UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 33-70476
Date of Report:
August 8, 1997
REPAP WISCONSIN, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1247669
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
433 North Main Street
Kimberly, Wisconsin 54136
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (414)788-3511
<PAGE>
Item 5. Other Events.
On August 8, 1997, Repap Enterprises, Inc. (REI) entered into
a definitive agreement with Consolidated Papers, Inc. of
Wisconsin Rapids, Wisconsin (Consolidated), to sell Repap
USA, Inc. for a transaction price estimated to total US$674
million. The estimated transaction price includes US$433
million for net debt, US$14 million for post-retirement
benefits, and US$227 million for equity, subject to closing
adjustments. Repap USA, Inc. is the holding company for
Repap Wisconsin, Inc., Repap's United States based coated
paper operation, and Repap Sales Corporation, which provides
coated paper sales and marketing services.
This transaction has the approval of the board of directors
of both REI and Consolidated, but is still subject to the
approvals of REI's shareholders and U.S. and Canadian
regulators. The proposed sale will be voted on by Repap
shareholders on September 25, 1997, and if approved is
expected to close September 30, 1997.
Silverton International Fund Limited, which beneficially owns
21.4% of outstanding REI common shares, and Paloma Partners,
L.L.C., which beneficially owns 7.2% of outstanding REI
common shares, have indicated to REI their intention to vote
all the REI common shares which they beneficially own or over
which they exercise control or direction in favor of the sale
of Repap USA, Inc. to Consolidated. George S. Petty, former
Chairman and Chief Executive Officer of REI who beneficially
owns or has ultimate voting control over 3.8% of outstanding
REI Common Shares has agreed to vote all the REI Common
Shares which he owns or controls in favor of the sale of
Repap USA, Inc. to Consolidated. In addition, all of the
directors and officers of REI have indicated their intention
to vote all the REI Common Shares owned or controlled by them
in favor of the sale of Repap USA, Inc. to Consolidated as
well.
The definitive agreement includes provisions that REI will
pay Consolidated US$10 million in the event the proposal is
rejected by its shareholders. REI has also agreed to pay
Consolidated US$25 million should its board of directors fail
to recommend the proposal to REI shareholders or should REI
enter into an agreement with another party to dispose of
Repap USA, Inc. or its subsidiaries through a sale, merger,
or other similar transaction prior to September 30, 1998.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial
Information, and Exhibits.
(c) Exhibits.
99.2 Stock Purchase Agreement between Repap Enterprises, Inc.
and Consolidated Papers, Inc., dated as of August 8, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, hereunto duly authorized, on
August 22, 1997.
Repap Wisconsin, Inc.
/s/ Timothy Morgan
Timothy Morgan
Senior Vice President and Controller
(Duly authorized officer and
principal financial
and accounting officer)
<PAGE>
Index to Exhibits
Exhibit Description
99.2 Stock Purchase Agreement between Repap Enterprises, Inc.
and Consolidated Papers, Inc., dated as of August 8, 1997.
<PAGE>
STOCK PURCHASE AGREEMENT
between
REPAP ENTERPRISES INC.
and
CONSOLIDATED PAPERS, INC.
Dated as of August 8, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS 2
Section 1.1 Specific Definitions 2
Section 1.2 Other Terms 11
Section 1.3 Other Definitional Provisions 11
ARTICLE II
PURCHASE AND SALE OF SHARES 12
Section 2.1 Purchase and Sale of Shares 12
Section 2.2 Closing; Delivery and Payment 12
Section 2.3 Adjustment to Purchase Price 13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF REPAP 19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER 19
ARTICLE V
TAX MATTERS 20
Section 5.1 Tax Sharing 20
Section 5.2 Tax Indemnification 20
Section 5.3 Tax Returns 21
Section 5.4 Contest Provisions 24
Section 5.5 Information to Be Provided by Buyer 25
Section 5.6 Information to Be Provided by Repap 26
Section 5.7 Assistance and Cooperation 26
Section 5.8 Post-Closing Actions Which May Affect
Repap's Liability for Taxes 27
Section 5.9 Savings and Costs to Buyer Resulting
from Adjustments to Tax Returns for
Periods Prior to Closing 28
Section 5.10 Survival of Obligations 31
<PAGE>
ARTICLE VI
CERTAIN COVENANTS AND AGREEMENTS
OF REPAP AND BUYER 31
Section 6.1 Access and Information 31
Section 6.2 Registrations, Filings and Consents 34
Section 6.3 Operation of Business 35
Section 6.4 Continued Employment; Employee Benefit
Plans 41
Section 6.5 Retention of Books and Records 43
Section 6.6 Closing Date Financial Information 44
Section 6.7 Notification of Certain Matters 44
Section 6.8 Non-Solicitation of Employees 45
Section 6.9 Further Assurances 46
Section 6.10 Stockholders Meeting 46
Section 6.11 Certain Interests After Closing Date 46
ARTICLE VII
CONDITIONS TO CLOSING 47
Section 7.1 Conditions to Obligations of Buyer 47
Section 7.2 Conditions to Obligations of Repap 50
Section 7.3 Conditions to Obligations of Buyer and
Repap 51
ARTICLE VIII
TERMINATION 52
Section 8.1 Termination 52
Section 8.2 Effect of Termination 54
ARTICLE IX
SURVIVAL AND INDEMNIFICATION 56
Section 9.1 Survival of Representations, Warranties,
Covenants and Agreements; Knowledge of
Breach 56
Section 9.2 Indemnification 58
Section 9.3 Method of Asserting Claims, etc. 60
<PAGE>
ARTICLE X
MISCELLANEOUS 63
Section 10.1 Amendment and Modification; Waiver 63
Section 10.2 Return of Information 64
Section 10.3 Expenses 64
Section 10.4 Public Disclosure 65
Section 10.5 Assignment 65
Section 10.6 Entire Agreement 66
Section 10.7 Fulfillment of Obligations 66
Section 10.8 Parties in Interest; No Third Party
Beneficiaries 66
Section 10.9 Schedules 66
Section 10.10 Counterparts 67
Section 10.11 Section Headings 67
Section 10.12 Notices 67
Section 10.13 GOVERNING LAW; SUBMISSION TO
JURISDICTION; SELECTION OF FORUM 68
Section 10.14 Severability 70
ANNEXES
Representations of Repap Annex A 72
Representations of Buyer Annex B 93
Schedules
<PAGE>
STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of
August 8, 1997, between REPAP ENTERPRISES INC., a corporation
incorporated under the laws of Canada ("Repap"), and CONSOLIDATED
PAPERS, INC., a Wisconsin corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, Repap owns all of the issued and outstanding
shares of capital stock of Repap USA, Inc., a Wisconsin
corporation ("Repap USA");
WHEREAS, Repap, George S. Petty Management Ltd.
("GSP"), Skeena Cellulose, Inc. ("Skeena") and Repap USA own all
of the issued and outstanding capital stock of Repap Wisconsin,
Inc., a Wisconsin corporation ("Repap Wisconsin");
WHEREAS, Repap USA owns all of the issued and
outstanding capital stock of Repap Sales Corp., a New York
corporation ("Repap Sales");
WHEREAS, Repap desires to sell and transfer to Buyer,
and Buyer desires to purchase from Repap, all of the issued and
outstanding capital stock of Repap USA (consisting of
<PAGE>
1,395 shares of common stock, without par value (the "Common
Shares")), as more specifically provided herein;
WHEREAS, Repap will acquire from GSP, Skeena and Repap
Sales prior to Closing, all of the issued and outstanding shares
of preferred stock of all classes of Repap Wisconsin, consisting
of 5,758.2 shares of Class I, no par value, 103.65 shares of
Class II, no par value, 539.94 shares of Class III, no par value,
and 483.25 shares of Class IV, no par value (collectively, the
"Repap Wisconsin Preferred Shares" and together with the Common
Shares, the "Shares"); and
WHEREAS, Repap desires to sell and transfer to Buyer,
and Buyer desires to purchase from Repap, all of the Repap
Wisconsin Preferred Shares, as more specifically described
herein;
NOW, THEREFORE, in consideration of the mutual
covenants and undertakings contained herein, and subject to and
on the terms and conditions herein set forth, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
<PAGE>
Section I.1 Specific Definitions. As used in this
Agreement, the following terms shall have the meanings set forth
or as referenced below:
"Acquisition Agreement" shall have the meaning set
forth in Section 8.2(d).
"Acquisition Proposal" shall have the meaning set forth
in Section 6.3(k).
"Acquisition Transaction" shall have the meaning set
forth in Section 8.2(d).
"Affiliate", as applied to any Person, means any other
Person directly or indirectly controlling, controlled by or under
common control with that Person.
"Agreement" shall mean this Agreement and all Annexes
and Schedules hereto.
"Antitrust Division" shall mean the Antitrust Division
of the United States Department of Justice.
"Balance Sheet" shall have the meaning set forth in
Section 3.6 of Annex A.
"Business" shall mean the manufacture, distribution and
sale of coated paper by Repap USA or any of its Subsidiaries from
<PAGE>
facilities located in Kimberly, Wisconsin and regional US sales
offices and distribution centers.
"Business Day" shall mean any day other than a
Saturday, a Sunday or a day on which banks in New York City, New
York are authorized or obligated by law or executive order to
close.
"Buyer" shall have the meaning set forth in the
Preamble.
"Capital Expenditures" shall have the meaning set forth
in Section 2.3(a).
"Claim Notice" shall have the meaning set forth in
Section 9.3.
"Closing" shall have the meaning set forth in
Section 2.2(a).
"Closing Date" shall have the meaning set forth in
Section 2.2(a).
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Common Shares" shall have the meaning set forth in the
Preamble.
"Competition Act" shall mean the Competition Act
(Canada).
<PAGE>
"Competition Director" shall mean the Director of
Investigation and Research under the Competition Act.
"Confidential Information" shall have the meaning set
forth in Section 6.1(d).
"Confidentiality Agreement" shall have the meaning set
forth in Section 6.1(c).
"Continuing Affiliate" shall mean an Affiliate of Repap
other than Repap USA and the Subsidiaries.
"Control" of a Person shall mean the power, direct or
indirect, to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise; the
terms "controlling" and "controlled" shall have meanings
correlative to the foregoing.
"Damage Threshold" shall have the meaning set forth in
Section 9.1(a).
"Debt" shall have the meaning set forth in Section
2.3(a).
"Deductible" shall have the meaning set forth in
Section 9.1.
"Disclosure Documents" shall have the meaning set forth
in Section 3.6 of Annex A.
<PAGE>
"Employees" means all employees of Repap USA and the
Subsidiaries who were employed on the Closing Date.
"Encumbrances" shall have the meaning set forth in
Section 3.2 of Annex A.
"Environmental Law" means any law, regulation, code,
license, permit, order, judgment, decree or injunction relating
to the protection of the environment (including air, water, soil
and natural resources) or the use, storage, handling, release or
disposal of any hazardous or toxic substance as in effect on the
date hereof.
"ERISA" shall have the meaning set forth in Section
3.12 of Annex A.
"ERISA Affiliate" shall have the meaning set forth in
Section 3.12 of Annex A.
"ERISA Affiliate Plan" shall have the meaning set forth
in Section 3.12 of Annex A.
"ERISA Plan" shall have the meaning set forth in
Section 3.12 of Annex A.
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
<PAGE>
"Financial Information" shall have the meaning set
forth in Section 3.6 of Annex A.
"Financial Statements" shall have the meaning set forth
in Section 3.6 of Annex A.
"FTC" shall mean the Federal Trade Commission.
"GAAP" shall mean U.S. generally accepted accounting
principles consistently applied.
"GSP" shall have the meaning set forth in the Preamble.
"Hazardous Substance" means any substance listed,
defined, designated or classified as hazardous, toxic or
radioactive under any applicable Environmental Law, including
petroleum and any derivative or by-products thereof.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Indemnified Party" shall have the meaning set forth in
Section 9.2.
"Indemnifying Party" shall have the meaning set forth
in Section 9.2.
"Intellectual Property" shall have the meaning set
forth in Section 3.31 of Annex A.
"Interim Financial Information" shall have the meaning
set forth in Section 3.6 of Annex A.
<PAGE>
"IRS" shall mean the United States Internal Revenue
Service.
"Knowledge of Repap" shall mean the knowledge of each
of Repap, Repap USA and Repap Wisconsin.
"Liabilities" shall have the meaning set forth in
Section 3.7 of Annex A.
"Listed Employees" shall have the meaning set forth in
Section 6.4(c).
"Losses" shall have the meaning set forth in
Section 9.2(a).
"Material Adverse Effect" shall mean a material adverse
effect on the Business, assets, financial condition or results of
operations of Repap USA and the Subsidiaries, taken as a whole.
"Maximum Amount" shall have the meaning set forth in
Section 9.1.
"Multiemployer Plan" shall have the meaning set forth
in Section 3.12 of Annex A.
"Notice Period" shall have the meaning set forth in
Section 9.3.
"Offer" shall have the meaning set forth in
Section 8.2(d).
<PAGE>
"Permitted Encumbrances" shall mean any mechanics',
workmen's, repairmen's, warehousemen's, carriers' or other like
liens and encumbrances (i) arising in the ordinary and usual
course of business consistent with past practice or being
contested in good faith by appropriate proceedings, (ii) not in
excess of $100,000 in the aggregate, (iii) necessarily incurred
in connection with a repair or capital expense to continue
operations or (iv) as contemplated by this Agreement.
"Person" shall mean any individual, corporation,
partnership, limited liability company, firm, joint venture,
association, joint-stock company, trust, unincorporated
organization, governmental or regulatory body or other entity.
"Plan" shall have the meaning set forth in Section 3.12
of Annex A.
"Pre-Closing Tax Period" shall have the meaning set
forth in Section 5.2(b).
"Purchase Price" shall have the meaning set forth in
Section 2.1.
"Repap" shall have the meaning set forth in the
Preamble.
<PAGE>
"Repap Group" shall mean any "affiliated group" (as
defined in Section 1504(a) of the Code without regard to the
limitations contained in Section 1504(b) of the Code) that
includes Repap USA and its Subsidiaries.
"Repap Sales" shall have the meaning set forth in the
Preamble.
"Repap Wisconsin" shall have the meaning set forth in
the Preamble.
"Repap Wisconsin Preferred Shares" shall have the
meaning set forth in the Preamble.
"Repap USA" shall have the meaning set forth in the
Preamble.
"Report" shall have the meaning set forth in
Section 6.2(a).
"Requisite Vote" shall mean the affirmative vote in
favor of the transactions contemplated by this Agreement by the
requisite number of votes cast by Repap shareholders entitled to
vote thereon at a meeting, including any adjournments thereof,
convened pursuant to Section 6.10 of this Agreement.
"SEC" shall mean the Securities and Exchange
Commission.
<PAGE>
"Securities Act" shall mean the Securities Act of 1933,
as amended.
"Severance Plans" shall have the meaning set forth in
Section 6.4.
"Shares" shall have the meaning set forth in the
Preamble.
"Skeena" shall have the meaning set forth in the
Preamble.
"Standby Loan Agreement" shall mean the standby loan
agreement made as of August 1, 1996 by and among Repap
Enterprises Inc., as borrower, TD Capital Group Limited, The
Toronto-Dominion Bank and The Royal Bank of Canada, as lenders,
and TD Capital Group Limited, as agent, as amended, supplemented
or restated from time to time.
"Statement of Capital Expenditures" shall have the
meaning set forth in Section 2.3(c).
"Statement of Consolidated Net Working Capital" shall
have the meaning set forth in Section 2.3(c).
"Statement of Debt" shall have the meaning set forth in
Section 2.3(c).
"Subsidiar[y][ies]" shall have the meaning set forth in
Section 3.3 of Annex A.
<PAGE>
"Tax Package" shall have the meaning set forth in
Section 5.5.
"Tax Returns" shall mean all federal, state, local or
foreign tax returns, tax reports, and declarations of estimated
tax, including without limitation consolidated federal income tax
returns of Repap Group.
"Taxes" shall mean all federal, state, local or foreign
income, gross receipts, windfall or excess profits, severance,
property, production, sales, use, license, excise, franchise,
employment, withholding or similar taxes, together with any
interest, additions or penalties with respect thereto and any
interest in respect of such additions or penalties.
"Third Party Claim Notice" shall have the meaning set
forth in Section 9.3.
"Working Capital" shall have the meaning set forth in
Section 2.3.
"WWF" shall mean WWF Paper Corporation.
Section I.2 Other Terms. Other terms may be defined
elsewhere in the text of this Agreement and, unless otherwise
indicated, shall have such meaning indicated throughout this
Agreement.
<PAGE>
Section I.3 Other Definitional Provisions. (a) The
words "hereof", "herein", and "hereunder" and words of similar
import, when used in this Agreement, shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement.
(b) The terms defined in the singular shall have a
comparable meaning when used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United
States Dollars.
ARTICLE II
PURCHASE AND SALE OF SHARES
Section II.1 Purchase and Sale of Shares. Buyer
agrees to purchase from Repap, and Repap agrees to sell to Buyer,
the Shares, for an aggregate purchase price in cash of $227.4
million (the "Purchase Price"). The Purchase Price shall be
adjusted as set forth in Section 2.3.
Section II.2 Closing; Delivery and Payment. (a) The
closing (the "Closing") shall take place at the offices of
Sullivan & Cromwell, 125 Broad Street, New York, New York 10004
at 10:00 A.M. local time, five business days following the latest
<PAGE>
to occur of: (i) obtaining shareholder approval of the
transactions contemplated by this Agreement pursuant to Section
6.10, (ii) the expiration of the waiting period under the HSR Act
including any extensions thereof, and (iii) the Competition Act
Director or any person authorized to exercise the powers and
perform the duties of the Competition Act Director shall have
issued a certificate under Section 102(l) of the Competition Act
to the effect that she is satisfied that she would not have
sufficient grounds on which to apply to the Competition Tribunal
established pursuant to the Competition Act under Section 92 of
the Competition Act in respect of the transactions contemplated
by this Agreement or the appropriate time period specified in
Section 123 of the Competition Act shall have expired or the
Competition Act Director shall have indicated in writing that she
does not intend to take any action under Section 92 of the
Competition Act whether before or after the completion of the
transactions contemplated by this Agreement, which could
materially interfere with or detrimentally affect the
transactions contemplated by this Agreement, or at such other
time and place as the parties hereto may mutually agree. The
date on which the Closing occurs is called the "Closing Date."
<PAGE>
(b) On the Closing Date, Repap shall deliver to Buyer
certificates representing the Shares duly endorsed and in form
for transfer to Buyer.
(c) On the Closing Date, Buyer shall pay or deliver to
Repap the Purchase Price in immediately available funds to an
account designated by Repap not less than two Business Days prior
to the Closing.
Section II.3 Adjustment to Purchase Price. (a) The
Purchase Price shall be:
(i) increased by the amount, if any, by which $4.9
million exceeds the amount of any final settlement paid by
Repap Wisconsin prior to the Closing Date to fully discharge
its obligations to Wisconsin Electric Power Company as
described in Note 11 to the Consolidated Financial
Statements of Repap Wisconsin in the Annual Report on Form
10-K for the fiscal year ended December 31, 1996, of Repap
Wisconsin, which is attached as part of Schedule 3.6 to this
Agreement;
(ii) increased by the amount the Working Capital as of
the Closing Date exceeds $70.4 million, or decreased by the
amount the Working Capital as of the Closing Date is less
than $70.4 million, as the case may be;
<PAGE>
(iii) (A) if the outstanding long-term indebtedness
plus the amount of the liability under FASB 106 of Repap USA
and its Subsidiaries as of the Closing Date and calculated
as set forth on Schedule 2.3(a)(iii) (collectively, the
"Debt") is less than $454.6 million, increased by an amount
equal to the difference between $454.6 million and the Debt,
or (B) if the Debt is greater than $454.6 million, decreased
by an amount equal to the difference between the Debt and
$454.6 million; and
(iv) increased by the amount of (A) capital
expenditures incurred and paid or accrued by Repap USA and
the Subsidiaries from March 31, 1997 through the Closing
Date and set forth on Schedule 2.3(a)(iv), (B) capital
expenditures incurred and paid or accrued by Repap USA and
the Subsidiaries through the Closing Date pursuant to
Section 6.3(g) hereof and (C) capital expenditures incurred
and paid by Repap USA and the Subsidiaries through the
Closing Date other than as provided in subclause (iv)(A) or
(iv)(B) and agreed to by Buyer in writing (such agreement
not to be unreasonably withheld) (collectively, the "Capital
Expenditures").
<PAGE>
(b) As used in this Agreement, "Working Capital" means
current assets less current liabilities as reflected on the
Statement of Consolidated Net Working Capital plus the amount, if
any, paid to the Listed Employees prior to the Closing Date
pursuant to Section 6.4(c). For purposes of such calculation,
current assets shall be the sum of cash, marketable securities,
net accounts receivable (including any affiliate accounts
receivable), prepaid expenses and net inventories of Repap USA
and the Subsidiaries. Current liabilities shall be the sum of
obligations (including any affiliate accounts payable), debts,
prepayments and accruals whose liquidation is reasonably expected
to require the use of current assets or the creation of current
liabilities (including any affiliate accounts payable) of Repap
USA and the Subsidiaries but shall not include accruals from
January 1, 1997 through the Closing Date for Repap Wisconsin's
supplemental pension plan to the extent that Repap fully funds
such supplemental pension plan on or prior to Closing. All of
the foregoing calculations shall be made in conformity with GAAP.
(c) For purposes of this Agreement, "Statement of
Consolidated Net Working Capital" means the audited calculation
<PAGE>
of the Working Capital of Repap USA and the Subsidiaries, on a
consolidated basis, as of the Closing Date from which the
calculation of the adjustment to the Purchase Price of the Shares
will be made in accordance with Section 2.3(a)(i) hereof.
(d) Within sixty (60) days following the Closing Date,
Repap shall prepare and deliver to Buyer (i) the Statement of
Consolidated Net Working Capital, which shall be audited by
Repap's auditors, including a review and assessment of accounts
receivable as of the Closing Date, an inventory of work in
process, pulp and raw materials, and finished goods taken by
Repap as of the Closing Date and a review of the liabilities as
of the Closing Date, each determined in accordance with GAAP and
performed in accordance with procedures of Repap's auditors in
the ordinary and usual course of business consistent with past
practice, (ii) a calculation of the amount of Debt outstanding as
of the Closing Date (the "Statement of Debt") and (iii) a
calculation of the amount of Capital Expenditures from March 31,
1997 through the Closing Date (the "Statement of Capital
Expenditures").
During the preparation of the Statement of Consolidated
Net Working Capital, the Statement of Debt and the Statement of
<PAGE>
Capital Expenditures and the period of any review or dispute as
provided in this Section 2.3, Buyer shall, and shall cause Repap
USA and the Subsidiaries to, (1) provide Repap and Repap's
authorized representatives with full access to the books,
records, facilities and employees of Repap USA and the
Subsidiaries, and (2) cooperate fully with Repap and Repap's
authorized representatives, including the provision on a timely
basis of all necessary or useful information. The taking of
inventory may be observed by Buyer and Buyer's auditors. To the
extent possible, Repap will provide Buyer with a preliminary
draft of the Statement of Consolidated Net Working Capital, the
Statement of Debt and the Statement of Capital Expenditures.
Buyer and Repap will in good faith attempt to resolve any
disputes with respect to such calculation before the final
Statement of Consolidated Net Working Capital, Statement of Debt
and Statement of Capital Expenditures are rendered.
Buyer may review the Statement of Consolidated Net
Working Capital, Statement of Debt and Statement of Capital
Expenditures and Repap shall make available the work papers of
Repap's auditors to Buyer and its accountants and Buyer and its
accountants may make inquiries of representatives of Repap and
<PAGE>
its auditors. Buyer shall give written notice to Repap of any
objection to the Statement of Consolidated Net Working Capital,
Statement of Debt and Statement of Capital Expenditures within
thirty (30) days after Buyer's receipt thereof. The notice shall
specify in reasonable detail the items in the Statement of
Consolidated Net Working Capital, Statement of Debt and Statement
of Capital Expenditures to which Buyer objects and shall provide
a summary of Buyer's reasons for such objections.
Any dispute between Buyer and Repap with respect to the
Statement of Consolidated Net Working Capital, Statement of Debt
and Statement of Capital Expenditures which is not resolved
within fifteen (15) Business Days after receipt by Repap of the
written notice from Buyer shall be referred for decision to an
independent accounting firm chosen from the "Big Six" accounting
firms who shall cause an audit partner who is not engaged in
providing services to Repap or Buyer or any of their affiliates
to decide the dispute within thirty (30) days of such referral.
The decision by the audit partner shall be final and binding on
Repap and Buyer. The cost of retaining the audit partner with
respect to resolving disputes as to the Statement of Consolidated
Net Working Capital, Statement of Debt and Statement of Capital
Expenditures shall be borne by Repap and Buyer equally.
<PAGE>
(e) Following delivery of the Statement of Consoli
dated Net Working Capital, Statement of Debt and Statement of
Capital Expenditures, any balance due to Repap or refund due to
Buyer pursuant to the adjustments set forth in Section 2.3(a)
shall be paid within ten (10) days of such delivery (unless there
is an objection under Section 2.3(d), in which case the amount
not in dispute shall be paid within ten (10) days of such
delivery, and the balance in dispute shall be paid within ten
(10) days of the resolution of such objection) together with
interest on such amount from the Closing Date at the 90 day LIBOR
rate, in immediately available funds to an account designated by
Repap or Buyer, as the case may be, at least two Business Days
before the payment is due.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF REPAP
Repap represents and warrants to Buyer as of the date
hereof and as of the Closing Date (except that representations
and warranties that are made as of a specific date need be true
only as of such date) as provided in Annex A hereto.
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Repap as of the date
hereof and as of the Closing Date (except that representations
and warranties that are made as of a specific date need be true
only as of such date) as provided in Annex B hereto.
ARTICLE V
TAX MATTERS
Section V.1 Tax Sharing. Any and all tax sharing
agreements and arrangements shall be canceled as between Repap
and the Continuing Affiliates, on the one hand, and Repap USA and
its Subsidiaries, on the other hand, and no further payments
shall be made by Repap USA or any of its Subsidiaries to Repap or
its Continuing Affiliates, or by Repap or its Continuing
Affiliates to Repap USA or its Subsidiaries, pursuant thereto.
Section V.2 Tax Indemnification. (a) Buyer and Repap
agree that no election shall be made under Section 338(h)(10) of
the Code or under any similar provisions of state or foreign law
with respect to the purchase of the Shares.
<PAGE>
(b) Repap hereby agrees to indemnify Buyer and hold it
harmless from (i) all liability for Taxes imposed on Repap USA
and its Subsidiaries for any taxable year or period ending on or
before the Closing Date and, in the case of any taxable year or
period beginning before and ending after the Closing Date, the
portion of such period ending on and including the Closing Date
(the "Pre-Closing Tax Period"), and (ii) all liability for Taxes
imposed on the Repap Group, other than Repap USA and its
Subsidiaries, except to the extent that, with respect to either
clause (i) or (ii), such Taxes are taken into account as a
liability on the Balance Sheet. Repap shall be entitled to all
refunds of such Taxes, except to the extent such Taxes are taken
into account on the Balance Sheet.
(c) Buyer hereby agrees to indemnify Repap and its
Continuing Affiliates and hold them harmless from all liability
for Taxes imposed on Repap USA and its Subsidiaries for any
taxable year or period beginning after the Closing Date and, in
the case of any taxable year or period beginning before and
ending after the Closing Date, the portion of such period
beginning after the Closing Date.
(d) Whenever it is necessary to determine liability
for Taxes for a portion of a taxable year or period beginning
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before and ending after the Closing Date, the determination shall
be made assuming that there was a closing of the books at the
close of the Closing Date, except that Taxes (other than Taxes
measured by net income or gains), exemptions, allowances or
deductions that are calculated on an annual basis shall be
apportioned on a time basis.
Section V.3 Tax Returns. (a) Repap shall, based upon
the Tax Package, prepare all Tax Returns that are required to be
filed by or with respect to Repap USA and its Subsidiaries for
taxable years or periods ending on or before the Closing Date
which have not been filed on or before the Closing Date. Drafts
of such Tax Returns in a form suitable for filing shall be
submitted to Buyer for review and approval not less than thirty
(30) days prior to their due date (including any extensions
thereof). Buyer shall notify Repap of any changes that it
proposes to make to such draft Tax Returns not less than twenty
(20) days before filing and shall discuss such changes with Repap
prior to filing the Tax Returns. Final decisions as to the form
and content of such Tax Returns shall be with Buyer, subject to
the consent of Repap which consent shall not be unreasonably
withheld; provided, however, that the usable net operating loss
<PAGE>
carryovers from periods ending on or before September 30, 1996
reported on such Tax Returns will be subject to the mutual
agreement of Buyer and Repap. Buyer shall file or cause to be
filed when due all such Tax Returns. Repap shall pay Buyer the
Taxes for which Repap is liable pursuant to Section 5.2(b) but
which are payable with Tax Returns to be filed by Buyer pursuant
to the previous sentence within 10 days prior to the due date for
the filing of such Tax Returns.
(b) Buyer shall file or cause to be filed when due all
Tax Returns that are required to be filed by or with respect to
Repap USA and its Subsidiaries for taxable years or periods
ending after the Closing Date and shall remit any Taxes due in
respect of such Tax Returns. Repap shall pay Buyer the Taxes for
which Repap is liable pursuant to Section 5.2(b) but which are
payable with Tax Returns to be filed by Buyer pursuant to the
previous sentence within 10 days prior to the due date for the
filing of such Tax Returns.
(c) In the event that the U.S. federal income tax
return filed by Buyer on behalf of Repap USA and Subsidiaries for
the taxable period ending on the Closing Date reports usable net
operating loss carryovers (excluding any net operating loss
<PAGE>
carryovers attributable to Nitec Paper Corporation) from periods
ending on or before September 30, 1996, of less than
$114.1 million (without regard to whether such net operating loss
carryovers are used in such Tax Returns or any subsequent Tax
Returns) or in the event that such amount is reduced upon audit
by the IRS, Repap shall pay to Buyer an amount equal to twenty-
nine percent (29%) of the difference between $114.1 million and
the amount of such usable net operating loss carryovers
(excluding any net operating loss carryovers attributable to
Nitec Paper Corporation) reported on such return.
(d) In the event that the U.S. federal income tax
return filed by Buyer on behalf of Repap USA and the Subsidiaries
for the taxable period ending on the Closing Date reports usable
net operating loss carryovers (excluding any net operating loss
carryovers attributable to Nitec Paper Corporation) from periods
ending on or before September 30, 1996, of greater than
$114.1 million (without regard to whether such net operating loss
carryovers are used in such Tax Returns or any subsequent Tax
Returns) or in the event that such amount is increased upon audit
by the IRS, Buyer shall pay to Repap an amount equal to twenty-
nine percent (29%) of the difference between the amount of such
<PAGE>
usable net operating loss carryovers (excluding any net operating
loss carryovers attributable to Nitec Paper Corporation) reported
on such return and $114.1 million.
Section V.4 Contest Provisions. Buyer shall promptly
notify Repap in writing upon receipt by Buyer or any of its
Affiliates (including Repap USA or any of its Affiliates) of
notice of any pending or threatened federal, state, local or
foreign income or franchise tax examinations, inquiries or audits
or assessments which may materially affect the tax liabilities of
Repap USA or its Subsidiaries for which Repap may be required to
indemnify Buyer pursuant to Sections 5.2(b) or 5.9(c) (provided
that failure to give this notice shall not affect Buyer's right
to indemnification hereunder unless such failure is prejudicial
to Repap), or which may affect any tax liability or refund claim
of Repap. Repap shall be entitled to participate at its expense
in the defense of any claims for Taxes or any other proposed
adjustments which may be the subject of indemnification by Repap
pursuant to Section 5.2(b) or 5.9(c), and, with the written
consent of Buyer, at its sole expense, may assume the entire
defense of such claims or proposed adjustments. Notwithstanding
the foregoing, Repap shall not be entitled to settle, either
<PAGE>
administratively or after the commencement of litigation, any
claim for Taxes which would adversely affect the liability for
Taxes of the Buyer, Repap USA or its Subsidiaries for any period
after the Closing Date to any extent (including, but not limited
to, the imposition of income tax deficiencies, the reduction of
asset basis or cost adjustments, the lengthening of any
amortization or depreciation periods, the denial of amortization
or depreciation deductions, or the reduction of loss or credit
carry forwards) without the prior written consent of Buyer. Such
consent shall not be unreasonably withheld.
Neither Buyer, Repap USA nor its Subsidiaries may agree
to settle any claim for Taxes or other proposed adjustments which
may be the subject of indemnification by Repap under
Sections 5.2(b) or 5.9(c) without the prior written consent of
Repap, which consent shall not be unreasonably withheld.
Section V.5 Information to Be Provided by Buyer. With
respect to the taxable year of Repap USA within which the Closing
Date occurs, Buyer shall promptly cause Repap USA to prepare and
provide to Repap a package of tax information materials (the "Tax
Package"), which shall be completed in accordance with past
practice including past practice as to providing the information,
<PAGE>
schedules and work papers and as to the method of computation of
separate taxable income or other relevant measure of income of
Repap USA. Buyer shall cause the Tax Package for the portion of
the taxable period ending on the Closing Date to be delivered to
Repap within one hundred twenty (120) days after the Closing
Date.
Section V.6 Information to Be Provided by Repap. At
the Closing, Repap shall provide to Buyer copies of all Tax
Returns filed by or on behalf of Repap USA and the Subsidiaries
that are relevant for purposes of establishing the amount of the
net operating loss and credit carryovers of Repap USA and the
Subsidiaries for federal and Wisconsin income tax purposes as of
the Closing Date. In addition, at Closing, Repap shall provide
to Buyer copies of all workpapers used in the preparation of such
Tax Returns.
Section V.7 Assistance and Cooperation. After the
Closing Date, each of Repap and Buyer shall:
(i) assist (and cause their respective affiliates to
assist) the other party in preparing any Tax Returns or
reports which such other party is responsible for preparing
and filing in accordance with this Article V;
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(ii) cooperate fully in preparing for any examina
tions, inquiries or audits of, or disputes with taxing
authorities regarding, any Tax Returns of Repap USA or its
Subsidiaries or any tax refund claims filed by Repap;
(iii) make available to the other and to any taxing
authority as reasonably requested all information, records
and documents relating to Taxes of Repap, Repap USA or its
Subsidiaries;
(iv) provide timely notice to the other in writing of
any pending or threatened tax examinations, inquiries or
audits or assessments of Repap USA or its Subsidiaries for
taxable periods for which the other may have a liability
under this Article V; and
(v) furnish the other with copies of all
correspondence received from any taxing authority in
connection with any tax examination, inquiry or audit or
information request with respect to any such taxable period
referred to in subsection (iv).
Section V.8 Post-Closing Actions Which May Affect
Repap's Liability for Taxes. Except to the extent required by
law, neither Buyer, Repap USA, its Subsidiaries, nor their
<PAGE>
Affiliates shall, without the prior written consent of Repap,
which shall not be unreasonably withheld, (i) amend any Tax
Return filed by, or with respect to, Repap USA or any of its
Subsidiaries for any taxable period, or portion thereof,
beginning before the Closing Date, or (ii) carryback any net
operating loss, capital loss, excess foreign tax credit or other
similar losses, deductions or credits derived with respect to any
period beginning after the Closing Date to any taxable year, or
portion thereof, of Repap USA or any of its Subsidiaries ending
on or before the Closing Date. Such consent shall not be
unreasonably withheld and shall not be necessary to the extent
that such amended returns or carrybacks do not affect Repap's
liability for Taxes.
Section V.9 Savings and Costs to Buyer Resulting from
Adjustments to Tax Returns for Periods Prior to Closing. (a)
If, after the Closing, an adjustment required by a taxing
authority in any item reflected on a Tax Return of Repap USA or
any of its Subsidiaries relating to any taxable period, or
portion thereof, ending on or before the Closing Date results in
a Tax benefit (including any deduction, credit, net operating
loss or similar loss or deduction) becoming available to Buyer or
<PAGE>
any of its Affiliates (including Repap USA and any of its
Subsidiaries) with respect to any taxable period beginning after
the Closing, Buyer agrees to recognize, and to cause its
Affiliates to recognize, any such adjustment on its or their Tax
Returns and to claim to the fullest extent possible all
deductions and credits available as a result. Buyer shall pay to
Repap an amount equal to the estimated net decrease in the Tax
liability of Buyer and its Affiliates as a result of the Tax
benefit becoming available. The estimated net decrease in the
Tax liability of Buyer and its Affiliates shall be determined by
multiplying any increase in deductions, net operating losses or
other similar items by twenty-nine percent (29%) and any increase
in credits by zero percent (0%).
(b) If, after the Closing, an adjustment required by a
taxing authority in any item reflected on a Tax Return of Repap
USA or any of its Subsidiaries relating to any taxable period, or
portion thereof, ending after the Closing Date results in a Tax
benefit (including any deduction, credit, net operating loss or
similar loss or deduction) becoming available to Repap or any of
its Continuing Affiliates with respect to any taxable period, or
portion thereof ending on or before the Closing, Repap agrees to
<PAGE>
recognize, and to cause its Continuing Affiliates to recognize,
any such adjustment on its or their Tax Returns and to claim to
the fullest extent possible all deductions and credits available
as a result. Repap shall pay to Buyer an amount equal to the net
decrease in the Tax liability of Repap and its Continuing
Affiliates as a result of claiming any such deduction or credit
(as compared to the Taxes they otherwise would have paid) at the
time such decrease is realized (whether by paying less Taxes or
receiving a refund). For purposes of determining the amount of
any such decrease in Taxes paid, any deductions or credits
otherwise available to Repap or its Continuing Affiliates shall
be deemed to be used prior to the deductions or credits resulting
from such adjustment.
(c) If, after the Closing, an adjustment required by a
taxing authority in any item reflected on a Tax Return of Repap
USA or any of its Subsidiaries relating to any taxable period, or
portion thereof, ending on or before the Closing Date results in
loss or reduction in a Tax benefit (including the loss or
reduction of any deduction, credit, net operating loss, or
similar loss or deduction) otherwise available to Repap USA or
any of its Subsidiaries or to Buyer or any of its Affiliates with
<PAGE>
respect to any taxable period beginning after the Closing, Repap
shall pay to Buyer an amount equal to the estimated net increase
in the Tax liability of Buyer and its Affiliates as a result of
the loss or reduction of such Tax benefit at the time such
adjustment by the taxing authority becomes final. The estimated
net increase in the Tax liability of Buyer and its Affiliates
shall be determined by multiplying any loss or reduction in
deductions, net operating losses or other similar items by twenty-
nine percent (29%) and any loss or reduction in credits by zero
percent (0%).
Section V.10 Survival of Obligations. The obligations
of the parties set forth in this Article V shall be unconditional
and absolute and shall remain in effect without limitation as to
time.
ARTICLE VI
CERTAIN COVENANTS AND AGREEMENTS
OF REPAP AND BUYER
Section VI.1 Access and Information. (a) Repap shall
permit Buyer and its representatives after the date of execution
of this Agreement to have reasonable access, during regular
business hours and upon reasonable advance notice, to the real
<PAGE>
property owned or leased by Repap USA and the Subsidiaries and to
the officers, key employees, customers, suppliers and parties to
material contracts of Repap USA and the Subsidiaries, subject to
Repap's reasonable rules and regulations, and shall furnish, or
cause to be furnished, to Buyer any financial and operating data
and other information that is available with respect to the
Business and properties of Repap USA and the Subsidiaries as may
be reasonably necessary for Buyer and Repap to obtain any third
party action, consent or approval required hereunder or as Buyer
shall from time to time otherwise reasonably request; provided
that the foregoing shall not require Repap to permit, prior to
Closing, any inspection, or to disclose any information, that (a)
relates to its proprietary coating formulas and its groundwood
customers or (b) in its reasonable judgment would result in the
disclosure of any trade secrets of third parties or violate any
of Repap's, Repap USA's or any of the Subsidiaries' obligations
with respect to confidentiality if Repap shall have used its
reasonable best efforts to obtain the consent of such third party
to such inspection or disclosure.
(b) In the event of the termination of this Agreement,
Buyer at its own expense shall promptly deliver (without
<PAGE>
retaining any copies thereof) to Repap, or (at Repap's option)
confirm in writing to Repap that it has destroyed all
Confidential Information furnished to Buyer or its
representatives by Repap, Repap USA, the Subsidiaries or any of
their respective agents, employees or representatives as a result
hereof or in connection herewith, whether so obtained before or
after the execution hereof, and all analyses, compilations,
forecasts, studies or other documents prepared by Buyer or its
representatives which contain or reflect any such Confidential
Information. Buyer shall at all times prior to the Closing Date,
and in the event of termination of this Agreement, cause any
Confidential Information so obtained to be kept confidential and
will not use, or permit the use of, such information in its
business or in any other manner or for any other purpose except
as contemplated hereby and except as required by law.
(c) All Confidential Information provided or obtained
pursuant to clause (a) above shall be held by Buyer in accordance
with and subject to the terms of the confidentiality agreement,
dated September 24, 1996, between Buyer and Repap (the
"Confidentiality Agreement"). At Closing, the Confidentiality
Agreement shall terminate and shall be of no further force and
effect except as provided therein.
<PAGE>
(d) As used in this Agreement, "Confidential
Information" means confidential business information regarding
Repap, Repap USA or the Subsidiaries, including customer lists
and files, prices and costs, Business and financial records,
information relating to personnel contracts and offices and
positions held, stock ownership, liabilities, litigation and the
terms of this Agreement and any written analysis or other
document reflecting such information that such party prepares.
However, "Confidential Information" shall not include:
(i) any information already in the possession of Buyer
prior to September 24, 1996, or information available to
Buyer from public records or from other sources in
accordance with law;
(ii) any information that is in the public domain or
subsequently enters the public domain otherwise than through
disclosure by Buyer or any of Buyer's representatives;
(iii) any information that is capable of being
independently developed by or on behalf of Buyer without
reference to the Confidential Information; or
<PAGE>
(iv) any information that is acquired from a third
party not known by Buyer after reasonable inquiry to be
providing such information in breach of a confidentiality
obligation to Repap, Repap USA or the Subsidiaries.
(e) Repap agrees that, at Closing, Repap will assign
to Buyer all rights of Repap in connection with the Confidential
Information of Repap USA and the Subsidiaries and will deliver to
Buyer copies of any written agreements and documents relating
thereto.
Section VI.2 Registrations, Filings and Consents.
Repap and Buyer will cooperate and use their respective
reasonable best efforts to fulfill the conditions precedent to
the other party's obligations hereunder, including but not
limited to, securing as promptly as practicable all consents,
approvals, waivers and authorizations required, necessary or
desirable in connection with the transactions contemplated
hereby. Buyer and Repap will promptly file documentary materials
required by the HSR Act, the Competition Act, Environmental Laws
and each of the other items listed in Section 3.4 of Annex A and
Section 4.2 of Annex B and promptly file any additional
information requested as soon as practicable after receipt of
request thereof; provided that each party shall duly file with
<PAGE>
the FTC and the Antitrust Division the notification and report
form (the "Report") required under the HSR Act, or an application
for an advanced ruling certificate or a comparable report
required under the Competition Act with respect to the sale and
purchase of the Shares no later than three Business Days after
the date hereof.
Section VI.3 Operation of Business. During the period
commencing on the date hereof and continuing until the Closing
Date, unless Buyer shall otherwise agree in writing (such
agreement not to be unreasonably withheld) or as otherwise
expressly contemplated or permitted by this Agreement, Repap
agrees that it will cause:
(a) Repap USA and the Subsidiaries to carry on their
Businesses in the regular and ordinary course (in substantially
the same manner as heretofore conducted) and use their best
efforts to preserve intact their Businesses, organizations,
employees, customers, suppliers and goodwill;
(b) Repap USA and the Subsidiaries not to subdivide,
consolidate, redeem, purchase or otherwise acquire or reclassify
any of their outstanding shares of any class of capital stock,
declare any dividends on or make other distributions (whether in
<PAGE>
cash, stock or property or any combination thereof) in respect of
their shares of any class of capital stock;
(c) Repap USA and the Subsidiaries not to amend their
articles or by-laws or similar organizational documents;
(d) Repap USA and the Subsidiaries not to issue,
authorize or propose or commit to the issuance of (whether
through the issuance or granting of options, warrants, com
mitments, subscriptions, rights to purchase or otherwise), or,
directly or indirectly, through an Affiliate or otherwise,
purchase or propose the purchase of, any shares in their capital
of any class or securities convertible into or exchangeable for,
or rights, warrants or options to acquire, any such shares or
other convertible or exchangeable securities;
(e) Repap USA and the Subsidiaries not to merge or
consolidate with or into any other Person;
(f) Repap USA and the Subsidiaries not to sell, lease,
transfer, mortgage, hypothecate or otherwise dispose of any of
their assets or properties, real, personal or mixed, moveable or
immoveable, that are material, individually or in the aggregate,
to the Business, assets, financial condition or results of
operations of Repap USA and the Subsidiaries or Buyer and its
subsidiaries, as the case may be, taken as a whole;
<PAGE>
(g) Repap USA and the Subsidiaries not to (i) incur
indebtedness for money borrowed in excess of $250,000, or assume,
guarantee, endorse or otherwise become liable or responsible for
the obligations of any other Person in excess of such amount, or
issue or sell any debt securities (it being understood that such
prohibition shall not otherwise prevent or hinder the drawing of
funds pursuant to lease arrangements or credit facilities
established and available as of the date hereof); (ii) approve
any new capital expenditures in excess of $100,000 individually
and $1,000,000 in the aggregate except for those listed on
Schedule 2.3(a)(iv); (iii) dispose of or incur, create or assume
any Encumbrance on any individual capital asset of Repap USA or
the Subsidiaries if the greater of the book value and the fair
market value of such capital asset exceeds $250,000 other than
Permitted Encumbrances; and (iv) enter into a contract,
agreement, commitment or arrangement with respect to any of the
foregoing;
(h) Repap USA and the Subsidiaries to grant to any
officer of Repap USA or the Subsidiaries any increase in
compensation or in severance or termination pay, or enter into
<PAGE>
new or amend existing agreements respecting employment (including
benefits) with any officer or employee of Repap USA or the
Subsidiaries, except as may be required under employment or
termination agreements in effect on the date hereof or as may be
required by law;
(i) Repap USA and the Subsidiaries to maintain
inventories of raw materials and finished goods at current
levels, except for sales and purchases in the ordinary course of
business, and maintain the properties of the Business in good
repair, order and condition, reasonable wear and tear excepted;
(j) Repap USA and the Subsidiaries not to amend or
terminate any material agreement;
(k) Repap USA and the Subsidiaries not take any action
to seek, encourage, solicit or support any inquiry, proposal,
expression of interest or offer from any other Person or entity
with respect to an acquisition, combination or similar
transaction involving the Shares, any Subsidiary, the Businesses
of Repap USA and the Subsidiaries or substantially all of the
assets or securities related thereto (any such inquiry, proposal,
expression of interest or offer being hereinafter referred to as
an "Acquisition Proposal"), and Repap will promptly inform Buyer
<PAGE>
of the existence of any such Acquisition Proposal and shall not
without the written consent of Buyer furnish any information to
or participate in any discussions or negotiations with any other
Person or entity regarding the same; provided, however, that
nothing contained in this Agreement shall prevent Repap or its
Subsidiaries from (A) providing information in response to a
request therefor in connection with an Acquisition Proposal by
any such Person or entity if the Board of Directors receives from
such Person or entity so requesting such information an executed
confidentiality agreement on terms substantially similar to those
contained in the Confidentiality Agreement; (B) engaging in any
negotiations or discussions with respect to an Acquisition
Proposal with any such Person or entity; or (C) terminating this
Agreement in the context of a competing Acquisition Proposal if
and only to the extent that, in each such case referred to in
clause (A), (B) or (C) above, the Board of Directors of Repap
determines in good faith after consultation with outside legal
counsel that such action is necessary in order for its directors
to comply with their respective fiduciary duties under applicable
law;
<PAGE>
(l) Repap USA or its Subsidiaries not to enter or
agree to enter into any agreement, except as otherwise set forth
in this Agreement, pursuant to which Repap or any Subsidiary
would be obligated to expend, or entitled to receive, more than
$100,000 in any 12 month period or which Repap USA or its
Subsidiaries, upon cancellation by Repap USA or the Subsidiaries
upon less than three (3) months' notice, are required to incur or
fund additional expenditures, penalties or increased costs;
(m) Repap USA and the Subsidiaries not to renew or
enter into any leases for sales offices; and
(n) Repap USA and the Subsidiaries to enter into any
transaction or perform any act which might interfere or be
inconsistent with the successful completion of the transactions
contemplated by this Agreement or which would render inaccurate
any of the representations and warranties set forth herein if
such representations and warranties were made at a date
subsequent to such transaction or act and all references to the
date hereof were to such later date.
From the date hereof through the Closing, Repap shall
confer on a regular and frequent basis with one or more
designated representatives of Buyer to report material
operational matters and the general status of ongoing operations
of the Businesses of Repap USA and the Subsidiaries.
<PAGE>
Repap shall promptly notify Buyer of any material
change in the financial condition, results of operations,
properties or Businesses of Repap USA or any Subsidiary or
prospects of the Businesses of Repap USA and the Subsidiaries,
and shall keep Buyer fully informed of such events and permit
Buyer's representatives to participate in all discussions
relating thereto.
Section VI.4 Continued Employment; Employee Benefit
Plans. (a) Buyer shall cause Repap USA and the Subsidiaries to,
maintain for a period of at least one year after the Closing Date
the Plans disclosed on Schedule 3.12 as in effect for the
Employees on the Closing Date, provided that, at Closing, each
and every Plan subject to the funding requirements of Section 412
of the Code has assets sufficient to cover the applicable Plan
liabilities for active, former and retired employees, on a fully
funded basis as actuarially determined using the actuarial
assumptions in effect for the Plan year including the Closing
Date; provided further, however, that, notwithstanding the fore
going, the Severance Plans maintained by Repap USA or any of the
Subsidiaries as of the Closing Date shall remain in effect
<PAGE>
without any modification adverse to the participants thereunder
for at least one year after the Closing Date, and any employee
whose employment is terminated and who is otherwise eligible for
severance benefits pursuant to the Severance Plans shall be
entitled to severance benefits based upon base pay and employment
position at levels at least equal to those applicable as of the
Closing Date (other than on account of any reduction in position
voluntarily agreed to in writing by any such employee). For
purposes of this Agreement, the "Severance Plans" shall mean the
severance plans of Repap USA and the Subsidiaries designated in
writing by Repap and consented to by Buyer, which consent shall
not be unreasonably withheld.
(b) Repap agrees that, prior to Closing, it will be
solely liable for obligations to the Employees under any benefit
plans not maintained by Repap USA or a Subsidiary. Effective as
of the Closing Date, (i) the Employees shall cease to participate
in the employee benefit plans of Repap or any of its Affiliates
other than Repap USA or a Subsidiary and (ii) Repap shall cause
the Employees to be fully vested in their accounts under any such
benefit plan.
<PAGE>
(c) Repap agrees that, prior to Closing, it will cause
Repap USA and the Subsidiaries, as applicable, to terminate
certain employees as provided by Buyer to Repap prior to Closing
(the "Listed Employees"); provided, however, that Buyer
acknowledges that Repap USA and the Subsidiaries remain liable
for any amounts paid to the Listed Employees pursuant to such
termination under the Severance Plans, except for Listed
Employees who, following such termination, are employed by Repap
or any Affiliate of Repap.
Buyer agrees that it shall indemnify, defend and hold
harmless the Repap Indemnified Parties from and against any
Losses imposed upon the Repap Indemnified Parties directly or
indirectly relating to or arising out of the termination of
employment of the Listed Employees in violation of law,
including, but not limited to, wrongful discharge, Title VII of
the Civil Rights Act of 1964, the Civil Rights Act of 1991, the
Age Discrimination in Employment Act, ERISA, the Worker
Adjustment and Retraining Notification Act (each as amended from
time to time) or similar federal, state or local laws.
(d) The Employees shall be given credit for all
service with Repap, Repap USA or any of its Subsidiaries (or
service credited by Repap, Repap USA or any of its Subsidiaries)
<PAGE>
for purposes of eligibility, vesting and the satisfaction of any
waiting periods (but not for purposes of benefit accruals) under
any employee benefit plan or arrangement of Buyer in which they
participate following the Closing Date.
Section VI.5 Retention of Books and Records. Buyer
shall cause Repap USA and the Subsidiaries to retain, until all
applicable tax statutes of limitations (including periods of
waiver) have expired, all books, records and other documents
pertaining to Repap USA and the Subsidiaries in existence on the
Closing Date for a period of at least five (5) years from the
date hereof and to make the same available after the Closing Date
for inspection and copying by Repap or its agents at Repap's
expense, during regular business hours and upon reasonable
request and upon reasonable advance notice. After the expiration
of such period, no such books and records shall be destroyed by
Buyer without first advising the tax director or other appro
priate officer of Repap in writing detailing the contents thereof
and giving Repap at least 30 days to obtain possession thereof.
Section VI.6 Closing Date Financial Information. For
a period of one year from and after the Closing Date, to the
extent reasonably necessary for Repap or its Continuing
<PAGE>
Affiliates to prepare consolidated financial statements or any
governmental permits, licenses or required filings and to comply
with reporting obligations in respect thereof, upon the written
request of Repap, Repap USA and the Subsidiaries will provide,
and Buyer shall use its best efforts to cause Repap USA and the
Subsidiaries to provide, to Repap and its accountants within 20
Business Days of such request with such computer support, access
to employees and Buyer's accountants and financial information of
Repap USA or the Subsidiaries as of the Closing Date as Repap may
reasonably request.
Section VI.7 Notification of Certain Matters. Until
the Closing Date, each of Buyer and Repap shall promptly notify
the other if any of the representations and warranties made by it
and contained in this Agreement ceases to be true, accurate and
complete in any material respect and of any failure to comply in
any material respect with any of its obligations under this
Agreement. Notification of any breach of representation or
warranty or failure to comply with any obligations shall not
constitute or be deemed a waiver of any of the conditions set
forth in Article VII or prejudice the rights of the parties
pursuant to Article VII hereof not to consummate the transactions
contemplated by this Agreement.
<PAGE>
Section VI.8 Non-Solicitation of Employees. Repap
agrees that, for a period of one (1) year following the Closing
Date, neither Repap nor any Continuing Affiliate shall solicit
the employment of any Person, other than as agreed by the
parties, it knows to be an employee of Repap USA or any of its
Subsidiaries or employ any Person it knows to be such an employee
(other than any hourly worker or any Employee who serves in a
clerical function) without the prior written consent of Buyer;
provided, however, that (i) general solicitations of employment
published in a journal, newspaper or other publication of general
circulation and not specifically directed towards such employees
shall not be deemed to constitute solicitation for purposes of
this Section 6.8 and (ii) Repap, its Continuing Affiliates and
representatives shall not be prohibited from employing any such
person who contacts them on his or her own initiative and without
any solicitation by Repap, its Continuing Affiliates and
representatives.
Section VI.9 Further Assurances. At any time after
the Closing Date, Repap and Buyer shall promptly, and Buyer shall
cause Repap USA or any Subsidiary promptly to, execute,
<PAGE>
acknowledge and deliver any other assurances or documents
reasonably requested by Buyer or Repap, as the case may be, and
necessary for Buyer or Repap, as the case may be, to satisfy its
obligations hereunder or obtain the benefits contemplated hereby.
Section VI.10 Stockholders Meeting. Repap shall take,
in accordance with its certificate of incorporation and by-laws,
all action necessary to convene a meeting of holders of shares of
Common Stock of Repap as promptly as practicable after the date
hereof to consider and vote upon the approval of the transactions
contemplated by this Agreement. Subject to fiduciary obligations
under applicable law, the Board of Directors of Repap shall
recommend such approval and shall take all lawful action to
solicit such approval.
Section VI.11 Certain Interests After Closing Date.
Buyer shall cause Repap Sales to continue to do business with WWF
at a volume consistent with past practice on Buyer's standard
terms and conditions with its customers for a period of two years
beginning on the Closing Date. Buyer shall give Repap and WWF at
least six months prior written notice of its intent to terminate
such relationship; provided, however, that no such notice shall
be given prior to eighteen (18) months following the Closing
<PAGE>
Date; and, provided further, that such relationship may be
immediately terminated if WWF fails to comply with any of its
payment obligations to Repap Sales.
ARTICLE VII
CONDITIONS TO CLOSING
Section VII.1 Conditions to Obligations of Buyer. The
obligation of Buyer to consummate the transactions contemplated
by this Agreement shall be subject to the satisfaction or waiver
by Buyer in writing on or prior to the Closing Date of each of
the following conditions:
(a) Each of the representations and warranties of
Repap contained in this Agreement which refers to a Material
Adverse Effect or otherwise makes reference to a concept of
materiality shall be true when made and as of the Closing Date,
and each of the other representations and warranties of Repap
contained in this Agreement shall be true and correct when made
and as of the Closing Date, with the same effect as though such
representations and warranties had been made on and as of the
Closing Date (except (i) representations and warranties that are
made as of a specific date need be true, or true in all material
<PAGE>
respects, as the case may be, only as of such date and (ii) as
expressly permitted by this Agreement to be changed between the
date of this Agreement and the Closing Date); each of the
covenants and agreements of Repap to be performed on or prior to
the Closing Date shall have been duly performed; and Buyer shall
have received at the Closing certificates to that effect dated as
of the Closing Date and executed on behalf of Repap by its
President or any of its Vice Presidents and its Secretary or any
of its Assistant Secretaries.
(b) Buyer shall have received from Repap: (i) an
opinion of Stikeman Elliott, Canadian outside counsel to Repap,
dated as of the Closing Date, substantially in the form set forth
in Schedule 7.1(b) hereof, (ii) an opinion of Foley & Lardner,
U.S. outside counsel to Repap, dated as of the Closing Date, in a
form mutually acceptable to Repap and Buyer and (iii) an opinion
of Sullivan & Cromwell, U.S. outside counsel to Repap, dated as
of the Closing Date, in a form mutually acceptable to Repap and
Buyer.
(c) Repap shall have delivered to Buyer resignations
of all directors of Repap USA and the Subsidiaries and all
officers of Repap USA and the Subsidiaries.
<PAGE>
(d) Repap shall acquire from GSP and Skeena prior to
Closing, all of the Repap Wisconsin Preferred Shares.
(e) Repap USA shall not (i) hold any interest in WWF,
(ii) hold any investment in the preferred stock of Repap;
(iii) hold any investment in the preferred stock of Skeena; and
(iv) hold any interest in any of Nitec Paper Corp., Nitec
International Sales Corp. and Nitec/Midtec Sales Inc.
(f) Except for a $4.5 million net receivable from
Repap New Brunswick Inc., which shall be paid to Repap Sales in
12 monthly installments of equal amounts over one year with the
first such installment payable on the Closing Date, neither Repap
USA nor any Subsidiary shall have any outstanding accounts
receivable from, or accounts payable to, Repap or any Repap
Affiliate, and Repap USA and the Subsidiaries shall have
terminated all agreements and arrangements with Repap and the
Repap Affiliates except as specifically provided herein and
except as set forth in Schedule 7.1(f) hereto.
(g) Repap shall have caused the pledge to TD Capital
Group Limited to be released with respect to the capital stock of
Repap USA and the Subsidiaries.
<PAGE>
(h) Buyer shall have received an affidavit of an
officer of Repap sworn to under penalties of perjury and dated
the Closing Date, in form and substance satisfactory to counsel
for Buyer, that, as of that date, an interest in Repap USA does
not constitute a "U.S. real property interest" within the meaning
of Section 897 of the Internal Revenue Code.
(i) George S. Petty shall have entered into an
agreement with Buyer to vote his shares of common stock of Repap
at the meeting of stockholders of Repap contemplated in
Section 6.10 to approve the transactions contemplated by this
Agreement.
Section VII.2 Conditions to Obligations of Repap. The
obligation of Repap to consummate the transactions contemplated
by this Agreement shall be subject to the satisfaction or waiver
by Repap in writing on or prior to the Closing Date of each of
the following conditions:
(a) Each of the representations and warranties of
Buyer contained in this Agreement qualified by a concept of
materiality shall be true when made and as of the Closing Date,
and each of the other representations and warranties of Buyer
contained in this Agreement shall be true and correct when made
and as of the Closing Date, with the same effect as though such
<PAGE>
representations and warranties had been made on and as of the
Closing Date (except (i) representations and warranties that are
made as of a specific date need be true, or true in all material
respects, as the case may be, only as of such date and (ii) as
expressly permitted by this Agreement to change between the date
of this Agreement and the Closing Date); each of the covenants
and agreements of Buyer to be performed on or prior to the
Closing Date shall have been duly performed; and Repap shall have
received at the Closing certificates to that effect dated as of
the Closing Date and executed on behalf of Buyer by its President
or any of its Vice Presidents and its Secretary or any of its
Assistant Secretaries.
(b) Repap shall have received from McDermott, Will &
Emery, as counsel for Buyer, an opinion, dated as of the Closing
Date, in a form mutually acceptable to Repap and Buyer.
Section VII.3 Conditions to Obligations of Buyer and
Repap. The obligations of the parties to consummate the
transactions contemplated by this Agreement shall be subject to
the satisfaction or waiver by both parties on or prior to the
Closing Date of the following conditions:
<PAGE>
(a) Each party shall have duly filed with the FTC and
the Antitrust Division the Report required under the HSR Act with
respect to the sale and purchase of the Shares and the waiting
period required by the HSR Act, and any extensions thereof
obtained by request or other action of the FTC and/or the
Antitrust Division shall have expired or been earlier terminated
by the FTC and the Antitrust Division.
(b) No court or governmental authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation or non-appealable judgment,
decree, injunction or other order which is in effect on the
Closing Date and prohibits the consummation of the Closing.
(c) The agreements set forth in Schedule 7.1(f) shall
have been entered into and be in full force and effect.
(d) The transactions contemplated by this Agreement
shall have been duly approved by the Requisite Vote of the
shareholders of Repap.
(e) The Competition Act Director or any person
authorized to exercise the powers and perform the duties of the
Competition Act Director shall have issued a certificate under
section 102(l) of the Competition Act to the effect that she is
satisfied that she would not have sufficient grounds on which to
<PAGE>
apply to the Competition Tribunal established pursuant to the
Competition Act under Section 92 of the Competition Act in
respect of the transactions contemplated by this Agreement or the
appropriate time period specified in Section 123 of the
Competition Act shall have expired or the Competition Act
Director shall have indicated in writing that she does not intend
to take any action under Section 92 of the Competition Act
whether before or after the completion of the transactions contem
plated by this Agreement.
ARTICLE VIII
TERMINATION
Section VIII.1 Termination. This Agreement may be
terminated at any time prior to the Closing:
(a) by agreement of Buyer and Repap;
(b) by either Buyer or Repap, by giving written notice
of such termination to the other party, if (x) any condition to
the terminating party's obligations hereunder has not been
satisfied or waived and (y) the Closing shall not have occurred
on or prior to the later of (i) September 30, 1997 and (ii) the
expiration of the waiting period under the HSR Act including any
<PAGE>
extensions thereof; provided that the terminating party is not in
material breach of its obligations under this Agreement;
(c) by either Buyer or Repap, by giving written notice
of such termination to the other party, if (x) each condition
thereto shall have been satisfied or waived and (y) the Closing
shall not have occurred on or prior to the later of (i)
September 30, 1997 and (ii) the expiration of the waiting period
under the HSR Act including any extensions thereof; provided that
the terminating party is not in material breach of its
obligations under this Agreement;
(d) by either Buyer or Repap if there shall be in
effect any law or regulation that prohibits the consummation of
the Closing or if consummation of the Closing would violate any
non-appealable final order, decree or judgment of any court or
governmental body having competent jurisdiction;
(e) by Repap if the Closing shall not have occurred on
or prior to 10 Business Days following the satisfaction of all
the conditions to Closing set forth in Sections 7.1 and 7.3
hereof as a result of any action or inaction by Buyer;
(f) by Buyer if the Closing shall not have occurred on
or prior to 10 Business Days following the satisfaction of all
<PAGE>
the conditions to Closing set forth in Sections 7.2 and 7.3
hereof as a result of any action or inaction by Repap;
(g) by Buyer if Repap's Board of Directors fails to
recommend that such stockholders approve the sale of the Shares
to Buyer; or
(h) by Repap, as set forth in Section 6.3(k).
Section VIII.2 Effect of Termination. (a) In the
event of the termination of this Agreement in accordance with
Section 8.1 hereof, this Agreement shall thereafter become void
and have no effect, and no party hereto shall have any liability
to the other party hereto or their respective Affiliates,
directors, officers or employees, except for the obligations of
the parties hereto contained in this Section 8.2 and in Sections
6.1(b), 6.1(c), 10.2 and 10.4 hereof, and except that nothing
herein will relieve any party from liability for any breach of
this Agreement prior to such termination.
(b) In the event that either (A) Repap's Board of
Directors fails to recommend that such stockholders approve the
sale of the Shares to Buyer and this Agreement is terminated
pursuant to Section 8.1, or (B) this Agreement is terminated
pursuant to Section 8.1, and at any time prior to September 30,
<PAGE>
1998, Repap, Repap USA or any Affiliate thereof enters into an
agreement, agreement in principle, letter of intent or similar
understanding with respect to, or consummates, an Acquisition
Proposal, then Repap, Repap USA and Repap Sales shall promptly
(but in no event later than five days after the date of such
termination or the occurrence of such event as the case may be)
pay, on a joint and several basis, to Buyer a termination fee of
$25.0 million payable by wire transfer of same day funds.
(c) In addition to (b) above, in the event that the
approval of the stockholders of Repap shall not have been
obtained prior to September 30, 1997 and Buyer shall have
terminated this Agreement pursuant to Section 8.1, then Repap,
Repap USA and Repap Sales shall pay, on a joint and several
basis, to Buyer on the business day following such termination, a
fee of $10.0 million payable by wire transfer of same day funds.
In the event that Buyer thereafter acquires the Business from
Repap on terms substantially similar to those contained herein
prior to September 30, 1998, the price paid by Buyer shall be
increased by the $10.0 million received by Buyer pursuant to this
section.
<PAGE>
(d) In no event shall Repap, Repap USA and Repap Sales
be required to pay, in the aggregate, more than $35.0 million
pursuant to Sections 8.2(b) and (c) to this Agreement.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
Section IX.1 Survival of Representations, Warranties,
Covenants and Agreements; Knowledge of Breach. (a)
Notwithstanding any otherwise applicable statute of limitations,
the representations and warranties included or provided for
herein shall survive the Closing until two (2) years after the
Closing Date; provided, however, that any representation,
warranty, covenant or agreement contained in Sections 3.14 and
3.18 of Annex A hereto, Sections 4.4 and 4.6 of Annex B hereto,
and Article V hereof shall survive the Closing until the
expiration of the applicable statute of limitations (including
any waivers or extensions thereof) with respect to such matters;
provided further, that no limitation shall apply to claims
alleging fraud on the part of a party hereto. The covenants and
other agreements contained in this Agreement shall survive the
Closing until the date or dates specified therein or the
expiration of the applicable statute of limitations (including
any waivers or extensions thereof) with respect to such matters,
<PAGE>
whichever is later. Except with respect to the representations,
warranties, covenants and agreements contained in Sections 3.18
and 4.4 and Article V hereof, in no event shall Buyer be liable
to Repap or Repap be liable to Buyer, as the case may be, for any
breach of the representations, warranties, covenants and
agreements included or provided for herein or in any schedule or
certificate or other document delivered pursuant to this
Agreement, unless and until all claims for which damages are
recoverable hereunder by Buyer or Repap, as the case may be,
exceed $1,000,000 (the "Deductible"), in which case Buyer or
Repap, as the case may be, shall be entitled to recover on the
amount of such claims in excess of the Deductible; provided,
however, that the maximum liability of Buyer or Repap, as the
case may be, for claims and damages shall be $75,000,000
(assuming an aggregate of $76,000,000 of indemnifiable claims)
(the "Maximum Amount"); provided, further, that exclusively for
purposes of this Article IX, in determining whether there is a
breach of, or action or state of facts inconsistent with, any
representation or warranty, the terms "material", "materiality"
and "Material Adverse Effect", when applied to such representa
tion and warranty, shall mean damages in excess of $150,000 (the
<PAGE>
"Damage Threshold") for each individual proven claim (or group of
claims arising from the same event, condition or course of
conduct) for which indemnification is being sought (whether or
not such claim is being made against the Deductible). For this
purpose, if the relevant representation and warranty contains a
material, materiality or Material Adverse Effect standard in the
aggregate, the Damage Threshold shall similarly apply in the
aggregate.
(b) No party hereto shall be deemed to have breached
any representation, warranty, covenant or agreement if (i) such
party shall have notified the other parties hereto in writing, at
least five days prior to the Closing Date, of the breach of, or
inaccuracy in, or of any facts or circumstances constituting or
resulting in the breach of or inaccuracy in, such representation,
warranty, covenant or agreement, specifically referring to the
provisions of this Agreement so breached or rendered inaccurate,
and (ii) such other party has permitted the Closing to occur and,
for purposes of this Agreement, is thereby deemed to have waived
such breach or inaccuracy; provided, however, that a disclosure
pursuant to this Section 9.1(b) shall not prejudice the rights of
the parties pursuant to Article VII hereof not to consummate the
transactions contemplated by this Agreement.
<PAGE>
Section IX.2 Indemnification. (a) For a period
commencing on the Closing Date and ending, as the case may be,
upon the expiration of the periods specified in Section 9.1(a)
hereof, Repap on the one hand, or Buyer, on the other hand (the
"Indemnifying Party"), shall, subject to the limitations set
forth in Sections 9.1(a) and 9.1(b) hereof, indemnify
respectively Buyer, on the one hand, or Repap, on the other hand,
as the case may be (the "Indemnified Party"), against and in
respect of all losses, damages, liabilities, costs and expenses
(including reasonable attorneys' fees and expenses incurred in
investigating, preparing or defending any claims covered hereby)
(collectively, "Losses") sustained or incurred arising out of any
breaches of the Indemnifying Party's representations, warranties,
covenants and agreements set forth in this Agreement (other than
representations, warranties, covenants and agreements set forth
in Article V, as to which the indemnification provisions set
forth in Article V shall govern). Any payments pursuant to this
Section 9.2 or Article V shall be treated as an adjustment to the
Purchase Price for all Tax purposes.
<PAGE>
(b) Repap releases and waives any right of indemnity
and contribution from Repap USA and the Subsidiaries.
(c) The indemnity provided herein as it relates to
this Agreement and the transactions contemplated by this
Agreement shall be the sole and exclusive remedy of the parties
hereto, their Affiliates, successors and assigns with respect to
any and all claims for losses, damages, liabilities, costs and
expenses sustained or incurred arising out of this Agreement and
the transactions contemplated by this Agreement, except for the
right of the parties hereto to seek specific performance of the
obligations set forth in Article II and Sections 6.4 and 6.8 of
this Agreement and, except for any other remedies available to
Repap or Buyer, as the case may be, based upon fraud.
Section IX.3 Method of Asserting Claims, etc. All
claims for indemnification by any Indemnified Party hereunder
shall be asserted and resolved as set forth in this Section 9.3
except for claims pursuant to Article V hereof (as to which the
provisions of Article V shall be applicable). In the event that
any written claim or demand for which an Indemnifying Party would
be liable to any Indemnified Party hereunder is asserted against
or sought to be collected from any Indemnified Party by a third
party, such Indemnified Party shall promptly, but in no event
<PAGE>
more than 30 Business Days following such Indemnified Party's
actual receipt of such claim or demand, notify the Indemnifying
Party of such claim or demand and the amount or the estimated
amount thereof to the extent then feasible (which estimate shall
not in any manner prejudice the right of the Indemnified Party to
indemnification to the fullest extent provided hereunder) (the
"Third Party Claim Notice") and in the event that an Indemnified
Party shall assert a claim for indemnity under this Article IX,
not including a third party claim, the Indemnified Party shall
notify the Indemnifying Party promptly following its discovery of
the facts or circumstances giving rise thereto (together with a
Third Party Claim Notice, a "Claim Notice"); provided, that no
such notice need be provided to an Indemnifying Party if the
Deductible has not been exceeded and will not be exceeded by such
claim or demand; and provided, further, that the failure to
notify on the part of the Indemnified Party in the manner set
forth herein shall not foreclose any rights otherwise available
to such Indemnified Party hereunder, except to the extent that
the Indemnifying Party is prejudiced by such failure to notify.
The Indemnifying Party shall have 30 days from the personal
delivery or mailing of the Third Party Claim Notice (except that
<PAGE>
such a period shall be decreased to a time 10 days before a
scheduled appearance date in a litigated matter) (the "Notice
Period") to notify the Indemnified Party (i) whether or not the
Indemnifying Party disputes the liability of the Indemnifying
Party to the Indemnified Party hereunder with respect to such
claim or demand and (ii) whether or not it desires to defend the
Indemnified Party against such claim or demand, which it shall
not be entitled to do until the Deductible is exceeded. All
costs and expenses incurred by the Indemnifying Party in
defending such claim or demand shall be a liability of, and shall
be paid by, the Indemnifying Party; provided, however, that the
amount of such costs and expenses incurred by the Indemnifying
Party shall be separate and apart from, and shall not be included
in, the Maximum Amount. In the event that the Indemnifying Party
notifies the Indemnified Party within the Notice Period that it
desires to defend the Indemnified Party against such claim or
demand, which it shall not be entitled to do until the Deductible
is exceeded and except as hereinafter provided, the Indemnifying
Party shall have the right to defend the Indemnified Party by
appropriate proceedings and by counsel reasonably acceptable to
the Indemnified Party. If any Indemnified Party desires to
<PAGE>
participate in, but not control, any such defense or settlement
it may do so at its sole cost and expense. The Indemnified Party
shall not settle a claim or demand without the consent of the
Indemnifying Party. The Indemnifying Party shall not, without
the prior written consent of the Indemnified Party, settle,
compromise or offer to settle or compromise any such claim or
demand on a basis which would result in the imposition of a
consent order, injunction or decree which would restrict the
future activity or conduct of, or which would otherwise have a
material adverse effect on, the Indemnified Party or any
subsidiary or Affiliate thereof. If the Indemnifying Party
elects not to defend the Indemnified Party against such claim or
demand, whether by not giving the Indemnified Party timely notice
as provided above or otherwise, then the amount of any such claim
or demand, or, if the same be contested by the Indemnified Party,
then that portion of any such claim or demand as to which such
defense is unsuccessful (and all reasonable costs and expenses
pertaining to such defense) shall be the liability of the
Indemnifying Party hereunder, subject to the limitations set
forth in Section 9.1 hereof. To the extent the Indemnifying
Party shall control or participate in the defense or settlement
<PAGE>
of any third party claim or demand, the Indemnified Party will
give to the Indemnifying Party and its counsel reasonable access
to all business records and other documents relevant to such
defense or settlement, and shall permit them to consult with the
employees and counsel of the Indemnified Party. The Indemnified
Party shall use its best efforts in the defense of all such
claims, and in connection therewith shall be entitled to
reimbursement by the Indemnifying Party of expenses directly
related to efforts undertaken at the specific request of the
Indemnifying Party.
ARTICLE X
MISCELLANEOUS
Section X.1 Amendment and Modification; Waiver. This
Agreement may only be amended or modified in writing, signed by
Repap and Buyer, at any time prior to the Closing with respect to
any of the terms contained herein. At any time prior to the
Closing either Repap or Buyer may (i) extend the time for the
performance of any of the obligations or other acts of the other
party hereto, (ii) waive any inaccuracies in the representations
and warranties of the other party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance
<PAGE>
with any of the agreements or conditions of the other party
contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party granting such extension
or waiver.
Section X.2 Return of Information. If for any reason
whatsoever the sale and purchase of the Shares pursuant to this
Agreement is not consummated, Buyer shall promptly return to
Repap or Repap USA all books, records and documents of Repap,
Repap USA or any Subsidiary (including all copies, if any,
thereof) furnished by Repap, Repap USA, any Subsidiary or any of
their respective agents, employees or representatives, and shall
not use or disclose the Confidential Information contained in
such books, records or documents for any purpose or make such
Confidential Information available to any other entity or person.
Section X.3 Expenses. Except as otherwise expressly
provided in this Agreement, whether or not the transactions
contemplated by this Agreement are consummated, the parties shall
bear their own respective expenses (including, but not limited
to, all compensation and expenses of counsel, financial advisors,
consultants, actuaries and independent accountants) incurred in
<PAGE>
connection with this Agreement and the transactions contemplated
hereby.
Section X.4 Public Disclosure. Each of the parties to
this Agreement hereby agrees with the other parties hereto that,
except as may be required to comply with the requirements of
applicable law or the rules and regulations of the stock
exchanges upon which the securities of the parties or their
Affiliates are listed, no press release or similar public
announcement or communication will be made or caused to be made
concerning the execution or performance of this Agreement unless
specifically approved in advance by all parties hereto; provided,
however, that to the extent that either party to this Agreement
is required by law or the rules and regulations of any stock
exchange upon which the securities of one of the parties or its
Affiliates is listed to make such a public disclosure, such
public disclosure shall only be made after prior consultation
with the other party to this Agreement.
Section X.5 Assignment. No party to this Agreement
may assign any of its rights or obligations under this Agreement
without the prior written consent of the other party hereto.
<PAGE>
Section X.6 Entire Agreement. This Agreement
(including all Annexes and Schedules hereto) contains the entire
agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and
understandings, oral or written, with respect to such matters,
except for the Confidentiality Agreement which will remain in
full force and effect for the term provided for therein.
Section X.7 Fulfillment of Obligations. Any
obligation of any party to any other party under this Agreement,
which obligation is performed, satisfied or fulfilled by an
Affiliate of such party, shall be deemed to have been performed,
satisfied or fulfilled by such party.
Section X.8 Parties in Interest; No Third Party
Beneficiaries. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement,
express or implied, is intended to confer upon any Person other
than Buyer, Repap, or their successors or permitted assigns, any
rights or remedies under or by reason of this Agreement.
Section X.9 Schedules. The inclusion of any matter in
any schedule to this Agreement shall be deemed to be an inclusion
for all purposes of this Agreement, including each representation
<PAGE>
and warranty to which it may relate, but inclusion therein shall
expressly not be deemed to constitute an admission by Repap, or
otherwise imply, that any such matter is material or creates a
measure for materiality for the purposes of this Agreement;
provided, however, that any disclosure made in the Disclosure
Documents shall not be deemed to be an inclusion in a schedule
except as specifically stated.
Section X.10 Counterparts. This Agreement and any
amendments hereto may be executed in one or more counterparts,
each of which shall be deemed to be an original by the parties
executing such counterpart, but all of which shall be considered
one and the same instrument.
Section X.11 Section Headings. The section and
paragraph headings and table of contents contained in this
Agreement are for reference purposes only and shall not in any
way affect the meaning or interpretation of this Agreement.
Section X.12 Notices. All notices hereunder shall be
deemed given if in writing and delivered personally, by express
delivery service or sent by facsimile (confirmation requested),
to the parties at the following addresses (or at such other
addresses as shall be specified by like notice):
<PAGE>
(a) if to Repap, to:
Repap Enterprises Inc.
1250 Rene-Levesque Blvd. West
Suite 3800
Montreal, Quebec
H3B 4Y3 Canada
Attention: Terry W. McBride, Esq.
Vice President and General
Counsel
Fax: (514) 846-1328
With a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Andrew D. Soussloff, Esq.
Fax: (212) 558-3588
(b) if to Buyer, to:
Consolidated Papers, Inc.
231 First Avenue North
Wisconsin Rapids, Wisconsin 54495
Attention: Carl H. Wartman, Esq.
General Counsel and Secretary
Fax: (715) 422-3203
With a copy to:
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606
Attention: Robert A. Schreck, Jr., P.C.
Fax: (312) 984-3669
Any notice given by delivery shall be effective when received.
Any notice given by facsimile shall be effective when the
appropriate facsimile answerback is received.
<PAGE>
Section X.13 GOVERNING LAW; SUBMISSION TO
JURISDICTION; SELECTION OF FORUM. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF WISCONSIN WITHOUT REFERENCE TO THE CHOICE OF LAW
PRINCIPLES THEREOF. EACH PARTY HERETO AGREES THAT IT SHALL BRING
ANY ACTION OR PROCEEDING IN RESPECT OF ANY CLAIM ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTAINED IN OR
CONTEMPLATED BY THIS AGREEMENT, WHETHER IN TORT OR CONTRACT OR AT
LAW OR IN EQUITY, EXCLUSIVELY IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF WISCONSIN (THE "CHOSEN COURT") AND
(I) IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE
CHOSEN COURT, (II) WAIVES ANY OBJECTION TO LAYING VENUE IN ANY
SUCH ACTION OR PROCEEDING IN THE CHOSEN COURT, (III) WAIVES ANY
OBJECTION THAT THE CHOSEN COURT IS AN INCONVENIENT FORUM OR DOES
NOT HAVE JURISDICTION OVER ANY PARTY HERETO AND (IV) AGREES THAT
SERVICE OF PROCESS UPON SUCH PARTY IN ANY SUCH ACTION OR
PROCEEDING SHALL BE EFFECTIVE IF NOTICE IS GIVEN IN ACCORDANCE
WITH SECTION 10.12 OF THIS AGREEMENT. REPAP IRREVOCABLY
DESIGNATES F&L CORP. AS ITS AGENT AND ATTORNEY-IN-FACT FOR THE
ACCEPTANCE OF SERVICE OF PROCESS AND MAKING AN APPEARANCE ON ITS
BEHALF IN ANY SUCH CLAIM OR PROCEEDING AND TAKING ALL SUCH ACTS
<PAGE>
AS MAY BE NECESSARY OR APPROPRIATE IN ORDER TO CONFER
JURISDICTION OVER IT UPON THE CHOSEN COURT AND REPAP STIPULATES
THAT SUCH CONSENT AND APPOINTMENT IS IRREVOCABLE AND COUPLED WITH
AN INTEREST.
Section X.14 Severability. The provisions of this
Agreement shall be deemed severable and the invalidity or
unenforceability of any provision shall not affect the validity
or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any
person or entity or any circumstance, is invalid or
unenforceable, (a) a suitable and equitable provision shall be
substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or
unenforceable provision and (b) the remainder of this Agreement
and the application of such provision to other persons, entities
or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed on
behalf of each of the parties hereto as of the date first written
above.
REPAP ENTERPRISES INC.
By:
Name:
Title:
By:
Name:
Title:
CONSOLIDATED PAPERS, INC.
By:
Name:
Title:
<PAGE>
Annex A
3.1 Incorporation and Qualification
Repap is a corporation duly incorporated and validly
subsisting under the laws of Canada. Each of Repap USA and the
Subsidiaries has been duly incorporated, is validly existing and
is in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its
Business as now being conducted and is duly registered, licensed
or qualified to carry on business in each jurisdiction in which
the nature of the Business as now being conducted by it or the
property owned or leased by it makes such registration, licensing
or qualification necessary, unless the failure to be so regis
tered or qualified would not have a Material Adverse Effect.
Schedule 3.1 sets forth each state or other jurisdiction in which
each of Repap USA and the Subsidiaries is licensed or qualified
to do business. Repap has delivered to Buyer an accurate,
correct and complete copy of its charter and by-laws and each
agreement, trust, proxy or other arrangement among its
stockholders.
3.2 Capitalization
(a) The authorized capital stock of Repap USA consists of
9,000 shares of common stock, without par value, of which the
Shares are the only issued and outstanding shares of capital
stock of Repap USA. The Shares are duly authorized, validly
issued, fully paid and non-assessable and are owned of record and
beneficially by Repap. Repap has good and valid title to the
Shares and, upon consummation of the transactions contemplated in
this Agreement, shall have transferred such title to the Shares
to Buyer pursuant to the terms of this Agreement, free and clear
of any liens, charges, pledges, security interests, adverse
claims or other encumbrances including, but not limited to, the
pledge to TD Capital Group Limited made pursuant to the Standby
Loan Agreement which will be released prior to Closing
(collectively, "Encumbrances"). There are not now, and at the
Closing Date there will not be, any outstanding options, warrants
<PAGE>
or rights to purchase or acquire, or securities convertible into
or exchangeable for, any shares in the share capital of Repap USA
and there are no contracts, commitments, agreements,
understandings, arrangements, restrictions, warrants, preemptive
rights, or outstanding subscription, convertible or exchangeable
security, other than the Standby Loan Agreement, which require
Repap USA to issue, sell or deliver any shares of its capital
stock.
(b) The authorized capital stock of Repap Wisconsin
consists of 300 shares of common stock, without par value, of
which 105 shares of common stock are issued and outstanding (the
"Repap Wisconsin Common Shares"), and 8,700 shares of preferred
stock of which the Repap Wisconsin Preferred Shares are the only
shares of preferred stock issued and outstanding. The Repap
Wisconsin Common Shares and the Repap Wisconsin Preferred Shares
shall be referred to collectively as the "Wisconsin Shares." The
Wisconsin Shares are the only shares of capital stock of Repap
Wisconsin issued and outstanding. The Wisconsin Shares are duly
authorized, validly issued, fully paid and non-assessable and, at
Closing, will be owned of record and beneficially by Repap or
Repap USA. At Closing, Repap and Repap USA, collectively, will
have good and valid title to all the Wisconsin Shares free and
clear of all Encumbrances, including, but not limited to, the
pledge to TD Capital Group Limited made pursuant to the Standby
Loan Agreement which will be released prior to Closing. There
are not now, and at the Closing Date there will not be, any
outstanding options, warrants or rights to purchase or acquire,
or securities convertible into or exchangeable for, any shares in
the share capital of Repap Wisconsin and there are no contracts,
commitments, agreements, understandings, arrangements,
restrictions, warrants, preemptive rights, or outstanding
subscription, convertible or exchangeable security, other than
the Standby Loan Agreement, which require Repap Wisconsin to
issue, sell or deliver any shares of its capital stock.
As of the date hereof, Repap Wisconsin has outstanding $250
million in aggregate principal amount of 9-1/4% First Priority
Senior Secured Notes Due 2002 (the "First Priority Notes") and
$150 million in aggregate principal amount of 9-7/8% Second
Priority Senior Secured Notes Due 2006 (the "Second Priority
Notes," and together with the First Priority Notes, the "Priority
<PAGE>
Notes"), $23 million of which Second Priority Notes were held by
Repap Wisconsin.
(c) The authorized capital stock of Repap Sales consists of
200 shares of common stock, without par value, of which 200
shares (the "Sales Shares") are issued and outstanding. The
Sales Shares are the only shares of capital stock of Repap Sales
issued and outstanding. The Sales Shares are duly authorized,
validly issued, fully paid and non-assessable and are owned of
record and beneficially by Repap USA. Repap USA has good and
valid title to the Sales Shares free and clear of all
Encumbrances, except for the pledge to Ferrostaal AG which will
be released prior to Closing. There are not now, and at the
Closing Date there will not be, any outstanding options, warrants
or rights to purchase or acquire, or securities convertible into
or exchangeable for, any shares in the share capital of Repap
Sales and there are no contracts, commitments, agreements,
understandings, arrangements, restrictions, warrants, preemptive
rights, or outstanding subscription, convertible or exchangeable
security, other than the Standby Loan Agreement, which require
Repap Sales to issue, sell or deliver any shares of its capital
stock.
3.3 Subsidiaries
Except for Repap Sales and Repap Wisconsin (each a
"Subsidiary," and, collectively, the "Subsidiaries"), there is no
corporation, association, limited liability company, partnership,
joint venture or other entity which is controlled directly or
indirectly by Repap USA or which Repap USA or any of the
Subsidiaries owns any stock or has any equity investment or other
interest in (other than WWF). At the Closing Date, the shares of
capital stock of each Subsidiary will be owned 100% by Repap USA
(except for those Repap Wisconsin Preferred Shares owned by
Repap) free and clear of all Encumbrances, other than such
Encumbrances on the shares of the Subsidiaries referred to in the
Standby Loan Agreement or in favor of Ferrostaal AG, or such re
strictions on transfer as are contained in the constituting
documents of the Subsidiaries; all such capital stock is duly
authorized, validly issued, fully paid and nonassessable and such
shares are the only shares of capital stock of such Subsidiaries
issued and outstanding. There are not now, and at the Closing
<PAGE>
Date there will not be, any outstanding subscriptions, options,
warrants, calls, commitments or agreements calling for, or any
preemptive rights in respect of, the issuance of any shares in
the capital of the Subsidiaries.
3.4 Authority; Filings, Consents and Approvals
Repap has the corporate power and authority to enter into
this Agreement and, subject to the receipt of the approvals,
consents and authorizations contemplated in this Agreement, to
carry out the transactions contemplated hereby. This Agreement
has been, and the documents to be delivered at Closing will be,
duly authorized, executed and delivered by Repap and constitutes
a legal, valid and binding obligation of Repap, enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors'
rights and to general equity principles, and no other proceedings
on the part of Repap are necessary to authorize this Agreement
and the consummation of the transactions contemplated hereby.
Except as set forth in Schedule 3.4 or as required by the
HSR Act, the execution, delivery and performance of this
Agreement will not require Repap, Repap USA or any of the
Subsidiaries to obtain any consent, waiver, authorization or
approval of, or make any filing with or give notice to, any
Person, except for such consents, waivers, authorizations or
approvals which the failure to obtain would not be reasonably
likely to have a Material Adverse Effect or would not prohibit or
materially delay Repap's ability to perform its obligations under
this Agreement.
3.5 Absence of Changes
Except for the transactions contemplated hereby or as set
forth in the Financial Statements or Disclosure Documents or on
Schedule 3.5, since June 30, 1997, (i) there has not been any
material change in the financial condition, assets, liabilities,
personnel or Business of Repap USA or any Subsidiary, or in their
relationships with suppliers, customers, distributors, lenders,
lessors or others, except changes in the ordinary course of
business, (ii) Repap USA and the Subsidiaries have not declared
<PAGE>
or paid any dividends or made any distribution of their
properties or assets to shareholders, and (iii) Repap USA and the
Subsidiaries have not entered into any agreement to dispose of
any of their assets or incurred any indebtedness other than in
the ordinary course of business.
3.6 Financial Statements; Disclosure Documents
Attached hereto as Schedule 3.6(a) is a copy of (a) the
unaudited consolidated balance sheet of Repap USA and the
Subsidiaries as of December 31, 1996 and the consolidated
statements of operations, stockholder's equity and cash flows for
the fiscal years ended December 31, 1995 and December 31, 1996
(collectively, with the notes thereto, the "Financial
Information") and (b) a copy of the unaudited consolidated
balance sheet (the "Balance Sheet") of Repap USA and the
Subsidiaries as of June 30, 1997 and the related consolidated
statements of operations, stockholder's equity and cash flows for
the six months then ended (collectively, with the notes thereto,
the "Interim Financial Information"). The Financial Information
and the Interim Financial Information (together, the "Financial
Statements") have been prepared in accordance with GAAP (except
as may be noted therein) and present fairly, in all material
respects, the consolidated financial position of Repap USA and
the Subsidiaries as of December 31, 1996 and June 30, 1997,
respectively, and the consolidated statements of operations,
stockholder's equity and cash flows of Repap USA and its
Subsidiaries for the fiscal years ended December 31, 1995 and
December 31, 1996 and the six months ended June 30, 1997,
respectively, subject, in the case of the Interim Financial
Information, to normal year-end adjustments.
Repap Wisconsin has filed all required documents with the
SEC since February 2, 1994. As of their respective dates, Repap
Wisconsin's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, and Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1997 (the "Disclosure Documents")
complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and, at
the respective times they were filed, none of the Disclosure
Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
<PAGE>
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
financial statements (including, in each case, any notes there)
of Repap Wisconsin included in the Disclosure Documents complied
as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC
with respect thereto, were prepared in accordance with GAAP
(except, in the case of the unaudited statements, as permitted by
Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the
notes thereto) and fairly presented in all material respects the
financial position of Repap Wisconsin as at the respective dates
thereof and the results of its operations and its cash flows for
the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments and to any other
adjustments described therein). Except as disclosed in the
Disclosure Documents or as required by GAAP, each of Repap USA
and Repap Wisconsin has not, since December 31, 1996, made any
change in the accounting practices or policies applied in the
preparation of financial statements.
3.7 Absence of Undisclosed Liabilities
Except as reflected in the Financial Statements of Repap USA
and except as set forth in the Disclosure Documents, neither
Repap USA nor any of the Subsidiaries has any liabilities or
obligations of any nature, whether absolute or contingent,
accrued or unaccrued, liquidated or unliquidated, due or to
become due, including any liability for Taxes (collectively,
"Liabilities"), which, either individually or in the aggregate,
are material to Repap USA and the Subsidiaries taken as a whole,
in excess of the Liabilities reflected or reserved against in the
Financial Statements, except those incurred in the ordinary
course of business and consistent with past practice since
December 31, 1996.
3.8 No Conflict
Subject to the receipt of the regulatory approvals referred
to in this Agreement or the approvals set forth on Schedule 3.4
and Schedule 3.8, the execution and delivery of this Agreement by
Repap does not, and the performance of this Agreement by Repap
<PAGE>
and the consummation by it of the transactions contemplated by
this Agreement shall not:
(a) conflict with or violate the articles or by-laws or
equivalent organizational documents of Repap, Repap USA
or any of the Subsidiaries;
(b) conflict with or violate any law, rule, regulation,
permit, order, judgment or decree applicable to Repap,
Repap USA or any of the Subsidiaries or by which any of
their respective properties is bound or affected, the
conflict with which or violation of which would have a
Material Adverse Effect or would prohibit or materially
delay Repap's ability to perform its obligations under
this Agreement; or
(c) result in any breach of or constitute a default (or an
event which with notice or lapse of time or both would
become a default) under, or give to others any rights
of termination, amendment, acceleration or cancellation
of, or result in the creation of an Encumbrance on any
of the properties or assets of Repap, Repap USA or any
of the Subsidiaries pursuant to, any note, bond, mort
gage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to
which Repap, Repap USA or any of the Subsidiaries is a
party or by which Repap, Repap USA or any of the
Subsidiaries or any of their respective properties is
bound or affected, which, in any such case, would have
a Material Adverse Effect or would prohibit or
materially delay Repap's ability to perform its
obligations under this Agreement.
3.9 Compliance
Except as disclosed in the Disclosure Documents or as
otherwise disclosed herein and in Schedule 3.9 and except for any
conflicts, defaults or violations which would not, individually
or in the aggregate (taking into account the impact of any
cross-defaults), have a Material Adverse Effect, neither Repap
USA nor any of the Subsidiaries is in conflict with, or in
default (including cross-defaults) or violation of, (i) its
<PAGE>
articles or by-laws or equivalent organizational documents,
(ii) any law, rule, regulation, order, permit, judgment or decree
applicable to Repap USA or any of the Subsidiaries or by which
any one of their respective properties is bound or affected or
(iii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or
obligation to which Repap USA or any of the Subsidiaries is a
party or by which Repap USA or any of the Subsidiaries or any of
their respective properties is bound or affected.
3.10 Litigation
Except as disclosed in the Disclosure Documents or Schedule
3.10, there are no claims, actions, proceedings, suits,
investigations or reviews pending or, to the Knowledge of Repap,
threatened in writing against Repap USA or any of the
Subsidiaries or any of their properties before any court,
arbitrator or administrative, governmental or regulatory
authority or body, domestic or foreign, that, individually or in
the aggregate, would have a Material Adverse Effect. As at the
date hereof, neither Repap USA nor any of the Subsidiaries nor
any of their properties is subject to any judgment, order or
decree which has or will have a Material Adverse Effect, except
as disclosed in the Disclosure Documents or Schedule 3.10.
3.11 Labor and Employment Relations
Except as disclosed in the Disclosure Documents or in
writing by Repap, neither Repap USA nor any of the Subsidiaries
is a party to any written agreement or arrangement providing for
severance or termination payments or any compensation in excess
of $25,000 to any director, officer or employee as a result of
the transactions contemplated by this Agreement or any written
employment agreement with any of its directors, officers and
employees. Except as disclosed in writing by Repap, neither
Repap USA nor any Subsidiary is a party to or bound by any
material labor agreement or collective bargaining agreement
respecting its employees, nor is there pending, or to the
Knowledge of Repap threatened, any strike, walkout or other work
stoppage or any union organizing effort by or respecting the
employees.
<PAGE>
Except as disclosed in writing by Repap, Repap does not have
any pending complaint filed with the National Labor Relations
Board or any other governmental agency alleging unfair labor
practices, human rights violations, employment discrimination
charges, or the like against Repap USA or any of the Subsidiaries
which would have a Material Adverse Effect and, to the Knowledge
of Repap, there are no existing facts which might result in any
such complaint or charge. Each of Repap USA and each Subsidiary
has complied in all material respects with all laws, rules and
regulations relating to the employment of labor, including
provisions related to wages, hours, equal opportunity,
occupational health and safety, collective bargaining and the
payment of social security and other employment taxes. There are
no controversies pending or, to the Knowledge of Repap, threat
ened, involving any group of employees, except individual
grievances under any collective bargaining agreement which, in
the aggregate, are not material.
3.12 Benefit Plans
(a) Except as disclosed in Schedule 3.12, (i) there are no
pension, retirement, profit sharing, bonus, savings,
deferred compensation, stock option, purchase or
appreciation, group insurance or other employee benefit
plans, programs or arrangements or fringe benefits
maintained or contributed to by Repap USA or any of the
Subsidiaries (each such plan, program or arrangement, a
"Plan"), (ii) there are no actions, claims, or other
proceedings pending or, to the Knowledge of Repap,
threatened with respect to the Plans, (iii) no promise
or commitment to increase benefits under the Plans has
been made except as required by law, (iv) no event has
occurred which could subject any person or fund to any
tax or penalty in connection with the Plans, where the
effect of such action or failure to comply under (ii)
through (iv) above would, individually or in the
aggregate, have a Material Adverse Effect. Repap has
provided Buyer with complete and accurate copies of all
the Plans.
(b) Except as disclosed in the Disclosure Documents or in
Schedule 3.12, none of the Plans is subject to the
<PAGE>
Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). With respect to each Plan that is
subject to ERISA (an "ERISA Plan") and, to the extent
specified, any ERISA Affiliate Plan (i) if such ERISA
Plan is intended to be qualified under Section 401(a)
of the Code, such ERISA Plan has been determined by the
IRS to be so qualified or a determination letter
request will be filed for such Plan within the remedial
amendment period for such Plan; (ii) such ERISA Plan
has complied (in form and in operation) in all material
respects with ERISA, and all other applicable laws;
(iii) no accumulated funding deficiency, as defined in
Section 302 of ERISA and Section 412 of the Code,
whether or not waived, exists with respect to such Plan
or any ERISA Affiliate Plan; (iv) with respect to each
single employer ERISA Plan and ERISA Affiliate Plan
subject to Title IV of ERISA, as of the last day of the
most recent plan year ended prior to the date hereof,
the actuarially determined present value of all
"benefit liabilities" (as defined under Section
4001(a)(16) of ERISA) under such Plan, determined on
the basis of the actuarial assumptions in effect for
such plan year, did not exceed the then current value
of the assets of such Plan; and (v) none of Repap USA,
the Subsidiaries or any ERISA Affiliate has incurred or
expects to incur any liability to the United States
Pension Benefit Guaranty Corporation or any withdrawal
liability under Title IV of ERISA with respect to any
"Multiemployer Plan" (as defined below), where the
effect of such event, condition, action or failure to
act under (i) through (v) above would be reasonably
expected to have a Material Adverse Effect. Except as
disclosed in the Disclosure Documents or in Schedule
3.12, neither Repap USA nor any Subsidiary maintains or
contributes to any employee welfare benefit plan (as
defined in Section 3(1) of ERISA) which is subject to
ERISA and which provides medical benefits to employees
after termination of employment other than as required
by Section 601 of ERISA or other applicable law.
(c) Neither Repap, Repap USA nor any ERISA Affiliate
maintains or contributes to any defined benefit pension
<PAGE>
plan subject to the funding requirements of Section 412
of the Code, or covered under Section 4021(a) of ERISA.
For purposes of the preceding paragraphs, "ERISA Affiliate"
means (a) any corporation which is a member of the same
controlled group of corporations, within the meaning of
Section 414(b) of the Code, as Repap USA or any of the
Subsidiaries, or (b) any partnership or trade or business
(whether or not incorporated) under common control, within the
meaning of Section 414(c) of the Code, with Repap USA or any of
the Subsidiaries; and "Multiemployer Plan" means any Plan that is
a "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA). "ERISA Affiliate Plan" means any single employer plan
subject to Title IV or Section 302 of ERISA maintained or
contributed to by an ERISA Affiliate.
3.13 Property
Each of Repap USA and the Subsidiaries has good title to all
of its respective properties and assets (real and personal,
tangible and intangible, including leasehold interests) including
all the properties and assets reflected in the balance sheets
forming part of the Financial Statements of Repap USA, except as
indicated in the notes thereto, together with all additions
thereto and less all dispositions thereof in the ordinary course
of its businesses, in each case subject to no Encumbrance
except for Permitted Encumbrances and as is reflected in the
balance sheets forming part of the Financial Statements of Repap
USA, except where the failure to have such title, individually or
in the aggregate, would not be reasonably likely to have a
Material Adverse Effect. To the Knowledge of Repap, it is not
aware of any need to make any material changes or modifications
to any equipment necessary to enable the Business to continue as
it has in the past.
3.14 Tax Matters
Except as reflected in the Financial Statements or
Disclosure Documents or as would not be reasonably likely to have
a Material Adverse Effect, (i) to the Knowledge of Repap, all Tax
Returns required to be filed prior to the Closing Date with
respect to Repap USA and the Subsidiaries have been duly filed,
<PAGE>
(ii) to the Knowledge of Repap, all such Returns are correct and
complete, (iii) all Taxes shown to be due on such Tax Returns
have been paid in full, (iv) no deficiencies for any Taxes with
respect to such Tax Returns have been asserted, (v) to the
Knowledge of Repap, no other Taxes are payable by Repap USA and
the Subsidiaries with respect to items or periods covered by such
Tax Returns (whether or not shown or reportable on such Tax
Returns), (vi) no waivers of statutes of limitation have been
given or requested with respect to any Taxes with respect to such
Tax Returns, (vii) there are no audits in process, pending or
threatened with respect to such Tax Returns, (viii) to the
Knowledge of Repap, Repap USA and the Subsidiaries have withheld
and paid over all Taxes required to have been withheld and paid
over, and complied with all information reporting and backup
withholding requirements, and (ix) there are no liens on any of
the assets of Repap USA with respect to Taxes, other than liens
for Taxes not yet due and payable or for Taxes that are
contesting in good faith through appropriate proceedings and for
which appropriate reserves have been established.
3.15 Contracts
Except as set forth in the Disclosure Documents or the
Financial Statements or Schedule 3.15 and except for contracts
entered into by Buyer or caused by Buyer to be entered into by
Repap USA or any Subsidiary in connection with this Agreement and
the transactions contemplated hereby, neither Repap USA nor any
Subsidiary is a party to, or bound by, any contract of any kind
which is to be performed or as to which Repap USA or any
Subsidiary may have any right or obligation after the Closing
Date other than contracts (i) which have been entered into in the
ordinary and usual course of business consistent with past
practice and (ii) pursuant to which Repap USA or the Subsidiary,
as the case may be, is or would be obligated to expend, or
entitled to receive, less than $250,000 in any 12-month period or
which is subject to cancellation by Repap USA or the Subsidiary,
as the case may be, upon less than three (3) months' notice,
without incurring any expenditure and without penalty or
increased cost. All contracts to which Repap USA or any
Subsidiary is a party constitute valid and binding obligations of
Repap USA or any Subsidiary, as the case may be, enforceable
against Repap USA or any Subsidiary, as the case may be, in
<PAGE>
accordance with their respective terms (subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles) and in full
force and effect, except for such contracts the invalidity or
unenforceability of which alone or in the aggregate would not be
reasonably likely to have a Material Adverse Effect. Except as
set forth in Schedule 3.9, there is not any pending or, to the
Knowledge of Repap, threatened cancellation, existing default, or
event under any such contract which, after notice or lapse of
time, or both, would constitute a default, except for such
pending or threatened cancellations, existing defaults or events
which, alone or in the aggregate, would not be reasonably likely
to have a Material Adverse Effect.
3.16 Licenses, etc.
Repap USA and each Subsidiary owns, possesses, or has
obtained and is in compliance with, all governmental licenses,
permits, certificates, consents, orders, grants and other
authorizations (the "Licenses and Permits") necessary to conduct
its Businesses as now conducted, the failure to own, possess,
obtain or be in compliance with which would have a Material
Adverse Effect, all of which are listed on Schedule 3.16. The
Licenses and Permits are valid and in full force and effect and
there are not pending, or, to the Knowledge of Repap, threatened,
any proceedings which could result in the termination,
revocation, limitation or impairment of any License or Permit.
No violations have been recorded in respect of any Licenses and
Permits, and to the Knowledge of Repap there is no meritorious
basis for any such recordation.
3.17 Environmental Matters
Except as disclosed in the Disclosure Documents or in
Schedule 3.17, or as would not have a Material Adverse Effect,
each of Repap USA and the Subsidiaries: (i) is in substantial
compliance with applicable Environmental Laws; (ii) has not
received any written notices from any governmental entity
alleging the violation of, or any claim or liability under, any
applicable Environmental Law; (iii) is not the subject of any
court order, administrative order or decree arising under any
<PAGE>
Environmental Law; (iv) has obtained all environmental permits
which are required in order to carry on their respective
Businesses and operations as presently conducted under all
applicable Environmental Laws, where noncompliance or failure to
obtain the same would have, individually or in the aggregate, a
Material Adverse Effect; (v) is not a subject to any compliance
schedules or other limitations in such environmental permits,
other than permit expiration dates, which will become effective
in the future and which will restrict or prevent operation of the
Businesses as presently conducted; and (vi) has not to the best
Knowledge of Repap spilled, released, disposed of or discharged
any hazardous substances onto property currently or previously
owned by Repap USA or the Subsidiaries which spill, release,
disposal or discharge has not been previously remediated to the
extent required under the applicable Environmental Laws. Neither
Repap USA nor the Subsidiaries has at any time given any written
undertakings with respect to remedying any breach of Environ
mental Laws which have not been duly performed in accordance with
the terms of such undertakings, which breach would have a
Material Adverse Effect. Except as disclosed in the Disclosure
Documents or in Schedule 3.17, to the best of Knowledge of Repap
no condition or environmental contamination exists on the
property owned by Repap USA or the Subsidiaries which would cause
or require Repap USA or its Subsidiaries to investigate and/or
take remedial actions under any applicable Environmental Laws to
address such conditions of contamination. Schedule 3.17(a) sets
forth all treatment, storage or disposal facilities utilized by
Repap USA or the Subsidiaries for the treatment, storage or
disposal of any hazardous substances generated by the operations
or activities of Repap USA or the Subsidiaries.
3.18 Brokers and Finders
Other than Dillon, Read & Co. Inc. and TD Securities Inc.,
Repap, Repap USA and the Subsidiaries have not employed any
broker, finder, consultant or intermediary in connection with the
transactions contemplated by this Agreement who would be entitled
to a broker's, finder's or similar fee or commission in
connection therewith or upon the consummation thereof, or if the
Closing does not occur. Repap agrees to bear all costs it
incurs, including fees and expenses of Dillon, Read & Co. Inc.
and TD Securities Inc., in connection with the transactions
<PAGE>
contemplated by this Agreement unless otherwise expressly
provided herein and Repap USA and the Subsidiaries shall not have
any liability with respect to Dillon, Read & Co. Inc. and TD
Securities Inc.
3.19 Books and Records
The corporate records and minute books of Repap USA and the
Subsidiaries have been and are maintained in all material
respects in accordance with applicable laws.
3.20 Transactions with Affiliates
Since December 31, 1996, there has not been any dividend or
other distribution of assets by Repap USA or any Subsidiary.
Except as set forth in Schedule 3.20, no Repap Affiliate:
(a) owns, directly or indirectly, any debt, equity or other
interest or investment in any corporation, association
or other entity which is a competitor, lessor, lessee,
customer, supplier, distribution sales agent or
advertiser of Repap USA or any Subsidiary;
(b) has any cause of action or other claim whatsoever
against or owes any material amount to, or is owed any
material amount by, Repap USA or any Subsidiary, except
for accrued vacation pay, employee benefits and similar
matters and except for those claims arising from
existing contracts in the ordinary course of business;
(c) has any interest in or owns any property or right used
in the conduct of the Businesses of Repap USA or any of
the Subsidiaries except for those interests arising in
the ordinary course of business;
(d) has lent or advanced any money to, or borrowed any
money from, or guaranteed or otherwise become liable
for any indebtedness or other obligations of, or
acquired any capital stock, obligations or securities
of, any Subsidiary except for such transactions arising
in the ordinary course of business;
<PAGE>
(e) is a party to any contract, lease, agreement,
arrangement or commitment used in the Business except
for such transactions arising in the ordinary course of
business; or
(f) received from or furnished to the Business any goods or
services (with or without consideration) since
December 31, 1996 except for such transactions arising
in the ordinary course of business.
The term "Repap Affiliate" shall mean any officer, director or
stockholder of Repap, or any of the Repap USA Group or any
corporation (other than WWF), partnership, trust or other entity
in which Repap, or any of the Repap USA Group or any such
officer, director or stockholder has a five percent (5%) or
greater interest or is a director, officer, partner or trustee.
The term Repap Affiliate shall also include any entity which
controls, or is controlled by, or is under common control with
any of the individuals or entities described in the preceding
sentence.
3.21 Inventory
All inventories reflected on the Financial Statements are,
and on the Statement of Consolidated Net Working Capital will be,
in all material respects, (a) properly valued at the lower of
cost or market value on a first-in, first-out basis (or, in the
case of work-in-process and finished goods, on an average cost
basis) in accordance with GAAP; (b) of good and merchantable
quality and contain no material amounts, except for job-lot that
are produced in the ordinary course of business, that are not
salable and usable for the purposes intended in the ordinary
course of business and meet the current standards and
specifications of the Businesses of Repap USA and the
Subsidiaries; (c) in conformity with warranties customarily given
to purchasers of like products; and (d) at levels adequate and
not excessive in relation to the circumstances of the Businesses
of Repap USA and the Subsidiaries and in accordance with past
inventory stocking practices. All inventories disposed of
subsequent to December 31, 1996, except for such dispositions
that do not have a material effect on Repap USA, have been
disposed of only in the ordinary course of business and at prices
and under terms that are normal and consistent with past
practice.
<PAGE>
3.22 Insurance
Schedule 3.22 sets forth an accurate, correct and complete
list and summary description (including the name of the insurer,
coverage, premium and expiration date) of all binders, policies
of insurance, sell insurance programs or fidelity bonds
("Insurance") maintained by Repap USA or a Subsidiary or in which
Repap USA or a Subsidiary is a named insured. All Insurance has
been issued by financially sound insurance companies under valid
and enforceable policies or binders for the benefit of Repap USA
or a Subsidiary, and all such policies or binders are in such
types and in full force and effect and are in amounts and for
risks, casualties and contingencies customarily insured against
by enterprises in operations similar to the Businesses of Repap
USA and the Subsidiaries. There are no pending or asserted
claims against any Insurance as to which any insurer has denied
liability, and there are no claims under any Insurance that have
been disallowed or improperly filed. Schedule 3.22 sets forth
the claims experience for the last two full fiscal years and the
interim period through the date hereof with respect to Repap USA
and the Subsidiaries (both insured and self-insured). No notice
of cancellation or nonrenewal with respect to, or material
increase of premium for, any insurance has been received by Repap
USA or any Subsidiary. Repap has no Knowledge of any facts or
the occurrence of any event which (i) reasonably might form the
basis of any claim against Repap USA or any Subsidiary relating
to the conduct or operations of their Business and which will
materially increase the insurance premiums payable under any
insurance or (ii) otherwise will materially increase the
insurance premiums payable under any insurance.
3.23 Customers and Suppliers
(a) All sales contracts and orders with customers and
suppliers were entered into by or on behalf of Repap USA or any
Subsidiary and were entered into in the ordinary course of
business for usual quantities and at normal prices. Schedule
3.23 sets forth an accurate, correct and complete list of the ten
largest customers and ten largest suppliers of Repap USA and of
<PAGE>
each Subsidiary, determined on the basis of revenues from items
sold (with respect to customers) or costs of items purchased
(with respect to suppliers) for each of the fiscal year ended
December 31, 1996 and the six-month period ended June 30, 1997.
To the Knowledge of Repap, no customer or supplier will cease to
do business with Repap USA or any Subsidiary after, or as a
result of, the consummation of any transactions contemplated
hereby or that any customer or supplier is threatened with
bankruptcy or insolvency in any manner that will reasonably
likely have a Material Adverse Effect. Neither Repap, Repap USA
nor any of the Subsidiaries knows of any fact, condition or event
which would adversely affect its relationship with any customer
or supplier in any manner that will reasonably likely have a
Material Adverse Effect. Since December 31, 1996, there has been
no cancellation of backlogged orders in material excess of the
average rate of cancellation prior to such date.
(b) Neither Repap USA, any Subsidiary, nor any of their
officers or employees, has, directly or indirectly, given or
agreed to give any rebate, gift or similar benefit to any
supplier, customer, distributor, broker, governmental employee or
other Person, who was, is or may be in a position to help or
hinder the Business (or assist in connection with any actual or
proposed transaction) which could subject Repap USA or any
Subsidiary or Buyer to any damage or penalty in any civil,
criminal or governmental litigation or proceeding or which would
have a Material Adverse Effect.
(c) Except as set forth on Schedule 3.23, (i) no Person
within the last twelve months has threatened in writing to cancel
or otherwise terminate, or to the Knowledge of Repap has
threatened orally to cancel or otherwise terminate, the
relationship of such Person with Repap USA and each Subsidiary in
any manner that will reasonably likely have a Material Adverse
Effect, and (ii) no Person during the last twelve months has
decreased materially or threatened in writing to decrease or
limit materially, or, to the Knowledge of Repap, intends to
decrease or limit materially, its supplies to Repap USA or any
Subsidiary or its purchase of Repap USA's or any Subsidiary's
products or services. Except as set forth on Schedule 3.23,
there is no material purchase commitment which provides that any
supplier will be the exclusive supplier of Repap USA or any Subsidiary.
<PAGE>
There is no material purchase commitment requiring
Repap USA or any Subsidiary to purchase the entire output of a
supplier.
3.24 Real Estate
(a) Schedule 3.24 sets forth an accurate legal description
of all real estate owned by Repap USA or any Subsidiary or for
which Repap USA or any Subsidiary has contracted to become the
owner (the "Owned Real Estate"), including identification of the
current owner of fee simple title thereto. The party identified
as the owner on Schedule 3.24 is the legal and equitable owner of
good and marketable title in fee simple absolute to such Owned
Real Estate, including the building, structures, spurtracks (as
set forth on Schedule 3.24) and improvements situated thereon and
appurtenances thereto, in each case free and clear of all
tenancies and other possessory interests, security interests,
conditional sale or other title retention agreements, liens,
encumbrances, mortgages, pledges, assessments, easements, rights
of way, covenants, restrictions, reservations, options, rights of
first refusal, defects in title, encroachments and other burdens,
except as disclosed on Schedule 3.24. Except as disclosed on
Schedule 3.24, Repap USA and the Subsidiaries are in possession
of the Owned Real Estate. All contracts, agreements, options and
undertakings affecting the Owned Real Estate are set forth in
Schedule 3.24 and are legally valid and binding and in full force
and effect, and, to the Knowledge of Repap, there are no
defaults, offsets, counterclaims or defenses thereunder, and
neither Repap USA nor any Subsidiary has received any notice that
any default, offset, counterclaim or defenses thereunder exists.
Repap has delivered or made available to Buyer correct and
complete copies of all such contracts, agreements, options and
undertakings, as well as copies of title commitments dated no
less than one month prior to the date hereof.
(b) Schedule 3.24 sets forth an accurate, correct and
complete list of all real estate leased, subleased or occupied by
Repap USA or any Subsidiary (such interests are the "Leased Real
Estate" and, collectively with the Owned Real Estate, are the
"Real Estate"), including identification of the lease or sublease
(each a "Real Estate Lease") and the parties thereto and list of
contracts, agreements, leases, subleases, options and
<PAGE>
commitments, oral or written, affecting such Leased Real Estate
or any interest therein to which Repap USA or any Subsidiary is a
party or by which any of its interest in the Leased Real Estate
is bound. Repap USA or any Subsidiary has been in peaceable
possession of the Leased Real Estate since the commencement of
the original term of such Real Estate Lease. Repap has delivered
to Buyer correct and complete copies of each Real Estate Lease.
(c) To the Knowledge of Repap, no Real Estate is located
within a flood or lakeshore erosion hazard zone for which flood
insurance is now required under the National Flood Insurance
Program. Neither the whole nor any portion of any Real Estate
has been condemned, requisitioned or otherwise taken by any
public authority, and no notice of any such condemnation,
requisition or taking has been received. To the Knowledge of
Repap, no such condemnation, requisition or taking is threatened
or contemplated. Repap has no Knowledge of any public
improvements which may result in any material special assessments
against or otherwise affect the Real Estate in any material way.
(d) To the Knowledge of Repap, except as set forth on
Schedule 3.17 or 3.24, the Real Estate is in material compliance
with all applicable zoning, building, health, fire, water, use or
similar statutes, codes, ordinances, laws, rules or regulations.
To the Knowledge of Repap, the zoning of each parcel of Real
Estate permits the existing improvements and the continuation
following consummation of the transaction contemplated hereby of
the Business of Repap USA and the Subsidiaries as presently
conducted thereon. Repap USA and the Subsidiaries have all
certificates of occupancy and authorizations required to utilize
the Real Estate. To the Knowledge of Repap, Repap USA and the
Subsidiaries have all easements and rights necessary to conduct
their Businesses, including easements for all utilities,
services, roadway, railway and other means of ingress and egress.
To the Knowledge of Repap, Repap USA and the Subsidiaries hold
such rights to off-site facilities as are necessary to ensure
compliance in all material respects with all zoning, building,
health, fire, water, use or similar statutes, codes, ordinances,
laws, rules or regulations and all such rights, to the extent
held by Repap, shall be conveyed as directed by Buyer at Closing.
Except as disclosed on Schedule 3.24, to the Knowledge of Repap,
no fact or condition exists which would result in the termination
<PAGE>
or impairment of access to the Real Estate or discontinuation of
sewer, water, electric, gas, telephone, waste disposal or other
utilities or services in any manner that will reasonably likely
have a Material Adverse Effect. Except as disclosed on Schedule
3.24, to the Knowledge of Repap, the facilities servicing the
Real Estate are in material compliance with all codes, laws,
rules and regulations.
(e) Repap has delivered or made available to Buyer
accurate, correct and complete copies of all existing title
insurance policies, title reports, surveys and environmental
audits and similar reports, if any, with respect to each parcel
of Real Estate.
3.25 Plant and Equipment
To the best Knowledge of Repap, all plant, structures and
equipment currently being used in the conduct of its operations
are free from material structural or mechanical deficiencies.
3.26 Bank Accounts
Schedule 3.26 sets forth a true and complete list of all
banks in which Repap USA and the Subsidiaries have an account,
safe deposit box, lock box or line of credit, and the names and
titles of all persons authorized to draw thereon or to have
access thereto, and a summary description of the use thereof.
3.27 Accounts Receivable
Schedule 3.27 sets forth an accurate, correct and complete
aging of all outstanding accounts and notes receivable of each of
Repap USA and the Subsidiaries as of December 31, 1996. All
outstanding accounts and notes receivable reflected on the
Financial Statements are due and valid claims against account
debtors for goods or services delivered or rendered and subject
to no defenses, offsets or counterclaims other than in the
ordinary course of business. All receivables arose in the
ordinary course of business. No receivables are subject to prior
assignment, claim, lien or security interest. The books and
records of Repap USA and the Subsidiaries reflect amounts taken
as a reserve against noncollection of accounts receivable, which
<PAGE>
reserve has been established in accordance with normal accounting
policies consistently maintained and there is no reason to
believe that such reserve will not be adequate for its purpose.
As of the Closing Date, neither Repap USA nor any Subsidiary will
have incurred any liabilities to customers for discounts,
returns, promotional allowances or otherwise, except those
granted in the ordinary course of business and reflected on the
Statement of Consolidated Net Working Capital.
3.28 Motor Vehicles
Schedule 3.28 sets forth an accurate and complete list of
all motor vehicles used in the Business of Repap USA and the
Subsidiaries, whether owned or leased. All such vehicles are
(i) properly licensed and registered in accordance with
applicable law; (ii) insured as set forth on Schedule 3.28;
(iii) in good operating condition and repair (reasonable wear and
tear excepted); and (iv) not subject to any lien or other
encumbrance, except as set forth on Schedule 3.28.
3.29 Product Warranty
The books and records of Repap USA and of the Subsidiaries
reflect amounts taken as a reserve against claims and allowances
for product warranties, which reserve has been established in
accordance with normal accounting policies and there is no reason
for Repap or Repap USA to believe that such reserve will not be
adequate for its purpose. As of the Closing Date, none of Repap
USA or the Subsidiaries will have incurred any unpaid liabilities
to customers for such claims and allowances, except those granted
in the ordinary course of business.
3.30 Intellectual Property
Repap has furnished to Buyer an accurate list, as set forth
in Schedule 3.30, of all patents, utility patents and design
patents and registrations therefor, trademarks, trade names,
trademark rights and trademark registrations, copyrights and
licenses, owned or used by Repap USA, the Subsidiaries and their
Businesses. All of the foregoing, together with all technical
documentation reflecting engineering and production data, plans,
specifications, drawings, technology, know how, trade secrets,
<PAGE>
software (whether owned or licensed), manufacturing processes and
all documentary evidence thereof relating to, are hereafter
referred collectively as the "Intellectual Property". The
Intellectual Property constitutes in all material respects all
such assets, properties and rights which are used in or necessary
for the conduct of Businesses of Repap USA and the Subsidiaries.
To the Knowledge of Repap, no one is infringing upon any rights
of Repap USA or any Subsidiary, with respect to any of the
Intellectual Property. To the Knowledge of Repap, neither Repap
USA nor any Subsidiary is infringing on or otherwise acting
adversely to the rights of any Person under, or in respect to,
any patents, patent rights, copyrights, licenses, trademarks,
trade names or trademark rights owned by any Person or Persons,
and there is no claim or action pending or threatened with
respect thereto. Except as set forth in Schedule 3.30, there are
no royalty, commission or similar arrangements, and no licenses,
sublicenses or agreements pertaining to any of the Intellectual
Property.
3.31 No Other Representations or Warranties
Except for the representations and warranties contained in
this Annex A, neither Repap, Repap USA, the Subsidiaries nor any
other Person makes any other express or implied representation or
warranty on behalf of Repap, Repap USA or the Subsidiaries.
<PAGE>
Annex B
4.1 Incorporation and Qualification
Buyer has been duly incorporated, is validly existing and is
in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its
business as now being conducted and is duly registered, licensed
or qualified to carry on business in each jurisdiction in which
the nature of the business as now being conducted by it or the
property owned or leased by it makes such registration, licensing
or qualification necessary, unless the failure to be so
registered or qualified would not have a Material Adverse Effect
on the business, assets, financial condition or results of
operations of Buyer and its subsidiaries, taken as a whole.
4.2 Authority; Filings, Consents and Approvals
Buyer has the corporate power and authority to enter into
this Agreement and, subject to the receipt of the approvals,
consents and authorizations contemplated in this Agreement, to
carry out the transactions contemplated hereby. This Agreement
has been duly authorized, executed and delivered by Buyer and
constitutes a legal, valid and binding obligation of Buyer,
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles, and no other
proceedings on the part of Buyer are necessary to authorize this
Agreement and the consummation of the transactions contemplated
hereby.
Except as set forth in Schedule 4.2 or as required by the
HSR Act or the filing of appropriate notices with the relevant
stock exchanges, material change reports and press releases, the
execution, delivery and performance of this Agreement will not
require Buyer or any of its subsidiaries to obtain any consent,
waiver, authorization or approval of, or make any filing with or
give notice to, any Person, except for such consents, waivers,
authorizations or approvals which the failure to obtain would not
be reasonably likely to have a material adverse effect on the
<PAGE>
business, assets, financial condition or results of operations of
Buyer and its subsidiaries, taken as a whole.
4.3 No Conflict
Subject to the receipt of the regulatory approvals referred
to in this Agreement or disclosed in writing to Repap, the
execution and delivery of this Agreement by Buyer does not, and
the performance of this Agreement by Buyer and the consummation
by it of the transactions contemplated by this Agreement shall
not:
(a) conflict with or violate the articles or by-laws or
equivalent organizational documents of Buyer;
(b) conflict with or violate any law, rule, regulation,
permit, order, judgment or decree applicable to Buyer or its
subsidiaries or by which any of their respective properties is
bound or affected, the conflict with which or violation of which
would have a material adverse effect on the business, assets,
financial condition or results of operations of Buyer and its
subsidiaries taken as a whole or would prohibit or materially
delay Buyer's ability to perform its obligations under this
Agreement; or
(c) result in any breach of or constitute a default (or an
event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the
creation of an Encumbrance on any of the properties or assets of
Buyer or any of its subsidiaries pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Buyer or any
of its subsidiaries is a party or by which Buyer or any of its
subsidiaries or any of their respective properties is bound or
affected, which, in any such case, would have a material adverse
effect on the business, assets, financial condition or results of
operations of Buyer and its subsidiaries taken as a whole or
would prohibit or materially delay Buyer's ability to perform its
obligations under this Agreement.
<PAGE>
4.4 Brokers and Finders
Other than Nesbitt Burns Inc., Buyer has not employed any
broker, finder, consultant or intermediary in connection with the
transactions contemplated by this Agreement who would be entitled
to a broker's, finder's or similar fee or commission in
connection therewith or upon the consummation thereof, or if the
Closing does not occur. Buyer agrees to bear all costs it
incurs, including fees and expenses of Nesbitt Burns Inc., in
connection with the transactions contemplated by this Agreement
unless otherwise expressly provided herein.
4.5 Financial Capability
On the Closing Date, Buyer will have sufficient funds to
purchase the Shares on the terms and conditions contemplated by
this Agreement.
4.6 Securities Act
Buyer is acquiring the Shares solely for the purpose of
investment and not with a view to, or for sale in connection
with, any distribution thereof in violation of the Securities
Act. Buyer acknowledges that the Shares are not registered under
the Securities Act or any applicable state securities law, and
that such Shares may not be transferred or sold except pursuant
to the registration provisions of such Securities Act or pursuant
to an applicable exemption therefrom and pursuant to state
securities laws and regulations as applicable.
4.7 No Other Representations or Warranties
Except for the representations and warranties contained in
this Annex B, neither Buyer nor any other Person makes any other
express or implied representation or warranty on behalf of Buyer.
<PAGE>
