Vendor at the Effective
Time ("Accounts Receivable");
(vi) Other Current Assets - all other current assets which are
reflected on the Balance Sheet;
(vii) Agreements, Contracts and Commitments - the full benefit of
all unfilled orders received by the Vendor relating to the
Business and all right, title and interest of the Vendor in,
to and under all agreements, contracts and commitments and
other rights of or relating to the Business, whether written
or oral, including, without limitation, the full benefit and
advantage of all forward commitments by the Vendor for
supplies or materials entered into in the Ordinary course of
the Business which are exclusively for use in the Business
whether or not there are any written agreements, contracts or
commitments with respect thereto (individually a "Contract"
and collectively, the "Contracts");
(viii) Intellectual Property Rights - except as otherwise provided in
this Agreement, all the right, title, benefit and interest of
the Vendor in and to:
(A) all trade marks, trade names, service marks, brand
names, styles or business names and all applications
therefor;
(B) all patents (including divisions, reissues, renewals
and extensions) and all applications therefor; and
<PAGE> 23
18.
(C) all copyrights, industrial designs and other
industrial property rights (including any invention
or know-how of any kind) and any applications
therefor;
both domestic and foreign and whether or not registered which
relate exclusively to the Business ("Intellectual Property
Rights");
(ix) Licenses and Permits - all licenses, permits, authorizations,
certificates, approvals, registrations, franchises, rights,
orders and similar consents or certificates granted or issued
by any Person, including a governmental authority (including
the softwood lumber quotas relating to the Business as at the
Closing Date), relating exclusively to the Purchased Assets or
Business ("Licenses");
(x) Prepaid Expenses - all prepaid expenses and deposits relating
to the Business;
(xi) Loans and Advances - all loans and advances made by the Vendor
to suppliers of the Vendor relating to the Business;
(xii) Goodwill - the goodwill of the Business, together with the
exclusive right of the Purchaser to represent itself as
carrying on the Business in continuation of and in succession
to the Vendor and the right to use any words indicating that
the Business is so carried on, excluding, however, except as
otherwise specifically set out herein, the right to use the
names "Avenor", "Bowater" or any variation thereof or any
associated trade marks, trade names, service marks, brand
names, styles or business names as part of the name of or
relating to the Business or any part thereof carried on or to
be carried on by the Purchaser;
(xiii) Leases - all rights, title and interest of the Vendor in, to
and under all Leases;
<PAGE> 24
19.
(xiv) Warranty Rights - the full benefit of all representations,
warranties, guarantees, indemnities, undertakings,
certificates, covenants, agreements and the like and all
security therefor received by the Vendor on the purchase or
other acquisition of any part of the Purchased Assets or
otherwise;
(xv) Records - all books, records, files and other documentation
and materials (regardless of the medium of recordal) relating
exclusively to the Business, including, without limitation all
production, woodland, Inventory, personnel, sales and customer
records, maps, site plans, surveys, soil and substratum
studies, as-built drawings, appraisals, electrical and
mechanical plans and studies, except that where the Vendor is
required by law to retain a particular book, record, file,
document or other written material, it shall retain the
original thereof and deliver to the Purchaser a copy thereof;
(xvi) Avenor America - all accounts receivable and inventories owned
by Avenor America Inc. which are related to the Business and
which are included in the calculation of the Closing Working
Capital Amount; and
(xvii) General - all other property, assets and rights, real or
personal, tangible or intangible, owned by the Vendor or an
Affiliate or to which it is entitled relating exclusively to
the Business,
except to the extent that any of the foregoing are or relate to Excluded Assets.
3.2 Excluded Assets
There shall be excluded from the purchase and sale of property and assets herein
contemplated the following ("Excluded Assets"):
(i) cash on hand or in banks or other depositories;
<PAGE> 25
20.
(ii) term or time deposits and similar cash items of, owned or held
by or for the account of the Vendor, except for the prepaid
expenses, loans and advances which are referred to in Section
3.1 and form part of the Purchased Assets;
(iii) insurance proceeds receivable except as otherwise provided for
in this Agreement;
(iv) insurance policies related to the Business;
(v) all books, records, files or other documentation and written
materials relating exclusively to any Excluded Assets;
(v) the Mercury Parcel, the exact boundaries of which shall be
agreed between the Vendor and the Purchaser acting reasonably
as soon as possible after the date of this Agreement;
(vi) the Cutpaper Agreement, unless such agreement is amended prior
to Closing to delete or waive the prohibition in Section 1
thereof regarding direct or indirect sales to a party; and
(vii) all assets listed as Excluded Assets on Schedule 3.2 to this
Agreement,
which shall remain the property of the Vendor.
3.3 Non-Transferable Assets
(a) Subject to the provisions of Paragraph 3.3(c) below and to Section
13.1.9 and Schedule 6.14 of the Disclosure Statement with regard to Real
Property owned by the Vendor, to the extent that any asset (other than Real
Property owned by the Vendor and other than the Required Contracts) that would
otherwise be an Other Purchased Asset is not capable of being sold, assigned,
transferred, conveyed or delivered without obtaining a consent (including,
without limitation, waiver of a right of first refusal or option right) of a
third party, (but, with regard to Licenses, only to the extent that any License
is not issued by or entered into with any governmental authority whose consent
to assignment is required by applicable law) or if such sale, assignment,
transfer,
<PAGE> 26
21.
conveyance or delivery or attempted sale, assignment, transfer, conveyance or
delivery would constitute a default under any Contract, Lease or License
relating specifically to such Purchased Asset, or a violation of any law or
License, or would result in the imposition of any significant additional
liability or obligation on either the Vendor or Purchaser, or a substantial
diminution in the value or use of such Purchased Asset, this Agreement shall not
constitute a sale, assignment, transfer, conveyance or delivery of such
Purchased Asset or an attempted sale, assignment, transfer, conveyance or
delivery thereof. Any such Purchased Asset and any Contract, Lease or License
that relates exclusively to any such Purchased Asset or Assets shall be a
"Non-Transferable Asset".
(b) If and to the extent that the Vendor is unable to obtain any
required third party consent in respect of a Non-Transferable Asset, the Vendor
shall continue to be bound by any such Non-Transferable Asset that is a
Contract, Lease or License. In such event, to the maximum extent permitted by
law or the terms of the Non-Transferable Asset, (i) the Vendor shall make the
benefit of such Non-Transferable Asset available to Purchaser with the intent
that the Purchaser will be in the same economic position as if such
Non-Transferable Asset were transferred to it, including holding any such
Non-Transferable Asset in trust for the Purchaser or acting as agent for the
Purchaser or entering into back to back arrangements with the Purchaser in
respect of such Non-Transferable Asset, and (ii) the assignment provisions of
this Agreement shall operate to the extent permitted by law or the applicable
Non-Transferable Asset to create a subcontract, sublease or sublicense with the
Purchaser whereby the Purchaser will perform each relevant Non-Transferable
Asset, and be entitled to receive all related benefits, in accordance with its
terms. To the extent such subcontract, sublease or sublicense is created, (1)
the Purchaser shall pay, perform and discharge fully all obligations of the
Vendor under any such Non-Transferable Asset from and after the Closing Date and
shall indemnify the Vendor against any Losses incurred by the Vendor arising
from the Purchaser's failure to pay, perform and discharge fully such
obligations, (2) the Vendor shall, without further consideration therefor, pay
and remit to the Purchaser promptly any monies, rights and other consideration
received by it in respect of such Non-Transferable Asset performance subsequent
to the Closing Date, and (3) the Vendor shall exercise or exploit its rights and
options under all such Non-Transferable Assets only as directed by the Purchaser
and at the Purchaser's expense.
<PAGE> 27
22.
(c) If and when any third party consent contemplated by Paragraph (b)
above shall be obtained or any such Non-Transferable Asset shall otherwise
become assignable, the Vendor shall promptly assign all of its rights and
obligations thereunder or in connection therewith to the Purchaser without
payment of further consideration therefor, and the Purchaser shall assume such
rights and obligations.
(d) Anything in this Agreement to the contrary notwithstanding, the
Vendor shall not be obligated to sell, assign, transfer, convey or deliver, or
cause to be sold, assigned, transferred, conveyed or delivered to the Purchaser,
and the Purchaser shall not be obligated to purchase, any Non-Transferable Asset
without first having obtained all required consents, removed or eliminated any
such potential default or violation or prevented the imposition of such
liability or obligation or diminution in value or use. Both before and after
Closing, the Vendor, at its expense, shall use reasonable commercial efforts,
and the Purchaser shall cooperate with the Vendor, to obtain any required
consents, to remove or eliminate any such potential default or violation or to
prevent the imposition of any such liability or obligation or any such
diminution in value or use so as to transfer each such Non-Transferable Asset to
the Purchaser without adversely modifying, amending or burdening such
Non-Transferable Asset.
3.4 Cutpaper Agreement
The Cutpaper Agreement will be dealt with as agreed among the parties.
3.5 Guarantee of Weyerhaeuser
(a) Weyerhaeuser unconditionally and irrevocably guarantees to the
Vendor, the due and punctual payment, performance and satisfaction by the
Purchaser of each and every liability or obligation of or owed by the Purchaser
under this Agreement and the documents to be executed and delivered hereunder or
in connection with the transaction contemplated herein to which the Purchaser is
a party.
(b) The obligations and liabilities of Weyerhaeuser hereunder shall be
absolute and unconditional, shall not be subject to any counter-claim, set-off,
deduction, abatement or defence
<PAGE> 28
23.
based upon any claim Weyerhaeuser may have against any other party and shall
remain in full force and effect without regard to, and shall not be released,
discharged or in any way affected by any circumstance or condition other than
the performance in full of the guaranteed liabilities and obligations.
(c) The guarantee herein provided is an absolute, unconditional,
continuing guarantee of payment, performance and satisfaction and not of
collectibility, is in no way conditioned upon any attempt to collect from the
Purchaser or upon any other event or contingency and shall be binding upon and
enforceable against Weyerhaeuser without regard to the genuineness, regularity,
validity or enforceability of this Agreement or of any term hereof or the lack
of power or authority of any party to enter into the same.
3.6 Guarantee of Bowater
(a) Bowater unconditionally and irrevocably guarantees to the Purchaser
the due and punctual payment, performance and satisfaction by the Vendor of each
and every liability or obligation of or owed by the Vendor under this Agreement
and the documents to be executed and delivered hereunder or in connection with
the transaction contemplated herein to which the Vendor or any of its Affiliates
is a party.
(b) The obligations and liabilities of Bowater hereunder shall be
absolute and unconditional, shall not be subject to any counter-claim, set-off,
deduction, abatement or defence based upon any claim Bowater may have against
any other party and shall remain in full force and effect without regard to, and
shall not be released, discharged or in any way affected by any circumstance or
condition other than the performance in full of the guaranteed liabilities and
obligations.
(c) The guarantee herein provided is an absolute, unconditional,
continuing guarantee of payment, performance and satisfaction and not of
collectibility, in no way conditioned upon any attempt to collect from the
Vendor or upon any other event of contingency and shall be binding upon and
enforceable against Bowater without regard to the genuineness, regularity,
validity or
<PAGE> 29
24.
enforceability of this Agreement or of any term hereof or the lack of power or
authority of any party to enter into the same.
ARTICLE 4
PURCHASE PRICE
4.1 Purchase Price
As full payment for the Purchased Assets, the Purchaser shall pay to the Vendor
a sum equal to $790,000,000 (the "Purchase Price") subject to an adjustment for
Working Capital as set forth in Section 4.3 which shall result in the "Adjusted
Purchase Price". The Purchase Price shall be paid by wire transfer in
immediately available Canadian funds pursuant to instructions given in writing
to the Purchaser at least two Business Days prior to the Closing Date.
4.2 Preparation of Closing Working Capital Amount Calculation
The parties agree to calculate the Closing Working Capital Amount in the
following manner:
(a) The Purchaser shall cause a physical count of the Inventory to
take place as at the Closing Date which representatives of the
Vendor shall be entitled to attend.
(b) As promptly as practicable, but no later than 60 days after
the Closing Date, the Purchaser will cause to be prepared and
delivered to the Vendor a certificate setting forth the
Purchaser's calculation of the Closing Working Capital Amount.
The Purchaser will, and will request its independent chartered
accountants, Arthur Andersen LLP, to review such certificate
and to make available to the Vendor copies of all customary
accounting working papers in their respective possession that
were prepared in connection with the calculation of the
Closing Working Capital Amount. The account balances on which
the Closing Working Capital Amount shall be calculated shall
be determined (x) in accordance with GAAP, and (y) in
accordance with accounting policies and practices consistent
with those used in the preparation of the Balance Sheet.
<PAGE> 30
25.
(c) If the Vendor questions or disagrees with the Purchaser's
calculation of the Closing Working Capital Amount, the Vendor
may, within 20 days after receipt by it of the documents
referred to in Paragraph 4.2(b), deliver a notice to the
Purchaser questioning or disagreeing with such calculation and
setting forth its calculation of such amount. Any such notice
of disagreement shall specify those items or amounts as to
which the Vendor questions or disagrees, and the Vendor shall
be deemed to have agreed with all other items and amounts
contained in the certificate and calculation delivered by the
Purchaser pursuant to Paragraph 4.2(b).
(d) If a notice is delivered pursuant to Paragraph 4.2(c), the
Purchaser and the Vendor, during the 15 days following
delivery of such notice, shall use their best efforts to reach
agreement on the disputed items or amounts in order to
determine, as may be required, the amount of the Closing
Working Capital Amount. If during such period, the Purchaser
and the Vendor are unable to reach such agreement, they shall
promptly thereafter cause PricewaterhouseCoopers, or such
other firm of nationally recognized independent chartered
accountants as may be agreed to by the Purchaser and the
Vendor (the "Accounting Referee") promptly to review this
Agreement and the disputed items or amounts for the purpose of
calculating the Closing Working Capital Amount. There shall
only be one Accounting Referee appointed to review all
disputed items or amounts pursuant to this Paragraph 4.2(c).
In making such calculations, the Accounting Referee shall
follow the methodologies and procedures described in clauses
(x) and (y) of Paragraph 4.2(b). The Accounting Referee shall
deliver to the Purchaser and the Vendor, as promptly as
practicable, a report setting forth such calculation. Such
report shall be final and binding upon the Vendor and the
Purchaser. The cost of such review and report shall be borne
equally by the Purchaser and the Vendor.
(e) The Purchaser and the Vendor agree that they will, and will
request their respective independent accountants to, cooperate
and assist in the preparation of such certificate and the
calculation of the Closing Working Capital Amount, and in the
conduct of
<PAGE> 31
26.
the reviews referred to in this Section 4.2 including, without
limitation, making available to the extent reasonably
necessary their respective books, records, working papers and
personnel.
(f) If no notice is delivered by the Vendor to the Purchaser
pursuant to Paragraph 4.2(c), the Vendor shall be deemed to
have accepted and agreed with the Purchaser's calculation of
the Closing Working Capital Amount.
4.3 Payment of Working Capital Adjustment to the Purchase Price
(a) Upon the settlement of the calculation set forth in Section 4.2
above, the parties agree that if the Final Working Capital Amount is less than
$62,023,485 (i.e. the amount of Working Capital as of May 31, 1998), the Vendor
shall owe to the Purchaser, as an adjustment to the Purchase Price, the amount
of such difference, which amount shall be payable in the manner and with
interest as provided in Paragraph 4.3(b). If the Final Working Capital Amount
exceeds $62,023,485, the Purchaser shall owe to the Vendor, as an adjustment to
the Purchase Price, the amount of such excess, which amount shall be payable in
the manner and with interest as provided in Paragraph 4.3(b).
(b) Any payment required to be made pursuant to Paragraph 4.3(a) shall
be made to the Purchaser or the Vendor, as the case may be, within 10 days after
the earlier of: (A) the deemed acceptance of the Purchaser's calculation of the
Closing Working Capital Amount pursuant to Paragraph 4.2(e), and (B) the
calculation of the Closing Working Capital Amount by the Accounting Referee
pursuant to Paragraph 4.2(c), by delivery of immediately available Canadian
funds to the Purchaser or the Vendor, as applicable. The amount of any payment
to be made pursuant to this Paragraph 4.3(b) by the Purchaser or the Vendor
shall bear interest from and including the Closing Date to but excluding the
date of payment at a rate per annum equal to the Interest Rate. Such interest
shall be payable (less any applicable withholding taxes) at the same time as the
payment to which it relates and shall be calculated daily on the basis of a year
of 365 days and the actual number of days elapsed. As used herein, "Interest
Rate" for any day means the
<PAGE> 32
27.
"prime rate" of interest as announced by The Toronto-Dominion Bank (or its
successor) for Canadian dollar loans to its Canadian customers on commercial
loans.
4.4 Transfer Taxes
(a) The Purchaser shall be liable for and shall pay at the Time of
Closing, either to the Vendor or directly to the applicable government
authority, as required, all land transfer taxes, federal and provincial sales
taxes and all other Taxes or other like charges properly payable by the
Purchaser upon and in connection with the conveyance and transfer of the
Purchased Assets by the Vendor to the Purchaser, including, but not limited to
GST, but excluding any income taxes payable by the Vendor as a result of the
completion of the sale contemplated herein.
(b) The Vendor and the Purchaser shall jointly complete and the
Purchaser shall file the elections under Section 167(1) of the GST Legislation
with respect to the purchase and sale of the Purchased Assets pursuant to the
provisions of this Agreement.
(c) The Purchaser shall supply the Vendor with a purchase exemption
certificate pursuant to, and in the manner prescribed in Regulations 1012 and
1013 of the Retail Sales Tax Act (Ontario) in respect of any tangible personal
property on which the Purchaser is entitled to claim exemptions from Ontario
retail sales tax.
ARTICLE 5
LIABILITIES OF VENDOR
5.1 Assumed Liabilities and Excluded Liabilities
At Closing, the Purchaser will assume, perform and fulfil the following
liabilities and obligations:
(a) all liabilities (i) reflected in the Balance Sheet (except
those which are paid or satisfied by the Closing Date); and
(ii) incurred on or before the Closing Date
<PAGE> 33
28.
in the Ordinary course of the Business, in each case, to the
extent that (i) and (ii) are included in the Closing Working
Capital Amount;
(b) all of the obligations of the Vendor and Avenor America to
perform the Contracts, Leases, and Licenses which accrue or
arise after the Closing Date;
(c) those liabilities and obligations related to environmental,
employee and pension matters expressly assumed by the
Purchaser as set forth in this Agreement;
(d) all liabilities for any damages, penalties, fines or other
claims whatsoever relating to products manufactured subsequent
to the Effective Time;
(e) the obligations to provide hardwood fibre or software fibre as
described in Section 5.2 hereof;
(f) the Taxes which are payable by the Purchaser as provided in
Section 4.4;
(g) any and all obligations of the Vendor which accrue or arise
after the Closing Date with respect to (i) the liens,
encumbrances and other matters disclosed by the registered
title as described in Part 2 of Exhibit 6 to Schedule 6.14 to
the Disclosure Statement and (ii) the unregistered leases made
by the Vendor as landlord of parts of the Real Property as
described in Part C of Schedule 6.15 to the Disclosure
Statement; and
(h) all other obligations expressly assumed by the Purchaser as
set forth in this Agreement
(collectively, the "Assumed Liabilities").
The Purchaser does not hereby and shall not in any way assume, be responsible
for or be obligated to pay, perform, satisfy or discharge any Excluded
Liabilities.
<PAGE> 34
29.
5.2 Third Party Fibre Supply Obligations
The Purchaser shall, subject to the approval of the Minister of Natural
Resources (Ontario), assume on and after the Closing Date all obligations to
supply hardwood and softwood fibre from the Wabigoon Forest or Trout Lake Forest
under the following Contracts:
(a) the memorandum of understanding dated September 17, 1996
between the Vendor and Tolko Industries Ltd. (as amended)
together with all applicable collateral agreements (which
agreement is for an initial 20-year term that expires on
December 31, 2015) to supply up to 120,000 cubic metres of
hardwood fibre on an annual basis (which increases to 161,000
cubic metres in the second 20-year term); and
(b) the memorandum of agreement made in 1995 between the Vendor
and L.K.G.H. Contracting Ltd. (which agreement is for a
20-year term that expires on March 31, 2015) to supply up to
98,000 cubic metres of softwood fibre on an annual basis.
Subject to the approval of the Minister of Natural Resources (Ontario), the
Purchaser shall also assume on and after the Closing Date, the following
obligations to supply hardwood and softwood fibre from the Wabigoon Forest or
Trout Lake Forest under the following Contract and directive:
(c) to supply up to 186,000 cubic metres of softwood fibre on an
annual basis to Abitibi-Consolidated Inc. pursuant to the
terms of the Memorandum of Agreement between the Vendor and
Abitibi-Consolidated Inc. made the 27th day of November, 1997
(which agreement is for a 20-year term that expires on
December 31, 2016); and
(d) to supply up to 70,000 cubic metres of hardwood fibre to
Columbia Forest Products on an annual basis pursuant to a
directive of the Minister of Natural Resources (Ontario) to
negotiate a memorandum of agreement with Columbia Forest
Products to give effect and to implement such directive.
<PAGE> 35
30.
5.3 Inter-Division Accounts
The Purchaser recognizes that the Business has been run by the Vendor as a
division of the Vendor's business and that certain accounts receivable and
accounts payable have been generated between the Business and the Vendor's other
divisions for various goods and services. All such accounts receivable and
accounts payable shall be netted as at the Effective Time and if the net amount
is an account payable of the Business it shall be an Assumed Liability of the
Purchaser and if it is an Account Receivable of the Business it shall be
included in the Accounts Receivable purchased hereunder and shall be paid within
60 days of the Closing Date.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE VENDOR
6.1 Representations and Warranties of the Vendor
Each of the Vendor and Bowater hereby makes to the Purchaser the representations
and warranties as set forth in Schedule 6.1 to this Agreement and acknowledges
that the Purchaser is relying upon those representations and warranties in
connection with entering into this Agreement.
6.2 Survival of Representations and Warranties of the Vendor
The representations and warranties of the Vendor and Bowater contained in
Section 6.12 of Schedule 6.1 to this Agreement shall not survive Closing and all
other representations and warranties of the Vendor and Bowater contained in this
Agreement and in any agreement, certificate, affidavit, statutory declaration or
other document delivered or given pursuant to this Agreement shall survive
Closing and shall continue in full force and effect for the benefit of the
Purchaser as provided herein below:
(a) in respect of the representations and warranties of the Vendor
and Bowater contained in this Agreement, for a period
commencing on the Closing Date and ending on the date listed
below opposite the section number to Schedule 6.1 of this
Agreement:
<PAGE> 36
31.
(i) Sections 6.1, 6.2, 6.3, 6.4, 6.5, - 3 years;
6.6, 6.7, 6.8, 6.10, 6.11, 6.13,
6.14(b) through (i), 6.15, 6.16,
6.17, 6.18, 6.19, 6.21, 6.22,
6.23, 6.24 and 6.25
(ii) Sections 6.9 and 6.14(a) - perpetual;
(iii) Section 6.20 - applicable
statute of
limitations
(b) in respect of the other representations and warranties of the
Vendor and Bowater contained in this Agreement or any other
agreement, certificate, affidavit, statutory declaration or
other document delivered or given pursuant to this Agreement,
for a period of 3 years from the Closing Date.
Upon the expiry of such respective periods, the Vendor and Bowater shall have no
further liability to the Purchaser with respect to any such representations and
warranties referred to in this Agreement and in any agreement, certificate,
affidavit, statutory declaration or other document delivered or given pursuant
to this Agreement.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
AND WEYERHAEUSER
7.1 Representations and Warranties of the Purchaser and Weyerhaeuser
Each of Weyerhaeuser and the Purchaser hereby jointly and severally makes to the
Vendor the representations and warranties as set forth in Schedule 7.1 to this
Agreement and acknowledges that the Vendor is relying upon those representations
and warranties in connection with entering into this Agreement.
7.2 Survival of Representations and Warranties of the Purchaser and
Weyerhaeuser
The representations and warranties of the Purchaser and Weyerhaeuser contained
in this Agreement and in any agreement, certificate, affidavit, statutory
declaration or other document delivered or given pursuant to this Agreement
shall survive Closing and continue in full force and effect for the benefit of
the Vendor for a period of 3 years from the Closing Date.
<PAGE> 37
32.
From and after the date which is 3 years from the Closing Date, the Purchaser
and Weyerhaeuser shall have no further liability to the Vendor with respect to
the representations and warranties referred to in this Agreement and in any
agreement, certificate, affidavit, statutory declaration or other document
delivered or given pursuant to this Agreement.
ARTICLE 8
ACTIVITIES OF THE VENDOR PRIOR TO THE CLOSING DATE
8.1 Operation of Business
The Vendor hereby agrees that during the Interim Period, except as otherwise
contemplated by this Agreement or as expressly agreed to in writing by the
Purchaser, the Vendor shall conduct the Business solely in the Ordinary course
consistent with past practices and, without limiting the generality of the
foregoing, the Vendor shall:
(a) Compensation Not pay or agree to pay to any Employee, compensation
that is in excess of the current compensation level of such Employee, except for
normal compensation increases to current Employees which are made in the
Ordinary course of business consistent with past practices nor enter into any
new written employment agreement or benefit plan or amend any current benefit
plans or compensation policies without the Purchaser's consent, except as
required by law or any applicable collective agreement;
(b) Disposition of Assets Not sell, transfer, or otherwise dispose of
any Purchased Assets, except in the Ordinary course of business;
(c) Indebtedness Not (i) create or suffer to exist any Encumbrance on
any of the Purchased Assets which would have a material adverse effect on the
Business, except those in existence on the date hereof, (ii) increase the amount
of any indebtedness outstanding under any Contract or Lease
<PAGE> 38
33.
which will be assigned to the Purchaser hereunder, except in the Ordinary course
of business consistent with past practice, or (iii) authorize any new capital
expenditures except in the Ordinary course of business, or as set forth in the
capital budgets provided to the Purchaser.
(d) Payables and Liabilities Not incur any accounts payable, including
trade payables, or other liabilities which relate predominantly to the Business,
except in the Ordinary course of business consistent with past practices, none
of which, individually or when aggregated together with all other liabilities,
might have a material adverse effect on the Business; and pay when due, in
accordance with past practices, all of its accounts payable and trade
obligations;
(e) Maintenance of Assets Maintain the Purchased Assets in the current
and existing operating order and condition, reasonable wear and tear excepted,
and notify the Purchaser promptly upon any material loss of, damage to, or
destruction of any of the Purchased Assets (whether or not covered by
insurance);
(f) Insurance Maintain in full force and effect insurance coverage
currently in place in respect of the Business, and except as provided in Section
16.1, apply the proceeds received under any applicable insurance policy, or as a
result of any loss or destruction of or damage to any Purchased Assets, to the
repair or replacement of such Purchased Assets;
(g) Contracts, Leases and Licenses Except as the Purchaser shall
otherwise consent to in writing, (i) maintain in full force and effect all
Contracts, Leases and Licenses necessary for or material to the operation of the
Business as such Business is now conducted, including all orders for the
purchase of Inventory now in existence or hereafter produced by the Business,
(ii) renew or revalidate any material Leases or Licenses relating to the
Business that may become void, expired, terminated, cancelled or withdrawn
during the Interim Period, and (iii) not enter into any other Contracts or
Leases relating to the Business, except in the Ordinary course of business
consistent with past practices, (iv) not cancel any debts or waive, release or
relinquish any material rights with respect to the Business, other than in the
Ordinary course of business consistent with past practices; and (v) use
reasonable efforts to comply with all covenants and conditions contained in such
Contracts, Licences and Leases;
<PAGE> 39
34.
(h) Required Consents Use its commercially reasonable efforts to obtain
all of the consents, approvals or waivers required to be obtained from any
Tribunal or other Person pursuant to the Contracts, Leases and Licences;
(i) Goodwill Use its commercially reasonable efforts to preserve the
business organization intact, to keep available the services of the Employees,
and to preserve the goodwill of its customers, suppliers, labour organizations,
licensors, licensees and others having business relations with it in respect of
the Business;
(j) Legal Proceedings Promptly advise the Purchaser in writing of the
commencement of, and of any known threat to commence, any Legal Proceedings
against the Vendor which relates to the Purchased Assets or the Business, and to
take commercially reasonable action to promptly defend or settle any such Legal
Proceeding (provided that any such settlement may not involve any future
obligation or prohibition relating to the Purchaser, the Purchased Assets or the
Business);
(k) Commitments Not commit or agree (in writing or otherwise) to take
any of the foregoing actions or any action that would make any representation or
warranty in this Agreement untrue or incorrect in any material manner, or omit
to take any action which would result in the occurrence of one of the foregoing
actions or any material inaccuracy in the representations or warranties in this
Agreement;
(l) New Policies and Methods Not introduce new management, accounting
policies or operations methods with respect to the Business; or
(m) Material Transactions Not enter into any material transaction or
commitment out of the Ordinary course of business.
8.2 Union Negotiations
In the event that negotiations with any of the union(s) representing any of the
Employees commence during the Interim Period, as and to the extent, in the
opinion of the Vendor's counsel, permitted by law, the Purchaser may recommend
to the Vendor the overall bargaining mandate for all
<PAGE> 40
35.
negotiations in respect of any collective bargaining agreements which relate to
the Business. The Vendor shall negotiate, in good faith, with such union(s) in
accordance with such mandate. Where the negotiations move outside the mandate
recommended, prior to reaching any agreement with such union(s), as and to the
extent, in the opinion of the Vendor's counsel, permitted by law, the Vendor
shall obtain direction and approval from the Purchaser. The Purchaser, at its
discretion, shall have the option of being present at and participating in any
such negotiations.
8.3 Notice of Change
The Vendor will promptly notify the Purchaser of the existence or happening of
any fact, event or occurrence prior to the Closing Date and of which the Vendor
has knowledge that may alter, in any manner, the accuracy or completeness of any
representation or warranty contained in Article 6 of this Agreement.
8.4 Fulfilment of Conditions
Subject to the other provisions of this Agreement, the Vendor will use its
reasonable commercial efforts to cause the conditions listed in Section 13.1
hereof to be satisfied on the Closing Date to the extent that the fulfilment of
such condition is within its control.
8.5 Amendment of Disclosure Statement
From time to time prior to Closing, the Vendor shall promptly supplement or
amend in writing the Disclosure Statement with respect to any matter hereafter
arising that, if existing or occurring at the date hereof, would have been
required to be set forth or described in the Disclosure Statement or that is
necessary to correct any information therein rendered, in any material manner,
inaccurate thereby.
8.6 Access to Management
From time to time prior to Closing, the Purchaser shall be given reasonable
access to the management personnel of the Business provided that such access
shall not adversely affect the Business and that the Purchaser obtains the prior
consent of the Vendor to any such access.
<PAGE> 41
36.
8.7 Avenor America Inc.
The Vendor shall cause Avenor America Inc. to assign, sell and transfer to the
Purchaser on the Closing all Purchased Assets which are owned or registered in
the name of Avenor America Inc.
8.8 Realty Taxes
The Vendor shall pay all realty taxes in respect of all Real Property owned by
the Vendor in respect of the Business owing up to the Closing Date.
8.9 Future Investigations
(a) During the Interim Period, the Vendor shall: (i) permit the
Purchaser and its employees, counsel, accountants and other representatives,
during the Interim Period, without undue interference to the Ordinary conduct of
the Business, to have reasonable access during normal business hours and upon
reasonable notice to (x) the Real Property, (y) the Purchased Assets and, in
particular to any information relating to the Purchased Assets and the Business,
including all books and records whether retained by the Vendor or otherwise, and
(z) all Contracts and Leases, and (ii) furnish to the Purchaser or its
employees, counsel, accountants or other such representatives such financial and
operating data and other information with respect to the Purchased Assets and
the Business as the Purchaser shall from time to time reasonably request.
(b) During the Interim Period, Bowater and the Vendor will permit the
Purchaser and its employees, counsel, accountants and other representatives,
without undue interference to their Ordinary course of business, to have
reasonable access to the order management software system of Bowater to
determine its applicability to its installation at the Business. In the event
that the Purchaser elects to use such order management software for a transition
period, not to extend beyond December 31, 2001, Bowater will provide without
charge to the Purchaser such order management software and the computer
necessary to run such order management software and the Purchaser shall pay
Bowater reasonable and customary costs for the installation, operation,
maintenance and training in connection therewith.
<PAGE> 42
37.
8.10 Applications Under the Land Titles Act
The Vendor shall make, at its sole cost, application, prior to the Closing Date,
under the Land Titles Act to amend the following parcel registers to delete the
following notices of leases, the full details of which are set out in Exhibit 6
to Schedule 6.14 to the Disclosure Statement:
(a) Parcel 4617 Remainder - Notice of Lease Instrument No. 86356;
(b) Parcel 8273 - Notice of Lease Instrument No. 68411;
(c) Parcel 18446 Remainder - Water Power Lease Agreement No. 84
denoted on Deposit 23R8547.
8.11 Employee List
The Vendor shall provide to the Purchaser, prior to the Closing, a list of all
Employees, their service with the Vendor, most recent hire date, position held,
whether union or non-union, and the salary or wages paid.
ARTICLE 9
ACTIVITIES OF THE PURCHASER PRIOR TO CLOSING DATE
9.1 Notice of Change
The Purchaser will promptly notify the Vendor of the existence or happening of
any fact, event or occurrence prior to the Closing Date and of which the
Purchaser has knowledge that may alter, in any manner, the accuracy or
completeness of any representation or warranty contained in Article 7 of this
Agreement.
<PAGE> 43
38.
9.2 Fulfilment
Subject to the other provisions of this Agreement, the Purchaser will use its
commercially reasonable efforts to cause the conditions listed in Article 14
hereof to be satisfied on the Closing Date to the extent that the fulfilment of
such conditions is within its control.
9.3 Confidentiality
The terms and conditions of the Confidentiality Agreement, as it relates to the
Purchaser's obligation to maintain in confidence certain information received
from the Vendor, and not to use certain information received from the Vendor
except in connection with this Agreement, is hereby incorporated herein by this
reference. This Section 9.3 shall terminate upon consummation of the transaction
contemplated hereby.
ARTICLE 10
ENVIRONMENTAL
10.1 Environmental Investigations
Within 7 days from the date of this Agreement, the parties, acting reasonably,
shall agree on the identity of a qualified environmental consulting engineering
firm (the "Environmental Consultant") to conduct a Phase I environmental
investigation (the "Environmental Investigation") of the Real Property. The
Vendor and the Purchaser agree that the Environmental Consultant shall have
access to the Real Property under the terms of the access agreement (the "Access
Agreement") annexed hereto as Schedule 10.1. The Environmental Consultant shall
be retained by the Vendor's solicitors on a privileged and confidential basis to
conduct the Environmental Investigation and to provide a Draft Report (the
"Draft Report") of its findings to the Vendor's Solicitors on or before
September 1, 1998. The Vendor shall cause its employees to co-operate with the
Environmental Consultant. The Vendor shall have the right to control all work
done by the Environmental Consultant in accordance with the Access Agreement.
The Vendor and the Purchaser agree to be equally
<PAGE> 44
39.
responsible for the cost of the Environmental Investigation and each agrees to
pay one-half of all invoices from the Environmental Consultant forthwith upon
receipt.
10.2 Draft Report
Upon receipt of the Draft Report of the Environmental Consultant, the Vendor's
solicitors shall provide a copy of the Draft Report on a privileged and
confidential basis to the Vendor and to the Purchaser's solicitors for review
and discussion with the Purchaser. The Purchaser agrees to keep the Draft Report
on a privileged and confidential basis pursuant to the terms and conditions set
forth in the Confidentiality Agreement. The Draft Report shall be the property
of the Vendor. Upon Closing, the Draft Report shall become the property of the
Purchaser. In the event that this Agreement is terminated for any reason, the
Draft Report shall remain the property of the Vendor and all copies of the Draft
Report shall be returned to the Vendor.
10.3 Access to Real Property
The Environmental Consultant shall have access to the Real Property during
normal business hours upon reasonable notice at its own risk for the purpose of
conducting the Environmental Investigation. The Purchaser agrees that the
Environmental Investigation will be non-intrusive and that any damage caused by
the Environmental Investigation will be repaired and mitigated as soon as
practicable and at the sole cost and expense of the Purchaser.
10.4 Conduct of the Work
The Purchaser shall conduct the work in the following manner:
(a) The Eligible Environmental Cost shall be incurred by the
Purchaser utilizing the services of persons who are
commercially viable and qualified and experienced in such
matters.
(b) The Eligible Environmental Cost shall be incurred in
accordance with all reasonable safety rules and regulations of
the Purchaser governing the Real Property and all applicable
laws.
<PAGE> 45
40.
(c) During the period in which the Eligible Environmental Cost is
incurred, the Vendor shall have full access to the Real
Property and may conduct tests and inspections from time to
time in accordance with the Access Agreement annexed as
Schedule 10.1.
(d) The Purchaser shall keep and maintain true and accurate
records as may be necessary to verify any amounts in respect
of the Eligible Environmental Cost and in respect of all
payments, credits and debits in respect thereof. The Purchaser
shall provide the Vendor with access to and copies of such
records and other information maintained by the Purchaser as
may be necessary for the verification of such amounts. If the
Vendor disputes the calculation or propriety of any of the
amounts charged, credited or debited by the Purchaser such
dispute shall be resolved by arbitration in accordance with
Paragraph 19.3(b).
10.5 Cost Sharing
The Vendor and the Purchaser shall share the Eligible Environmental Cost
incurred in connection with any condition on the Purchased Assets in accordance
with the following formula:
(a) the Purchaser shall pay, and shall not seek any contribution,
indemnity or reimbursement from the Vendor in any way
whatsoever for the first TWO MILLION ($2,000,000) DOLLARS or
less of the Eligible Environmental Cost (which amount is
expressly excluded from the calculation of the Threshold
Amount under Section 18.3);
(b) the Vendor and the Purchaser shall pay the Eligible
Environmental Cost in excess of TWO MILLION ($2,000,000)
DOLLARS up to and including TEN MILLION ($10,000,000) DOLLARS
in the following ratio: Purchaser, 25 Percent; Vendor, 75
Percent;
(c) the Vendor and the Purchaser shall pay the Eligible
Environmental Cost in excess of TEN MILLION ($10,000,000)
DOLLARS up to and including TWENTY MILLION
<PAGE> 46
41.
($20,000,000) DOLLARS in the following ratio: Purchaser, 50
Percent; Vendor, 50 Percent,
(d) the Vendor and the Purchaser shall pay the Eligible
Environmental Cost in excess of TWENTY MILLION ($20,000,000)
DOLLARS, up to a maximum of ONE HUNDRED MILLION ($100,000,000)
DOLLARS; in the following ratio: Purchaser, 35 Percent;
Vendor, 65 Percent,
(e) the Vendor shall have no obligation to pay in excess of the
amounts set out in this Section 10.5 in respect of the
Eligible Environmental Cost. The Vendor shall have no
obligation to pay any additional sum to the Purchaser for
breaches of representations or warranties set out in Section
6.12 to Schedule 6.1 and acknowledges that the payments under
this Section constitute satisfaction of any claim the
Purchaser might make arising in connection with the
representations and warranties set out in Section 6.12 to
Schedule 6.1.
The Vendor's obligation to make any payment to the Purchaser with respect to the
Eligible Environmental Cost shall be limited to the payments provided for in
this Section 10.5. The Vendor's obligation to make any payment to the Purchaser
under this Section 10.5 shall survive Closing and continue in full force and
effect for the benefit of the Purchaser for a period of 15 years from the
Closing Date. From and after the date which is 15 years from the Closing Date,
the Vendor shall have no further liability to the Purchaser under this Section
10.5.
10.6 Dispute Resolution
In the event that the parties are unable to agree on the entitlement of the
Purchaser to any part of or the amount of any portion of the Eligible
Environmental Cost, the parties shall cooperate in good faith in attempting to
resolve the dispute and if the parties fail to resolve any such dispute within
ten business days of the receipt of the environmental notice, such dispute shall
be determined by arbitration in accordance with Paragraph 19.3(b).
<PAGE> 47
42.
10.7 Environmental Indemnity
The Vendor shall indemnify the Purchaser from and against any Claim wherein the
Claimant alleges that any Loss, or any damages of any nature whatsoever, was
suffered or incurred as a result of a release or discharge of any Hazardous
Substance that occurred prior to the Time of Closing, which Hazardous Substance
leaves or left the Purchased Assets prior to the Time of Closing and which
originated from the Purchased Assets (the "Claim"). For purposes of this
paragraph, Claimant shall not include the Purchaser. The carriage and defence of
the Claim shall be conducted in accordance with Section 18.4. There shall be no
limitation period and no maximum amount for the Indemnity under this Section
10.7.
ARTICLE 11
EMPLOYEE AND PENSION MATTERS
11.1 Employees
(a) Subject to the Closing taking place as herein contemplated,
the Purchaser shall offer employment:
(i) effective the Closing Date, to each of the Non-union
Employees, except the Excluded Employees, who are not
Disabled Non-Union Employees;
(ii) to each of the Disabled Non-Union Employees,
effective the date each such Employee is fit to
return to work, provided each such Employee provides
confirmation of fitness to return to work within 180
days immediately following the Closing Date;
on terms and conditions which, in the aggregate, are no less favourable than the
Employee Benefits as were in effect with respect to each such Employee on the
Closing Date. The Employees who accept such offer of employment are referred to
herein as the "Non-union Transferred Employees". The Purchaser shall recognize
the service of the Non-union Transferred Employees that was recognized by the
Vendor in the administration of the Employee Benefits as at the Closing Date,
for
<PAGE> 48
43.
all purposes including eligibility for membership, vesting and locking-in under
the benefit plans established or designated by the Purchaser.
(b) Subject to Closing taking place as herein contemplated, the
Purchaser shall continue to employ the Union Employees on the same terms and
conditions of employment and with respect to Employee Benefits as applied on the
Closing Date, except as may be amended in collective bargaining negotiations
subsequent to the date of this Agreement, and shall recognize the service of the
Union Employees for all purposes.
(c) Subject to Closing taking place as herein contemplated, the
Purchaser shall recognize the labour union(s) or employee association(s) that
represent Union Employees as the bargaining agent(s) for such Employees and
agrees to be bound by and observe all of the terms, conditions, rights and
obligations of the Vendor under any applicable collective agreement(s) and as
may be amended in collective bargaining negotiations subsequent to the date of
this Agreement, to the extent that such collective agreement(s) apply to the
Union Employees, as if the Purchaser were an original signatory thereto.
(d) Subject to Closing taking place as herein contemplated, the
Purchaser covenants and agrees to honour and comply with the terms of those
existing written employment and severance agreements of the Vendor with respect
to the Non-union Transferred Employees which are disclosed to the Purchaser,
excluding any change of control agreement to which the Vendor is a party. The
Purchaser also agrees that for a period of one year from the date hereof, it
will deal with the Non-union Transferred Employees whose employment may be
terminated after the Effective Time in a fair and equitable manner consistent
with the existing termination policies of the Vendor as disclosed to the
Purchaser.
(e) The Vendor will be responsible for all obligations and liabilities
for wages, severance pay, termination pay, notice of termination of employment
or pay in lieu of notice, damages for wrongful dismissal or other Employee
Benefits or Claims or awards of Tribunals (regardless of date of decision) for
matters incurred or arising prior to the Closing Date in respect of all
Employees.
<PAGE> 49
44.
(f) Effective from the Closing Date, the Purchaser assumes all
obligations and liabilities in respect of wages, severance pay, termination pay,
notice of termination of employment or pay in lieu of such notice, damages for
wrongful dismissal or other Employee Benefits or Claims of all Non-union
Transferred Employees and all Union Employees.
11.2 Employee Benefit Plans
(a) Effective the Closing Date, the Purchaser shall establish plans in
order to provide Employee Benefits as provided in Paragraph 11.1(a) of this
Agreement. Subject to the insurer's consent, which the Purchaser shall use its
reasonable commercial efforts to obtain, the Purchaser shall cause such plans to
waive any pre-existing condition limitations, accept any pre-approvals, and
honour any deductibles and out-of-pocket expenses incurred by Non-union
Transferred Employees who participate in the applicable Employee Benefit plans
provided by the Vendor on the Closing Date and their dependants and survivors.
(b) The Purchaser shall provide the Vendor with such access to the
Non-union Transferred Employees, and such information within the possession or
control of the Purchaser, which the Vendor reasonably requests, in order to
assist the Vendor in (a) administering and defending claims against the Vendor
with respect to the Employee Benefits of the Employees, the Former Employees and
their dependants and survivors, and (b) administering benefits to which the
Former Employees and their dependants and survivors are entitled, in particular,
post-retirement health and welfare benefits.
11.3 Pension and Retirement Plans
(a) List of plans
This Section 11.3 deals with the following plans:
-- Executive Staff Retirement Plan (1976) of Avenor Inc.
(the "Vendor's 1976 Staff Plan");
-- Supervisory Employees' Retirement Plan (1976) of
Avenor Inc. (the "Vendor's 1976 Supervisory Plan");
<PAGE> 50
45.
-- Employees' Retirement Plan (1981) of Avenor Inc. (the
"Vendor's 1981 Union Plan");
-- Supplemental Retirement Benefit Plan for Grade 12 and
over Employees of Avenor Inc., dated November 28,
1997 (the "Vendor's Supplemental Plan for Grade 12
and Over");
-- Supplemental Retirement Benefit Plan for Grade 11 and
under Employees of Avenor Inc., dated November 28,
1997 (the "Vendor's Supplemental Plan for Grade 11
and Under"); and
-- obligations described in the "Addendum to the Ear
Falls Partnership Agreement" dated July 20, 1998, a
copy of which has been provided by the Vendor to the
Purchaser ("Ear Falls Plan").
(b) Vendor's Pension Plans
(i) Assignment of Pension Benefits
The Vendor shall assign to the Purchaser and the
Purchaser shall assume the obligations of the Vendor
with respect to the benefits of the Non-union
Transferred Employees who are members of the Vendor's
1976 Staff Plan and the Vendor's 1976 Supervisory
Plan, all in accordance with this Paragraph 11.3(b).
(ii) Purchaser Establishes New Plans
The Purchaser shall promptly establish and register,
effective the Closing Date, with the appropriate
federal and provincial regulators, at its own
expense, a pension plan (the "Purchaser's Staff
Plan") which provides pension benefits and ancillary
benefits (excluding any right to surplus) no less
favourable than those of the Vendor's 1976 Staff Plan
as at the Closing Date and a pension plan (the
"Purchaser's Supervisory Plan") which provides
pension benefits and ancillary benefits (excluding
any right to surplus) no less favourable than those
of the Vendor's 1976 Supervisory Plan as at the
Closing Date.
<PAGE> 51
46.
(iii) Termination of Accrual Under Vendor's Plans
Effective the Closing Date the Non-union Transferred
Employees who are members of the Vendor's 1976 Staff
Plan shall cease to accrue benefits thereunder and
shall begin to accrue benefits under the Purchaser's
Staff Plan and the Non-union Transferred Employees
who are members of the Vendor's 1976 Supervisory Plan
shall cease to accrue benefits thereunder and shall
begin to accrue benefits under the Purchaser's
Supervisory Plan. The Purchaser's Staff Plan and the
Purchaser's Supervisory Plan (the "Purchaser's
Plans") shall provide that for the purposes of
determining the period of employment for any
eligibility or determining benefit entitlement (but
not benefit accrual), employment of the Non-union
Transferred Employees with the Vendor or any
affiliate or predecessor of the Vendor shall be
recognized as continuous unbroken employment with the
Purchaser.
(iv) Pension Benefits For Pre-Closing Service
Subject to the receipt by the Purchaser's Staff Plan
of the assets described in Paragraph 11.3(b)(xii)
hereof, the Purchaser's Staff Plan shall provide to
the Non-union Transferred Employees who are members
of the Vendor's 1976 Staff Plan as at the Closing
Date, pension benefits and ancillary benefits
(excluding any right to surplus) which are the same
as the pension benefits and ancillary benefits
(excluding any right to surplus) provided for such
individuals under the Vendor's 1976 Staff Plan as
constituted at the Closing Date (inclusive of future
salary increases and bonus payments), and as modified
by amendments to the Purchaser's Staff Plan, if any,
required by applicable laws. Subject to the receipt
by the Purchaser's Supervisory Plan of the assets
described in paragraph 11.3(b)(xii) hereof, the
Purchaser's Supervisory Plan shall provide to the
Non-union Transferred Employees who are members of
the Vendor's 1976 Supervisory Plan as at the Closing
Date, pension benefits and ancillary benefits
(excluding any right to surplus) which are the same
as the pension benefits and ancillary benefits
(excluding any right to surplus) provided for such
individuals under the Vendor's 1976 Supervisory Plan
as constituted at the Closing Date (inclusive of
future salary increases and bonus payments), and as
modified by amendments to the Purchaser's Supervisory
Plan, if any, required by applicable laws.
<PAGE> 52
47.
(v) Calculation of Pension Transfer Amounts
The Vendor shall instruct an actuary (the "Vendor's
Actuary") to determine as soon as practicable, and in
no event later than ninety (90) days after the
Closing Date, the Staff Plan Transfer Amount (as
defined below) and the Supervisory Plan Transfer
Amount (as defined below). The Vendor's Actuary shall
calculate the value of the pro rata share of the
assets of the Vendor's 1976 Staff Plan (the "Staff
Plan Transfer Amount") held in respect of benefits
for the Non-union Transferred Employees who are
members thereof as at the Closing Date, pro rated on
the basis of the liabilities attributable to such
individuals and the total liabilities of the Vendor's
1976 Staff Plan as at the Closing Date, determined on
a going concern basis using the methods and
assumptions which were set out in writing in the
Report on the Actuarial Valuation for Funding
Purposes as at December 31, 1996 in respect of the
Vendor's 1976 Staff Plan, dated October 1997, by
William M. Mercer Limited (the "Mercer 1996 Staff
Plan Report"), with the following exceptions:
-- investment return of 7.5% per annum;
-- inflation rate of 3.5% per annum;
-- increases in pensionable earnings at the
rate of 4.0% per annum plus merit increases
on an age-related basis and promotions as
shown in the Mercer 1996 Staff Plan Report;
-- increases in YMPE at the rate of 4.0% per
annum;
-- increases in the calculation of the maximum
pension permitted under the Income Tax Act
(Canada) at the rate of 4.0% per annum
commencing 2005; and
-- no account will be taken of the terminations
or retirements that occur under the Optimal
Employment Strategy program following the
Closing Date.
The Vendor's Actuary shall also calculate the value
of the pro rata share of the assets of the Vendor's
1976 Supervisory Plan (the "Supervisory Plan Transfer
Amount") held in respect of benefits for the
Non-Union Transferred Employees who are members
thereof as at the Closing Date, pro rated on the
basis of the liabilities attributable to such
individuals and the total liabilities of the Vendor's
1976
<PAGE> 53
48.
Supervisory Plan as at the Closing Date, determined
on a going concern basis using the methods and
assumptions which were set out in writing in the
Report in the Actuarial Valuation for Funding
Purposes as at December 31, 1996 in respect of the
Vendor's 1976 Supervisory Plan, dated October 1997,
by William M. Mercer Limited, with the exceptions set
out above in respect of the calculation of the Staff
Plan Transfer Amount.
(vi) Transfer Reports
Forthwith upon determination of each of the Staff
Plan Transfer Amount and the Supervisory Plan
Transfer Amount, the Vendor shall cause the Vendor's
Actuary to provide to the Purchaser a report in
respect of the calculation of each of the Staff Plan
Transfer Amount and the Supervisory Plan Transfer
Amount which reports shall include such information
as may be required to obtain the consent of the
Ontario Superintendent of Financial Services to the
transfer of pension assets and liabilities
contemplated in this Paragraph 11.3(b) (the "Transfer
Reports").
(vii) Review of Report by Purchaser
The Vendor shall furnish to the Purchaser such
information and data as may be reasonably required or
requested by the Purchaser in order to review the
Transfer Reports.
(viii) Purchaser Disputes Report
If the Purchaser questions or disagrees with the
calculation of the Staff Plan Transfer Amount or the
Supervisory Plan Transfer Amount, the Purchaser may,
within forty-five (45) days after delivery of the
applicable Transfer Report, deliver a notice to the
Vendor questioning or disagreeing with the applicable
Transfer Report and setting forth its calculation of
the amount. Any such notice of disagreement shall
specify those items or amounts as to which the
Purchaser questions or disagrees, and the Purchaser
shall be deemed to have agreed with all other items
and amounts contained in the applicable Transfer
Report.
<PAGE> 54
49.
(ix) Pension Referee
If a notice is delivered pursuant to Paragraph
11.3(c)(viii), the Purchaser and the Vendor, during
the 15 days following delivery of such notice, shall
use their best efforts to reach agreement on the
disputed items or amounts in order to determine the
applicable Transfer Amount(s). If during such period,
the Purchaser and the Vendor are unable to reach such
agreement, they shall promptly thereafter cause
Towers Perrin (Toronto Office), or such other
internationally recognized actuarial consulting firm
as may be agreed to by the Purchaser and the Vendor
(the "Pension Referee"), promptly to review all
information and data which was available to the
Vendor's Actuary, for the purpose of calculating the
applicable Transfer Amount(s). There shall only be
one Pension Referee appointed to review all disputed
items or amounts pursuant to this Paragraph
11.3(c)(ix). In making such calculation, the Pension
Referee shall apply the applicable actuarial
valuation assumptions, actuarial methodology and
other assumptions set out in Paragraph 11.3(b)(v).
The Pension Referee shall deliver to the Purchaser
and the Vendor, as promptly as practicable, a written
report setting forth such calculation. Such report
shall be final and binding upon the Vendor and the
Purchaser. The cost of such review and report shall
be borne equally by the Purchaser and the Vendor.
(x) Deemed acceptance of Report
If no notice is delivered by the Purchaser to the
Vendor pursuant to Paragraph 11.3(c)(viii), the
Purchaser shall be deemed to have accepted and agreed
with the Transfer Reports delivered to the Purchaser
pursuant to Paragraph 11.3(c)(vi).
(xi) Regulatory Consent
Within sixty (60) days following the acceptance of a
Transfer Report by the Purchaser or the decision of
the Pension Referee, as applicable, the Vendor shall
submit the Transfer Report to the Ontario
Superintendent of Financial Services to obtain the
regulatory consent required by law to the transfer of
assets and liabilities as set out in the applicable
Transfer Report. If required by the Ontario
Superintendent of Financial Services or applicable
laws, the Vendor shall consult with the Purchaser and
shall make changes to the Transfer Report to which
the Purchaser consents in writing, provided that the
Purchaser shall not unreasonably withhold its
consent.
<PAGE> 55
50.
(xii) Transfers
As soon as practicable, and in no event later than
sixty (60) days after its receipt of the required
consent of the Ontario Superintendent of Financial
Services with respect to the applicable Transfer
Report, the Vendor shall cause to be transferred to
the applicable Purchaser's Plan, in accordance with
the applicable Transfer Report, cash (or securities
acceptable to the Purchaser) in an amount equal to
the Staff Plan Transfer Amount or the Supervisory
Plan Transfer Amount, adjusted to take account of
benefits and other disbursements paid from the
applicable Vendor's Plan, in respect of the Non-union
Transferred Employees, as applicable, from the
Closing Date to the date of such transfer, and
adjusted further to take account of investment gains
or losses at the same rate as the investment gains or
losses experienced by the applicable Vendor's Plan
during the relevant period.
(xiii) Standard Life Group Annuities
The parties acknowledge that there are certain
pension benefits provided under the Vendor's Plans
which are funded pursuant to group annuity policies
issued by Standard Life Assurance Company (the
"Standard Life Group Annuities"). Prior to the
Closing Date the Vendor and the Purchaser shall
negotiate with Standard Life Assurance Company on
terms acceptable to all of them in order to create
one or more additional group annuity policies (the
"New Group Annuities") (at no cost to the Vendor or
Purchaser) which shall be held by or in respect of
the Vendor's Plans, in respect of benefits allocable
to the Non-union Transferred Employees under the
Standard Life Group Annuities, in substitution for
such benefits payable to or in respect of the
Non-union Transferred Employees under the Standard
Life Group Annuities. Subject to the Closing taking
place as herein contemplated, the Vendor shall assign
or cause to be assigned to the Purchaser, and the
Purchaser shall assume, the New Group Annuities,
provided that no such assignment and assumption shall
occur prior to completion of the applicable transfer
contemplated in Paragraph 11.3(b)(xii).
(xiv) Release and Discharge
Upon the completion of the transfers contemplated in
this subsection 11.3(b), as of the Closing Date, the
Vendor, the Vendor's Plans and their respective
agents shall be completely discharged of all or
<PAGE> 56
51.
their obligations and liabilities with respect to the
pension benefits accrued by the Non-union Transferred
Employees under the Vendor's Plans.
(d) Supplementary Retirement Plan Obligations
The Purchaser shall assume from the Vendor and the Vendor
shall be relieved by the Purchaser of the Vendor's obligations
to provide pension and ancillary benefits to the Non-union
Transferred Employees and their beneficiaries under the
Vendor's Supplemental Plan for Grade 12 and Over and the
Vendor's Supplemental Plan for Grade 11 and Under, with
respect to service prior to the Closing Date.
(e) Assignment of Plans
Subject to the Closing taking place as herein contemplated, on
and with effect from the Closing Date, the Vendor and the
Purchaser shall enter into an assignment and assumption
agreement in respect of each of the Vendor's 1981 Union Plan
and the Ear Falls Plan, on mutually satisfactory terms and
conditions. It is expressly acknowledged and agreed by the
Vendor that the Purchaser is not assuming any obligations or
liabilities of the Vendor, its Affiliates, the Vendor's 1981
Union Plan, or any of their agents or administrators in
respect of the operation, administration or investment of the
Vendor's 1981 Union Plan prior to the Closing Date except the
obligation to pay pensions following the Closing Date.
11.4 U.S. Employees
Subject to the Closing taking place as herein contemplated, the Purchaser shall
offer employment to certain employees of a U.S. affiliate of the Vendor who
currently provide services in the United States exclusively in connection with
the Business, on no less favourable terms and conditions as to employee benefits
as were in effect on the Closing Date. The Purchaser shall recognize the service
of such individuals who accept such offer that was recognized by the Vendor in
administering the employee benefits of such individuals as at the Closing Date,
for all purposes including eligibility for membership, vesting and locking-in
under the benefit plans established or designated by the Purchaser.
<PAGE> 57
52.
ARTICLE 12
BULK SALES ACT; INVESTMENT CANADA ACT; COMPETITION ACT;
HART-SCOTT-RODINO ANTITRUST ACT
12.1 Bulk Sales Act Waiver
The Purchaser hereby waives compliance with the Bulk Sales Act. The Vendor
agrees to indemnify and save Purchaser harmless from any Claims or Losses
actually suffered by Purchaser as a result of such non-compliance, without
regard to the limitations set forth in Section 18.3.
12.2 Investment Canada Act
(a) The Purchaser shall promptly, but in no event later than 15
Business Days after the date hereof, make an application under the Investment
Canada Act (Canada) in connection with the proposed investment in the Purchased
Assets by the Purchaser.
(b) The Purchaser shall use its reasonable commercial efforts to cause
the Minister responsible for the Investment Canada Act, the Minister of
Industry, to be satisfied, or to be deemed to be satisfied, that the investment
is likely to be of net benefit to Canada.
(c) The Vendor shall use its reasonable commercial efforts to cooperate
with and assist the Purchaser in making such application. Subject to information
being competitively sensitive, each party shall supply the other with copies of
all written material supplied or filed by it after the date hereof under the
Investment Canada Act, including the Purchaser's application under such Act,
forthwith after such material is supplied or filed and shall indicate thereon
the date of supply or filing. Each party shall also supply the other with copies
of all notices or other correspondence received from or the details of any
communications with the Minister of Industry or any other person on his behalf
promptly after receipt of such notices or exchange of other correspondence or
the occurrence of such communications.
<PAGE> 58
53.
12.3 Competition Act (Canada)
(a) Each of the Vendor and Purchaser shall promptly, but in no event
later than 15 Business Days after the date hereof, file or cause to be filed
with the Director of Investigation and Research appointed under the Competition
Act (Canada) the notification required to be filed under section 114 of the
Competition Act with respect to the proposed transaction contemplated herein.
The Purchaser shall pay the filing fee in respect of such notification.
(b) The Vendor and Purchaser shall use their reasonable commercial
efforts to cause the Director of Investigation and Research appointed under the
Competition Act to advise that he does not intend to make an application to the
Competition Tribunal in respect of the transactions contemplated herein.
(c) The Vendor shall use its reasonable commercial efforts to cooperate
with and assist the Purchaser in making such notification. Subject to
information being competitively sensitive, each party shall supply the other
with copies of all written material supplied or filed by it after the date
hereof under the Competition Act, including the notification under such Act,
forthwith after such material is supplied or filed and shall indicate thereon
the date of supply or filing. Each party shall also supply the other with copies
of all notices or other correspondence received from or the details of any
communications with the Director or any other person on his behalf promptly
after receipt of such notices or exchange of other correspondence or the
occurrence of such communications.
12.4 Hart-Scott-Rodino Antitrust Act
(a) Each of the Purchaser and the Vendor shall promptly, but in no
event later than 15 Business Days after the date hereof, file with the Federal
Trade Commission and the United States Department of Justice the notifications
and reports required to be filed pursuant to the HSR Act and shall promptly file
any supplemental information that may reasonably be requested in connection
therewith, which notifications and reports and filing of supplemental
information will comply in all material respects with the requirements of HSR
Act.
<PAGE> 59
54.
(b) Without limiting the provisions set forth in Paragraph 12.4(a)
above, the Purchaser shall use reasonable commercial efforts to take or cause to
be taken all actions necessary, proper and advisable to obtain any consent,
waiver, approval or authorization relating to the HSR Act that is required for
the completion of the transaction contemplated herein.
(c) Subject to advice of counsel, the Purchaser shall use commercially
reasonable efforts to defend or cause to be defended any Legal Proceeding
brought against it or any of its affiliates under the HSR Act challenging this
Agreement or the completion of the transaction contemplated by this Agreement.
(d) Each of the parties shall furnish to the other party such
information as such other party may reasonably request in order to make such
filings as it may be legally required to make under the HSR Act. The Vendor
shall use its commercially reasonable efforts to cooperate with and assist the
Purchaser in providing such information. Each party shall also supply the other
with copies of all written notices or information supplied or filed by it after
the date hereof under the HSR Act forthwith after such notices or information
are supplied or filed and shall indicate thereon the date of supply or filing.
Each party shall also supply the other with copies of all notices or other
correspondence received from or the details of any communications with the
Federal Trade Commission or United States Department of Justice or any other
Person on his behalf promptly after receipt of such notices or exchange of other
correspondence or the occurrence of such communications.
ARTICLE 13
PURCHASER'S CONDITIONS OF CLOSING
13.1 Conditions for the Benefit of the Purchaser
The obligation of the Purchaser to complete the purchase of the Purchased Assets
and the assumption of the Assumed Liabilities on the Closing Date shall be
subject to the satisfaction or the waiver by the Purchaser of the following
conditions on or prior to the Closing Date:
<PAGE> 60
55.
13.1.1 Truth of Representations and Warranties of the Vendor
(a) Subject to Section 13.1.1(b), the representations and warranties of
the Vendor contained in this Agreement and in any agreement, certificate,
affidavit, statutory declaration or other document delivered or given pursuant
to this Agreement:
(i) which are qualified by materiality shall be true and
correct on the date hereof and at the Time of Closing
in all respects; and
(ii) which are not so qualified shall be true and correct
at the Time of Closing, except to the extent that any
inaccuracy or incorrectness would not materially
adversely affect, either individually or in the
aggregate, the Purchased Assets or Business or the
completion of the transactions herein;
with the same force and effect as if such representations and warranties had
been made on and as of each of such times. The Vendor shall deliver to the
Purchaser at the Time of Closing certificates, affidavits, statutory
declarations or other evidence to such effect and to the effect that as of the
Closing Date each of the conditions set forth in this Article 13 have been
complied with.
(b) The Purchaser will have accepted, and will be reasonably satisfied
with, any matter added to the Disclosure Statement pursuant to Section 8.5.
Notwithstanding the foregoing, however, if the Purchaser reasonably objects, in
writing, to any matter added to the Disclosure Statement the Purchaser will
nevertheless be obligated to complete the transaction contemplated by this
Agreement unless any such matters will have a material adverse effect on the
Business; provided, however, that the Purchaser's closing of the transaction
contemplated by this Agreement will not be deemed to be a waiver of any breach
of the representations and warranties regarding any matter added to the
Disclosure Statement as to which the Purchaser has reasonably objected within
five (5) Business Days after receipt of written notice of such addition.
<PAGE> 61
56.
13.1.2 Performance of Covenants, etc. by the Vendor
The Vendor shall have performed all obligations, covenants and agreements
contained in this Agreement to be performed by the Vendor at or prior to the
Time of Closing including, without limitation, the covenants set forth in
Article 8.
13.1.3 Corporate Consents, etc.
(a) Consents to the assignment of the Required Contracts shall have
been obtained.
(b) all consents obtained to the assignment of Purchased Assets shall
be on terms and conditions reasonably satisfactory to the Purchaser.
(c) (i) The applicable waiting period under section 123 of the
Competition Act (Canada) shall have expired and (x) the Purchaser shall have
been advised in writing by the Director of Investigation and Research appointed
under such Act that he has determined not to make an application for an order
under section 92 of the Competition Act in respect of the transaction herein
contemplated or (y) an advance ruling certificate shall have been issued under
section 102 of the Competition Act in respect of the transaction contemplated;
or
(ii) An advance ruling certificate shall have been issued under
section 102 of the Competition Act in respect of the transaction contemplated.
(d) The Minister responsible for the Investment Canada Act (Canada)
shall be satisfied, and shall have so advised the Purchaser in writing, or shall
be deemed to be satisfied that the acquisition of the Business and the Purchased
Assets by the Purchaser as herein contemplated is likely to be of net benefit to
Canada.
(e) The HSR Act shall have been fully complied with (including without
limitation, compliance with the information furnishing and waiting period
requirements thereof) or such compliance shall have been waived by the Tribunal
having authority to give such waiver.
<PAGE> 62
57.
13.1.4 No Action Taken Restricting Sale
There shall not be in effect any law or any judgment directing that the
transaction contemplated herein not be consummated; provided, however, that
prior to invoking this condition each party shall use its reasonable best
efforts to have any such judgment vacated; and there shall have been no law
enacted or promulgated which would make consummation of the transaction illegal.
No legal action or proceeding in any jurisdiction will be pending or threatened
by any Person, other than a party to this Agreement, to enjoin, restrict or
prohibit:
(a) the sale and purchase of the Purchased Assets as contemplated
hereby; or
(b) the right of the Purchaser to conduct the Business.
13.1.5 Forestry Consents
The Purchaser and the Vendor shall obtain all of the necessary consents,
approvals and licenses from the Ministry of Natural Resources (Ontario) to
permit the Vendor to assign to the Purchaser those Licenses (including the
Sustainability Forest Licences under the Crown Forest Sustainability Act
(Ontario)) which are listed in numbers 1 and 2 of Schedule 6.11 to the
Disclosure Statement, and the said Minister shall have issued to the Purchaser
such forest resource processing facility licences under the said Act as are
necessary to be issued thereunder to permit the Purchaser to conduct the
Business, all on terms reasonably acceptable to the Purchaser, it being agreed
that the conditions set out in: (i) the second sentence of Paragraph 4; (ii)
Paragraph 7; (iii) Paragraph 10(d); and (iv) Paragraph 15, of the undated letter
of the Ministry of Natural Resources in response to the letter of Richard K.
Hamilton of Bowater Incorporated dated May 28, 1998 would be acceptable to the
Purchaser as reasonable.
13.1.6 Fibre Supply Agreements
The Vendor and Purchaser shall execute and deliver at the Time of Closing, fibre
supply and purchase agreements substantially in the form set forth in Schedules
13.1.6A and 13.1.6B.
<PAGE> 63
58.
13.1.7 Shared Services Agreement
The Vendor and Purchaser shall execute and deliver at the Time of Closing, a
shared services agreement substantially in the form set forth in Schedule
13.1.7.
13.1.8 No Material Adverse Change
There shall not have occurred a material adverse change to the Purchased Assets
or Business, nor shall there have occurred any event which would reasonably
likely result in a material adverse change to the Purchased Assets or Business,
it being agreed that any changes in economic, market or other forces or
conditions which are external to the Business shall not constitute a material
adverse change. In the event the Purchaser becomes aware of an occurrence of
such a material adverse change or an event which would reasonably likely result
in such a material adverse change, the Purchaser shall promptly provide written
notice to the Vendor following the Purchaser becoming aware of such material
adverse change or event.
13.1.9 Planning Act
The subdivision control provisions of the Planning Act (Ontario) will have been
complied with, by the Vendor at its expense, such that all portions of the Real
Property that are required to enable the Purchaser to operate the Business in
substantially the same manner in which the Business is currently being operated
and any Real Property that may be required for any reasonable expansion of the
Business can be transferred to the Purchaser in compliance with such provisions.
With respect to any other portions of the Real Property, the Vendor shall use
reasonable commercial efforts after the Closing Date to obtain any necessary
consents in final and binding form, to enable the Vendor to transfer any such
portions of the Real Property to the Purchaser in compliance with the
subdivision control provisions of the Planning Act (Ontario) free from
Encumbrances, save and except those set out in Parts 1 and 2 of Exhibit 6 to
Schedule 6.14 of the Disclosure Statement.
<PAGE> 64
59.
If the Vendor using reasonable commercial efforts is unable to obtain consent
under the subdivision control provisions of the Planning Act (Ontario) to
severance with respect to the Mercury Parcel and the reservation of easement
referred to in Section 17.6 in final and binding form prior to Closing then the
Purchaser agrees to accept title to the Mercury Parcel and the Vendor shall
transfer the Mercury Parcel to the Purchaser on the Closing Date. In such event
the Vendor shall continue to use reasonable commercial efforts after the Closing
Date at its sole expense to obtain such consent in final and binding form and if
and when obtained the Purchaser shall transfer the Mercury Parcel back to the
Vendor together with the benefit of said easement and the Vendor will accept
such transfer. If the Purchaser is required to take title to the Mercury Parcel
the Mercury Parcel shall be considered as part of the Purchased Assets with
respect to Article 10.
13.1.10 Retail Sales Tax Act
If applicable, the Vendor will have delivered to the Purchaser a certificate
issued by the Ministry of Finance of Ontario pursuant to Section 6 of the Retail
Sales Tax Act (Ontario) which indicates that the Vendor has paid or made
arrangements to pay all taxes collectable or payable under the said Act up to
the Closing Date.
13.1.11 Form of Documents
All documents to be delivered to the Purchaser at Closing pursuant to the terms
of this Agreement will be in a form satisfactory to the Purchaser, acting
reasonably.
13.1.12 Transfer of Real Property
The Vendor shall have transferred to the Purchaser good and marketable title to
all portions of the Real Property that are required to enable the Purchaser to
operate the Business in
<PAGE> 65
60.
substantially the same manner in which the Business is currently being operated
and any Real Property or any portion of the Real Property that may be required
for any reasonable expansion of the Business free from Encumbrances save and
except those set out in Part 1 of Exhibit 6 to Schedule 6.14 of the Disclosure
Statement and the liens, encumbrances and other matters disclosed by the
registered title as described in Part 2 of Exhibit 6 to Schedule 6.14 of the
Disclosure Statement.
13.2 Non-Fulfilment of Conditions, etc. for the Benefit of the Purchaser
In the event that any condition, obligation, covenant or agreement of the Vendor
to be fulfilled and/or performed hereunder at or prior to the Time of Closing,
including, without limitation, the conditions set forth in this Article 13,
shall not be fulfilled and/or performed, at or prior to the Time of Closing, the
Purchaser may not elect to not complete the transaction contemplated in this
Agreement or exercise any termination right arising therefrom unless the
Purchaser has delivered a written notice to the Vendor specifying in reasonable
detail all breaches of covenants, representations and warranties or other
matters which the Purchaser is asserting as the basis for non-fulfilment of the
applicable condition precedent or termination right, as the case may be. If any
such notice is delivered, provided that the Vendor is proceeding diligently to
cure such matter, if such matter is susceptible to being cured, the Purchaser
may not rescind or terminate this Agreement until the expiration of a period of
30 days from such notice; and, if such extension would postpone the Closing Date
beyond November 30, 1998, the parties shall be deemed to have agreed to extend
the Closing Date to such 30th day. If after such 30 day period, such matter is
not cured, the Purchaser may rescind this Agreement by notice to the Vendor,
without limiting any other right of the Purchaser, and in such event the
Purchaser shall be released from all obligations hereunder except the covenant
to maintain the confidentiality of certain information under the Confidentiality
Agreement; provided, however, that any of the said conditions, obligations,
covenants or agreements may be waived in whole or in part by the Purchaser
without prejudice to the Purchaser's right of rescission in the event of the
non-fulfilment and/or non-performance of any
<PAGE> 66
61.
other material condition, obligation, covenant or agreement, any such waiver to
be binding on the Purchaser only if the same is in writing.
ARTICLE 14
VENDOR'S CONDITIONS OF CLOSING
14.1 Conditions for the Benefit of the Vendor
The obligation of the Vendor to complete the sale of the Business on the Closing
Date shall be subject to the satisfaction or the waiver by the Vendor of the
following conditions on or prior to the Closing Date:
14.1.1 Truth of Representations and Warranties of the Purchaser
The representations and warranties of the Purchaser contained in this Agreement
or in any agreement, certificate, affidavit, statutory declaration, agreement or
other document delivered or given pursuant to this Agreement (including, without
limitation, the representations and warranties set forth in Article 7):
(i) which are qualified by materiality shall be true and correct
on the date hereof and at the Time of Closing in all respects;
and
(ii) which are not so qualified shall be true and correct in all
material respects at the Time of Closing, except to the extent
that any inaccuracy or incorrectness would not materially
adversely affect, either individually or in the aggregate, the
completion of the transaction contemplated herein;
with the same force and effect as if such representations and
warranties had been made on and as of each of such times. The Purchaser
shall deliver to the Vendor at the Time of Closing certificates,
affidavits, statutory declarations or other evidence to that effect and
to
<PAGE> 67
62.
the effect that as of the Closing Date each of the conditions set forth
in this Article 14 has been complied with.
14.1.2 Performance of Covenants, etc. by the Purchaser
The Purchaser shall have performed all obligations, covenants and agreements
contained in this Agreement to be performed by it at or prior to the Time of
Closing, including, without limitation, the covenants set forth in Article 10.
14.1.3 Consents, etc.
(a) (i) The applicable waiting period under section 123 of the
Competition Act (Canada) shall have expired and (x) the Purchaser shall have
been advised in writing by the Director of Investigation and Research appointed
under such Act that he has determined not to make an application for an order
under section 92 of the Competition Act in respect of the transaction herein
contemplated or (y) an advance ruling certificate shall have been issued under
section 102 of the Competition Act in respect of the transaction contemplated;
or
(ii) An advance ruling certificate shall have been issued under
section 102 of the Competition Act in respect of the transactions contemplated.
(b) The Minister responsible for the Investment Canada Act (Canada)
shall be satisfied, and shall have so advised the Purchaser in writing, or shall
be deemed to be satisfied that the acquisition of the Business and the Purchased
Assets by the Purchaser as herein contemplated is likely to be of net benefit to
Canada.
(c) The Purchaser and the Vendor shall obtain all of the necessary
consents, approvals and licenses from the Ministry of Natural Resources
(Ontario) to permit the transfer to the Purchaser of the Sustainability Forest
Licences issued under the Crown Forest Sustainability Act (Ontario) which are
essential to the Business.
(d) The HSR Act shall have been fully complied with (including, without
limitation, compliance with the information furnishing and waiting period
requirements thereof) or such compliance shall have been waived by the Tribunal
having authority to give such waiver.
<PAGE> 68
63.
14.1.4 No Action Taken Restricting Sale
There shall not be in effect any law or any judgment directing that the
transaction contemplated herein not be consummated; provided, however, that
prior to invoking this condition each party shall use its reasonable best
efforts to have any such judgment vacated; and there shall have been no law
enacted or promulgated which would make consummation of the transaction illegal.
No legal action or proceeding in any jurisdiction will be pending or threatened
by any Person, other than a party to this Agreement, to enjoin, restrict or
prohibit the sale and purchase of the Purchased Assets as contemplated hereby.
14.1.5 Fibre Supply Agreements
The Vendor and Purchaser shall execute and deliver at the Time of Closing, fibre
supply and purchase agreements substantially in the form set forth in Schedules
13.1.6A and 13.1.6B.
14.1.6 Pulp Supply Agreement
The Vendor and Purchaser shall execute and deliver at the Time of Closing, a
pulp supply agreement substantially in the form set forth in Schedule 14.1.6.
14.1.7 Form of Documents
All documents to be delivered to the Vendor at Closing pursuant to the terms of
this Agreement will be in a form satisfactory to the Vendor, acting reasonably.
14.2 Non-Fulfilment of Conditions etc. for the Benefit of the Vendor
In the event that any condition, obligation, covenant or agreement of the
Purchaser to be fulfilled and/or performed hereunder at or prior to the Time of
Closing, including, without limitation, the conditions set forth in this Article
14, shall not be fulfilled and/or performed, at or prior to the Time of Closing,
the Vendor may not elect to not complete the transaction contemplated in this
Agreement or exercise any termination right arising therefrom unless the Vendor
has delivered a written notice to the Purchaser specifying in reasonable detail
all breaches of covenants,
<PAGE> 69
64.
representations and warranties or other matters which the Vendor is asserting as
the basis for non-fulfilment of the applicable condition precedent or
termination right, as the case may be. If any such notice is delivered, provided
that the Purchaser is proceeding diligently to cure such matter, and if such
matter is susceptible to being cured, the Vendor may not terminate this
Agreement until the expiration of a period of 30 days from such notice; and, if
such extension would postpone the Closing Date beyond November 30, 1998, the
parties shall be deemed to have agreed to extend the Closing Date to such 30th
day. If after such 30 day period, such matter is not cured, the Vendor may
rescind this Agreement by notice to the Purchaser in which event the Vendor
shall be released from all obligations hereunder provided, however, that any of
the said conditions, obligations, covenants or agreements may be waived in whole
or in part by the Vendor without prejudice to its right of rescission in the
event of the non-fulfilment and/or non-performance of any other material
condition, obligation, covenant or agreement, any such waiver to be binding upon
the Vendor only if the same is in writing.
ARTICLE 15
CLOSING ARRANGEMENTS
15.1 Date, Time and Place of Closing
The Closing shall take place at the Time of Closing on the Closing Date at the
Toronto offices of Fraser & Beatty or at such other time, on such other date
and/or at such other place as may be agreed upon by the parties hereto.
15.2 Closing Arrangements
At the Time of Closing and subject to the fulfilment of all the terms and
conditions set forth in this Agreement which have not been waived in writing by
the parties hereto, respectively:
<PAGE> 70
65.
15.2.1 Purchase and Sale of Business and Purchased Assets
The Vendor shall sell to the Purchaser the Business and the Purchased Assets and
the Purchaser shall purchase the Business and the Purchased Assets from the
Vendor and pay and satisfy the Purchase Price, in accordance with the terms
hereof.
15.2.2 Delivery of Closing Documents
Each party shall deliver to the other such documents as are reasonably requested
by such other party for the purposes of completing the transaction contemplated
hereby. The Vendor shall deliver to the Purchaser all deeds, conveyances, bills
of sale, assurances, transfers, assignments and consents and any other documents
as shall be necessary or reasonably requested by the Purchaser to effectively
transfer the Purchased Assets (other than those disposed of in the Ordinary
course of the Business between the date hereof and the Time of Closing) to the
Purchaser and shall deliver to the Purchaser all books, records, books of
account, lists of suppliers and customers and all other documents, files,
records and other data, financial or otherwise, relating to the Business. At the
Closing the Vendor shall deliver to the Purchaser an opinion of: (i) the Bowater
Legal Department as to corporate matters relating to the due authorization by
the Vendor and Bowater of this Agreement; and (ii) Fraser & Beatty as to the
enforceability of this Agreement against the Vendor and Bowater. At the Closing
the Purchaser shall deliver to the Vendor an opinion of: (i) the Weyerhaeuser
legal department as to corporate matters relating to the due authorization of
this Agreement by the Purchaser and Weyerhaeuser; and (ii) McCarthy Tetrault as
to the enforceability of this Agreement against the Purchaser and Weyerhaeuser.
The Vendor shall use reasonable commercial efforts to provide at the Closing
legal opinions addressed to the Purchaser from Ogilvy Renault with respect to
the Real Property situate in Dryden, Ontario and from Erickson and Partners with
respect to the Real Property situate in Ear Falls, Ontario in substantially the
form of the legal opinions obtained by the Vendor from those law firms which
opinions have been disclosed to the Purchaser.
15.2.3 Actual Possession
The Vendor shall deliver actual possession of the Purchased Assets to the
Purchaser.
<PAGE> 71
66.
15.2.4 Payments
Upon the fulfilment of the foregoing provisions of this Article 15, and subject
to all the other terms and conditions contained in this Agreement being complied
with, the Purchaser shall pay and satisfy the Purchase Price in the manner
specified in Section 4.1 and shall pay $6,500,000 to the Vendor in respect of
the transfer of certain pension plans and related programs.
15.2.5 Tender
Any tender of documents or money may be made on the party or parties designated
to receive such documents or money or their respective legal counsel.
ARTICLE 16
RISK OF LOSS
16.1 Risk of Loss
Until the Time of Closing, the Purchased Assets shall remain at the risk of the
Vendor, in accordance with the terms of this Agreement. If prior to the Closing
Date, any of the Purchased Assets or any portion thereof is damaged or destroyed
by fire or any other casualty, the Vendor shall promptly give notice of the same
to the Purchaser. The Purchaser shall have the right to terminate this Agreement
if there is damage to or destruction of the Purchased Assets constituting a
material adverse change thereto, by giving notice thereof to the Vendor within
15 days after receipt of the Vendor's notice under this Section 16.1. If the
Purchaser terminates this Agreement pursuant to this Section 16.1, this
Agreement shall become null and void, and the Vendor and Purchaser shall
thereupon have no further liabilities under this Agreement or otherwise with
respect to all the Purchased Assets. If the Purchaser does not terminate this
Agreement pursuant to this Section 16.1, the Purchaser shall be entitled to the
benefits of all insurance proceeds and claims relating to any such fire or
casualty loss, and the Vendor shall at or prior to Closing assign to the
Purchaser all such insurance proceeds and claims. The Vendor shall inform
Purchaser of any negotiations with respect to insurance claims involving any
Purchased Assets which are damaged will permit the Purchaser to
<PAGE> 72
67.
take part therein, and will not settle any such claims without the Purchaser's
prior written consent, which will not be unreasonably withheld. The Purchaser
shall be entitled to a diminution of the Purchase Price to the extent such
insurance proceeds are less than the fair market value of the Purchased Assets
damaged or destroyed.
16.2 Expropriation
If any authority having the right of eminent domain shall commence negotiations
or shall commence legal action for the damaging, taking or acquiring of any of
the Purchased Assets, either temporarily or permanently, by expropriation,
condemnation or by exercise of the right of eminent domain ("expropriation"),
the Vendor shall promptly give written notice of the same to the Purchaser. The
Purchaser shall have the right to terminate this Agreement if the expropriation
constitutes a material adverse change to the Purchased Assets by giving notice
thereof to the Vendor within 15 days after receipt of the Vendor's notice under
this Section 16.2. If the Purchaser terminates this Agreement pursuant to this
Section, this Agreement shall become null and void, and the Vendor and Purchaser
shall thereupon have no further liabilities under this Agreement or otherwise
with respect to the expropriated Purchased Assets described in this Section 16.2
(or all the Purchased Assets if the entire Agreement is thereby terminated). If
the Purchaser does not so terminate this Agreement pursuant to this Section
16.2, the Purchaser shall be entitled to the benefits of all awards, claims,
settlement proceeds, and other proceeds payable by reason of any such
expropriation acquiring, and the Vendor shall assign to the Purchaser all
awards, claims, settlement proceeds, or other proceeds payable by reason of any
such damaging, taking, or acquiring. In the event of any negotiations with
respect to any Purchased Asset with any authority regarding settlement on
account any expropriation, the Vendor will inform the Purchaser of all such
negotiations, will permit the Purchaser to take part therein, and will not enter
into any settlements thereof without the Purchaser's prior written consent,
which will not be unreasonably withheld. The Purchaser shall be entitled to a
diminution of the Purchase Price to the extent the proceeds are less than the
fair market value of the Purchased Assets expropriated.
<PAGE> 73
68.
ARTICLE 17
CONDUCT AFTER CLOSING
17.1 Taxes
Each of the Vendor and the Purchaser agrees that after Closing it shall furnish
or cause to be furnished to the other, upon request, as promptly as practicable,
such information (including access to books and records) and assistance relating
to the Business or the Purchased Assets as is reasonably necessary for the
filing by the other party of any Tax Return, for the preparation for any audit
or for the prosecution or defense of any Legal Proceeding or proposed adjustment
relating to Taxes of the Vendor or the Purchaser relating to the Business or the
Purchased Assets. The party furnishing such information shall be reimbursed by
the party requesting such information for all out of pocket costs incurred by it
in reproducing and delivering such information.
17.2 Maintenance and Access to Records
Each of the Vendor and the Purchaser agrees that it will retain all books and
records and any other documents, information and files relating to the Business
or the Purchased Assets, in the case of the Purchaser, delivered to it by the
Vendor and in the case of the Vendor, retained by it, and relating to any period
ending on or prior to the Closing Date for a period of six years following the
Closing Date. So long as such books and records and such other documents,
information and files are retained by the Purchaser or the Vendor, as the case
may be, the other or its authorized representatives shall have reasonable access
thereto in connection with any bona fide business purpose. Notwithstanding the
foregoing, the Purchaser or the Vendor may at any time notify the others that
they desire to dispose of identified books and records, in which event the party
receiving such notice may, at its own cost and expense, take delivery of some or
all of such books and records, failing which the party giving such notice may
dispose of such books and records without further liability to the other
parties. All costs relating to the copying of any documents, information or
files retained under this Section 17.2 shall be borne by the party requesting
such copies.
17.3 Intentionally Deleted
<PAGE> 74
69.
17.4 Non-Competition
For a period commencing on the Closing Date and continuing for a period of five
years thereafter, neither the Vendor nor its Affiliates shall acquire or build a
paper mill which manufactures or sells, or convert an existing machine to
manufacture and sell, uncoated free sheet paper in competition with the Business
in Canada and the United States, provided that:
(i) the Vendor and its Affiliates shall not be prevented from
making any acquisition (whether by way of assets, capital
stock or otherwise) of an interest in, or any investment in,
in either case, whether directly or indirectly, any business
or entity that derives 30% or less of its gross revenues from
the manufacturing or sale of uncoated free sheet paper within
Canada and the United States as referred to above; or
(ii) if any Person, entity or group (a "Hostile Acquiror")
announces its intention or willingness to acquire control of
the Vendor or any of its Affiliates (including without
limitation, Bowater) (collectively, the "Target") by tender
offer, merger, proxy solicitation, open market purchase or
otherwise in a transaction that has not been approved or
recommended by the Board of Directors of the Target prior to
such announcement, then, prior to the time such Hostile
Acquiror announces the termination or withdrawal of its
efforts to acquire such control, the provisions of this
Section 17.4 to the contrary notwithstanding, the Vendor and
its Affiliates (or any of them), including but not limited to
Bowater, may enter into a merger, acquisition or other
business combination transaction with any Person, other than
the Hostile Acquiror or any Affiliate of the Hostile Acquiror,
in which Bowater acquires or is acquired by such Person.
17.5 License to Use Avenor Name
The Vendor hereby grants a license, effective on Closing, to the Purchaser to
use the name "Avenor" and any associated trade marks, trade names, service
marks, brand names, styles or business names (the "Avenor Marks") which brand
any Inventory purchased by the Purchaser under
<PAGE> 75
70.
this Agreement until such time as all such Inventory is sold, provided that the
Purchaser shall use its reasonable commercial efforts to sell such Inventory as
promptly as possible after the Closing Date. The Vendor hereby grants a license
to the Purchaser to use the Avenor Marks for the purpose of branding the Avenor
Marks on Inventory or packaging materials produced by it subsequent to the
Closing Date for a period of 60 days following the Closing Date. The foregoing
license rights may not be assigned by the Purchaser to any other party, subject
to the general provision for the assignment of this Agreement as a whole
provided for in Section 19.10. At the Vendor's request, prior to Closing the
Purchaser shall execute a License Agreement containing customary terms and
conditions, but without royalties, sufficient, in the reasonable opinion of the
Vendor's counsel, to protect the Avenor Marks with respect to claims of any
third party.
17.6 Reservation of Easement to Mercury Parcel
If the Vendor obtains consent to severance and the reservation of the easement
hereinafter referred to either before or after the Closing Date under the
subdivision control provisions of the Planning Act (Ontario) such that the
Mercury Parcel is either retained by the Vendor and does not form part of the
Real Property or is repurchased by the Vendor after the Closing Date, the
Purchaser acknowledges and agrees that either the Vendor shall reserve for the
Vendor and its successors and assigns for the benefit of the Mercury Parcel or
the Purchaser shall grant, subject to compliance with the subdivision control
provisions of the Planning Act (Ontario), a permanent easement with or without
vehicles in, over, along and upon such part or parts of the Real Property that
is or are necessary for ingress and egress to and from the Mercury Parcel to and
from the public road system for all purposes to enable the Vendor to maintain,
repair, operate, monitor or remediate the Mercury Parcel, the location of such
easements to be mutually agreed upon, by both parties acting reasonably. All
costs in relation to the creation and transfer of the easement shall be borne by
the Vendor.
<PAGE> 76
71.
ARTICLE 18
INDEMNIFICATION
18.1 By Vendor
From and after the Closing Date, regardless of any investigation undertaken or
made by the Purchaser or any of its officers, directors, agents or employees
(each a "Purchaser Indemnified Party" and, collectively the "Purchaser
Indemnified Parties") the Vendor shall indemnify and hold harmless the
Purchaser, its officers, directors, agents and employees from and against any
and all Claims (including without limitation, Claims arising out of facts or
circumstances that have occurred on or prior to the Closing Date, even though
such Claim may not be filed or become known until after the Closing Date) or
Losses, which a Purchaser Indemnified Party may sustain, suffer or incur,
resulting from, related to or arising out of:
(a) any misstatement of or omission from or breach of any
representation or warranty of the Vendor contained in this
Agreement, any Schedule, Exhibit or Annex to this Agreement,
or in any certificate, financial statement or other document
or instrument furnished or to be furnished to the Purchaser;
(b) any breach of any covenant, agreement or undertaking by the
Vendor contained in this Agreement, any Schedule, Exhibit or
Annex to this Agreement, any certificate or other document or
instrument furnished or to be furnished to the Purchaser
hereunder;
(c) the Excluded Liabilities; and
(d) any liabilities which the Vendor has expressly retained or for
which the Vendor has expressly agreed to indemnify the
Purchaser under this Agreement;
The obligation of the Vendor to indemnify the Purchaser as set forth in
Paragraph 18.1(a) shall be subject to the limitation periods referred to in
Section 6.2 with respect to survival of such
<PAGE> 77
72.
representation and warranty, and for any other obligation shall be limited to
the period, if any, expressly provided for in the applicable provision.
Notwithstanding the foregoing, cost sharing for Eligible Environmental Costs
shall be governed by the terms of Article 10, and the Purchaser shall not be
entitled to claim indemnity from the Vendor for such costs pursuant to this
Article 18.
18.2 By Purchaser
From and after the Closing Date, the Purchaser shall indemnify and hold harmless
the Vendor, its officers, directors, agents and Employees (each a "Vendor
Indemnified Party" and, collectively, the "Vendor Indemnified Parties") from and
against any and all Claims or Losses, that a Vendor Indemnified Party may
sustain, suffer or incur, resulting from, related to, or arising out of:
(a) any misstatement or omission from or breach of any
representation or warranty of the Purchaser contained in this
Agreement, any Schedule, Exhibit or Annex to this Agreement,
or in any certificate or other document or instrument
furnished or to be furnished to the Vendor;
(b) any breach of any covenant, agreement or undertaking by the
Purchaser contained in this Agreement, any Schedule, Exhibit
or Annex to this Agreement, any certificate or other document
or instrument furnished or to be furnished to the Vendor
hereunder;
(c) the Purchaser's failure to discharge any of the Assumed
Liabilities;
(d) any Legal Proceeding arising out of any of the foregoing; and
(e) any additional Taxes otherwise payable by the Purchaser under
Section 4.4 hereof plus interest and penalties as a result of
any assessment or re-assessment.
18.3 Limitation of Indemnity
Notwithstanding any other provision herein to the contrary, the Vendor shall not
be required to indemnify, defend or hold harmless the Purchaser Indemnified
Parties pursuant to Section 18.1(a)
<PAGE> 78
73.
until such time as the aggregate amount of Losses sustained, suffered or
incurred, or which may be sustained, suffered or incurred, and for which
indemnity may be sought under Section 18.1(a) hereof, exceeds in the aggregate
the sum of $3,000,000 (the "Threshold Amount") in which event such recovery
shall only be to the extent of any such Losses in excess of the Threshold
Amount. In no event shall the Vendor be required to indemnify the Purchaser
Indemnified Parties pursuant to Section 18.1(a) for any amount in excess of
$40,000,000 in the aggregate less the amount of the Threshold Amount.
18.4 Notice and Defense; Costs of Defense
Promptly after acquiring knowledge of any Loss or Claim, against which
the Purchaser Indemnified Parties or Vendor Indemnified Parties are or may be
entitled to indemnification hereunder, the Vendor, on the one hand, or the
Purchaser, on the other hand, shall send a Claim Notice to an Indemnifying
Party; provided, however, that failure to provide such Claim Notice shall not
relieve the Indemnifying Party of the obligation to indemnify an Indemnified
Party. The Indemnifying Party shall have the right to control the defense of any
such Claim or Loss unless:
(i) within 10 Business Days after receipt by it of the Claim
Notice, the Indemnifying Party has not waived in writing and
delivered to the Indemnified Party its right to contest the
obligation to indemnify an Indemnified Party pursuant to this
Article 18 for all Claims or Losses relating to the matters
set forth in the Claim Notice, in which case the Indemnified
Party may take control of the defense of any such Claim or
Loss but the Indemnifying Party shall continue to pay the
costs of such defense incurred by the Indemnified Party (and
all such costs shall be deemed to be Losses for purposes of
this Article 18); provided, however, the Indemnifying Party
shall be permitted to participate in such defense at its own
expense;
(ii) the Indemnifying Party, after receipt of the Claim Notice,
fails to take timely action to defend the Claim or Loss
relating to the matters set forth in the Claim Notice, in
which event the Indemnified Party may take control of the
defense of any such Claim or Loss, but the Indemnifying Party
shall continue to pay the costs of such
<PAGE> 79
74.
defense incurred by the Indemnified Party (and all such costs
shall be deemed to be Losses for purposes of this Article 18);
provided, however, that the Indemnifying Party shall be
permitted to participate in such defense at its own expense;
or
(iii) the Indemnifying Party is otherwise relieved of its obligation
to indemnify hereunder with respect to such Claim or Loss by
the Indemnified Party, in which case the Indemnified Party
shall pay its own costs of such defense (and the costs of such
defense incurred by the Indemnified Party shall not be deemed
to be Losses for purposes of this Article 18); provided,
however, the Indemnifying Party shall be permitted to
participate in such defense at its own expense.
(b) If the Indemnifying Party controls the defense of any such Claim or
Loss:
(i) it shall receive from the Indemnified Party all necessary and
reasonable cooperation in said defense including, but not
limited to, the services of employees of the Indemnified Party
who are familiar with the transactions out of which any such
Loss or Claim may have arisen; provided, however, the costs
and expenses incurred by the Indemnified Party in connection
with such cooperation shall be deemed to be Losses for
purposes of this Agreement; and
(ii) the Indemnified Party shall also have the right to participate
in all aspects of the defense of any such Loss or Claim
(including attending meetings and obtaining and reviewing
copies of all documents) and may choose and retain, at its own
cost and expense, separate counsel in connection therewith;
provided, however, if counsel retained by the Indemnified
Party determines that there exists an actual or potential
conflict of interest between the Indemnified Party and the
Indemnifying Parties with respect to the defense of such Loss
or Claim, then the reasonable fees and disbursements of the
separate counsel retained and chosen by the Indemnified Party
shall be borne by the Indemnifying Party.
(c) The party who controls the defense of any Claim or Loss shall have
the right, subject to the next succeeding sentence, at its option, to
compromise, settle or defend, at its own expense and by
<PAGE> 80
75.
its own counsel, any such matter involving the asserted liability for the Claim
or Loss. In the event that any such party controlling the defense of a Claim or
Loss shall seek to compromise or settle the Claim or Loss, the Indemnified
Party, whether or not it controls the defense thereof, shall have the right to
approve any such compromise or settlement, which approval shall not be
unreasonably withheld, unless such compromise or settlement involves solely the
payment of damages which will be paid, subject to the Threshold Amount, solely
by the Indemnifying Party, and includes a full and complete release of liability
for the Indemnified Party, in which case no approval of the Indemnified Party
shall be required.
18.5 Other
Any payments pursuant to this Article 18 shall be treated as an adjustment to
the Purchase Price for all Tax purposes. The remedies provided for in this
Article 18 will be exclusive of and limit any other remedies that may be
available to any Indemnified Party.
ARTICLE 19
MISCELLANEOUS
19.1 Brokerage, Commissions, etc.
The Vendor represents and warrants to the Purchaser that no broker, agent or
other intermediary has acted for the Vendor in connection with the transaction
herein contemplated except the appointment of Goldman, Sachs & Co. by the
Vendor. The Vendor hereby agrees to indemnify and save harmless the Purchaser
from and against any claim for commission or other remuneration payable or
alleged to be payable to Goldman, Sachs & Co. and any other broker, agent or
other intermediary who purports to act or to have acted for the Vendor in
connection with the transaction herein contemplated. The Purchaser represents
and warrants to the Vendor that no broker, agent or other intermediary has acted
for the Purchaser in connection with the transaction herein contemplated except
the appointment of Morgan Stanley & Co. Incorporated by the Purchaser. The
Purchaser agrees to indemnify and save harmless the Vendor from and against any
claim for any commission
<PAGE> 81
76.
or other remuneration payable or alleged to be payable to any broker, agent or
other intermediary who purports to act or to have acted for the Purchaser in
connection with the transaction herein.
19.2 Further Assurances
Each of the parties hereto upon the request of the other party or parties
hereto, whether before or after the Time of Closing, shall do, execute,
acknowledge and deliver or cause to be done, executed, acknowledged or delivered
all such further acts, deeds, documents, assignments, transfers, conveyances,
powers of attorney and assurances as may be reasonably necessary or desirable to
effect complete consummation of the transaction herein contemplated.
19.3 Dispute Resolution
(a) Mediation
(i) In the event of any dispute, controversy or claim arising out of or
relating to this Agreement or the breach, termination, interpretation or
validity thereof, except for disputes otherwise specifically required to be
resolved under this Agreement and disputes in respect of which equitable relief
is sought ("Dispute"), the parties shall make good faith efforts to settle the
Dispute by mediation pursuant to the provisions of this Paragraph 19.3(a) before
resorting to the procedure set forth in Paragraph 19.3(b) below.
(ii) Unless the parties agree otherwise and except as modified by the
terms of this Agreement, the mediation shall be conducted in accordance with the
Rules of Conduct of Arbitrations of the Arbitration and Mediation Institute of
Ontario Inc. by a mediator who (x) has the qualifications and experience set
forth in paragraph (iii) of this Paragraph 19.3(a) and (y) is selected as
provided in paragraph (iv) of this Section 19.3(a).
(iii) Unless the parties agree otherwise, the mediator shall be a
lawyer or retired judge who has mediated cases involving large commercial
transactions for the federal, provincial or state courts or a reputable
commercial alternative dispute resolution ("ADR") firm or not-for-profit ADR
organization.
<PAGE> 82
77.
(iv) Either party (the "Initiating Party") may initiate mediation of
the Dispute by giving the other party (the "Recipient Party") written notice (a
"Mediation Notice") setting forth a list of the names and resumes of
qualifications and experience of 3 impartial persons who the Initiating Party
believes would be qualified as a mediator pursuant to the provisions of
paragraph (iii) hereof. Within 7 days after the delivery of the Mediation
Notice, the Recipient Party shall give a counter-notice (the "Counter-Notice")
to the Initiating Party in which the Recipient Party may designate a person to
serve as the mediator from among the 3 persons listed by the Initiating Party in
the Mediation Notice (in which event such designated person shall be the
mediator). If none of the persons listed in the Mediation Notice is designated
by the Recipient Party to serve as the mediator, the Counter-Notice shall set
forth a list of the names and resumes of 3 impartial persons who the Recipient
Party believes would be qualified as a mediator pursuant to the provisions of
paragraph (iii) hereof. Within 7 days after the delivery of the Counter-Notice,
the Initiating Party may designate a person to serve as the mediator from among
the 3 persons listed by the Recipient Party in the Counter-Notice (in which
event such designated person shall be the mediator). If the parties cannot agree
on a mediator from the 3 impartial nominees submitted by each party, each party
shall strike 2 names from the other party's list, and the 2 remaining persons on
both lists will jointly select as the mediator any person who has the
qualifications and experience set forth in paragraph (iii) hereof. If they are
unable to agree, then the mediator will be selected by the Arbitration and
Mediation Institute of Ontario Inc. upon application by either party.
(v) If the Dispute cannot be settled within 30 days after the mediator
has been selected as provided above, either party may give the other party and
the mediator a written notice declaring the mediation process at an end, in
which event the Dispute shall be conclusively settled by submission to
arbitration as hereinafter provided.
(vi) All conferences and discussions which occur in connection with
mediation conducted pursuant to this Agreement shall be deemed settlement
discussions, and nothing said or disclosed, nor any document produced, which is
not otherwise independently discoverable, shall be offered or received as
evidence or used for impeachment or for any other purpose in any current or
future arbitration or litigation.
<PAGE> 83
78.
(vii) Each party shall bear its own costs and expenses with respect to
mediation; provided that the costs of the mediator shall be shared equally
between the parties.
(b) Arbitration
(i) Any Dispute not settled in accordance with the procedures set forth
in Paragraph 19.3(a) of this Agreement shall, at the request of either party, be
conclusively settled by submission to arbitration in accordance with the Rules
of the Conduct of Arbitrations of the Arbitration and Mediation Institute of
Ontario Inc. then in effect (the "Rules"), except as the Rules may be modified
in this Section 19.3(b).
(ii) The arbitration shall be held in Toronto, Ontario. There shall be
3 arbitrators, of whom each party shall select 1. The party-appointed
arbitrators shall select jointly the third arbitrator. Each of the arbitrators
shall be a former or retired judge with at least 10 years' experience in
commercial matters.
(iii) This Agreement shall be governed by, and construed in accordance
with the laws of the Province of Ontario, without reference to the conflict of
laws principle thereof. The procedures for the arbitration shall be governed by
the Arbitration Act, 1991 (Ontario) except to the extent that such procedures
are inconsistent with the Rules.
(iv) The hearing shall be commenced within 90 days and the award shall
be rendered no later than 120 days following the appointment of the last of the
3 arbitrators. All discovery shall be completed no later than 20 days prior to
the commencement of the hearing.
(v) Consistent with the expedited nature of arbitration, each party
will, upon the written request of the other party, provide the other with copies
of documents in its possession, custody or control relevant to the issues raised
by any claim or counterclaim. Other discovery may be agreed by the parties or
ordered by the arbitrators to the extent the arbitrators deem additional
discovery relevant and appropriate, and any dispute regarding discovery,
including disputes as to the need therefor or the relevance or scope thereof,
shall be determined by the arbitrators, which determination shall be conclusive.
<PAGE> 84
79.
(vi) The parties and the arbitrators shall treat the proceedings, any
related discovery and the decisions of the arbitrators as confidential, except
in connection with a judicial challenge to, or enforcement of, an award, and
unless otherwise required by law.
(vii) Any claim by either party shall be time barred unless the
asserting party makes a demand for arbitration with respect to such claim within
the applicable statute of limitations except to the extent otherwise provided in
this Agreement. Any dispute as to the timeliness of such demand or other statute
of limitations issues shall be decided by the arbitrators.
(viii) The award of the arbitrators shall be final and binding and
shall be the sole and exclusive remedy between the parties regarding any claims,
counterclaims, issues, or accounting presented to the tribunal. The arbitrators'
award shall state the reasons on which the award is based. Judgment upon the
award rendered by the arbitrators may be entered by any court having
jurisdiction thereof. Each of the parties hereby consents to service of process
by registered mail, by receipted Federal Express or other courier delivery, or
by personal delivery at its address set forth above and agrees that its
submission to jurisdiction and its consent to service of process by mail is made
for the express benefit of the other party.
(ix) Each party shall bear its own costs and expenses and those of the
arbitrator selected by it under subparagraph (ii) above with respect to
arbitration. All other costs (except any award) shall be shared equally between
the parties.
19.4 Announcements
Except to the extent required by law or by any Tribunal the parties hereto agree
that no disclosure or public announcement with respect to this Agreement or the
transactions herein contemplated shall be made by any party hereto without the
prior written consent of each of the other parties hereto, which consent shall
not be unreasonably withheld.
<PAGE> 85
80.
19.5 Notices
(a) Any notice, direction or other instrument required or permitted to
be given to any party hereto shall be in writing and shall be sufficiently given
if delivered personally, by courier or transmitted by fax or other form of
recorded communication tested prior to transmission to such party, as follows:
(i) in the case of the Vendor, at:
Bowater Pulp and Paper Canada Inc.
c/o Bowater Incorporated
55 East Camperdown Way
Greenville, South Carolina
U.S.A. 29602
Attention: Mr. Anthony Barash,
Senior Vice-President, Corporate Affairs and
General Counsel
Fax No.: (864) 282-9468
with a copy to:
Fraser & Beatty
Suite 4100
1 First Canadian Place
Toronto, Ontario
M5X 1B2
Attention: Mr. Jamie Plant
Fax No.: (416) 863-4592
(ii) in the case of Bowater:
Bowater Incorporated
55 East Camperdown Way
Greenville, South Carolina
U.S.A. 29602
Attention: Mr. David G. Maffucci,
Senior Vice-President - Chief Financial Officer
Fax No.: (864) 282-9594
<PAGE> 86
81.
(iii) in the case of the Purchaser, at:
Weyerhaeuser Canada Ltd.
25th Floor
1075 West Georgia Street
Vancouver, B.C.
V6E 3C9
Attention: Vice President, General Counsel
Fax No.: (604) 691-2445
with a copy to:
McCarthy Tetrault
Suite 4700, Toronto Dominion Bank Tower
Toronto-Dominion Centre
Toronto, Ontario
M5K 1A2
Attention: Philip C. Moore
Fax No.: (416) 868-0673
(iv) in the case of Weyerhaeuser, at:
Weyerhaeuser Company
Corporate Headquarters
33663 Weyerhaeuser Way South
Federal Way, Washington
U. S. A. 98003
Attention: Vice President, General Counsel
Fax No.: (253) 924-3253
(b) Any such notice, direction or other instrument, if delivered
personally, shall be deemed to have been given and received on the date on which
it was delivered, provided that if such day is not a Business Day then the
notice, direction or other instrument shall be deemed to have been given and
received on the first Business Day next following such day; if delivered by
courier, shall be deemed to have been given and received on the next Business
Day after it was delivered, and if transmitted by fax or other form of recorded
communication, shall be deemed to have been given and received on the day of its
transmission, provided that if such day is not a Business Day or if it is
transmitted or received after the end of normal business hours then the notice,
direction or
<PAGE> 87
82.
other instrument shall be deemed to have been given and received on the first
Business Day next following the day of such transmission.
Any party hereto may change its address for service from time to time
by notice given to the other parties hereto in accordance with the foregoing
provisions.
19.6 Time of the Essence
Time shall be of the essence of this Agreement.
19.7 Costs and Expenses
Except as otherwise expressly set forth in this Agreement, all costs and
expenses (including, without limitation, the fees and disbursements of legal
counsel) incurred in connection with this Agreement and the transaction herein
contemplated shall be paid by the party incurring such costs and expenses.
19.8 Applicable Law
This Agreement shall be construed and enforced in accordance with, and the
rights of the parties hereto shall be governed by, the laws of the Province of
Ontario and the laws of Canada applicable therein. Any and all disputes arising
under this Agreement, whether as to interpretation, performance or otherwise,
shall be subject to the exclusive jurisdiction of the Courts of the Province of
Ontario and each of the parties hereto hereby irrevocably attorns to the
jurisdiction of the Courts of such Province.
19.9 Entire Agreement
This Agreement, including the Disclosure Statement, Schedules hereto and
thereto, constitutes the entire agreement between the parties hereto with
respect to the transaction herein contemplated and cancels and supersedes any
prior understandings, agreements, negotiations and discussions between the
parties hereto with respect thereto except as specifically provided or
contemplated in this
<PAGE> 88
83.
Agreement or in any agreement, certificate, affidavit, statutory declaration or
other document delivered or given pursuant to this Agreement. There are no
representations, warranties, terms, conditions, undertakings or collateral
agreements or understandings, express or implied, between the parties hereto
other than those expressly set forth in this Agreement or in any such agreement,
certificate, affidavit, statutory declaration or other document as aforesaid.
This Agreement may not be amended or modified in any respect except by written
instrument executed by each of the parties hereto.
19.10 Assignment
This Agreement may not be assigned by any of the parties hereto without the
prior written consent of the other parties but may be assigned by the Purchaser
without the consent of the Vendor to an Affiliate provided that such Affiliate
enters into a written agreement with the Vendor to be bound by the provisions of
this Agreement in all respects and to the same extent as the Purchaser and
provided that the Purchaser will continue to be bound by all the obligations
hereunder as if such assignment had not occurred and perform such obligations to
the extent that such Affiliate fails to do so.
19.11 Parties in Interest
This Agreement shall enure to the benefit of and be binding upon the parties
hereto and their respective successors including any successor by reason of the
amalgamation or merger of any party, administrators and permitted assigns.
19.12 Third Parties
Except as specifically set forth or referred to herein, nothing herein is
intended or shall be construed to confer upon or give to any Person, other than
the parties hereto and their respective successors, including any successor by
reason of the amalgamation or merger of any party, administrators or permitted
assigns, any rights or remedies under or by reason of this Agreement.
<PAGE> 89
84.
19.13 Counterparts and Facsimile
This Agreement may be executed in two or more counterparts and by facsimile each
of which will be deemed to be an original and all of which together shall be
deemed to be one and the same instrument.
<PAGE> 90
85.
IN WITNESS WHEREOF this Agreement has been executed by the parties
hereto.
BOWATER PULP AND PAPER CANADA INC.
By: /s/ Arnold M. Nemirow
------------------------------------
/s/ Wendy C. Shiba
------------------------------------c/s
BOWATER INCORPORATED
By: /s/ Arnold M. Nemirow
------------------------------------
/s/ David G. Maffucci
------------------------------------c/s
WEYERHAEUSER CANADA LTD.
By: /s/ Maurice F. Denis
------------------------------------
/s/ Alex A. Shorten
------------------------------------c/s
WEYERHAEUSER COMPANY
By: /s/ Steven R. Rogel
------------------------------------
------------------------------------c/s
<PAGE> 1
EXHIBIT 2.1.1
AMENDING AGREEMENT
THIS AMENDING AGREEMENT is made this 30th day of September, 1998 by and
between BOWATER PULP AND PAPER CANADA INC., a corporation incorporated under the
laws of Canada (formerly known as Avenor Inc.) (hereinafter called the
"Vendor"), BOWATER INCORPORATED, a corporation incorporated under the laws of
Delaware, WEYERHAEUSER CANADA LTD., a corporation incorporated under the laws of
the Province of British Columbia (hereinafter called the "Purchaser") and
WEYERHAEUSER COMPANY, a corporation incorporated under the laws of Washington.
BACKGROUND
WHEREAS the parties hereto have entered into an asset purchase
agreement (hereinafter referred to as the "Asset Purchase Agreement") made the
4th day of August, 1998 providing for the sale by the Vendor to the Purchaser of
substantially all of the property and assets owned by the Vendor or any of its
Affiliates and used by or in connection with the Business;
AND WHEREAS it is desirable to clarify certain provisions of the Asset
Purchase Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
covenants, agreements and warranties hereinafter set forth, the parties hereto
agree as follows:
1. Definitions
Unless otherwise defined herein, all capitalized terms used in this amending
agreement shall have the respective meanings ascribed thereto in the Asset
Purchase Agreement.
2. Scope of Amendment
The parties hereby concur in this amendment to the Asset Purchase Agreement and,
upon the execution of this amending agreement, the Asset Purchase Agreement and
this amending agreement shall be deemed to constitute the entire Asset Purchase
Agreement. Subject as hereinafter set forth the Asset Purchase Agreement is
hereby confirmed in all respects.
<PAGE> 2
2.
3. Amendments
3.1 The definition of "Required Contracts" contained in Section 1.1 of the
Asset Purchase Agreement is hereby amended by deleting the words "and
(ii) contract number 1 under the Ear Falls heading, on Schedule 6.10 to
the Disclosure Statement".
3.2 Paragraph 3.2(v) of the Asset Purchase Agreement is deleted in its
entirety and shall be replaced by "(v) Intentionally Deleted".
3.3 Paragraph 11.3 (b)(ii) of the Asset Purchase Agreement is deleted in
its entirety and replaced by the following:
"(ii) Purchaser Establishes New Plans
The Purchaser shall promptly establish and register, effective the Closing Date,
with the appropriate federal and provincial regulators, at its own expense, a
pension plan (the "Purchaser's Staff Plan") which, together with the other
Employee Benefits, provides pension benefits and ancillary benefits (excluding
any right to surplus) no less favourable than those of the Vendor's 1976 Staff
Plan as at the Closing Date and a pension plan (the "Purchaser's Supervisory
Plan") which, together with the other Employee Benefits, provides pension
benefits and ancillary benefits (excluding any right to surplus) no less
favourable than those of the Vendor's 1976 Supervisory Plan as at the Closing
Date."
3.4 Paragraph 11.3 (b)(iv) of the Asset Purchase Agreement is deleted in
its entirety and replaced by the following:
"(iv) Pension Benefits For Pre-Closing Service
Subject to the receipt by the Purchaser's Staff Plan of the assets described in
Paragraph 11.3(b)(xii) hereof, the Purchaser's Staff Plan shall provide to the
Non-union Transferred Employees who are members of the Vendor's 1976 Staff Plan
as at the Closing Date, pension benefits and ancillary benefits in respect of
past service (excluding any right to surplus) which are substantively the same
as the pension benefits and ancillary benefits (excluding any right to surplus)
provided for such individuals under the Vendor's 1976 Staff Plan as constituted
at the Closing Date (inclusive of future salary increases and bonus payments),
and as modified by amendments to the Purchaser's Staff Plan, if any, required by
applicable laws. Subject to the receipt by the Purchaser's Supervisory Plan of
the assets described in paragraph 11.3(b)(xii) hereof, the Purchaser's
Supervisory Plan shall provide to the Non-union Transferred Employees who are
members of the Vendor's 1976 Supervisory Plan as at the Closing Date, pension
benefits and ancillary benefits in respect of past service (excluding any right
to surplus) which are substantively the same as the pension benefits
<PAGE> 3
3.
and ancillary benefits (excluding any right to surplus) provided for such
individuals under the Vendor's 1976 Supervisory Plan as constituted at the
Closing Date (inclusive of future salary increases and bonus payments), and as
modified by amendments to the Purchaser's Supervisory Plan, if any, required by
applicable laws. "
3.5 There shall be inserted after Paragraph 11.3 (b)(xiv) and before
Paragraph 11.3 (d) the following:
"(c) Intentionally deleted".
3.6 There shall be added at the end of the final sentence to the second
paragraph in Section 13.1.9 of the Asset Purchase Agreement after the
words "Article 10" the following:
", provided that the Mercury Parcel shall not be considered as part of the
Purchased Assets with respect to Article 10 after the Purchaser transfers the
Mercury Parcel back to the Vendor and, provided further, the Mercury Parcel
shall not be considered as part of the Purchased Assets with respect to Article
10 during the term of any lease of the Mercury Parcel between the Purchaser and
the Vendor. In the event that the Purchaser is required to take title to the
Mercury Parcel, the Vendor and Purchaser shall enter into a lease in respect of
the Mercury Parcel which shall include a right of access to the Mercury Parcel,
in a form satisfactory to the Vendor and the Purchaser, each acting reasonably."
3.7 The reference to "Paragraph 14.1.3(d)" in Section 6.19 of Schedule 6.1
to the Asset Purchase Agreement shall be deleted and replaced by a
reference to "Paragraph 14.1.3(c)".
4. Counterparts and Facsimile
This amending agreement may be executed in two or more counterparts and by
facsimile each of which will be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
5. Governing Law
This amending agreement shall be construed and enforced in accordance with, and
the rights of the parties hereto shall be governed by, the laws of the Province
of Ontario and the laws of Canada applicable therein. Any and all disputes
arising under this amending agreement, whether as to interpretation, performance
or otherwise, shall be subject to the exclusive jurisdiction of the
<PAGE> 4
4.
Courts of the Province of Ontario and each of the parties hereto hereby
irrevocably attorns to the jurisdiction of the Courts of such Province.
IN WITNESS WHEREOF this amending agreement has been executed by the
parties hereto.
BOWATER PULP AND PAPER CANADA INC.
By: /s/ Marc Regnier
----------------------------------
BOWATER INCORPORATED
By: /s/ A. H. Barash
----------------------------------
WEYERHAEUSER CANADA LTD.
By: /s/ Alex A. Shorten
----------------------------------
WEYERHAEUSER COMPANY
By: /s/ L. Dale Sowell
----------------------------------
<PAGE> 1
EXHIBIT 99.1
Media Contact:
--------------
Deborah L. Humphrey
(864) 282-9571
Analyst Contact:
----------------
James H. Dorton
(864) 282-9500
FOR IMMEDIATE RELEASE
WEDNESDAY, SEPTEMBER 30, 1998
BOWATER ANNOUNCES COMPLETION OF DRYDEN MILL SALE
GREENVILLE, S.C. Bowater Incorporated (NYSE:BOW) today announced the completion
of the sale of the pulp and paper mill and related assets in Dryden, Ontario, to
Weyerhaeuser Company (NYSE:WY) for C$790 million (approximately US$520 million).
The transaction includes the Dryden mill, which has the capacity to produce
380,000 short tons of fine paper per year and a small amount of bleached market
pulp, the Ear Falls sawmill and the Dryden stud mill. Related Crown forest
licenses were transferred along with the production facilities.
Bowater Incorporated, headquartered in Greenville, SC, is a global leader in
newsprint. In addition, the company makes coated and uncoated groundwood papers,
bleached kraft pulp and lumber products. It has 11 pulp and paper mills in the
United States, Canada and Korea. These operations are supported by more than 4
million acres of timberlands owned in the United States and Canada and over 14
million acres of timber cutting rights in Canada. The company is one of the
worlds largest users of recycled newspapers and magazines. Bowater common stock
is listed on the New York Stock Exchange, U.S. regional exchanges and the London
Stock Exchange. A special class of stock exchangeable into Bowater common stock
is listed on the Toronto and Montreal exchanges.
# # #
