ACQUISITION AGREEMENT
relating to the sale by
INTERNATIONAL PAPER COMPANY
of the only issued and outstanding share of
WELDWOOD OF CANADA LIMITED
to
XXXX XXXXXX TIMBER CO. LTD.
Dated the 21st day of July, 2004
TABLE OF CONTENTS
Page
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PART 1 INTERPRETATION................................................................1
RULES OF INTERPRETATION AND DEFINITIONS...........................................1
SCHEDULES AND APPENDIX............................................................1
PART 2 PURCHASE AND SALE.............................................................2
PURCHASE AND SALE OF PURCHASED SHARE..............................................2
PURCHASE PRICE....................................................................2
PAYMENT OF PURCHASE PRICE.........................................................4
SECTION 116 CERTIFICATE...........................................................5
CLOSING PAYMENT STATEMENT.........................................................8
CLOSING DATE STATEMENTS...........................................................8
NO DUPLICATION....................................................................9
DISPUTE RESOLUTION................................................................9
TAX RETURNS......................................................................10
REIMBURSEMENT OF VENDOR PAID EXPENSES............................................10
REIMBURSEMENT OF TRIGGERING EVENT ADJUSTMENT AMOUNT..............................11
PART 3 REPRESENTATIONS AND WARRANTIES...............................................11
REPRESENTATIONS AND WARRANTIES OF THE VENDOR.....................................11
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER..................................11
PART 4 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS AND INDEMNIFICATION....11
EXPIRATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE VENDOR............11
EXPIRATION OF THE REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER.....12
INDEMNITY........................................................................12
LIMITATIONS ON INDEMNITY.........................................................15
EXCEPTIONS TO LIMITATIONS........................................................15
NO SPECIAL DAMAGES...............................................................16
NOTICE OF CLAIM..................................................................16
DIRECT CLAIMS....................................................................16
CONTROL OF THIRD PARTY CLAIMS....................................................16
SETTLEMENT OF THIRD PARTY CLAIMS.................................................17
COOPERATION......................................................................17
SUBROGATION......................................................................17
CLAIMS TO BE NET OF INSURANCE AND NET TAX CONSEQUENCES...........................17
ADDITIONAL PROVISIONS FOR ENVIRONMENT MATTERS....................................18
ADDITIONAL PROVISIONS FOR TAX MATTERS............................................20
LIMITATION RE APPLICABLE PLANS...................................................21
EXCLUSIVE REMEDY.................................................................22
PART 5 COVENANTS OF THE PARTIES.....................................................22
INVESTIGATION OF BUSINESS........................................................22
CONDITIONS OF DISCLOSURE.........................................................23
PERSONAL INFORMATION.............................................................23
DISCLOSURE STATEMENT.............................................................24
NOTICE OF CERTAIN MATTERS........................................................24
PRELIMINARY PROSPECTUS...........................................................25
CONDUCT PRIOR TO CLOSING (TARGET)................................................25
DELIVERY OF AUTHORIZING DOCUMENTATION............................................26
PURCHASER'S CONDUCT PRIOR TO CLOSING.............................................26
COMPETITION ACT FILING...........................................................27
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INVESTMENT CANADA ACT FILING.....................................................27
COLLECTION OF PRE-CLOSING DATE DUTY REFUNDS......................................27
ELECTIONS AND DESIGNATIONS.......................................................28
PART 6 PRE-CLOSING MATTERS..........................................................28
LOSS BEFORE CLOSING..............................................................28
CLAIM AFTER CLOSING..............................................................28
REIMBURSEMENT....................................................................29
INDEMNIFICATION..................................................................29
NOTICE OF LOSS...................................................................29
PURCHASER'S OPTION...............................................................30
CLOSING POSTPONED................................................................30
NO SOLICITATION..................................................................30
PART 7 TERMINATION OF AGREEMENT.....................................................31
TERMINATION......................................................................31
AUTOMATIC TERMINATION............................................................33
FAILURE TO GIVE NOTICE...........................................................33
EFFECT OF STATUS OF AGREEMENT AFTER TERMINATION..................................33
PART 8 CONDITIONS OF CLOSING........................................................33
CONDITIONS OF CLOSING IN FAVOUR OF THE PURCHASER.................................33
CONDITIONS OF CLOSING IN FAVOUR OF THE VENDOR....................................34
MUTUAL CONDITIONS PRECEDENT......................................................34
PART 9 CLOSING ARRANGEMENTS.........................................................35
PLACE OF CLOSING.................................................................35
TRANSFER.........................................................................35
DELIVERY OF BOOKS AND RECORDS....................................................36
DELAWARE SALES COMPANY BOOKS AND RECORDS.........................................36
FUTURE ACCESS TO BOOKS, RECORDS AND EMPLOYEES....................................36
CLOSING DOCUMENTS................................................................37
INTERIM SERVICES.................................................................37
EXECUTIVE PENSION AGREEMENTS.....................................................38
POST-CLOSING COVENANTS...........................................................38
TAX APPEAL.......................................................................38
PHANTOM PLAN.....................................................................38
MANAGEMENT INCENTIVE PLAN........................................................38
FURTHER ASSURANCES...............................................................39
PART 10 MISCELLANEOUS...............................................................39
NOTICES..........................................................................39
CONSULTATION.....................................................................40
COMMERCIALLY REASONABLE EFFORTS..................................................40
COUNTERPARTS.....................................................................40
NON-MERGER.......................................................................41
EXPENSES.........................................................................41
INTEREST.........................................................................41
ACQUISITION AGREEMENT
THIS AGREEMENT is made July 21, 2004
BETWEEN:
INTERNATIONAL PAPER COMPANY, a New York corporation with an office at
000 Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxxx 00000
(the "Vendor")
AND:
XXXX XXXXXX TIMBER CO. LTD., a British Columbia corporation with an
office at 1000 - 0000 Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X
0X0
(the "Purchaser")
WHEREAS:
(A) The Vendor is the registered and beneficial owner of the Purchased Share;
and
(B) The Vendor wishes to sell to the Purchaser and the Purchaser wishes to
purchase from the Vendor the Purchased Share on the terms and conditions set out
in this Agreement;
THEREFORE THIS AGREEMENT WITNESSES THAT the Parties agree as follows:
PART 1
INTERPRETATION
Rules of Interpretation and Definitions
1.1 The rules of interpretation set out in Part A of Appendix 1 apply to this
Agreement. Terms and expressions defined in Part B of Appendix 1 have those
meanings when used in this Agreement.
Schedules and Appendix
1.2 The following Schedules and Appendix are attached to and form part of this
Agreement:
Schedule A - Prohibited Activity
Schedule 3.1 - Representations and Warranties of the Vendor
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Schedule 3.2 - Representations and Warranties of the Purchaser
Schedule 3.7 - Subsidiaries and Other Ownership Interests
Schedule 5.7(g) - Target Information and Financial Data
Schedule 7.1(c) - Vendor's Bring Down Certificate (Due
Diligence Satisfaction Date)
Schedule 7.1(d) - Purchaser's Bring Down Certificate
Schedule 7.1(j) - Vendor's Bring Down Certificate (Closing Date)
Appendix 1 - Part A - Rules of Interpretation
Appendix 1 - Part B - Definitions
PART 2
PURCHASE AND SALE
Purchase and Sale of Purchased Share
2.1 On the Closing Date the Vendor will sell, assign and transfer to the
Purchaser and the Purchaser will purchase from the Vendor the Purchased Share
free and clear of all Encumbrances.
Purchase Price
2.2
Purchase Price Calculation
(a) The purchase price (the "Purchase Price") payable by the Purchaser to
the Vendor for the Purchased Share will be an amount equal to the total of:
(i) $1,260,000,000 less,
(A) the Triggering Event Adjustment Amount; and
(B) the Vendor Paid Expenses;
(ii) the Duty Refund Amount;
(iii) the Pulp Amount; and
(iv) the Tax Refund Amount.
subject to adjustment as provided in Section 2.2(b).
Net Worth Adjustment
(b) If the Closing Date Net Worth is greater than the Target Net Worth, the
Purchase Price will be increased by the amount of such excess (the "Net
Worth Positive Adjustment Amount"). If the Target Net Worth is greater than
the Closing Date Net
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Worth, the Purchase Price will be decreased by the amount of such excess
(the "Net Worth Negative Adjustment Amount").
Definitions
(c) In this Part 2, except as otherwise expressly provided or unless the
context otherwise requires,
(i) "Adjusted Closing Date Statements" has the meaning set out in
Section 2.6.
(ii) "Adjustment Date" means the later of the date on which the
Closing Date Statements or the Adjusted Closing Date Statements have
been finalized as provided in Section 2.6.
(iii) "Closing Date Balance Sheet" means the consolidated balance
sheet of the Target Companies as of the Closing Date included in the
Closing Date Statements or, if applicable, the Adjusted Closing Date
Statements.
(iv) "Closing Date Net Worth" means the amount that is the
Shareholder's Equity as set out in the Closing Date Balance Sheet.
(v) "Closing Date Statements" has the meaning set out in Section 2.6.
(vi) "Closing Payment Statement" has the meaning set out in Section
2.5.
(vii) "Duty Refund Amount" means 64.38% of any Pre-Closing Date Duty
Refunds received from time to time by the Target after the Closing
Date.
(viii) "Net Worth Negative Adjustment Amount" has the meaning set out
in Section 2.2(b).
(ix) "Net Worth Positive Adjustment Amount" has the meaning set out in
Section 2.2(b).
(x) "Pre-Closing Cash Dividends" means cash dividends paid by the
Target during the period commencing on the Execution Date and ending
at the Time of Closing, other than (1) any dividend in kind of the
shares of the Finance Company or (2) any dividend funded out of
amounts received on or prior to the Closing Date from the Finance
Company.
(xi) "Pulp Amount" means $50,000,000; provided that if the sum of the
Periodic Amounts for the Pulp Periods is less than $50,000,000, the
Pulp Amount will be reduced by such difference.
(xii) "Target Net Worth" means $750,000,000.
(xiii) "Triggering Event Adjustment Amount" has the meaning set out in
Part 3 of the Disclosure Statement.
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(xiv) "Vendor Paid Expenses" means the sum of
(A) 64.38% of the amounts paid by any of the Target Companies
after the Closing Date, to the extent not reflected in the
Closing Date Balance Sheet, under any employee retention
agreement entered into between any of the Target Companies and
any of its employees prior to the Closing Date in connection with
the transactions contemplated under this Agreement; and
(B) 64.38% of the legal and other expenses (including any
non-refundable Taxes imposed on such expenses) paid by any of the
Target Companies after the Closing Date, to the extent not
reflected in the Closing Date Balance Sheet, in connection with
the transactions contemplated under this Agreement, including the
Finance Company Reorganization, but excluding any such expenses
(I) to be paid by the Purchaser under the terms of this
Agreement;
(II) incurred prior to the Closing Date at the written
request of the Purchaser; or
(III) incurred after the Closing Date.
Payment of Purchase Price
2.3 The Purchase Price will be paid by the Purchaser to the Vendor as follows:
Closing Date Payment
(a) on the Closing Date, the Purchaser will pay to the Vendor by way of
wire transfer to such bank account as is designated by the Vendor in a
notice given to the Purchaser before the Closing,
(i) if there is a Net Worth Positive Adjustment Amount, $1,260,000,000
plus the Vendor's reasonable estimate of the Net Worth Positive
Adjustment Amount as set out in the Closing Payment Statement, or
(ii) if there is a Net Worth Negative Adjustment Amount,
$1,260,000,000 minus the Vendor's reasonable estimate of the Net Worth
Negative Adjustment Amount as set out in the Closing Payment
Statement;
Payment on Adjustment Date
(b) on the Adjustment Date the Purchaser will pay to the Vendor, or the
Vendor will pay to the Purchaser, any difference between the Net Worth
Positive Adjustment Amount or the Net Worth Negative Adjustment Amount, as
the case may be, as set out in the
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Closing Date Statements or, if applicable, the Adjusted Closing Date
Statements, and the reasonable estimate of such amounts included in the
Closing Payment Statement;
Payment of Duty Refund Amount
(c) subject to Section 5.12, amounts in respect of the Duty Refund Amount
will be paid by the Purchaser to the Vendor not later than the 10th
Business Day after the day on which the corresponding Pre-Closing Date Duty
Refund is received, or, if funds are initially received by a Target Company
under conditions that do not qualify the funds as Pre-Closing Date Duty
Refunds on the basis of the impediments set out in the definition thereof,
not later than the 10th Business Day after the day on which such funds
become Pre-Closing Date Duty Refunds;
Payment of Tax Refund Amount
(d) amounts in respect of the Tax Refund Amount will be paid by the
Purchaser to the Vendor not later than the 10th Business Day after the day
on which a Tax Refund Amount arises; and
Payment of Pulp Amount
(e) in respect of the Pulp Amount, the Purchaser will pay to the Vendor its
reasonable estimate of the Periodic Amount for each Pulp Period on or
before the 10th Business Day following the Pulp Period and will make any
payment or withholding required to adjust such estimate to the actual
Periodic Amount concurrently with the payment made in respect of the
immediately succeeding Pulp Period, and the Parties will make such
adjustment in respect of the final Pulp Period not later than 30 Business
Days following the end of the final Pulp Period.
Section 116 Certificate
2.4 (a) If the Vendor does not deliver to the Purchaser on or before Closing an
appropriate certificate under subsection 116(2) of the Tax Act (a "S 116(2)
Certificate") in respect of the sale of the Purchased Share to the
Purchaser (the "Share Sale") specifying a "certificate limit" at least
equal to the Purchaser's Cost (as defined in Section 2.4(h)) for purposes
of subsection 116(5) of the Tax Act, the Vendor may deliver to the
Purchaser on Closing an irrevocable, unconditional letter of credit drawn
on a global commercial bank with a credit rating of not less than AA- or
equivalent, payable in Canadian dollars ("Letter of Credit") in an amount
(the "Potential Remittance Amount") equal to 25% of the amount by which the
Purchaser's Cost exceeds the certificate limit, if any, of any appropriate
certificate under subsection 116(2) of the Tax Act in respect of the Share
Sale delivered by the Vendor to the Purchaser on or before Closing. Such
Letter of Credit will not be drawn upon except as provided below.
(b) If the Vendor does not provide the Letter of Credit under Section
2.4(a), the Purchaser will withhold from the Purchase Price an amount equal
to the Potential Remittance Amount and deposit such amount at Closing into
escrow pursuant to an escrow agreement to be entered into by the Parties at
Closing, in form and substance satisfactory
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to the Parties, acting reasonably and reflecting the provisions of this
Section 2.4 and preserving the Purchaser's ability to satisfy the Potential
Remittance Amount in full at the time or times as required under the Tax
Act with income from the escrowed funds (subject to withholding) being for
the benefit of the Vendor (the "Escrow Agreement").
(c) Subject to Section 2.4(e) below:
(i) if after Closing and on or before the 29th day of the month
following the calendar month during which the Closing Date occurred
(the "Deadline Date"), the Vendor delivers to the Purchaser either:
(A) a S 116(2) Certificate with a certificate limit at least
equal to the Purchaser's Cost, or
(B) an appropriate certificate under subsection 116(4) of the Tax
Act in respect of the Share Sale referencing proceeds of
disposition not less than the Purchaser's Cost (a "S 116(4)
Certificate")
the Purchaser will return the Letter of Credit, or release the
Potential Remittance Amount held under the Escrow Agreement to the
Vendor, as applicable; and
(ii) if neither a S 116(2) Certificate with certificate limit equal to
the Purchaser's Cost nor an appropriate S 116(4) Certificate is
delivered by the Vendor to the Purchaser on or before the Deadline
Date, the Purchaser will be entitled to draw under the Letter of
Credit or under the Escrow Agreement as applicable and remit to the
Receiver General for Canada ("Receiver General") immediately following
the Deadline Date for the account of the Vendor an amount equal to the
lesser of:
(A) the Potential Remittance Amount, and
(B) 25% of the excess of the Purchaser's Cost over the
certificate limit of a S 116(2) Certificate, if any, in respect
of the Share Sale delivered by the Vendor to the Purchaser on or
before Deadline Date;
(d) The Purchaser will provide to the Vendor a copy of a receipt of the
Receiver General in respect of any payment under Section 2.4(c) and will
either (i) return the Letter of Credit forthwith to the Vendor for
cancellation if less than the full amount has been drawn; or (ii) release
the amount, if any, remaining under the Escrow Agreement to the Vendor.
(e) The Letter of Credit will not be drawn nor any amount released to the
Purchaser from under the Escrow Agreement and no amount will be remitted by
the Purchaser to the Receiver General under Section 2.4(c)(ii) if the
Vendor delivers to the Purchaser, or the Purchaser otherwise receives, on
or before the Deadline Date (as extended from time to time under this
Section 2.4(e)), one or more appropriate comfort letters (each, a "Comfort
Letter") issued by CRA from time to time extending the time period within
which the Purchaser is required to remit an amount in respect of the
Purchase Price on behalf of the
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Vendor and the latest of such Comfort Letters has not been withdrawn or
cancelled or otherwise ceases to have effect. In such case, the Deadline
Date will be deemed to be the second Business Day before the date, or the
end of any time period, specified in the latest of such Comfort Letters.
(f) If the Canadian Institute of Chartered Accountants issues any
accounting rules applicable to the Purchaser which, when implemented, would
have a material adverse effect on the Purchaser's financial reporting
status as a result of the Purchaser holding the Letter of Credit, the
Purchaser will give to the Vendor not less than 20 Business Days notice
requiring the Vendor to take commercially reasonable steps to replace the
Letter of Credit by either implementing the Escrow Agreement, or taking
other measures that are satisfactory to the Purchaser, acting reasonably,
and which alleviate or avoid the material adverse effect. If, at the end of
such period, or a reasonable extension thereof taking into account the
implementation date for the accounting rules, the Vendor has not
implemented measures as contemplated herein, the Purchaser may draw on the
Letter of Credit and make the remittance described in Section 2.4(c)(ii).
(g) If at any time the aggregate of the amounts paid or then payable by the
Purchaser on account of the Purchase Price under Section 2.3 exceeds the
Purchaser's Cost, the Purchaser will be entitled to deduct and withhold 25%
of any such excess if and to the extent the Purchaser is liable to pay an
amount on behalf of the Vendor under the Tax Act. If such deduction is made
and the Parties do not enter into alternative arrangements in form and
substance satisfactory to the Parties acting reasonably preserving the
Purchaser's ability to satisfy its obligations in respect of the amount so
deducted in full at the time or times as required under the Tax Act, the
Purchaser will remit such amount forthwith to the Receiver General for the
account of the Vendor and provide to the Vendor a copy of a receipt of the
Receiver General in respect thereof.
(h) For the purposes of this Section 2.4:
(i) The "Purchaser's Cost" means the excess of $1,540,000,000 over the
aggregate of the Pre-Closing Cash Dividends (which amount will be
confirmed by the Vendor in a notice to the Purchaser delivered on the
Closing Date), or such other amount as may be agreed upon by the
Parties from time to time.
(ii) A certificate under subsection 116(2) of the Tax Act will be
conclusively deemed to be appropriate if:
(A) it accurately describes the Purchased Share, the Vendor, the
Purchaser and specifies a certificate limit, a certificate date
and an issuing tax services office, with no material errors or
other comments, or
(B) it is otherwise acceptable to the Purchaser's counsel, acting
reasonably.
(iii) A certificate under subsection 116(4) of the Tax Act will be
conclusively deemed to be appropriate if:
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(A) it accurately describes the Purchased Share, the Vendor, the
Purchaser, the date of disposition and specifies proceeds of
disposition not less than the Purchaser's Cost, a certificate
date and an issuing tax services office, with no material errors
or other comments, or
(B) it is otherwise acceptable to the Purchaser's counsel, acting
reasonably.
(iv) A Comfort Letter will be deemed to be appropriate if it contains
a specific confirmation from CRA that no amounts are required to be
remitted to the Receiver General under section 116 of the Tax Act in
respect of the Share Sale until a date, or the end of any time period,
if any, specified in the Comfort Letter, with no material errors.
(v) If the Tax Act is amended to alter the 25% tax rate referenced for
purposes of subsection 116(5) of the Tax Act before the Closing Date
or a relevant payment date under this Agreement with application to
the transactions or relevant payments contemplated under this
Agreement (or is proposed to be amended with such intended retroactive
effect publicly announced by the Department of Finance) the references
in this Section 2.4 to 25% will be read instead as references to the
tax rate as so altered.
Closing Payment Statement
2.5 Not later than five Business Days before the Closing Date, the Vendor will
prepare and provide to the Purchaser a statement (the "Closing Payment
Statement") setting out the Vendor's reasonable estimate of the Net Worth
Positive Adjustment Amount or Net Worth Negative Adjustment Amount, as the case
may be.
Closing Date Statements
2.6 Not later than the 60 Business Days following the Closing Date, the
Purchaser will cause:
(a) the Target to prepare, and have audited by the Target's auditors,
consolidated financial statements for the Target for the period beginning
on January 1, 2004 and ending at 12:01 a.m. on the Closing Date (but
without giving effect to the Closing), prepared in accordance with GAAP in
a manner consistent with the Interim Financial Statements; and
(b) Target's auditors to prepare a statement setting out the calculation of
the Net Worth Positive Adjustment Amount or the Net Worth Negative
Adjustment Amount, as the case may be,
(collectively, the "Closing Date Statements"). The Vendor will be deemed to have
accepted the Closing Date Statements, and the Closing Date Statements will be
deemed to be finalized, if the Vendor does not give the Purchaser notice of its
objections (which must be made in good faith) on or before the date which is 20
Business Days following receipt by the Vendor of the Closing
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Date Statements. Any such objection will be governed by Section 2.8. Immediately
following the Closing Date, the Purchaser will, upon reasonable request, provide
access to the Vendor and its advisors, to all relevant books and records, with
the right to take copies of the relevant information, and to the appropriate
personnel, for the sole purpose of verifying the Closing Date Statements. Where
the Vendor has disputed any item contained in the Closing Date Statements, the
Purchaser will cause, within five Business Days of the resolution of the items
in dispute pursuant to Section 2.8, the Closing Date Statements to be adjusted
to reflect the resolution or determination of the dispute (the "Adjusted Closing
Date Statements"). Each Party will bear the fees and expenses of its personnel
or advisors in preparing or reviewing the Closing Date Statements and preparing
the Adjusted Closing Date Statements.
No Duplication
2.7 The Parties acknowledge and agree that it is the intention of the Parties
that for the purposes of this Agreement:
(a) no amount will be included in the determination or calculation of more
than one of
(i) any of the Vendor Paid Expenses, the Triggering Event Adjustment
Amount, the Duty Expense Amount, the Duty Refund Amount or the Tax
Refund Amount, and
(ii) the Closing Date Net Worth; and
(b) no amount included in the determination or calculation of the Closing
Date Net Worth, the Vendor Paid Expenses or the Duty Expense Amount, or
that is otherwise a reduction of the Purchase Price pursuant to the terms
of this Agreement, will be the subject of a claim for indemnification by
the Purchaser.
Dispute Resolution
2.8 (a) Where a party (the "Disputing Party") is expressly entitled to dispute
or object to any amount or calculation contemplated by Part 2 of this
Agreement or otherwise have a matter determined pursuant to this Section
2.8 (each a "Dispute"), the provisions of this section will apply. To be
valid, the notice (the "Dispute Notice") delivered by the Disputing Party
to the other Party must be delivered within the applicable time period and
contain a statement of the basis of the Disputing Party's Dispute (which
may be inadequacy of information or inability to verify) and each amount in
dispute. A Dispute based on inadequacy of information or inability to
verify must identify the additional information the Disputing Party needs
with reasonable particularity.
(b) If the Disputing Party makes a good faith Dispute based on inadequacy
of information or inability to verify, and requests additional information
pursuant to Section 2.8(a), the Disputing Party will be deemed to have
withdrawn its Dispute Notice if the Disputing Party does not give the other
Party notice of its further objections (which must be made in good faith)
within 20 Business Days from the day on which the additional information is
given to the Disputing Party in response to the Dispute.
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(c) Where either Party delivers a Dispute Notice, the Purchaser and the
Vendor will work expeditiously and in good faith to resolve the Dispute
within a period of 20 Business Days after the day on which the Disputing
Party gives notice to the other of its Dispute. If the Parties do not
resolve the Dispute within such period the Dispute will be resolved by
final and binding arbitration before a senior chartered accountant who is a
partner of the firm of KPMG LLP or if KPMG LLP is unable to act, of Xxxxx
Xxxxxxxx LLP, or if Xxxxx Xxxxxxxx LLP is unable to act, BDO Dunwoody LLP,
or if BDO Dunwoody LLP is unable to act, any other independent firm of
chartered accountants agreed upon by the Parties (the "Arbitrator")
conducted in Vancouver pursuant to the provisions of the International
Commercial Arbitration Act (British Columbia). If the Parties cannot agree
on procedure within five Business Days following the day of the appointment
of the Arbitrator, the Arbitrator will develop an expeditious procedure for
resolving the Dispute in his sole discretion. The Arbitrator will be
requested to resolve the Dispute and deliver his written decision as to
such items within 20 Business Days following referral of the matters to the
Arbitrator.
(d) If the Arbitrator is retained to determine a Dispute, the costs and
expenses of the Arbitrator will be borne equally by the Vendor and the
Purchaser. Each Party will bear its own costs in presenting its case to the
Arbitrator.
(e) If resolution or determination of any Dispute in accordance with this
Section 2.8 occurs following the Closing Date, and such resolution or
determination results in an adjustment to the Purchase Price paid by the
Purchaser at Closing, such that amounts become owing by the Purchaser to
the Vendor or amounts become refundable by the Vendor to the Purchaser,
such amounts will be paid within five Business Days following such
resolution or determination of the Dispute. Any payment made under this
Section 2.8 will include interest at the rate of 5.11% per annum from and
including the Closing Date to, but excluding, the date of payment.
Tax Returns
2.9 The Purchaser will cause the Target to deliver to the Vendor a draft of each
Target Company's Income Tax return for the period ending on the Closing Date (or
any period ending before the Closing Date if such return was not required to
have been filed before the Closing Date) as soon as is reasonably practicable
after completion thereof. The Vendor will have a reasonable period to approve
such returns before the filing thereof, such approval not to be unreasonably
withheld or delayed. Such tax returns for each Target Company will be prepared
on a basis consistent with Income Tax returns filed by such Target Company for
prior periods and the Closing Date Statements or the Adjusted Closing Date
Statements, as applicable. The Purchaser will ensure that no tax return of any
of the Target Companies for any period ending on or before the Closing Date is
amended without the Vendor's prior written consent, such consent not to be
unreasonably withheld or delayed.
Reimbursement of Vendor Paid Expenses
2.10 Upon request from the Purchaser from time to time after the Closing Date,
the Vendor will, within 10 Business Days of receipt of the request, reimburse
the Target for the
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amount of any Vendor Paid Expenses paid by the Target, or at the option of the
Target, pay such amounts directly to the Person to whom such amounts are owed.
The Purchaser will include with its request reasonable particulars of any such
Vendor Paid Expense.
Reimbursement of Triggering Event Adjustment Amount
2.11 Within 10 Business Days of the end of the Triggering Event Adjustment
Period, the Vendor will pay to the Purchaser the Triggering Event Adjustment
Amount.
PART 3
REPRESENTATIONS AND WARRANTIES
Representations and Warranties of the Vendor
3.1 The Vendor hereby represents and warrants to the Purchaser as set out in
Schedule 3.1.
Representations and Warranties of the Purchaser
3.2 The Purchaser hereby represents and warrants to the Vendor as set out in
Schedule 3.2.
PART 4
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
AND INDEMNIFICATION
Expiration of Representations, Warranties and Covenants of the Vendor
4.1 Subject to Section 10.5, the representations and warranties and covenants of
the Vendor contained in this Agreement, or in any agreement, instrument or
certificate executed and delivered by the Vendor pursuant hereto, will survive
the Closing and, notwithstanding the Closing, will continue in full force and
effect for the benefit of the Purchaser for a period of 18 months from the
Closing Date other than:
(a) any misrepresentation or breach of warranty under Section 1, Section 2
or Section 3 of Schedule 3.1, or in respect of the payments and indemnities
described under Part 2 and Section 4.3(b) and Section 10.7 which will
survive without limitation;
(b) any misrepresentation or breach of warranty under Section 24 of
Schedule 3.1, which will survive for the period ending 60 Business Days
after the expiry of the period in which the applicable Government Authority
may issue a notice of reassessment to the applicable Target Company in
respect of the taxation year in respect of which the misrepresentation or
breach relates; and
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(c) any misrepresentation or breach of warranty relating to environmental
matters set out in Section 29 of Schedule 3.1, which representations and
warranties will survive for a period of three years from the Closing Date;
and
(d) any misrepresentation or breach of warranty of the Vendor relating to
silviculture in the last sentence of Section 30 of Schedule 3.1, which
representation and warranty will survive for a period of nine months from
the Closing Date;
and Section 4.3(d) will survive until the expiry of the survival period of the
indemnity under Section 4.3(a), (b) or (c) in respect of which the Claim under
Section 4.3(d) is made.
Expiration of the Representations, Warranties and Covenants of the Purchaser
4.2 Subject to Section 10.5, the representations and warranties and covenants of
the Purchaser contained in this Agreement, or in any agreement, instrument or
certificate executed and delivered pursuant hereto, will survive the Closing
and, notwithstanding the Closing, will continue in full force and effect for the
benefit of the Vendor for a period of eighteen months from the Closing Date
other than any misrepresentation or breach of warranty under Section 1 or
Section 3 of Schedule 3.2 or in respect of the payments and indemnities
described under Part 2 and Section 4.3(c), 6.4, 9.8, 9.9, 9.12 and 10.7, which
matters will survive without limitation and Section 4.3(d) will survive until
the expiry of the survival period of the indemnity under Section 4.3(a), (b) or
(c) in respect of which the Claim under Section 4.3(d) is made.
Indemnity
4.3 Each Party (the "Indemnifying Party") will, to the extent not reflected in
the Closing Date Net Worth or otherwise taken into account in determining the
Purchase Price or any other amount payable by the Vendor to the Purchaser
hereunder, indemnify and save harmless the other Party (the "Indemnified Party")
of and from any loss whatsoever suffered by the Indemnified Party arising out
of, under or pursuant to
(a) any misrepresentations by, or breach of any warranty or covenant of,
the Indemnifying Party contained in this Agreement;
(b) in the case of the Vendor, in favour of the Purchaser,
(i) any liabilities of the Target Companies that arise, and any losses
or diminution of value (including reduction or impairment of positive
tax attributes but only to the extent such attributes would otherwise
have been available to the Target Companies after Closing) suffered by
the Target Companies, as a result of the activities of the Finance
Company or in respect of the Finance Company Reorganization; and
(ii) subject to Section 2 of Part 3 of the Disclosure Statement, the
amount, if any, by which
(A) the total amounts paid by any of the Target Companies after
the Closing Date on account of retroactive wages or benefit
entitlements for
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periods ending before the Closing Date pursuant to any collective
agreement that is not in force and effect as at the Closing Date
and which is entered into by the Target Company after the Closing
Date which replaces or extends a collective agreement which
expires or has expired before the Closing Date
exceeds
(B) the Wages and Benefits Accrual;
(iii) the amount, if any, by which
(A) the amount of any anti-dumping and countervailing duties for
periods ending before the Closing Date finally determined by the
applicable Government Authority, without further right of appeal,
to be payable by the Target Companies with respect to the import
of Canadian softwood lumber into the United States
exceeds
(B) the amounts accrued on the books and records of, or deposited
or paid by, the Target Companies in respect of periods ending
before the Closing Date pursuant to anti-dumping and
countervailing orders by the U.S. Department of Commerce with
respect to the import of Canadian softwood lumber into the United
States;
(iv) subject to Section 4.16 and Section 9.9(b) and except to the
extent a liability arises as a result of the Purchaser's breach of
Section 9.11, any liabilities incurred by any of the Target Companies
in connection with the termination of the Phantom Plan other than
(A) any liabilities incurred by any of the Target Companies in
connection with an obligation to make payments to a Participant
(as defined in the Phantom Plan) under the Phantom Plan, and
(B) Taxes that would have been incurred, or become payable, in
connection with the payment of benefits pursuant to the terms of
the Phantom Plan in effect on the Execution Date;
(v) any penalties or interest applicable to any Taxes payable, as a
consequence of the termination of the Phantom Plan, by an employee of
any of the Target Companies participating in the Phantom Plan who has
not died, retired or terminated employment prior to the date of
termination of the Phantom Plan (the "Termination Date") in respect of
any calendar year ending prior to the calendar year in which the
Termination Date occurs, except to the extent that any such liability
arises as a result of the Purchaser's breach of Section 9.11;
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(vi) any Taxes payable by the Target Companies as a consequence of the
termination of the Phantom Plan in respect of any taxation year of the
Target Companies ending prior to the Termination Date, except to the
extent that any such liability arises as a result of the Purchaser's
breach of Section 9.11;
(vii) any Taxes that any of the Target Companies is required to pay as
a result of a determination that any of the expenses that formed part
of the calculation of the Vendor Paid Expenses were not currently
deductible expenses of the Target Companies for the purposes of the
Tax Act;
(viii) any interest or penalties claimed by CRA from the Purchaser as
a consequence of its failure to remit any amount to the Receiver
General as a result of the Purchaser's reliance on a Comfort Letter as
contemplated under Section 2.4(e); and
(ix) any amounts paid by the Target Companies in respect of Taxes for
the period ending on the Closing Date to the extent not reflected on
the Closing Date Balance Sheet;
(c) in the case of the Purchaser, in favour of the Vendor, the amount, if
any, by which
(i) the Wages and Benefits Accrual
exceeds
(ii) the total amounts paid by any of the Target Companies after the
Closing Date on account of retroactive wages or benefit entitlements
for periods ending before the Closing Date pursuant to any collective
agreement that is not in force and effect as at the Closing Date and
which is entered into by the Target Company after the Closing Date
which replaces or extends a collective agreement which expires or has
expired before the Closing Date; and
(d) all actual out-of-pocket costs and expenses (including reasonable legal
and accounting fees) in respect of the foregoing,
except that the obligations of the Indemnifying Party to indemnify the
Indemnified Party pursuant to this Section 4.3 will expire at the end of the
period described in Section 4.1 or Section 4.2, if applicable, unless, before
the expiration of such period, a demand for indemnification (a "Claim") is made
in accordance with this Part 4 and is diligently pursued by the Indemnified
Party against the Indemnifying Party, in which case the obligation of the
Indemnifying Party in respect of the Claim will continue to survive until the
Claim is satisfied or extinguished. For the purposes of Section 4.3(b)(ii)(A)
and Section 4.3(c)(ii) notwithstanding that the amounts of retroactive wages and
benefit entitlements may be specifically allocated under the applicable
collective agreement to a particular period, such amounts will be allocated in
the same proportion that the number of days between the retroactive effective
date of the applicable collective agreement and the Closing Date bears to the
entire term of the collective agreement.
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Limitations On Indemnity
4.4 (a) Subject to Section 4.5, no Claim by the Indemnified Party for indemnity
under Section 4.3 may be made by the Indemnified Party unless:
(i) the amount of an individual Claim exceeds $500,000 (each a
"Threshold Claim");
(ii) the aggregate amount of all Threshold Claims exceeds $5,000,000,
in which case the Indemnified Party will only be liable for the
aggregate amount of all Threshold Claims in excess of $5,000,000, and
(iii) the aggregate amount of all Threshold Claims and all Claims not
subject to the limitations set forth in Section 4.4(a)(i) and Section
4.4(a)(ii) made by the Indemnified Party does not exceed
$1,350,000,000.
(b) No Claim may be made by the Purchaser for any misrepresentation or
breach of warranty of the Vendor if
(i) such misrepresentation or breach has been cured on or before the
Closing Date; or
(ii) the Vendor has made disclosure in Parts 1 or 2 of the Disclosure
Statement or there has been deemed disclosure of the event, condition
or occurrence which would otherwise constitute a misrepresentation or
breach of warranty, on or before the Interim Disclosure Date; or
(iii) the Vendor has made disclosure or there has been deemed
disclosure on or before the Closing Date of the event, condition or
occurrence which would otherwise constitute a misrepresentation or
breach of warranty on or before the Closing Date, if such event,
condition or occurrence which would otherwise constitute a
misrepresentation or breach of warranty was not known by the Vendor as
of the Interim Disclosure Date.
Exceptions to Limitations
4.5 The limitations set forth in Section 4.4(a)(i) and Section 4.4(a)(ii) will
not apply to:
(a) Claims by the Purchaser for misrepresentation or breach of warranty
under Section 1, Section 2, Section 3 or Section 24 of Schedule 3.1;
(b) Claims by the Purchaser under Section 4.3(b);
(c) Claims by the Vendor under Section 4.3(c), Section 6.4, Section 9.8,
Section 9.9 or any breach of Section 9.12;
(d) Claims by the Vendor for misrepresentation or breach of warranty under
Section 1 or Section 3 of Schedule 3.2; or
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(e) Claims by the Vendor or the Purchaser for the breach by the other Party
of any of its obligations to make payments hereunder other than pursuant to
an indemnity.
No Special Damages
4.6 No Indemnifying Party will have any obligation to indemnify and save
harmless the Indemnified Party for consequential damages, special damages,
incidental damages, indirect damages, lost profits, unrealized expectations or
similar items.
Notice of Claim
4.7 In the event that an Indemnified Party will become aware of any information,
facts or circumstances that could reasonably form the basis of a Claim by the
Indemnified Party hereunder, the Indemnified Party will promptly, but in each
case no later than 15 Business Days after becoming so aware, give notice thereof
to the Indemnifying Party. If, through no fault of the Indemnifying Party, the
Indemnifying Party does not receive such notice in time to effectively contest
the determination of any potential liability, then the liability of the
Indemnifying Party to the Indemnified Party under this Part 4 will be reduced by
the amount of any loss incurred by the Indemnifying Party resulting from the
Indemnified Party's failure to give such notice on a prompt basis. Such notice
will specify whether the potential liability arises as a result of a claim by a
Person against the Indemnified Party (a "Third Party Claim") or whether the
claim does not so arise (a "Direct Claim"), and will also specify with
reasonable particularity (to the extent that the information is available) the
factual basis for the claim and the amount of the claim, if known.
Direct Claims
4.8 Following receipt of notice from the Indemnified Party of a Direct Claim,
the Indemnifying Party will have 45 Business Days to make such investigation of
the Direct Claim as it considers necessary or desirable. For the purpose of such
investigation, the Indemnified Party will make available to the Indemnifying
Party the information relied upon by the Indemnified Party to substantiate the
Direct Claim, together with all such other information as the Indemnifying Party
may reasonably request. If both Parties agree at or prior to the expiration of
such period (or any mutually agreed upon extension thereof) to the validity and
amount of such Direct Claim, the Indemnifying Party will immediately pay to the
Indemnified Party the full agreed upon amount of the Claim, failing which the
matter will be determined by a court of competent jurisdiction.
Control of Third Party Claims
4.9 With respect to any Third Party Claim, the Indemnifying Party will have the
right, at its expense, to participate in or assume control of the negotiation,
settlement and defence of the Third Party Claim. If the Indemnifying Party
elects to assume such control, the Indemnified Party will have the right to
participate in the negotiation, settlement and defence of such Third Party Claim
and to retain counsel to act on its behalf, provided that the fees and
disbursements of such counsel will be paid by the Indemnified Party. If the
Indemnifying Party, having elected to assume such control, thereafter fails to
defend the Third Party Claim within a reasonable time, the Indemnified Party
will be entitled to assume such control, and the Indemnifying Party will be
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bound by the results obtained by the Indemnified Party with respect to such
Third Party Claim. At any time after the Indemnifying Party has assumed control
of a Third Party Claim under this Section 4.9, the Indemnified Party may assume
exclusive control of the Third Party Claim and the Indemnifying Party will
thereupon be released by the Indemnified Party from any liability with respect
thereto with no further action required by the Parties.
Settlement of Third Party Claims
4.10 Provided that notice has been duly given in accordance with Section 4.7, if
the Indemnifying Party fails to assume control of the defence of any Third Party
Claim, the Indemnified Party will have the exclusive right to contest, settle or
pay the amount claimed. If the Indemnifying Party assumes control of the
negotiation, settlement or defence of any Third Party Claim, the Indemnifying
Party will not settle any Third Party Claim without the written consent of the
Indemnified Party, which consent will not be unreasonably withheld or delayed;
provided, however, that the liability of the Indemnifying Party will be limited
to the proposed settlement amount if any such consent is not obtained for any
reason.
Cooperation
4.11 The Indemnified Party and the Indemnifying Party will cooperate fully with
each other with respect to Third Party Claims and will keep each other advised
with respect thereto (including supplying copies of all relevant documentation
promptly as it becomes available). The Indemnified Party will provide to the
Indemnifying Party full and complete disclosure and complete access to and right
of inspection, by the Indemnifying Party's representatives, of all documents and
records in the possession or control of the Indemnified Party relating to the
subject matter of any Claim.
Subrogation
4.12 In the event that an Indemnified Party has a right of recovery against any
third party with respect to any Third Party Claim or Direct Claim in connection
with which a payment is made to such Indemnified Party by an Indemnifying Party,
then:
(a) such Indemnifying Party will, to the extent of such payment, be
subrogated to all of the rights of recovery of such Indemnified Party
against such third party with respect to such Third Party Claim or Direct
Claim; and
(b) such Indemnified Party will execute all documents reasonably required
and take all action necessary to secure such rights, including the
execution of such documents as are reasonably necessary to enable such
Indemnifying Party to bring suit to enforce such rights.
Claims to be Net of Insurance and Net Tax Consequences
4.13 The amount of any Claim of any Indemnified Party will be determined after
taking into account any insurance proceeds and any other amounts (including
Taxes) recovered from other Persons in respect of the subject of such Claim and
the present value of related net Tax consequences (including Tax credits and
deductions), using a discount rate that is reflective
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of the degree of uncertainty relating to such Tax consequences and the
then-prevailing level of interest rates (such discount rate to be agreed between
the Purchaser and the Vendor within 10 Business Days, failing which to be
determined by the Arbitrator pursuant to Section 2.8). The Indemnified Party
will account to the Indemnifying Party for any insurance proceeds and other
amounts recovered (other than Taxes and Tax benefits) relating to a Claim which
are recovered or realized by the Indemnified Party subsequent to the
determination of that Claim as provided herein, to the extent that such Claim
has been satisfied in an amount which did not reflect any subsequently recovered
or realized amount. The Indemnified Party will use its commercially reasonable
efforts to obtain such insurance proceeds, other amounts recovered and Tax
consequences.
Additional Provisions for Environment Matters
4.14 Any Claim by the Purchaser for misrepresentation or breach of warranty
under Section 29 of Schedule 3.1 with respect to any investigation, remediation
or containment of Contaminants that are present on or before the Closing Date
(each, a "Remediation"), in any environmental media on or under or migrating
from any property owned, leased, licensed, used or controlled by any Target
Company on or before the Closing Date will be subject to the following
additional provisions and limitations:
(a) The Vendor will only be required to indemnify and save harmless the
Purchaser:
(i) if the Remediation is required pursuant to, or in order to avoid a
fine or penalty under, an applicable Environmental Law as at the Due
Diligence Satisfaction Date;
(ii) to the extent that such Remediation is conducted using reasonably
cost effective methods that are reasonably available for such
Remediation consistent with applicable Environmental Law taking into
account the adverse impact of involuntary downtime for operations
being conducted at the site of the Remediation; and
(iii) to the extent that the losses by the Purchaser incurred in
connection with a Remediation are in excess of the losses that would
be incurred for a Remediation according to the Applicable Remediation
Standard, the Vendor will have no obligation to indemnify the
Purchaser for such excess losses.
(b) If the costs of Remediation that is subject to an indemnity by the
Vendor hereunder are increased due to an act or omission (after the
Closing) by a Person (other than the Vendor or an agent, representative or
contractor of the Vendor), the Vendor will not be responsible for any such
increase in costs incurred. The Vendor will not be responsible for any
increased costs or increased losses to the extent they arise by reason of a
material change in the operations of the Target Companies immediately prior
to the Closing Date.
(c) The Vendor will have the right to control the management of any
Remediation at the relevant property subject to indemnification by the
Vendor pursuant to this Agreement, including the control of discussions
with Government Authorities relating to
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the scope of any such Remediation as further described in this Section
4.14. The Vendor will notify the Purchaser, within 15 Business Days of
receipt of notice of the Purchaser's Claim for indemnification for such
matter, that (i) it intends to undertake such control or (ii) more
information is needed from the Purchaser before the Vendor can reasonably
determine that the Purchaser's Claim is subject to indemnification pursuant
to this Agreement. The Purchaser will promptly respond to such requests for
information and, within 10 Business Days of receipt of such information,
the Vendor will notify the Purchaser as to whether it will control the
Remediation. Prior to a determination by the Vendor that it will control
any Remediation under this Section 4.14, the Purchaser will take only those
actions necessary to comply with applicable Environmental Laws to address
conditions that pose an immediate environmental or health risk or other
immediate and material risk.
(d) In controlling a Remediation pursuant to this Section 4.14, the Vendor
will
(i) retain a qualified independent environmental consultant;
(ii) comply with all applicable Laws, including all applicable
Environmental Laws;
(iii) provide copies to the Purchaser of all notices, correspondence,
draft reports, submissions, work plans and final reports and will
provide the Purchaser a reasonable opportunity (at the Purchaser's own
expense) to comment on any submissions the Vendor proposes to deliver
or submit to the appropriate Government Authority prior to said
submission.
The Purchaser may, at its own expense, hire its own consultants,
contractors, lawyers or other professionals to monitor the Remediation,
including any field work undertaken by the Vendor, and the Vendor will
provide the Purchaser with the results of all such field work.
Notwithstanding the above, the Purchaser will not take any actions that
will unreasonably interfere with the Vendor's control of the Remediation.
The Vendor will undertake any such work required herein in a manner
designed to minimize any disruption, to the greatest extent reasonably
possible, with the conduct of operations of the Purchaser. The Purchaser
will allow the Vendor reasonable access to conduct any of the work
contemplated herein and will fully cooperate with the Vendor in the
performance of the Remediation, including providing the Vendor with
reasonable access to employees and documents as necessary.
(e) If the Vendor declines to control a Remediation hereunder, the
Purchaser will be entitled to control thereof. In controlling a Remediation
pursuant to this Section 4.14, the Purchaser will
(i) retain a qualified independent environmental consultant;
(ii) comply with all applicable Laws, including all applicable
Environmental Laws; and
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(iii) provide copies to the Vendor of all notices, correspondence,
draft reports, submissions, work plans and final reports and will
provide the Vendor a reasonable opportunity (at the Vendor's own
expense) to comment on any submissions the Purchaser proposes to
deliver or submit to the appropriate Government Authority prior to
said submission.
The Vendor may, at its own expense, hire its own consultants, contractors,
lawyers or other professionals to monitor the Remediation, including any
field work undertaken by the Purchaser, and the Purchaser will provide the
Vendor with the results of all such field work. Notwithstanding the above,
the Vendor will not take any actions that will unreasonably interfere with
the Purchaser's performance of the Remediation. The Vendor's decision to
allow the Purchaser to control the Remediation hereunder will not limit or
expand any obligation the Vendor may have to indemnify the Purchaser
pursuant to this Agreement.
Additional Provisions for Tax Matters
4.15 Notwithstanding any other provision in this Agreement, any Claim by the
Purchaser for misrepresentation or breach of warranty under Section 24 of
Schedule 3.1 (a "Tax Claim") will be subject to the following additional
provisions and limitations:
(a) the Purchaser will give prompt notice to the Vendor of any proposed
assessment or reassessment, notice of assessment, or notice of
re-assessment received from a Tax Authority or any other matter that may
give rise to a Tax Claim (each, a "Tax Issue") and will not enter into
discussions or negotiations with any applicable Government Authority
administering Taxes (each, a "Tax Authority") with respect to, or settle or
compromise, any Tax Issue without the Vendor's consent, not to be
unreasonably withheld or delayed;
(b) the Vendor will, within 20 Business Days after the day of receipt of
notice from the Purchaser under Section (a) of a Tax Issue or, if later, at
least five Business Days before the time that any Taxes in respect of which
a Tax Claim by the Purchaser against the Vendor would arise ("Excess
Taxes") are due, pay to the Purchaser an amount equal to all Excess Taxes
owing, or alleged by the Tax Authority to be owing, as a result of the Tax
Issue but not exceeding the amount of the related Tax Claim. The Vendor
will be entitled to forward amounts directly to the Tax Authority on behalf
of the Vendor on account of the Tax Issue. The Purchaser will preserve for
the Vendor any rights of appeal or contestation related to the Tax Issue
available under applicable Law;
(c) the Vendor will have the right, at its expense, to appeal any Tax Issue
and to represent the interests of the Target Companies in any
administrative or court proceeding (each, a "Proceeding") relating to the
taxation years of any of the Target Companies ending on or before the
Closing or with respect to any matter that may give rise to a Tax Claim and
to control the conduct of such Proceeding, including discussions,
negotiations, settlement, compromise or other disposition thereof except
that the Vendor may not, without the written consent of the Purchaser, not
to be unreasonably withheld or delayed, settle or compromise Taxes or Tax
Issues in respect of any matter that may affect liability for Taxes of any
of the Target Companies for any period following the Closing;
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(d) upon final resolution of such Proceeding, the Purchaser will pay to the
Vendor the amount, if any, by which the amount paid by the Vendor under
Section 4.15(b) exceeds the amount of the Tax Claim as finally determined,
plus the after tax amount of interest or other amount received by, or
credited to, a Target Company in respect of such amount;
(e) the Vendor's obligation to indemnify the Purchaser for Excess Taxes
will not extend to Excess Taxes that arise as a direct result of the
Purchaser or any of the Target Companies, at any time after the Closing
Date,
(i) filing any amended return of Taxes;
(ii) the making of elections or designations other than at the request
of the Vendor under Section 5.13; or
(iii) signing any waiver or other document or instrument extending the
period within which a Tax Authority may issue a notice of assessment
or reassessment,
in either case for any taxation year of the Target ending on or before the
Closing;
(f) the Purchaser will, and will cause the Target Companies to, cooperate
with any reasonable requests of the Vendor for information and assistance
in relation to any Tax Issue or Proceeding and permit the Vendor during
normal business hours to inspect and make copies, at its expense, of
relevant books and records, and provide cooperation, including attendance
at the offices of the relevant Tax Authority or at any appeal or other
Proceeding related to any Tax Issue (and the Purchaser will have the right
to be represented, at its expense, at all Proceedings) and make any
objection, appeal or other action relating to a Tax Issue that the Vendor
requests, acting reasonably. The Purchaser agrees to cause the Target
Companies to execute or cause to be executed any document necessary,
reasonable and appropriate to enable the Vendor to so defend, object,
oppose or contest;
(g) the Vendor is not responsible for any payments that would otherwise be
payable hereunder to the extent the liability for Taxes is attributable to
the refusal, delay or neglect of the Purchaser to observe and perform its
obligations hereunder.
Limitation re Applicable Plans
4.16 (a) The Purchaser acknowledges and agrees that notwithstanding Section 3.1
and Schedule 3.1, but subject to Section 4.16(b), the Vendor will not have
any obligation or liability to the Purchaser or any of the Target Companies
or any Plan Beneficiary with respect to any funding deficit, future funding
or contribution obligation or other unfunded obligation under any
Applicable Plan.
(b) Section 4.16(a) will not relieve the Vendor of its obligations under
Section 5.7.
(c) In this Section 4.16,
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(i) "Applicable Plan" means an Employee Plan included in the table
showing the funding or financial status of the long-term pension and
benefit plans as at December 31 included in Note 9 of the Financial
Statements; and
(ii) "Plan Beneficiary" means any current, former or future employee
of any Target Company or any predecessor thereto who may become, is or
was, entitled to a payment or benefit under any Employee Plan and any
other Person claiming through such current, former or future employee.
Exclusive Remedy
4.17 The provisions of this Part 4 will be the Parties' exclusive remedies with
respect to any claim for breach of any covenant, representation, warranty or
other provision of this Agreement or any agreement, instrument or certificate
executed and delivered pursuant to this Agreement (other than a claim for
specific performance or injunctive relief) with the intent that all such claims
will be subject to the limitations and other provisions contained in this Part
4.
PART 5
COVENANTS OF THE PARTIES
Investigation of Business
5.1 During the period from the date hereof to the Closing Date, subject
to Section 5.2, the Vendor will:
(a) ensure that the Target Companies will provide reasonable access to, and
permit the Purchaser, through its representatives, to make such
investigation of, the Business and the Target Companies and their
respective assets, liabilities, condition (financial or otherwise), claims,
obligations, operations, results of operations or legal or regulatory
status or affairs as the Purchaser reasonably deems necessary or advisable;
(b) ensure that the Target Companies will produce for inspection and
provide copies to the Purchaser of
(i) the documents or instruments referred to in the body of, or in any
of the attachments to, this Agreement, or in the Disclosure Statement,
(ii) the documents, instruments, databases, books and records relating
to the matters described in Section (a),
(iii) other information that, in the reasonable opinion of the
Purchaser or its representatives, is required in order to make an
examination of such matters; and
(iv) interim quarterly financial statements for any quarter ending
during the Interim Period as reviewed by the Target's auditors to the
extent that any such review is requested and undertaken at the
Purchaser's expense;
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(c) ensure that the Purchaser and its representatives will have reasonable
access to the management and other employees and consultants of the Target
Companies for the purposes described in Section (a) and Section (b) and,
subject to applicable Law, for the purposes of planning for post-Closing
management and workforce integration;
during normal business hours and in a manner that is not disruptive to the
conduct of the business and affairs of the Target Companies.
Conditions of Disclosure
5.2 Neither the Vendor nor the Target Companies will have the obligation to
disclose or otherwise make available to the Purchaser any information pursuant
to Section 5.1 where such disclosure would result in the loss of privilege
(except where the potential harm of losing such privilege is not material to the
Vendor or the Target Companies), be contrary to Law, including the Competition
Act, or result in the breach of any material agreement to which any Target
Company or the Vendor is a party or by which it is bound, except that the Vendor
will take reasonable commercial steps to provide disclosure in such form as may
be permitted under such Laws or agreements, including reviews by third parties
under conditions that will permit disclosure. All disclosure under Section 5.1
will be subject to the Confidentiality Agreement. Except for the purposes of
facilitating and obtaining Canadian Competition Satisfaction and the Designated
Regulatory Approvals, seeking the satisfaction described in Section 7.1(h), or
undertaking searches of publicly available information, the Purchaser will not
make any enquiries of any Government Authorities without the prior written
consent of the Vendor, not to be unreasonably withheld or delayed. To the extent
reasonably practicable and, subject to the foregoing, the Parties will
coordinate and will regularly report on any enquiries made by either of them to
Government Authorities with respect to the transactions contemplated under this
Agreement.
Personal Information
5.3 Each Party agrees that it will comply with Applicable Privacy Laws in the
course of collecting, using and disclosing Personal Information in connection
with the transactions contemplated by this Agreement. The Purchaser will
collect, use and disclose Personal Information prior to Closing only for
purposes related to the transactions contemplated by this Agreement and will
only use Personal Information necessary to determine whether to proceed with
such transactions in connection with its due diligence review under Section 5.1
and, if it does not elect to terminate this Agreement as provided herein, for
the completion of such transactions. If the Purchaser proceeds with the
transactions contemplated by this Agreement, the Purchaser agrees that Personal
Information obtained as a result of such transactions will not be used or
disclosed following the Closing for purposes other than for which such Personal
Information was collected, except with the consent of the individuals to whom
such Personal Information relates or as permitted or required by applicable Law.
The Purchaser will not disclose Personal Information to any Person other than to
its employees, officers, consultants and advisors ("Representatives") who are
evaluating and advising on the transactions contemplated by this Agreement. The
Purchaser will protect and safeguard the Personal Information against
unauthorized collection, use or disclosure, as provided by Applicable Privacy
Laws. The Purchaser will cause its Representatives to observe the terms of this
Section 5.3 and to protect and safeguard Personal Information in their
possession. If the Vendor or the Purchaser terminates
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this Agreement as provided herein, the Purchaser will promptly deliver to the
Vendor all Personal Information collected under Section 5.1 or otherwise in
connection with this Agreement, including all copies, reproductions, summaries
or extracts in its possession or in the possession of any of its
Representatives.
Disclosure Statement
5.4 (a) The Vendor will promptly make reasonable inquiries and investigations
in order to identify any exceptions to the Target R&W's that are not
already included in the Disclosure Statement (the "Part 2 Exceptions") and
on or before the Interim Disclosure Date, will revise and deliver to the
Purchaser the Disclosure Statement by including the Part 2 Exceptions
therein.
(b) If, after the Interim Disclosure Date and before the Closing Date (the
"Final Disclosure Date"), the Vendor becomes aware of any fact or condition
that causes any of the representations and warranties of the Vendor set out
in Schedule 3.1 (as modified by Parts 1 and 2 of the Disclosure Statement
or this Section 5.4(b)) to be untrue or incorrect, the Vendor will promptly
notify the Purchaser of such facts or conditions ("Vendor Closing
Exceptions").
Notwithstanding anything to the contrary contained herein,
(i) no such disclosure made before the Interim Disclosure Date, and
(ii) no such disclosure made between the Interim Disclosure Date and
the Final Disclosure Date of any fact or condition which was not known
by the Vendor on the Interim Disclosure Date
will constitute a misrepresentation or breach by the Vendor of any of its
representations and warranties under Schedule 3.1.
(c) Part 2 of the Disclosure Statement and any notice given by the Vendor
to the Purchaser under Section 5.4(b) will include particulars that are
sufficient to permit the Purchaser to identify the subject matter thereof
and each exception to a representation or warranty will identify the
specific representation or warranty of which it is an exception.
Notice of Certain Matters
5.5 The Purchaser will notify the Vendor if it has acquired knowledge of any
inaccuracy in, or breach of, any representation, warranty, covenant or agreement
of the Vendor set forth in this Agreement, or any agreement, instrument or
certificate executed and delivered by the Vendor pursuant to this Agreement (as
modified by Parts 1 and 2, as applicable, of the Disclosure Statement or
pursuant to Section 5.4(b)), promptly upon acquiring knowledge of any such
matter. Any such matter of which the Purchaser becomes aware on or before the
Interim Disclosure Date will be deemed disclosed by the Vendor in Part 2 of the
Disclosure Statement and will not be subject to the Vendor's obligations of
indemnity under Section 4.3. Any such matter of which the Purchaser becomes
aware after the Interim Disclosure Date and on or before the Final Disclosure
Date (the "Purchaser Closing Exceptions") will not be subject to the Vendor's
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obligations of indemnity under Section 4.3 except as it relates to Section 24 of
Schedule 3.1 or except if such matter was within the knowledge of the Vendor on
the Interim Disclosure Date. As used in this Section 5.5, "knowledge" with
respect to the Purchaser will mean the knowledge of any officer of the
Purchaser. The Purchaser will use commercially reasonable efforts to give the
notice described in Section (ii) of the definition of the "Interim Disclosure
Date" to the Vendor not less than four Business Days and in any event, will
provide such notice not less than one full Business Day before the day described
in Section (ii) of the definition of the "Due Diligence Satisfaction Date".
Preliminary Prospectus
5.6 The Purchaser will give the Vendor at least four Business Days' notice
before filing any preliminary prospectus in connection with the Purchaser's
financing contemplated by Section 7.1(f). The Purchaser will also provide the
Vendor a reasonable opportunity to review and comment on such prospectus during
its preparation. Subject to Section 5.2, the Vendor will, and will cause the
Target to, provide all such information concerning the Target Companies as the
Purchaser may reasonably require in the preparation of the prospectus and
authorize the use of such information in the prospectus except that neither the
Vendor nor any Target Company will have any liability to the Purchaser with
respect to any such information.
Conduct Prior to Closing (Target)
5.7 Without in any way limiting any other obligations of the Vendor hereunder,
except as contemplated hereunder or in connection with the Finance Company
Reorganization or any Permitted Payment, or with the prior written consent of
the Purchaser, not be unreasonably withheld or delayed, during the Interim
Period:
(a) Conduct of Business - the Vendor will cause the Target Companies to
conduct the Business and the operations and affairs of the Target Companies
only in the ordinary and normal course of business consistent with their
past practice, and the Vendor will not permit any Target Company to enter
into any transaction or refrain from doing any action that, if effected
before the date of this Agreement, would constitute a breach of any
representation, warranty, covenant or other obligation of the Vendor
contained herein, or would constitute a Prohibited Activity;
(b) Continuance of Insurance - the Vendor will cause the Target Companies
to use their commercially reasonable efforts to continue and maintain in
full force and effect all of the Target Companies' policies of insurance or
renewals thereof now in effect and will give all notices and present all
claims under all policies of insurance in a due and timely fashion;
(c) Permitted Payment - the Vendor will use its good faith efforts to cause
the Target not to make any Permitted Payments which would result in a Net
Worth Negative Adjustment Amount;
(d) Maintenance of Business Assets - the Vendor will cause the Target
Companies to use their commercially reasonable efforts to maintain the
Business Assets to their current condition consistent with past practice of
the Target Companies;
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(e) Discharge Liabilities - the Vendor will cause the Target Companies to
pay and discharge the liabilities of the Target Companies in the ordinary
course of their business in accordance and consistent with past practice of
the Target Companies, except those contested in good faith by any Target
Company;
(f) Corporate Action - the Vendor will use its commercially reasonable
efforts to take and cause the Target to take, all necessary corporate
action, steps and proceedings to complete the transfer of the Purchased
Share to the Purchaser and to cause all necessary meetings of directors and
shareholders of the Target and directors of the Vendor to be held for such
purpose;
(g) Provide Assistance - the Vendor will, and will cause the Target
Companies and their respective counsel and auditors to provide, to the
Purchaser such information and financial data concerning the Target as is
set out in Schedule 5.7(g) on or before the dates set out in such schedule;
(h) Satisfy Conditions - the Vendor will use its commercially reasonable
efforts, and will cause the Target Companies to use their commercially
reasonable efforts, to satisfy the conditions contained in Section 8.2 and
Section 8.3;
(i) Labour Negotiations - the Vendor will cause the Target, to provide to
the Purchaser, in a timely manner from time to time, all relevant
information concerning any ongoing labour negotiations.
Delivery of Authorizing Documentation
5.8 Each Party will, at Closing, deliver to the other Party a certified copy of
a resolution of its board of directors authorizing such Party's execution,
delivery and performance of this Agreement.
Purchaser's Conduct Prior to Closing
5.9 Without in any way limiting any other obligations of the Purchaser
hereunder, during the Interim Period:
(a) Corporate Action - the Purchaser will use its commercially reasonable
efforts to take and cause its Affiliates to take all necessary corporate
action, steps and proceedings to complete the purchase of the Purchased
Share from the Vendor;
(b) Satisfy Conditions - the Purchaser will use its commercially reasonable
efforts to satisfy the conditions contained in Section 8.1 and Section 8.3;
and
(c) Reasonable Efforts regarding Certain Termination Rights - the Purchaser
will use its commercially reasonable efforts to (i) obtain the financing
commitments contemplated by Section 7.1(f) and (ii) obtain Canadian
Competition Satisfaction and the satisfaction contemplated by
Section 7.1(h), on or before the dates specified in such sections.
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Competition Act Filing
5.10 The Parties will
(a) file, on a confidential basis, with respect to the transaction
contemplated by this Agreement, not later than 30 days after the Execution
Date, a short-form pre-merger notification (which may be filed in separate
parts) pursuant to and in compliance with the Competition Act and a request
for advice from the Commissioner of Competition that she does not intend to
make application under Section 92 of the Competition Act with respect to
the transactions proposed under this Agreement; and
(b) promptly furnish any additional information requested of it under such
Act.
If the Vendor fails to file its portion of the notification within the period
contemplated herein, the Purchaser's obligation to file will be extended to the
date on which the Vendor completes such filing.
Investment Canada Act Filing
5.11 The Purchaser will file, on a confidential basis, with respect to the
transaction contemplated by this Agreement, within 20 days after the Execution
Date, an application for review pursuant to Section 17 of the Investment Canada
Act and promptly furnish any additional information required of it under that
Act and the Vendor will, and, subject to Section 5.2, will cause the Target
Companies to, promptly furnish to the Purchaser any information concerning the
Target Companies that is reasonably requested by the Purchaser.
Collection of Pre-Closing Date Duty Refunds
5.12 The Purchaser will cause the Target Companies to use their commercially
reasonable efforts, in a manner consistent with the Purchaser's own efforts, to
maximize the amount of, and collect, refunds, returns, credits or reimbursement
in whole or in part to the Target Companies of Duties paid by any of them
without regard for whether they relate to periods before or after the Closing
Date, including seeking administrative reviews by the applicable Government
Authority of the relevant entries. If any Pre-Closing Date Duty Refunds are
received by any of the Target Companies after the Closing Date, the Purchaser
may deduct from the Duty Refund Amount otherwise payable in respect thereof an
amount that will result in the total amounts deducted under this Section 5.12 to
such date being equal to the Duty Expense Amount calculated as at the date the
Pre-Closing Date Duty Refunds are received by the Target Company. Nothing in
this Section 5.12 will in any way limit the Purchaser's right to pursue any
course of action, or to enter into any negotiation, settlement or compromise,
with respect to the subject matter of the dispute giving rise to the payment of
Duties, or any matter related thereto, that the Purchaser determines is in its
interest to do as long as it does not intentionally discriminate between Duties
paid by the Target Companies before the Closing Date and those paid after the
Closing Date or between Duties paid by the Purchaser or any of its Affiliates
and those paid by any of the Target Companies in respect of lumber produced in
the same Province and otherwise where recovery of such Duties is based on
substantially similar circumstances.
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Elections and Designations
5.13 After the Closing, the Purchaser will cause the Target, at the request and
expense of the Vendor, to prepare and file an election under subsection 93(1) of
the Tax Act in respect of the Finance Company Reorganization designating such
amounts as the Vendor will specify and subject to the consent of the Purchaser
(which consent is not to be unreasonably withheld) to prepare and file any such
other elections or designations with respect to Taxes, and take all necessary
corporate action, steps or proceedings necessary or desirable as requested by
the Vendor, in connection with the Finance Company Reorganization.
PART 6
PRE-CLOSING MATTERS
Loss Before Closing
6.1 If, during the Interim Period, the Vendor becomes aware of any loss of, or
destruction or damage to, any of the Business Assets, or any third party claims
against any Target Company for which any insurance policy held by the Vendor
provides coverage of such Target Company, the Vendor will promptly advise the
Purchaser and, at the expense of the Target Company, but subject to Section 6.3
and Section 6.4,
(a) if it is able to do so in a commercially reasonable manner before
Closing, make and, until Closing, diligently pursue a claim under the
policy in respect of the destruction, loss, damage or claim or, if
applicable, defend the third party claim; and
(b) hold any insurance proceeds received by the Vendor before or after
Closing in respect of the destruction, loss, damage or claim for the
benefit of the Target Company, and pay such proceeds promptly on receipt to
the Target Company after deducting any amounts owed to it under Section 6.3
or Section 6.4.
After Closing, the Vendor will, at the expense of the Target Company, provide
its reasonable cooperation to the Target Company in the pursuit of any claim.
Claim After Closing
6.2 If, during the Interim Period, any loss of, or destruction or damage to, any
of the Business Assets occurs or a third party claim is made against any Target
Company for which any insurance policy held by the Vendor provides coverage for
the Target Company and for which no claim is filed before Closing as
contemplated by Section 6.1, the Vendor will, at the expense of the Target
Company, but subject to Section 6.3 and Section 6.4,
(a) cooperate with the Target Company in filing a claim under the policy in
respect of the destruction, loss, damage or claim, and in the pursuit of
the claim, and, if applicable, in defending the third party claim, and
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(b) hold any insurance proceeds received by the Vendor in respect of the
destruction, loss, damage or claim for the benefit of the Target Company
and pay such proceeds promptly on receipt to the Target Company after
deducting any amounts owed to it under Section 6.3 or Section 6.4.
After Closing, the Vendor will, at the expense of the Target Company, provide
its reasonable cooperation to the Target Company in the pursuit of the claim.
Reimbursement
6.3 If any third party claim is made under policies of insurance as contemplated
by Section 6.1 or Section 6.2 and any of the Target Companies and the Vendor
(including any of its subsidiaries) is a party to the third party claim, any
insurance proceeds recovered in respect of the claim will be applied, firstly,
to reimburse the Vendor for the costs of pursuing the claim or defending any
third party action and secondly, to any claims against or suffered by each of
the Target Company and the Vendor on a pro rata basis in proportion to the
amount of their respective claims.
Indemnification
6.4 In respect of any claim contemplated by Section 6.1 or Section 6.2,
(a) the Purchaser will ensure that the affected Target Company indemnifies
and saves harmless the Vendor from and against any and all claims suffered,
incurred or sustained in making or pursuing the claim,
(b) the Vendor will not be required to take any step or action involving
the expenditure of funds or exposure to liability unless it is indemnified
to its satisfaction (both as to the identity and creditworthiness of the
indemnifying party and the scope and terms of the indemnity), and
(c) the Vendor will not be required to take any step or action that is
reasonably expected to involve significant commitments of time by its
employees unless it is compensated for the loss of time of such employees
and the time expenditure is convenient to it in relation to the employee's
duties.
Notice of Loss
6.5 If, during the Interim Period,
(a) any loss of, or destruction or damage to, any of the Business Assets
occurs that, after giving effect to the receipt of insurance proceeds
reasonably expected to be obtained by a Target Company as a result of the
event, would reasonably be expected to have a Material Adverse Effect
(including any loss, destruction or damage described in Section 6.1 that
has such effect and assuming for the purposes of determining whether a
Material Adverse Effect has occurred, that the insurance proceeds include
an amount equal to insurance deductibles that apply to policies of
insurance of the Purchaser in respect of comparable assets) and the
applicable Business Assets cannot be repaired, replaced or restored by the
Closing Date by assets of equal value and utility; or
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(b) any part of the Business Assets is seized by a Government Authority
(which, for greater certainty, does not include the expropriation
implemented in March, 2003 under the Forest Revitalization Act (British
Columbia)) and, after giving effect to the receipt of proceeds of taking
reasonably expected to be obtained by the affected Target Company as a
result of the event, such seizure would reasonably be expected to have a
Material Adverse Effect and the applicable Business Asset cannot be
replaced by the Closing Date by assets of equal value and utility,
then, in either case, the Vendor will forthwith give to the Purchaser notice,
including reasonable particulars, thereof including particulars of any insurance
proceeds or proceeds of taking expected to be obtained by such Target Company.
Purchaser's Option
6.6 The Purchaser will have the option, exercisable by notice given within five
Business Days after the day on which the Purchaser receives notice of any loss,
destruction, damage or seizure under Section 6.5, to
(a) complete the transactions contemplated hereby without reduction of the
Purchase Price, in which event all proceeds of insurance or compensation
for destruction, loss, damage or seizure of any of the Business Assets will
be paid directly to the affected Target Company or, if received by the
Vendor will be paid by the Vendor to such Target Company promptly on
receipt; or
(b) terminate this Agreement and not complete the transactions contemplated
hereby and in such event the Vendor and the Purchaser will be released from
all obligations hereunder, other than their obligations under Section 10.2
and Section 10.6.
Closing Postponed
6.7 If the Vendor gives notice pursuant to Section 6.6(a) later than five
Business Days before the Closing Date, the Closing Date will be postponed until
five Business Days after the day on which such notice is given by the Vendor but
not later than the latest date on which the Closing Date is otherwise
contemplated to occur.
No Solicitation
6.8 Until the termination of this Agreement, the Vendor will not, directly or
indirectly, participate in any discussions or negotiations with any third party
with a view to the possible disposition to any Person (other than the Purchaser
hereunder) of
(a) any Business Assets or any interest therein (other than in the ordinary
course of business) having a value in excess of $500,000,
(b) the Purchased Share, or
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(c) except for the Finance Company Reorganization, other equity securities
(or securities convertible into equity securities) issued by any Target
Company (other than in the case of the Subsidiaries, to the Target).
PART 7
TERMINATION OF AGREEMENT
Termination
7.1 This Agreement may be terminated, and the transactions contemplated hereby
may be abandoned, as follows:
(a) by mutual written consent of the Purchaser and the Vendor, at any time
prior to the Closing Date;
(b) by the Purchaser, by giving notice to the Vendor on or before the Due
Diligence Satisfaction Date if it is not satisfied, acting bona fide and in
its reasonable discretion, with its due diligence review pursuant to
Section 5.1;
(c) by the Purchaser, by giving notice to the Vendor on the Due Diligence
Satisfaction Date if (i) the representations and warranties of the Vendor
contained in this Agreement, as modified by Parts 1 and 2 of the Disclosure
Statement and Section 5.4(b), are not true and correct on the Due Diligence
Satisfaction Date, with the same force and effect as if such
representations and warranties were made at, and as of, such time, except
where the failure to be so true and correct would not, individually or in
the aggregate, have or be reasonably likely to have a Material Adverse
Effect; or (ii) a certificate of a senior officer of the Vendor in the form
attached as Schedule 7.1(c) (in the officer's corporate rather than
individual capacity) dated the Due Diligence Satisfaction Date has not been
delivered to the Purchaser before noon (Vancouver time) on the Due
Diligence Satisfaction Date (except that, for the purposes of this Section
7.1(c), any of the representations and warranties that are qualified by
reference to materiality standards, including "material respects" or "would
reasonably be expected to have a Material Adverse Effect" or words to like
effect, will be considered not to be so qualified);
(d) by the Vendor, by giving notice to the Purchaser on the Due Diligence
Satisfaction Date if (i) the representations and warranties of the
Purchaser contained in this Agreement are not true and correct in all
material respects on the Due Diligence Satisfaction Date, with the same
force and effect as if such representations and warranties were made at and
as of such time; or (ii) a certificate of a senior officer of the Purchaser
in the form attached as Schedule 7.1(d) (in the officer's corporate rather
than individual capacity) dated the Due Diligence Satisfaction Date has not
been delivered to the Vendor before noon (Vancouver time) on the Due
Diligence Satisfaction Date;
(e) by the Purchaser, by giving notice to the Vendor on or before the Due
Diligence Satisfaction Date if there will have occurred on or before the
Due Diligence Satisfaction
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Date an event or circumstance that has, or such events or circumstances
collectively have, a Material Adverse Effect;
(f) by the Purchaser, by giving notice to the Vendor on or before the
Financing Satisfaction Date, if the Purchaser has not obtained financing
commitments acceptable to it, acting bona fide and in its reasonable
discretion, in order to complete the purchase of the Purchased Share
contemplated hereunder;
(g) by the Purchaser, by giving notice to the Vendor on or before the
Competition Satisfaction Date if the Purchaser determines, acting bona fide
and reasonably, that it will not receive the Canadian Competition
Satisfaction by the Competition Satisfaction Date;
(h) by the Purchaser, by giving notice to the Vendor on or before the B.C.
Forest Act Satisfaction Date if it is not satisfied, acting bona fide and
in its reasonable discretion, that the Minister of Forests (British
Columbia) will not, pursuant to Section 54.5 of the B.C. Forest Act and as
a consequence to the transaction contemplated hereby, cancel any of the
B.C. Tenures or reduce allowable annual cut under the any of the B.C.
Tenures or impose terms and conditions with respect to the B.C. Tenures
that would, in either case, reasonably be expected to have a Material
Adverse Effect;
(i) by the Purchaser, by giving notice to the Vendor at any time before the
Closing Date if there will have occurred a breach or breaches of the
Vendor's covenants under Section 5.7 and such breach has, or such breaches
collectively have, a Material Adverse Effect;
(j) by the Purchaser, by giving notice to the Vendor on the Closing Date if
(i) the representations and warranties of the Vendor, as modified by
Parts 1 and 2 of the Disclosure Statement and Section 5.4(b),
contained in this Agreement are not, without giving effect to the
Vendor Closing Exceptions and the Purchaser Closing Exceptions, true
and correct on the Closing Date, with the same force and effect as if
such representations and warranties were made at, and as of, such
time, except where the failure to be so true and correct would not,
individually or in the aggregate, have or be reasonably likely to have
the effect of reducing the value of the Business Assets or the
financial condition of the Business taken as a whole by more than
$75,000,000 after giving effect to any recoveries that may be
reasonably expected to be available after Closing, other than any
failure of such representations or warranties to be true and correct
resulting from (A) general political, financial or economic conditions
or the state of the securities markets in general, (B) matters
affecting the forestry industry in general (including product supply,
demand and pricing) and not specifically relating to the Target or its
Subsidiaries, the Purchaser or the Vendor, (C) the announcement of the
transactions contemplated hereby, or (D) any labour disruption,
strike, collective bargaining or other condition with respect to any
collective agreement that expires or has expired before the Execution
Date; or
(ii) a certificate of a senior officer of the Vendor in the form
attached as Schedule 7.1(j) (in the officer's corporate rather than
individual capacity) dated
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the Closing Date has not been delivered to the Purchaser before the
Time of Closing
except that, for the purposes of this Section 7.1(j), any of the
representations and warranties that are qualified by reference to
materiality standards, including "material respects" or "would reasonably
be expected to have a Material Adverse Effect" or words to like effect,
will be considered not to be so qualified; or
(k) by the Vendor, by giving notice to the Purchaser on the Closing Date if
(i) the representations and warranties of the Purchaser contained in this
Agreement are not true and correct in all material respects on the Closing
Date, with the same force and effect as if such representations and
warranties were made at and as of such time; or (ii) a certificate of a
senior officer of the Purchaser in the form attached as Schedule 7.1(d) (in
the officer's corporate rather than individual capacity) dated the Closing
Date has not been delivered to the Vendor before the Time of Closing.
The Parties do not intend that the amount described in Section 7.1(j) will be
used in interpreting "Material Adverse Effect" and confirm that such amount was
agreed upon solely for the purposes of Section 7.1(j).
Automatic Termination
7.2 If the transactions contemplated hereby will not have been consummated on or
before January 4, 2005, this Agreement will automatically terminate at 12:01
a.m. on January 5, 2005.
Failure to Give Notice
7.3 If either Party fails to give any notice that such Party is permitted to
give under Section 7.1 within the period specified for such notice under a
provision of Section 7.1, such Party will lose its right to terminate this
Agreement under such provision.
Effect of Status of Agreement After Termination
7.4 If this Agreement is terminated in accordance with the provisions of Section
7.1 or Section 7.2, neither Party will have any further liability to perform its
obligations hereunder, except as provided in Section 10.2 and Section 10.6.
PART 8
CONDITIONS OF CLOSING
Conditions of Closing in Favour of the Purchaser
8.1 The Purchaser's obligations to complete the transactions contemplated hereby
are subject to the satisfaction or waiver at or prior to the Time of Closing of
the following conditions:
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(a) Investment Canada Act - the Purchaser will have received Investment
Canada Act Approval;
(b) Other Competition/Antitrust Compliance - Other Competition/Antitrust
Compliance will have occurred except where
(i) the failure to obtain any approval or decision required under
applicable Law in connection with such compliance, or
(ii) the completion of the transactions contemplated hereunder before
the expiry of any applicable waiting period,
would not constitute a criminal offence by the Purchaser or the Target
Companies or expose the Purchaser or the Target Companies to criminal
liability or any other liability material in relation to the Target
Companies, taken as a whole, or the Purchaser; and
(c) Pulp Sales Agreement - the Vendor will have delivered to the Purchaser
at Closing the Pulp Sales Agreement, duly executed on behalf of the Vendor
and the Target.
Conditions of Closing in Favour of the Vendor
8.2 The Vendor's obligations to complete the transactions contemplated hereunder
are subject to the satisfaction or waiver at or before the Time of Closing of
the condition that Other Competition/Antitrust Compliance will have occurred
except where
(a) the failure to obtain any approval or decision required under
applicable Law in connection with such compliance, or
(b) the completion of the transactions contemplated hereunder before the
expiry of any applicable waiting period,
would not constitute a criminal offence by the Vendor or the Target Companies or
expose the Vendor or the Target Companies to criminal liability or any other
liability (for which, in the case of any such other liability, the Purchaser has
not provided the Vendor an indemnity of the Purchaser in form and substance
satisfactory to the Vendor, acting reasonably).
Mutual Conditions Precedent
8.3 The respective obligations of each of the Vendor and the Purchaser to
complete the transactions contemplated hereby are subject to the satisfaction or
mutual waiver at or before the Time of Closing of each of the following
conditions:
(a) No Restraining Order - there is not in force any judgment, order or
decree restraining or enjoining, or which would be breached as a result of,
the consummation of the transactions contemplated by this Agreement and
there is no proceeding, of a judicial or administrative nature or
otherwise, brought by a Government Authority in progress or threatened that
relates to or results from the transactions contemplated by this Agreement
that would, if successful, potentially result in a judgment order or ruling
that would
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preclude completion of the transactions contemplated by this Agreement in
accordance with the terms hereof or would otherwise be inconsistent with
the Designated Regulatory Approvals which have been obtained or would
reasonably be expected to have a Material Adverse Effect;
(b) Canadian Competition - either
(i) Canadian Competition Waiting Period Compliance will have occurred
and the Purchaser has received Canadian Competition Satisfaction at
any time before the Competition Satisfaction Date, or
(ii) Canadian Competition Waiting Period Compliance will have occurred
and the Competition Satisfaction Date will have occurred without this
Agreement being terminated pursuant to Section 7.1(g);
(c) HSR Compliance - HSR Compliance will have occurred; and
(d) No Pending Action - there will not be pending or threatened any suit,
action or proceeding by any Government Authority or other Person, in each
case that has a reasonable likelihood of success, (i) seeking to prohibit
or restrict the acquisition by the Purchaser of the Purchased Share, or
seeking to obtain from the Vendor or the Purchaser any damages that are
material in relation to the Target and its Subsidiaries taken as a whole,
(ii) seeking to impose material limitations on the ability of the Purchaser
to acquire or hold, or exercise full rights of ownership of, the Purchased
Share, except that the rights of the Minister of Forests (British Columbia)
under section 54.5 of the B.C. Forest Act or any pending or threatened
suit, action or proceeding by the Competition Bureau will not be considered
a threatened suit, action or proceeding by a Government Authority under
this Section 8.3(d).
PART 9
CLOSING ARRANGEMENTS
Place of Closing
9.1 The Closing will take place at the Time of Closing at the offices of the
Purchaser's counsel, Lang Xxxxxxxx LLP, at Suite 1500 - 0000 Xxxx Xxxxxxx
Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx.
Transfer
9.2 As at the Time of Closing, upon satisfaction or waiver of all the conditions
set out in Part 8, the Vendor will
(a) deliver to the Purchaser a certificate representing the Purchased
Share, duly endorsed in blank for transfer,
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(b) cause those directors and officers of the Target Companies specified by
the Purchaser who are not employees of any Target Company to resign and
execute and deliver a release in favour of the Target Companies, in form
and substance acceptable to the Parties, acting reasonably, and
(c) provide evidence reasonably satisfactory to the Purchaser that the
Finance Company Reorganization has been completed,
whereupon, subject to all other terms and conditions hereof being complied with,
the Purchaser will make the payment contemplated in Section 2.3(a) net of any
applicable withholding as contemplated in Section 2.4.
Delivery of Books and Records
9.3 At the Time of Closing the Vendor will deliver to the Purchaser all of the
books and records of and relating to the Target Companies and the Business in
its possession and control; provided that the Vendor may retain electronic or
other copies of such books and records solely in connection with, and for the
duration of, the provision of the services contemplated by Section 9.7 or where
it is impracticable to provide all copies to the Purchaser.
Delaware Sales Company Books and Records
9.4 On the termination of the period during which a Target Company provides
services to the Delaware Sales Company under Section 9.7, the Purchaser will
cause the Target Companies to deliver to the Vendor all of the books and records
of and relating to the Delaware Sales Company in its possession and control
provided that the Target may retain and use electronic or other copies of such
books and records.
Future Access to Books, Records and Employees
9.5 The Purchaser will preserve and keep any records of the Target Companies and
the Business delivered to the Purchaser for any period as may be required by any
applicable Law, or pursuant to any policy, order or direction of any Government
Authority having jurisdiction. After the Closing Date, upon reasonable advance
notice the Purchaser will grant the Vendor and its representatives reasonable
access during normal business hours, and hereby grants to the Vendor a license
free of charge, to use the books, records and documentation of the Business, the
Target Companies and take copies thereof relating to the period up to the
Closing Date (and for any period after the Closing Date, in respect of
information which the Vendor requires in order to comply with applicable Tax Law
in respect of any period ending on December 31 of the year following the year of
the Closing) including any employment records relating to the period up to the
Closing Date of the employees of the Target Companies, Tax records of the Target
Companies and the computer systems, tapes, discs, records and software of the
Target Companies. The Purchaser will not unreasonably refuse a request of the
Vendor to make available to the Vendor one or more employees for the purposes of
giving evidence in any legal proceeding relating to matters or circumstances
arising before Closing. The Vendor may, by giving notice to the Purchaser, set
out reasonable particulars of any records of the Target Company in respect of
which access by the Vendor is either required for Tax-related purposes or may
otherwise be of value to the Vendor and, in respect of such documents and
subject to any
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restrictions or prohibitions imposed by Law, the Purchaser will
take reasonable steps not to cause the destruction thereof without providing the
Vendor an opportunity to take possession thereof.
Closing Documents
9.6 At Closing each Party will deliver to the other Party
(a) a certificate of status and certified copies dated as of the Closing
Date, of the articles and by-laws of the Party and, in the case of the
Vendor, of the Target Companies,
(b) a certified copy of resolutions of the board of directors of the Party
pursuant to Section 5.8, and
(c) a legal opinion of its counsel confirming the due authorization by, and
binding nature of this Agreement on, the Party and such other matters that
are commonly the subject of legal opinions in similar transactions, subject
to such customary qualifications and assumptions as such counsel may
require.
Each Party will also execute and deliver, or cause to be executed and delivered,
to the other Party a copy of such other documents relevant to the closing of the
transaction contemplated hereby as the other Party, acting reasonably, may
request, including all necessary transfers, assignments, assumptions and other
documentation required to effect the covenants, agreements and transactions
described in Part 2.
Interim Services
9.7 The Vendor will not, and the Purchaser will cause the Target Companies not
to, unreasonably refuse to continue to provide such services as are presently
provided by the Vendor to a Target Company or by a Target Company to the Vendor
or any of its Affiliates (including accounting and information technology
services and, in respect of services provided by a Target Company to the
Delaware Sales Company, administrative services, including accounting and the
preparation of and filing of U.S. federal and state returns for Taxes, but
excluding any other services which a Party advises the other in writing before
the Due Diligence Satisfaction Date will not be provided after Closing) for a
reasonable period following Closing of no more than six months provided
(a) such services will be paid for at reasonable commercial rates;
(b) the nature and extent of such services will be identified and agreed
upon by the Parties before Closing;
(c) the provision of such services will be subject to the receipt of any
necessary third party consents; and
(d) the provision of such services will be subject to the terms and
conditions of a transitional services agreement to be executed and
delivered at Closing, in form and substance acceptable to the Parties,
acting reasonably.
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Executive Pension Agreements
9.8 On, or as soon as is commercially reasonable following, the Closing Date the
Purchaser will take all steps necessary to permit the Vendor to withdraw the
letters of credit that are currently deposited under the Target's executive
pension agreements, which totalled $43,397,700 as at December 31, 2003, by
providing replacement security or funding. The Purchaser will indemnify and hold
harmless the Vendor for any loss suffered by the Vendor arising from any failure
on the part of the Purchaser to obtain such replacement security or funding
pursuant to this Section 9.8.
Post-Closing Covenants
9.9 Following the Closing, the Purchaser will
(a) subject to applicable Law and any employment or collective agreement
cause the Target Companies to offer to any employee whose employment is
terminated severance arrangements substantially the same as those which the
Purchaser would normally offer to one of its similarly situated employees
in similar circumstances; and
(b) indemnify and save harmless the Vendor of and from any liability, loss,
cost or expense whatsoever suffered or incurred by the Vendor arising out
of, relating to or with respect to the employment or the termination of
employment of any employee of any of the Target Companies following the
Closing Date except to the extent that such liability, loss, cost or
expense arises solely from the termination of the Phantom Plan as
contemplated under this Agreement.
Tax Appeal
9.10 The Parties agree that after the Closing, the Vendor will have full
authority, on behalf of the Target, to conduct the Tax appeal disclosed under
Section 24(h) of Part 1 of the Disclosure Statement, and will have the right to
receive, pursuant to Section 2.3(d) but subject to Section 2.7(a), the amount of
all Tax Refund Amounts with respect thereto.
Phantom Plan
9.11 As soon as practicable after Closing (and in any event within 12 months
after Closing), the Purchaser will cause the Target to terminate in an orderly
manner the Phantom Plan. The Purchaser will, and will cause the Target to,
consult with the Vendor on all matters relating to the termination of such plan.
Management Incentive Plan
9.12 (a) During the Interim Period, the Vendor will cause the Target Companies
to continue to accrue amounts in respect of awards under the Vendor's
Management Incentive Plan (the "MIP") on a basis consistent with accruals
made for the period from January 1, 2004 to but excluding the Execution
Date.
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(b) Subject to Section (c), promptly following the Closing Date, the
Purchaser will cause the Target Companies to pay to each employee of any of
the Target Companies eligible on the Closing Date to participate in awards
under the MIP an amount that is not less than the amount accrued on the
Closing Date on the books and records of the applicable Target Company in
respect of the awards to such employee (the "Target Amount").
(c) If the Purchaser, in its sole discretion, causes the Target Companies
to provide incentive compensation to such eligible employees for the period
between the Closing Date and December 31, 2004, an amount not less than the
Target Amount will be paid to employees no later than February 28, 2005.
Further Assurances
9.13 Each Party to this Agreement covenants and agrees to execute and deliver up
to the Closing Time, and from time to time subsequent to the Closing Date at the
reasonable request and expense of the requesting Party, all such documents,
including all such additional conveyances, transfers, consents and other
assurances and do all such other acts and things as any other Party hereto,
acting reasonably, may from time to time request be executed or done in order to
better evidence, perfect or effectuate any provision of this Agreement or of any
agreement or other document executed pursuant to this Agreement or any of the
respective obligations intended to be created hereby or thereby.
PART 10
MISCELLANEOUS
Notices
10.1 Any notice or other communication required or permitted to be given
hereunder will be in writing and will be delivered by personal delivery,
transmitted by facsimile or international courier service, addressed as follows:
(a) if to the Vendor:
000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: General Counsel
Facsimile: (000) 000 0000
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with a copy to:
Blake, Xxxxxxx & Xxxxxxx LLP
Commerce Court West, 000 Xxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxx Xxxxxx
Facsimile: (000) 000 0000
(b) if to the Purchaser:
0000 - 0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx.
X0X 0X0
Attention: Vice-President, Finance and CFO
Facsimile: (000) 000-0000
Any Party may at any time change its address for service from time to time by
giving notice to the other Party in accordance with this Section 10.1. Any such
notice or communication so given will be deemed to have been received on the
next Business Day after the date of delivery or sending.
Consultation
10.2 The Parties will consult with each other before issuing any press release
or making any other public announcement with respect to this Agreement or the
transactions contemplated hereby and, except as required by any applicable Law
or regulatory requirement, neither the Vendor nor the Purchaser will issue any
such press release or make any such public announcement without the prior
written consent of the other, which consent will not be unreasonably withheld or
delayed.
Commercially Reasonable Efforts
10.3 The Parties acknowledge and agree that, for all purposes of this Agreement,
an obligation on the part of any Party to use its commercially reasonable
efforts to obtain any waiver, consent, approval, permit, licence or other
document will not require such Party to make any payment to any Person for the
purpose of procuring the same, other than payments for amounts due and payable
to such Person, payments for incidental expenses incurred by such Person and
payments required by any applicable Law.
Counterparts
10.4 This Agreement may be executed in counterparts, each of which will
constitute an original and all of which taken together will constitute one and
the same instrument. The delivery of counterparts may be effected by facsimile
transmission or transmission of an electronic (PDF) file.
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Xxx-Xxxxxx
10.5 The Parties agree that all provisions of this Agreement other than the
specific provisions referred to in Section 4.1 and Section 4.2 and the
indemnities and agreements in Section 4.3, Section 6.4, Section 9.8, Section 9.9
and Section 9.12 (which will be subject to the specific arrangements provided
for in Part 4) will forever survive the execution, delivery and performance of
this Agreement and the Closing.
Expenses
10.6 Each Party will be responsible for its own legal and other expenses
(including any Taxes imposed on such expenses) incurred in connection with the
negotiation, preparation, execution, delivery and performance of this Agreement
and the transactions contemplated by this Agreement and for the payment of any
broker's commission, finder's fee or like payment payable by it in respect of
the purchase and sale of the Purchased Share pursuant to this Agreement.
Notwithstanding the foregoing, the filing fee payable in connection with the
short-form pre-merger notification contemplated pursuant to Section 5.10 will be
shared equally by the Parties.
Interest
10.7 Unless expressly provided herein, any amount not paid when due under any
provision of this Agreement will bear interest at the rate of interest described
in Section 2.8 calculated daily from the due date to the date of payment
thereof.
IN WITNESS WHEREOF this Agreement has been executed by the Parties hereto on the
day and year first above written.
INTERNATIONAL PAPER COMPANY
Per: "X. Xxxx Xxxx" (signed)
-----------------------------------
X. Xxxx Xxxx
Senior Vice President
XXXX XXXXXX TIMBER CO. LTD.
Per: "Xxxxx X. Xxxxxxx" (signed)
-----------------------------------
Xxxxx X. Xxxxxxx
Chairman, President and
Chief Executive Officer
Per: "Xxxxxx Xxxxx" (signed)
-----------------------------------
Xxxxxx Xxxxx
Vice-President, Finance and
Chief Financial Officer
Schedule A
Prohibited Activity
In this Agreement, "Prohibited Activity" means, with respect to the Target
Companies, any of the following activities (except as may be contemplated by
this Agreement, in connection with the Finance Company Reorganization or with
the prior written consent of the Purchaser, not to be unreasonably withheld),
(a) any change in its constating documents or by-laws;
(b) the issue of any of its securities;
(c) any Restricted Payment;
(d) any cash payments or distributions, other than Permitted Payments,
except in the normal course of the Target's business;
(e) any investment by a Target Company other than a Permitted Investment or
in a Target Company;
(f) incurring or agreeing to incur any liability or make any capital
expenditure, in a single transaction or a series of related transactions,
involving an aggregate amount of more than
(i) $1,000,000 in respect of expenditures contained in any capital
expenditure budget of the Target Companies in effect on the date
hereof and disclosed to the Purchaser; or
(ii) $100,000 for unbudgeted expenditures,
except that no consent of the Purchaser will be required for expenditures
required in response to an emergency involving danger to life, property,
safety or the environment;
(g) increase or commit or promise to increase the compensation payable or
to become payable to any officer, director or employee of any of the Target
Companies or make any discretionary bonus or management fee payment to any
such Person, except (i) bonuses or salary increases to employees at the
times and in the amounts consistent with its past practice or (ii) as may
be required under any contract (including any collective agreement) to
which any Target Company is a party, the Vendor's Management Incentive Plan
or the employee retention arrangements referred to in the definition of
Vendor Paid Expenses;
(h) create, assume or permit to be created or imposed any Encumbrances
(other than Permitted Encumbrances) upon any of its assets or properties,
whether now owned or hereafter acquired, except for purchase money
Encumbrances incurred in connection with
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the acquisition of equipment with an aggregate cost not in excess of
$50,000 or in connection with any liability or capital expenditure
permitted under Section (f);
(i) except as required by applicable Law or any contract to which any
Target Company is a party or in accordance with past practice of a Target
Company, adopt, establish, amend or terminate any Employee Plan, or other
employee compensation or benefit arrangement plan or policy, or take any
discretionary action, or omit to take any contractually required action, if
that action or omission could either (i) materially deplete the assets of
any Employee Plan or (ii) materially increase the liabilities or
obligations under any Employee Plan;
(j) sell, assign, lease or otherwise transfer or dispose of any of its
Business Assets in a single transaction or a series of related transactions
having an aggregate value in excess of $50,000 other than in the ordinary
course of its business and consistent with its past practice;
(k) negotiate for the acquisition of any business or the start-up of any
new business;
(l) merge, consolidate or effect a share exchange with, or agree to merge,
consolidate or effect a share exchange with, any other Person;
(m) waive any of its material rights or claims, provided that it may
negotiate and adjust accounts receivable in the course of good faith
disputes with customers in a manner consistent with its past practice;
(n) commit a material breach of any Contract;
(o) enter into a Prohibited Contract;
(p) suffer a change in working capital or shareholder's equity that is not
in the ordinary course of the Target Companies' business;
(q) amend any Tax return that has been filed, or enter into or sign any
waiver, tax indemnification agreement or advance pricing agreement, or any
other agreement with a Tax Authority affecting Taxes;
(r) incur any long-term indebtedness, or
(s) commit to do any of the foregoing.
Schedule 3.1
Vendor's Representations and Warranties
Part A - Pertaining to the Vendor
Organization of Vendor
1. The Vendor is a corporation incorporated and organized and validly subsisting
under the laws of its jurisdiction of incorporation and has the corporate power
to enter into this Agreement and to perform its obligations hereunder and under
the Pulp Sales Agreement. The Vendor is a non-resident of Canada for the
purposes of the Tax Act.
Authorization and Solvency
2. This Agreement has been, and at the Time of Closing, the Pulp Sale Agreement
will be duly authorized, executed and delivered by the Vendor. This Agreement
is, and at the Time of Closing, the Pulp Sales Agreement will be, a legal, valid
and binding obligation of the Vendor, enforceable against the Vendor, by the
Purchaser in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency and other laws affecting the rights of creditors
generally and except that equitable remedies may be granted only in the
discretion of a court of competent jurisdiction.
Neither the Vendor nor the Target nor any of the Target's Subsidiaries
is insolvent or has committed an act of bankruptcy, proposed a compromise or
arrangement to its creditors generally, had any petition in bankruptcy filed
against it, made a voluntary assignment in bankruptcy or taken any proceeding to
be declared bankrupt, to liquidate its assets or to be dissolved.
Ownership of Purchased Shares
3. As of the Time of Closing, the Vendor will be the only registered and
beneficial owner of the Purchased Share of the Target with good and marketable
title thereto, free and clear of all Encumbrances and the Purchased Share is not
subject to any voting trust, shareholder agreement or voting agreement. Upon
completion of the transaction contemplated by this Agreement, the Purchased
Share will be owned by the Purchaser as the beneficial owner of record, with a
good and marketable title thereto (except for such Encumbrances as may have been
granted by the Purchaser). No Person other than the Purchaser has any written or
oral agreement or option or any right or privilege (whether by law, pre-emptive
or contractual) capable of becoming an agreement or option for the purchase or
acquisition from the Vendor of the Purchased Share.
No Conflicts
4. Subject to receipt of the approvals or consents contemplated herein,
including the Designated Regulatory Approvals, the execution and delivery of
this Agreement and the Pulp Sales Agreement by the Vendor and the consummation
of the transactions herein provided for
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will not result in the breach or violation of any of the provisions of, or
constitute a default under, or conflict with or cause the acceleration of any
obligation under:
(a) any contract, licence, or permit to which the Vendor is a party;
(b) any provision of the constating documents, by-laws or resolutions of
the board of directors (or any committee thereof) or shareholders of the
Vendor;
(c) any judgment, decree, order or award of any Government Authority having
jurisdiction over the Vendor; orS
(d) any applicable Law,
except where such event would not, individually or collectively with all other
such events, have (i) a Material Adverse Effect, or (ii) a material adverse
effect on the ability of the Vendor to perform its obligations under this
Agreement or the Pulp Sales Agreement or the validity or enforceability of this
Agreement or the Pulp Sales Agreement.
Share Capital
5. The authorized capital of the Target consists of an unlimited number of
common shares of which the Purchased Share is, and at the Time of Closing will
be, the only common share issued and outstanding. The Purchased Share has been
duly issued and is fully paid and non-assessable.
No Share Rights
6. As of the Time of Closing, no Person will have any agreement or option or any
right or privilege (whether by law, pre-emptive or contractual) capable of
becoming an agreement, including convertible securities, warrants or convertible
obligations of any nature, for the purchase, subscription, allotment,
conversion, exchange or issuance of any unissued shares or other securities of
the Target.
Part B - Pertaining to the Target
7. Each of the representations and warranties set out in this Part B of Schedule
3.1, other than those set out in Section 24, (the "Target R&W's") is subject,
(a) as at the Execution Date, to the information set out in Part 1 of the
Disclosure Statement;
(b) as at the Due Diligence Satisfaction Date to the information set out in
Parts 1 and 2 of the Disclosure Statement; and
(c) as at the Closing Date, to the information set out in Parts 1 and 2 of
the Disclosure Statement and, except for the purposes of Section 7.1(j),
those Vendor Closing Exceptions and Purchaser Closing Exceptions that were
not within the knowledge of the Vendor as at the Interim Disclosure Date.
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Organization, Capitalization and Interests of the Target
8. The Target is a corporation incorporated and organized and validly subsisting
under the laws of British Columbia, and has the corporate power to own or lease
its property. The Target is duly qualified as a corporation to do business in
each jurisdiction in which the nature of the Business or the property and assets
owned or leased makes such qualification necessary except where a failure to so
qualify would not be material to the ongoing operation of the Business.
The only corporations or other business entities in which the Target
has a direct or indirect legal or beneficial interest, and the Target's
interests therein, are listed in Schedule 3.7.
No Violation
9. Subject to receipt of the approvals or consents contemplated herein,
including the Designated Regulatory Approvals and the right of the Minister of
Forests (British Columbia) under Section 54.5 of the B.C. Forest Act, the
execution and delivery of this Agreement by the Vendor and the consummation of
the transactions herein provided for will not result in either:
(a) the breach or violation of any of the provisions of, or constitute a
default under, or conflict with or cause the acceleration of any obligation
of any Target Company, under:
(i) any contract to which a Target Company is a party or by which it,
or any of its properties is, bound;
(ii) any provision of the constating documents, by-laws or resolutions
of the board of directors (or any committee thereof) or shareholders
of a Target Company;
(iii) any judgment, decree, order or award of any Government Authority
having jurisdiction over a Target Company;
(iv) any licence, permit, approval, consent or authorization held by a
Target Company necessary for the operation of the Business; or
(v) any applicable Law; or
(b) the creation or imposition of any Encumbrance on any of the property or
assets of a Target Company,
except where such event would not, individually or collectively with all other
such events have (i) a Material Adverse Effect or (ii) a material adverse effect
on the ability of the Vendor to perform its obligations under this Agreement or
the validity or enforceability of this Agreement.
Business of the Target
10. The Business is the only business operations carried on by the Target
Companies. Except as contemplated by this Agreement, since December 31, 2003 the
Business has been
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conducted in the ordinary and usual course of business and no action that would
be a Prohibited Activity if undertaken after the date of this Agreement has
occurred since such date. All the material tangible assets, except for inventory
(including raw materials) in transit or assets in another location for repair,
of the Target Companies are situated at locations that are owned or leased by
the Target Company or, to the extent that any such assets of a Target Company
are situated elsewhere as at the date of this Agreement, such assets will be
situated at Closing at a location owned or leased by the Target Company.
Personal Property
11. The Target Companies collectively have good and valid title to, or a
leasehold interest in, the personal property reflected by the Financial
Statements and Interim Financial Statements (except as disposed of subsequent to
the date thereof in the ordinary course of business) (the "Personal Property"),
free and clear of all Encumbrances other than the Permitted Encumbrances, in
order to allow it to use the Personal Property as currently being used by the
Target Companies in the ordinary course of their business.
Real Property
12. None of the Target Companies owns or has agreed to acquire or lease any real
property or interest in real property material to the Business other than the
owned real property reflected in the Financial Statements (the "Real Property").
Title to Real Property
13. The Target Companies collectively have the exclusive right to possess, use
and occupy, and have good and marketable title in fee simple to, all the Real
Property, free and clear of all Encumbrances or other restrictions of any kind
other than Permitted Encumbrances. Each material building, structure,
improvement and appurtenance situated on the Real Property is adequate for the
purposes for which it is currently being used by a Target Company and the Target
Company has adequate rights of ingress and egress for the operation of the
Business, in the ordinary course, as currently conducted by the Target Company.
None of such material buildings, structures, improvements or
appurtenances (or any equipment therein), nor the operation or maintenance
thereof, violates any restrictive covenant or law or encroaches on any property
owned by others except where such violation or encroachments would not,
individually or in the aggregate, have a Material Adverse Effect.
No Real Property Leases
14. The Target is not party to any lease or agreement in the nature of a lease
in respect of any real property, whether as lessor or lessee, that is material
to the Business other than the Tenures.
The Business Assets
15. The Personal Property and the Real Property (collectively, the "Business
Assets") comprise all the material real and personal property used directly by
any of the Target
-5-
Companies in carrying on the Business as conducted by them on the date hereof
and no other material tangible property or assets, except those provided under a
Contract and leased Personal Property, are necessary to carry on the Business as
conducted by the Target Companies on the date hereof.
Intellectual Property
16. The Target Companies collectively own, are licensed or otherwise possess
rights to use all Intellectual Property currently necessary to carry on the
Business as conducted by the Target Companies on the date hereof. No Person has
been granted any interest in or right to use all or any portion of the
Intellectual Property in any manner that would materially diminish the value to
the Target Companies of any of the Intellectual Property.
Infringement of Intellectual Property
17. Neither the Vendor nor any of the Target Companies has received
(a) any notice alleging any infringement by a Target Company of any
patents, trademarks, industrial designs, design xxxx, copyrights or other
intellectual property rights held or owned by any other Persons, or
(b) notice of
(i) any pending or threatened challenge to a Target Company's right to
use the trademarks or trade names that are included in the
Intellectual Property, or
(ii) any use or proposed use by any Person other than the Vendor or a
Target Company of such trademarks or trade names for any of the wares
or services covered thereby.
Insurance
18. All material third party insurance policies maintained by the Vendor or by
any of the Target Companies on any of the Business Assets or the Target
Companies' personnel as of the date hereof are identified in the Disclosure
Statement and are in full force and effect and neither the Vendor nor any Target
Company is in default thereunder.
Contracts
19. Each of the Contracts is valid, binding, in full force and effect, in all
material respects, and enforceable by the Target Company that is bound by it, in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency and other laws affecting the rights of creditors generally and except
that equitable remedies may be granted only in the discretion of a court of
competent jurisdiction. Such Target Company
(a) is not in breach or default in any material respect under such
Contract;
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(b) has not waived any of its material rights under such Contract or
modified any of the material terms thereof;
and to the knowledge of the Vendor or any of the Target Companies no other party
to any Contract is in breach or default in any material respect under any such
Contract, other than any such failure, breach, default, or waiver, as
applicable, which, individually or collectively with all other failures,
breaches, defaults or waiver under any Contracts, would not be reasonably likely
to have a Material Adverse Effect. A change of control of the Target will not
give rise to a right by any third party to terminate, or vary any material term
of, any Contract except where such termination or variation would not,
individually or collectively with all such other terminations or variations,
have a Material Adverse Effect.
Licences
20. No proceeding is pending or, to the knowledge of the Vendor or any of the
Target Companies, threatened to revoke or limit any material Licence.
Financial Statements
21. Each of the following financial statements have been, or when prepared will
have been, prepared in accordance with GAAP applied on a basis consistent with
prior periods, present fairly in all material respects the financial position of
the Target Companies on a consolidated basis as at the respective dates of such
statements and the results of their operations, earnings and cash flows of the
Target Companies on a consolidated basis for the respective periods covered by
such statements except as provided below:
(a) the Financial Statements, except as set out in the auditors' report
thereon,
(b) the financial statements described in Section I(a)(iii) of Schedule
5.7(g), except as set out in the auditors' report thereon and to the extent
that changes in GAAP do not permit such consistency of preparation, and
(c) each of the Interim Financial Statements and the interim financial
statements described in Section I(b)(ii) of Schedule 5.7(g), except for the
absence of complete notes, normal year-end adjustments that would be made
in the ordinary course of an audit and that would not be material, and to
the extent that changes in GAAP do not permit such consistency of
preparation.
Additional Information
22. The production and shipping information for the Target Companies for each of
the financial years in the period January 1, 1999 to December 31, 2003 and for
the first quarter of 2004 provided to the Purchaser pursuant to Schedule 5.7(g)
reflects information in the books and records of the Target Companies and is
true and correct in all material respects.
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Books and Records
23. The books and records of each of the Target Companies fairly and correctly
set out and disclose in all material respects the financial position of such
Target Company as of the date thereof and all material financial transactions of
the Target Company as of the date hereof have been accurately recorded in such
books and records.
The minute books of each of the Target Companies contain accurate and
complete records of all meetings, resolutions and corporate actions taken by the
shareholders, the board of directors and all committees thereof and contain a
true and complete copy of such Target Company's constating documents.
Taxes
24. Each of the Target Companies
(a) has prepared in a true, correct and complete manner, and duly and
timely filed or caused to be filed, all Tax returns required to be filed by
it (except if not yet due), has paid or caused to be paid all Taxes which
are due and payable in all respects and has made adequate provision in the
Financial Statements and the Interim Financial Statements for the payment
of all other Taxes for the periods covered thereby. With respect to any
period beginning after December 31, 2003, no liability for Taxes has arisen
for any of the Target Companies, except for Taxes arising in the ordinary
course of its business;
(b) has made adequate and timely instalments on account of Taxes for each
period ending on or prior to the date hereof to the extent required by
applicable Law;
(c) does not owe any amounts with respect to GST other than accruals in the
ordinary course that are not overdue in any amount;
(d) has in all respects withheld from payments made to its past or present
employees, officers and directors, and to non-residents, the required
amount in respect of Taxes and other deductions to be withheld therefrom,
and has remitted any amounts so withheld to the applicable Governmental
Authority within the required time periods under the applicable
legislation;
(e) has collected all Taxes that it was required to collect and, as of the
date hereof, all Taxes (of the nature of payroll or sales taxes) have been
remitted to the applicable Governmental Authority within the required time
period;
(f) has not received any refund of Taxes or any credit against Taxes from
any relevant Governmental Authority to which it was not entitled and which
has not been returned to any relevant Governmental Authority;
(g) has filed all Tax returns through and including the financial year
ended December 31, 2002, and there are no waivers of any limitation periods
or agreements providing for an extension of time for the filing of any Tax
return, election or designation
-8-
or the payment of any Taxes in respect of any financial year for which an
assessment has not been issued;
(h) is not now the subject of any claim, suit, action, dispute,
investigation, order, directive, demand, prosecution, proceeding,
assessment, reassessment or appeal (a "Tax Action") concerning any Tax
liability claimed or raised by any Governmental Authority in writing, and
there are no Tax Actions in progress or pending or to the knowledge of the
Vendor or any of the Target Companies threatened, or any grounds that could
prompt a Tax Action;
(i) has not entered into or signed any waiver, tax indemnification
agreement or advance pricing agreement or any other agreement with a Tax
Authority affecting Taxes;
(j) does not have any liability for the Taxes of any other Person under any
applicable Tax Law as a transferee or successor, by contract, operation of
Law or otherwise;
(k) will have furnished to the Purchaser before the Interim Disclosure Date
true, complete and accurate copies of all Tax returns and any amendments
thereto filed with any Tax Authority since December 31, 2000 and all
notices of assessment and reassessment and material correspondence with any
Tax Authority relating thereto;
(l) has been issued Canadian federal and provincial assessments in respect
of all Taxes covering all periods up to and including December 31, 2002.
The only taxation years of any of the Target Companies that remain open for
assessment or reassessment of additional Tax are set out in Part 1 of the
Disclosure Statement;
(m) has kept and keeps its books and records in compliance with section 230
of the Tax Act; and
(n) except to the extent reflected in the Financial Statements or the
Interim Financial Statements, owes no amount to "related persons" as
defined in the Tax Act, has not claimed any reserves for the purposes of
the Tax Act and has not had any indebtedness settled or forgiven without
payment of the full principal amount, in each case for the periods covered
by such financial statements.
Litigation
25. There are no material actions, suits or proceedings (whether or not
purportedly on behalf of a Target Company) pending or, to the knowledge of the
Vendor or any of the Target Companies, threatened against any of the Target
Companies or before or by any Government Authority. Neither the Vendor nor any
of the Target Companies is aware of any facts or circumstances that could
reasonably be expected to lead to any of the above.
Employment Matters
26. None of the Target Companies,
-9-
(a) is a party to any written or oral policy, agreement, obligation or
understanding (except for any obligation under applicable Law) providing
for severance or termination payments to, or any written employment
agreement with, any Person;
(b) is a party to any collective bargaining agreement nor subject to any
application for certification or to the knowledge of the Vendor and the
Target Companies, any threatened or apparent union-organizing campaigns for
employees not covered under a collective bargaining agreement nor are there
any current or pending or, to the knowledge of the Vendor or any of the
Target Companies, threatened strikes or lockouts at any of the operations
of the Target;
(c) is subject to any material claim for wrongful dismissal, constructive
dismissal or any tort claim, actual or pending or, to the knowledge of the
Vendor or any of the Target Companies, threatened, or any litigation,
actual or pending or, to the knowledge of the Vendor or any of the Target
Companies, threatened, relating to employment or termination of employment
of employees or independent contractors;
(d) has failed to operate in all material respects in accordance with all
applicable Laws with respect to employment and labour, including employment
and labour standards, occupational health and safety, employment equity,
pay equity, workers' compensation, human rights code and labour relations
and there are no current, or pending or, to the knowledge of the Vendor or
any of the Target Companies, threatened proceedings before any board or
tribunal with respect to any of the above areas in this Section 26; and
(e) has failed to reflect in any material respect in its books and records
all accruals for premiums and assessments for employment insurance, health
premiums, Canada Pension Plan premiums, accrued wages, salaries and
commissions and contributions or premiums required under the terms of any
Employee Plan.
Employee Plans
27. In respect of each Employee Plan, except for such instances of
non-compliance which would not, individually or collectively, be material to the
value or ongoing operations of the Business, each of the Employee Plans is, and
has been, established, registered, qualified, administered and invested in
compliance with
(a) the terms thereof, and
(b) all applicable Laws, including the applicable pension and tax
legislation.
Non Arm's Length Transactions
28. None of the Target Companies has, since December 31, 2003, made any payment
or loan to, or borrowed any moneys from or otherwise become indebted to, any
officer, director, employee, shareholder or any other Person not dealing at
arm's length (within the meaning of the Tax Act) with the Target Company, except
for usual employee reimbursements and compensation paid in the ordinary and
normal course of the Business and transactions with the
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Vendor and its Affiliates including those described in the Financial Statements
and various administrative, supply and other services provided by the Vendor and
its Affiliates to the Target Companies on a regular and ongoing basis.
Environmental
29. Each of the Target Companies is in substantial compliance with all
applicable Environmental Laws and
(a) in connection with Environmental Activities, there is no notice of any
material infraction, action, suit or proceeding pending or, to the
knowledge of the Vendor or any of the Target Companies, threatened against,
or in any other manner relating adversely and materially to, any of the
Target Companies or its respective properties in any court or before any
arbitrator of any kind or before or by any Government Authority;
(b) all material Environmental Permits which are necessary under any
applicable Environmental Law for the ownership and operation by a Target
Company of any of the Business Assets used by such Target Company have been
duly obtained, made or taken and are in full force and effect, are not
subject to further Environmental Permits or appeal or any pending or, to
the knowledge of the Vendor or any of the Target Companies, threatened
legal or administrative proceedings, and, to the knowledge of the Vendor or
any of the Target Companies, there are no proposals to amend, revoke or
replace such material Environmental Permits;
(c) none of the Target Companies and, to the knowledge of the Vendor or any
of the Target Companies, no past or present lessee, owner, occupant, or
licensee or other Person other than a Target Company has or is engaged in
any Environmental Activity at, upon, under, over, within or with respect to
the Real Property in violation of any applicable Environmental Law which
could reasonably be expected to lead to the imposition of material
liability on, or a material Remediation order against, any Target Company;
(d) since June 19, 2000, no activities or operations of any of the Target
Companies are or have been subject to any judicial, administrative or other
proceedings alleging a material violation of any applicable Environmental
Law;
(e) since June 19, 2000, none of the Target Companies has been, nor is,
involved in any operations or Environmental Activity in violation of any
applicable Environmental Law which activities could reasonably be expected
to lead to the imposition of material liability on, or a material
remediation order against, any Target Company;
(f) since June 19, 2000, none of the Target Companies has filed any written
notice or report of a material Release of a Contaminant with any Government
Authority in respect of the Real Property or any part thereof;
(g) since June 19, 2000, no Order has been issued which required any of the
Target Companies to carry out any material environmental remediation of any
of the Real Property under any applicable Environmental Law; and
-11-
(h) the Vendor has delivered to the Purchaser true and complete copies of
all material environmental audits, evaluations, assessments, studies or
tests relating to any of the Target Companies which have been completed
since June 19, 2000 (the "Environmental Reports") which the Vendor has in
its possession. On the Interim Disclosure Date, the Vendor will have caused
the Target Companies to have delivered true and complete copies of the
Environmental Reports to the Purchaser.
Tenures
30. There are no material rentals, stumpage, royalty, scale accounts or other
amount or other Taxes, assessments or costs arising under the Tenures are
overdue or in dispute with the applicable Government Authority.
The allowable annual cut for each of the Tenures and the actual cut
for each of 2001, 2002 and 2003 are as disclosed in Part 1 of the Disclosure
Statement.
Each Target Company
(a) is in compliance in all material respects, commensurate with good
forest industry practice prevailing in the forest regions in which such
Target Company operates as at the date hereof, with all covenants,
agreements and obligations including silviculture obligations on its part
to be observed or performed under the provisions of each of the Tenures and
the licenses, authorizations, permits, plans, contracts and other
agreements relating thereto, and all other applicable Laws,
(b) is not in material breach of, nor has it received any notice of
material breach of, the Tenures, any of the timber cutting rights or
permits or operating or development plans issued or filed pursuant to any
of the Tenures, other than breaches that have been remedied by the Target
Company or in respect of which the notice has been abandoned by the Person
having authority to do so; and
(c) has all material licences, permits, orders, authorities and other
permissions necessary or advisable to provide free access in and out of the
Tenures and to transport logs to the Target Company's xxxxx and conversion
facilities.
Other than as contemplated by the Forestry Revitalization Act (British
Columbia), no Government Authority has given any written notice to any Target
Company with respect to one or more of the Tenures concerning any matter which
would have the effect of reducing, impairing, suspending or terminating in a
material manner such Tenures or any rights or privileges attached thereto after
the date hereof and, with respect to proceedings under the Forestry
Revitalization Act (British Columbia) the status of the expropriation thereunder
is accurately described in the Disclosure Statement,
The possible effects of the failure to obtain the assurances of the
Minister of Forests contemplated by Section 7.1(h) are excluded from this
representation and warranty.
None of the Tenures, other than the B.C. Tenures, requires any consent
of, or notification to, any Government Authority in the event of a change of
control of the Target
-12-
except where failure to obtain any such consent or provide any such notification
would not, individually or collectively with all such other failures, have a
Material Adverse Effect.
The silviculture liabilities of the Target are accurately represented
in the balance sheet of the Target's Financial Statements and in the Interim
Financial Statements in all material respects as at the dates thereof.
Aboriginal Claims
31. Neither the Vendor nor any Target Company has received written notice that
any Target Company, or Tenure or a material part of the Business Assets is
subject to any claim by any First Nation that would, if adversely determined,
reasonably be expected to have a Material Adverse Effect, other than claims that
have been publicly disclosed of aboriginal title or right of a general nature
which could incidentally affect the Target Companies, the Tenures or the
Business Assets.
Softwood Lumber Dispute Duties
32. Deposits in respect of the United States Department of Commerce
countervailing and anti-dumping duties to be imposed on softwood lumber shipped
by any of the Target Companies to the United States have been paid and accrued
by such Target Company to the date hereof in accordance with GAAP and on a basis
consistent with industry standards and applicable methodologies and policies for
the determination of such duties.
Inventories
33. Inventory levels are being maintained in all material respects at such
amounts as are required for the normal operation of the Business as previously
conducted, in the ordinary course, and such inventories levels are adequate
therefor.
Accounts Receivable
34. All trade accounts receivable, notes receivable, book debts and other debts
due or accruing due to or from any Target Company in respect of the Business
(including any interest due thereon and the full benefit of all security
therefor) are subject to reserves in respect thereof for doubtful accounts
calculated in accordance with GAAP, have arisen in the ordinary course of
business and are bona fide. The Target has not undertaken any external factoring
or securitization of any of its accounts receivable and, in respect of trade
accounts receivable.
Part C - Disclosure
Execution Date Disclosure
35. The information set out in Part 1 of the Disclosure Statement includes all
of the exceptions to each Target R&W's that are within the knowledge of the
Vendor, following reasonable review with, and inquiry of, the Designated Persons
as at the Execution Date and each exception includes reasonable particulars and
identifies the representation and warranty that it modifies.
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Final Disclosure
36. As of the Interim Disclosure Date and the Closing Date, there will be no
fact known to the Vendor which has not been disclosed to the Purchaser orally or
in writing or made available for review by the Purchaser as part of its due
diligence investigations pursuant to Section 5.1 which has had or would
reasonably be expected to have a Material Adverse Effect.
Schedule 3.2
Representations and Warranties of the Purchaser
Organization
1. The Purchaser is a corporation validly subsisting under the laws of British
Columbia and it has the corporate power to enter into and perform its
obligations pursuant to this Agreement.
No Violation
2. The execution and delivery of this Agreement by the Purchaser and the
consummation of the transactions provided for herein will not result in the
breach or violation of any of the provisions of, or constitute a default under,
or conflict with or cause the acceleration of any obligation of the Purchaser
under:
(a) any contract, license or permit to which the Purchaser is a party or by
which it is bound;
(b) any provision of the constating documents or by-laws or resolutions of
the board of directors (or any committee thereof) or shareholders of the
Purchaser;
(c) any judgment, decree, order or award of any Government Authority having
jurisdiction over the Purchaser; or
(d) any applicable Law.
Authorization and Solvency
3. This Agreement has been duly authorized, executed and delivered by the
Purchaser. This Agreement is a legal, valid and binding obligation of the
Purchaser, enforceable against the Purchaser by the Vendor in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency and
other laws affecting the enforcement of rights of creditors generally and except
that equitable remedies may only be granted in the discretion of a court of
competent jurisdiction.
The Purchaser is not insolvent and has not committed an act of
bankruptcy, proposed a compromise or arrangement to its creditors generally, had
a petition in bankruptcy filed against it, made a voluntary assignment in
bankruptcy or taken any proceedings to be declared bankrupt, to liquidate its
assets or to be dissolved.
Consents and Approvals
4. Except for the Designated Regulatory Approvals, there is no requirement for
the Purchaser to make any filing with, give any notice to or obtain any licence
of any Government
-2-
Authority as a condition to the lawful consummation of the transactions
contemplated by this Agreement.
Schedule 3.7
Subsidiaries and Other Ownership Interests
The following is a list of subsidiaries and affiliated companies which indicates
the ownership percentage of each subsidiary (100% unless otherwise stated):
o Weldwood of Canada Sales Limited (in liquidation)
o Weldwood Transportation Limited
o Weldwood Forest Products Ltd.
o Weldwood Finance Limited
o Weldwood Asia Limited
o Weldwood Capital Co.
o Weldwood International Limited
o Weldwood Acquisitions Limited
o Sunpine Inc.
o Sunpine Forest Products Limited
o Babine Forest Products Limited (85%)
o Babine Forest Products (Trustee) Limited (68%)
o Decker Lake Forest Products Ltd.
x Xxxxxx Timber Ltd.
x Xxxxxx Ventures Limited (68%)
o Burnslake Specialty Wood Ltd. (45%)
o Babine Forest Products Company (68%) (Joint Venture)
o Houston Forest Products Company (50%) (Joint Venture)
o Houston Forest Products (Trustee) Ltd. (50%)
o Cariboo Pulp & Paper Company (50%) (Joint Venture)
o Cariboo Pulp & Paper Company Limited (50%)
o 484577 B.C. Ltd.
o Westech Wood Products Ltd.
o Xxxxxx Seed Orchard Company Ltd. (30%)
o Huallen Seed Orchard Co. Ltd. (30%)(1)
o Seaboard General Partnership
o Seaboard Shipping Company Limited (9.77%)
----------
(1) The percentage ownership varies with seed production.
Schedule 5.7(g)
Target Information and Financial Data
Date to Provide
---------------
I. Financial Statements
(a) Annual Financial Statements
(i) Audited comparative consolidated (with the exception of the Finance Prior to Execution of
Company) statements of income, retained earnings and cash flows for the Agreement - Delivered
financial years of the Target ended December 31, 2002 and 2003 and balance
sheet as at December 31, 2002 and 2003 together with the notes thereto and
the auditors' report thereon with a reservation for non-consolidation of
Target's investment in the Finance Company. The income statements will be
prepared on a net sales basis. Evidence of due approval of the board of the
Target will be provided.
(ii) Audited comparative consolidated statements of income, retained Prior to Execution of
earnings and cash flows for the financial years of the Target ended Agreement - Delivered
December 31, 1999, 2000 and 2001 and balance sheets as at December 31,
1999, 2000 and 2001 together with notes thereto and auditors' report
(Xxxxxx Xxxxxxxx) thereon. The income statements have been prepared on a
net sales basis and no gross sales information or segmented information
will be provided. Auditors' consent on these statements will not be
provided. Evidence of due approval of the board of the Target will be
provided. No further review, analysis or commentary will be provided by
Vendor or its auditors with respect to these years.
(iii) Audited comparative consolidated (with the exception of the Finance Date of Preliminary
Company) statements of income, retained earnings and cash flows for the Prospectus
financial year of the Target ended December 31, 2002 and 2003 and balance
sheet as at December 31, 2002 and 2003 together with the notes thereto
including segmented information, with an unsigned auditors' report thereon
with a reservation for non-consolidation of Target's investment in the
Finance Company, together with a comfort letter in accordance with section
10.2(b)6. of NI 44-101. The income statements will be prepared on a gross
sales basis and the Target has provided net sales information for the same
periods in I(a)(i) above. Evidence of due approval of the board of the
Target will be provided. These
-2-
Date to Provide
---------------
Financial Statements will be prepared in the English and French languages.
(iv) Signed audit report and consent letter from auditors of the Target Date of Final
respecting the financial statements described in Prospectus
I(a)(iii)
(b) Interim Financial Statements
(i) Unaudited comparative consolidated (with the exception of the Finance Prior to Execution of
Company) statements of income, retained earnings and cash flows for the six Agreement - Delivered
months ended June 30, 2003 and 2004 and a balance sheet as at June 30,
2004. The income statements will be prepared on a gross sales basis.
(ii) Unaudited comparative consolidated (with the exception of the Finance Date of Preliminary
Company) statements of income, retained earnings and cash flows for the six Prospectus
months ended June 30, 2003 and 2004 and a balance sheet as at June 30, 2004
together with the notes thereto including segmented information. The income
statements will be prepared on a gross sales basis and the Target will
separately provide net sales information for the same periods. Evidence of
due approval of the board of the Target will be provided. These Financial
Statements will be prepared in the English and French languages and be
formatted on the same page as the annual statements in I(a)(iii) above.
(iii) Signed auditors' comfort letter to the securities commissions and Date of Final
review engagement report from auditors of Target respecting the statements Prospectus
described in I(b)(ii).
II. Financial Information
Production and shipping information for the 5 year period January 1, 1999 to Prior to Execution of
December 31, 2003 and the first two quarters of 2004 and capacity information as Agreement - Delivered
at June 30, 2004 prepared by management of the Target from information in the
books and records of the Target and not audited or reviewed by auditors of the
Target. Segmented financial information for the first two quarters of 2004 and
2003, and the years ended 2003 and 2002. Sales information prepared on a gross
sales basis for the first two quarters of 2004 and 2003, and the years ended
2003 and 2002.
-3-
Date to Provide
---------------
III. Comfort Letter to Underwriters
A comfort letter or letters addressed by auditors of the Target, to the Date of final prospectus
underwriters of (appointed in connection with any equity financing) and the of Purchaser and brought
directors of the Purchaser, in form and substance satisfactory to the down to date of closing
underwriters, acting reasonably, with respect to financial information relating of any equity financing
to the Target, provided by the Target to the Purchaser for inclusion in any described in the final
prospectus of the Purchaser, excluding any financial and accounting information prospectus of the
for the years 1999 to 2001, inclusive. Purchaser
IV. Translation Opinion
An opinion of the Target's auditors that the Target financial information Date of preliminary and
contained in any prospectus of the Purchaser is in all material respects a final prospectus of the
complete and proper translation of the financial information provided by the Purchaser
Target to the Purchaser for inclusion in such document in the English language,
excluding any financial information for the years 1999 to 2001, inclusive.
Schedule 7.1(c)
Bring Down Certificate (Vendor)
[To be dated as of Due Diligence Satisfaction Date]
TO: Xxxx Xxxxxx Timber Co. Ltd. (the "Purchaser")
This certificate is given pursuant to Section 7.1(c) of the Acquisition
Agreement dated July 21, 2004 (the "Acquisition Agreement") between
International Paper Company (the "Vendor") and the Purchaser. Capitalized terms
used in this Certificate will have the meanings given to them in the Acquisition
Agreement.
I, [Name of Officer], hereby certify, for and on behalf of the Vendor and not in
my personal capacity, that:
1. I am the [office held] of the Vendor.
2. Subject to the Disclosure Statement, the representations and warranties of
the Vendor contained in Schedule 3.1 of the Acquisition Agreement are true and
correct as of the date hereof as though they were made as of the date hereof
except (i) where a failure to be so true and correct would not, individually or
in the aggregate, have or be reasonably likely to have a Material Adverse Effect
(except that, for the purposes of this Certificate, any of the representations
and warranties that are qualified by references to materiality standards,
including the "material respects" or "would be reasonably be expected to have a
Material Adverse Effect" or words to like effect will be considered not to be so
qualified); or (ii) insofar as such representations and warranties are given as
of a particular date or for a particular period and relate solely to such date
or period.
Dated as of the o day of o, 2004.
International Paper Company
Per:
------------------------------------
[Name]
[Office]
Schedule 7.1(d)
Bring Down Certificate (Purchaser)
[To be dated as of Due Diligence Satisfaction Date or Closing Date, as
applicable]
TO: International Paper Company (the "Vendor")
This certificate is given pursuant to Section 7.1(d) of the Acquisition
Agreement dated July 21, 2004 (the "Acquisition Agreement") between Xxxx Xxxxxx
Timber Co. Ltd. (the "Purchaser") and the Vendor. Capitalized terms used in this
Certificate will have the meanings given to them in the Acquisition Agreement.
I, [Name of Officer], hereby certify, for and on behalf of the Purchaser and not
in my personal capacity, that:
1. I am the [office held] of the Purchaser.
2. The representations and warranties of the Purchaser contained in Schedule 3.2
of the Acquisition Agreement are true and correct in all material respects as of
the date hereof as though they were made as of the date hereof.
Dated as of the o day of o, 2004.
XXXX XXXXXX TIMBER CO. LTD.
Per:
------------------------------------
[Name]
[Title]
Schedule 7.1(j)
Bring Down Certificate (Vendor)
[To be dated as of Closing Date]
TO: Xxxx Xxxxxx Timber Co. Ltd. (the "Purchaser")
This certificate is given pursuant to Section 7.1(j) of the Acquisition
Agreement dated July 21, 2004 (the "Acquisition Agreement") between
International Paper Company (the "Vendor") and the Purchaser. Capitalized terms
used in this Certificate will have the meanings given to them in the Acquisition
Agreement.
I, [Name of Officer], hereby certify, for and on behalf of the Vendor and not in
my personal capacity, that:
1. I am the [office held] of the Vendor.
2. Subject to the Disclosure Statement (including Part 2 thereof) and any
updates, additions or changes to the Disclosure Statement, including the Vendor
Closing Exceptions set out in the supplement attached to this certificate and
any Purchaser Closing Exceptions, the representations and warranties of the
Vendor contained in Schedule 3.1 of the Acquisition Agreement are true and
correct as of the date hereof as though they were made as of the date hereof
except (i) where a failure to be so true and correct would not, individually or
in the aggregate, have or be reasonably likely to have a Material Adverse Effect
(except that, for the purposes of this Certificate, any of the representations
and warranties that are qualified by references to materiality standards,
including the "material respects" or "would be reasonably be expected to have a
Material Adverse Effect" or words to like effect will be considered not to be so
qualified); or (ii) insofar as such representations and warranties are given as
of a particular date or for a particular period and relate solely to such date
or period.
Dated as of the o day of o, 2004.
INTERNATIONAL PAPER COMPANY
Per:
------------------------------------
[Name]
[Office]
Appendix 1
Rules of Interpretation and Definitions
Part A
Interpretation
1. In this Agreement, except as otherwise expressly provided or unless the
context otherwise requires,
(a) "this Agreement" means this Acquisition Agreement, including the
Schedules hereto, as from time to time supplemented or amended by one or
more agreements entered into pursuant to the applicable provisions hereof,
(b) the headings in this Agreement are inserted for convenience only and do
not form a part of this Agreement and are not intended to interpret, define
or limit the scope, extent or intent of this Agreement or any provision
hereof,
(c) the word "including", when following any general statement or term, is
not to be construed as limiting the general statement or term to the
specific items or matters set forth or to similar items or matters, but
rather as permitting the general statement or term to refer to all other
items or matters that could reasonably fall within its broadest possible
scope,
(d) all accounting terms not otherwise defined herein have the meaning
ascribed to them under, and all calculations to be made hereunder are to be
made in accordance with, GAAP applied on a consistent basis,
(e) a reference to a statute includes all regulations made thereunder, all
amendments to the statute or regulations in force from time to time, and
any statute or regulation that supplements or supersedes such statute or
regulations,
(f) a reference to an entity includes any successor to that entity,
(g) words importing the masculine gender include the feminine or neuter,
words in the singular include the plural, words importing a corporate
entity include individuals, and vice versa,
(h) a reference to "approval", "authorization" or "consent" means written
approval, authorization or consent,
(i) a reference to a Part is to a Part of this Agreement or to a Part of a
Schedule hereto and the symbol Section followed by a number or some
combination of numbers and letters refers to the section, paragraph,
subparagraph, clause or subclause of this Agreement so designated,
-2-
(j) except as otherwise expressly provided, a reference to currency herein
means Canadian dollars and all amounts payable hereunder will be paid in
Canadian dollars; and
(k) "to the knowledge of the Vendor or any of the Target Companies", "to
the knowledge of the Vendor", "known to the Vendor" and words to like
effect mean, as at the Execution Date, to the actual knowledge of the
Vendor following reasonable review with, and inquiry of, the Designated
Persons and as at, and following, the Interim Disclosure Date means to the
actual knowledge of the Designated Persons, after having made reasonable
inquiries of management of the Target Companies.
Entire Agreement
2. This Agreement (together with the Confidentiality Agreement) constitutes the
entire agreement between the Parties with respect to the subject matter hereof
and supersedes all prior agreements, understandings, negotiations and
discussions, whether written or oral. There are no conditions, covenants,
agreements, representations, warranties or other provisions, express or implied,
collateral, statutory or otherwise, relating to the subject matter hereof except
as herein provided.
Construction
3. The Parties agree that each Party and its counsel have reviewed and revised
this Agreement and that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting Party is not applicable in
the interpretation of this Agreement or any amendments, schedules or exhibits
thereto.
Applicable Law
4. This Agreement will be construed, interpreted and enforced in accordance
with, and the respective rights and obligations of the Parties will be governed
by, the laws of British Columbia and the federal laws of Canada applicable in
British Columbia, and each Party hereby irrevocably and unconditionally submits
to the non-exclusive jurisdiction of the courts of such province and all courts
competent to hear appeals from such courts. The Vendor agrees that it will not
bring any suit, action or proceeding in connection with the transactions
contemplated hereunder except in a court of competent jurisdiction in British
Columbia or the State of New York.
Severability
5. If any provision of this Agreement is determined by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect, such
determination will not impair or affect the validity, legality or enforceability
of the remaining provisions hereof, and each provision is hereby declared to be
separate, severable and distinct.
Successors and Assigns
6. This Agreement will enure to the benefit of and will be binding on and
enforceable by the Parties and their respective successors and permitted
assigns. Except as
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permitted under this Section 6, no Party may assign any of its rights or
obligations hereunder without the prior written consent of the other Party. The
Purchaser may, by giving notice to the Vendor not less than five Business Days
before the Closing Date, assign its right to purchase the Purchased Share to a
direct or indirect wholly-owned subsidiary except that no such assignment will
relieve the Purchaser of any of its obligations hereunder and in respect of
which obligations the Purchaser and the assignee will be jointly and severally
liable. At Closing, the Purchaser and the assignee will execute and deliver in
favour of the Vendor an assignment and assumption agreement, in form and
substance acceptable to the Vendor, acting reasonably, under which the assignee
assumes, on a joint and several basis with the Purchaser, the Purchaser's
obligations hereunder and makes those representations and warranties set out in
Schedule 3.2 with respect to the assignee (which representations and warranties
will be subject to Part 4, mutatis mutandis).
Amendments and Waivers
7. No amendment or waiver of any provision of this Agreement will be binding on
any Party unless consented to in writing by such Party. No waiver of any
provision of this Agreement will constitute a waiver of any other provision, nor
will any waiver constitute a continuing waiver unless otherwise expressly
provided.
Payments
8. Any payment contemplated under this Agreement, other than the payments to be
made on the Closing Date which will be made as provided in Section 2.3, will be
made by certified cheque, bank draft or electronic inter-bank transfer in
immediately available funds.
Time of the Essence
9. Time will be of the essence of this Agreement in all respects.
Third Party Beneficiaries
10. The provisions of this Agreement are intended solely to benefit the Parties
and, to the full extent permitted by applicable Law, will not be construed as
conferring any benefit upon any other Person.
Part B
Definitions
1. In this Agreement, except as otherwise expressly provided or unless the
context otherwise requires,
(a) "ADMT" means 1,000 kilograms of 10% moisture content weight;
(b) "Affiliate" has the meaning ascribed to that term in the Securities Act
(British Columbia);
-4-
(c) "Alberta Forests Act" means the Forests Act (Alberta) and all rules,
regulations and policies thereunder now in effect or as may be enacted or
amended from time to time before the Closing Date;
(d) "Applicable Privacy Laws" means the Personal Information Protection and
Electronic Documents Act (Canada) and any similar provincial legislation
governing the protection of personal information applicable to the parties
hereto;
(e) "Applicable Remediation Standard" means the Remediation Standard that
was enforceable as of the Due Diligence Satisfaction Date under the
applicable Environmental Law that is the source of the requirement to
conduct a Remediation, or, where no such Remediation Standard was
enforceable as of the Due Diligence Satisfaction Date, the least stringent
Remediation Standards that were applied, within one year prior to the Due
Diligence Satisfaction Date, on a case-by-case basis, to properties that
are most similar to the relevant property that is subject to a Remediation;
(f) "Arbitrator" has the meaning set out in Section 2.8(c);
(g) "B.C. Forest Act" means the Forest Act (British Columbia) and all
rules, regulations and policies thereunder now in effect or as may be
amended from time to time before the Closing Date;
(h) "B.C. Forest Act Satisfaction Date" means the later of
(i) the Competition Satisfaction Date, and
(ii) September 30, 2004;
(i) "B.C. Tenures" means any tree farm licences, forest licences, timber
sale licences, timber licences, pulpwood agreements and any other timber
harvesting rights issued under the B.C. Forest Act and held by any of the
Target Companies as at the date hereof;
(j) "Business" means the business currently carried on by the Target and
its Subsidiaries, consisting of the harvesting of timber and the
manufacture and sale of lumber, wood chips, plywood, northern bleached
softwood kraft pulp, laminated veneer lumber, treated wood, veneer, pulp
process by-products (tall oil), sale of power to the Alberta energy grid,
purchase and resale of logs, sales of by-products from sawmills;
development of coalbed methane undersurface rights, factoring arrangements
and water and sewage treatment operations and any business ancillary to the
foregoing but does not include the business conducted by Finance Company;
(k) "Business Assets" has the meaning set out in Section 15 of Schedule
3.1;
(l) "Business Day" means any day (other than a Saturday or a Sunday) on
which the banks, in Vancouver, British Columbia and Stamford, Connecticut
are generally open for business;
-5-
(m) "Canadian Competition Waiting Period Compliance" means
(i) the Purchaser and the Target have given the notice required under
section 114 of the Competition Act with respect to the transactions
contemplated by this Agreement, and
(ii) the applicable waiting period under section 123 of the
Competition Act has expired.
(n) "Canadian Competition Satisfaction" means that the Commissioner of
Competition has notified the Purchaser, in writing, that the Commissioner
of Competition does not, at that time, intend to make an application under
section 92 of the Competition Act in respect of the transactions proposed
under this Agreement and any terms and conditions attached to any such
advice, including the form of any such terms and conditions, are acceptable
to the Purchaser and the Vendor, acting reasonably, and such advice has not
been rescinded or amended;
(o) "Claim" has the meaning set out in Section 4.3;
(p) "Closing" means the completion of the transactions contemplated by this
Agreement;
(q) "Closing Date" means subject to Section 7.2, the fifth Business Day
after the day (the "Satisfaction Date") on which the last of conditions set
out in Section 8.1(a) and (b), Section 8.2 and Section 8.3(b) and (c) has
been satisfied or waived as contemplated herein (provided that if the
Satisfaction Date is after the 20th day of the month in which it occurs,
the Closing Date will be the first Business Day of the immediately
following month), or such other date that the Purchaser and the Vendor
agree in writing that the Closing will take place;
(r) "Comfort Letter" has the meaning set out in Section 2.4(e);
(s) "Commissioner of Competition" means the Commissioner of Competition
appointed pursuant to the Competition Act;
(t) "Competition Act" means the Competition Act (Canada);
(u) "Competition Satisfaction Date" means the date which is 12 weeks after
the date upon which the Competition Bureau certifies that the transaction
contemplated under this Agreement is non-complex or complex;
(v) "Confidentiality Agreement" means the confidentiality agreement dated
March 18, 2004 between the Parties;
(w) "Contaminant" means any pollutants, explosives, dangerous goods and
substances, underground or above ground storage tanks, deleterious
substances, special waste, liquid waste, industrial waste, hauled liquid
waste or waste of any other kind, toxic substances, hazardous wastes,
hazardous materials, hazardous substances or contaminants or any other
substance the storage, manufacture, disposal, handling, treatment,
-6-
generation, use, transport or release into the environment of which is
prohibited, controlled or regulated under any Environmental Law;
(x) "Contracts" means each agreement, indenture, contract, lease, deed of
trust, licence, option, instrument or other commitment, whether written or
oral that is binding upon any of the Target Companies and that involves
payments or other obligations that could be reasonably valued at more than
$500,000 in the aggregate or whose termination could have a Material
Adverse Effect but excluding Tenures;
(y) "CRA" means Canada Revenue Agency;
(z) "Deadline Date" has the meaning set out in Section 2.4(c);
(aa) "Delaware Sales Company" means Weldwood Sales, Inc.;
(bb) "Designated Persons" means those individuals listed in Part 5 of the
Disclosure Statement;
(cc) "Designated Regulatory Approvals" means
(i) Canadian Competition Waiting Period Compliance,
(ii) HSR Compliance,
(iii) Other Competition/Antitrust Compliance, and
(iv) Investment Canada Act Approval;
(dd) "Direct Claim" has the meaning set out in Section 4.7;
(ee) "Disclosure Statement" means the disclosure statement delivered by the
Vendor to the Purchaser before the Execution Date and, with respect to Part
2 thereof, as completed and delivered, and updated, added to or changed (or
deemed updated, added or changed) from time to time, pursuant to Section
5.4 and Section 5.5;
(ff) "Dispute" has the meaning set out in Section 2.8(a);
(gg) "Dispute Notice" has the meaning set out in Section 2.8(a);
(hh) "Disputing Party" has the meaning set out in Section 2.8(a);
(ii) "Due Diligence Satisfaction Date" means the earlier of
(i) August 31, 2004, and
(ii) the day on which the Purchaser enters into an underwriting
agreement in connection with an equity financing for the purposes of
completing the acquisition contemplated hereby;
-7-
(jj) "Duties" means amounts either
(i) paid as a deposit, bond or other form of security by or for the
account of a Person to the applicable U.S. Government Authority on
account of or pursuant to the anti-dumping and countervailing duty
orders issued by the U.S. Department of Commerce with respect to
softwood lumber from Canada, or
(ii) paid as a duty by or for the account of a Person to the
applicable U.S. Government Authority on account of or pursuant to the
anti-dumping and countervailing duty orders issued by the U.S.
Department of Commerce with respect to softwood lumber from Canada;
(kk) "Duty Expense Amount" means, as at a particular date, a proportion of
the Total Duty Recovery Expenses incurred from the Closing Date to such
date that
(i) the amount of the Pre-Closing Date Duty Refunds received by the
Target Companies as at such date,
bears to
(ii) the total amount of all refunds, returns or reimbursement in
whole or in part to the Target Companies and the Purchaser of Duties
paid by any of them as at such date except for Duties paid by the
Purchaser on account of or pursuant to the anti-dumping duty orders
issued by the U.S. Department of Commerce with respect to softwood
lumber from Canada;
(ll) "Duty Refund Amount" has the meaning set out in Section 2.2(c);
(mm) "Employee Plans" means each deferred compensation, bonus or incentive
compensation, share option or purchase, severance, termination pay,
hospitalization or other medical benefit, life or other insurance, vision,
dental, drug, sick leave, disability, salary continuation, vacation,
supplemental unemployment benefits, profit sharing, incentive or other
compensation, mortgage assistance, pension or supplemental pension plan,
retirement compensation arrangement, group registered retirement savings
plan, deferred profit sharing plan, employee profit sharing plan, savings,
retirement or supplemental retirement plan, program or arrangement, whether
funded or unfunded, that is maintained, contributed to or required to be
contributed to, by any of the Target Companies, or to which any of them is
a party, or bound by, or under which any of them has any liability or
contingent liability for the benefit of employees or former employees of
any of the Target Companies and their dependants but excluding, for greater
certainty, statutory and multi-employer plans;
(nn) "Encumbrance" means any encumbrance, lien, charge, hypothec, pledge,
mortgage, title retention agreement, security interest of any nature,
adverse claim, exception, reservation, easement, right of occupation, any
matter capable of registration against title, option, right of pre-emption,
privilege or any contract to create any of the foregoing;
-8-
(oo) "Environmental Activity" means any activity, event or circumstance in
respect of a Contaminant, including, without limitation, its storage, use,
holding, collection, purchase, accumulation, assessment, generation,
manufacture, construction, processing, treatment, stabilization,
disposition, handling or transportation, or its Release, escape, leaching,
dispersal or migration into the natural environment, including the movement
through or in the air, soil (land surface or subsurface strata), surface
water or groundwater;
(pp) "Environmental Law" means any and all Laws in effect and enforceable
on the Execution Date relating to pollution or the environment or any
Environmental Activity;
(qq) "Environmental Permits" means, collectively, all permits, approvals,
licences, certificates, variances, remediation orders and authorizations of
or any registration with, any Government Authority pursuant to any
Environmental Law;
(rr) "Escrow Agreement" has the meaning set out in Section 2.4(b);
(ss) "Excess Taxes" has the meaning set out in Section 4.15(b);
(tt) "Execution Date" means the date hereof;
(uu) "Final Disclosure Date" has the meaning set out in Section 5.4(b);
(vv) "Finance Company" means Weldwood Finance Limited;
(ww) "Finance Company Reorganization" means the reorganization of the
Target's investment in the Finance Company which will result in the Target
no longer having any interest in the Finance Company, including the
declaration of cash dividends by the Finance Company to the Target and the
declaration of cash dividends in the aggregate amount of such dividends,
and a dividend-in-kind of the Target's shares in the Finance Company, by
the Target to the Vendor and the filing of any elections or other
designations in any tax return of the Target for any period ending on or
before the Closing Date;
(xx) "Financial Statements" means, the financial statements described in
Section I(a)(i) of Schedule 5.7(g);
(yy) "Financing Satisfaction Date" means the earlier of
(i) September 27, 2004, and
(ii) the day on which the Purchaser completes an equity financing for
the purposes of completing the acquisition contemplated hereby;
(zz) "First Nation" means a First Nation, tribal council or aboriginal
group;
(aaa) "GAAP" or "generally accepted accounting principles" means accounting
principles generally accepted in Canada from time to time including those
recommended
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by the Canadian Institute of Chartered Accountants Handbook or as
recommended by another entity approved by a significant segment of the
accounting profession, that are applicable to the circumstances as of the
relevant date;
(bbb) "Government Authority" means any nation or any province, state,
county, territory, municipality or other political subdivision thereof, or
any government, quasi-government, administrative or regulatory authority,
agency, board, body, commission, instrumentality, court or tribunal
thereof, any Tax authority, any ministry or department or agency of the
foregoing, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, or
any arbitrator or panel of arbitrators;
(ccc) "GST" means any and all taxes payable under Part IX of the Excise Tax
Act (Canada) or under any similar provincial legislation;
(ddd) "HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended;
(eee) "HSR Compliance" means the Parties will have completed the filing of
all forms required by the HSR Act in respect of the transactions
contemplated by this Agreement, and the waiting periods (or any extensions
thereof) applicable under the HSR Act will have been terminated or will
have expired;
(fff) "Income Tax" means all Taxes payable under the Tax Act and all Taxes
similar to those paid under the Tax Act payable under tax legislation of
other jurisdictions (whether domestic or foreign);
(ggg) "Indemnified Party" has the meaning set out in Section 4.3;
(hhh) "Indemnifying Party" has the meaning set out in Section 4.3;
(iii) "Intellectual Property" means all trade marks, trade names, business
names, patents, inventions, copyrights, service marks, brand names,
industrial designs used by any Target Company in carrying on the Business,
including all licences and all like rights used by or granted to any Target
Company in connection with the Business as at the date of this Agreement;
(jjj) "Interim Disclosure Date" means the day that is the earlier of
(i) August 26, 2004, and
(ii) subject to Section 5.5, the first Business Day immediately
following the day on which the Purchaser gives notice to the Vendor
that the event described in Section(ii) of the definition of the "Due
Diligence Satisfaction Date" will occur;
(kkk) "Interim Financial Statements" means financial statements described
in Section I(b)(i) of Schedule 5.7(g);
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(lll) "Interim Period" means the period beginning on, and including, the
Execution Date and ending at the end of the day immediately preceding the
Closing Date;
(mmm) "Investment Canada Act" means the Investment Canada Act (Canada);
(nnn) "Investment Canada Act Approval" means that the Purchaser, unless it
determines before Closing that, upon Closing it will not be a non-Canadian
under the Investment Canada Act and confirms such status to the Vendor in a
manner satisfactory to the Vendor, acting reasonably, will have received a
notice from the Minister responsible for the Act issued under Sections 21,
22 or 23 of the Act indicating that the Minister is, or is deemed to be,
satisfied that the transactions contemplated in this Agreement are likely
to be of net benefit to Canada;
(ooo) "Law" means all statutes, regulations, statutory rules, orders, or
any other requirements having the force of law and the term "applicable"
with respect to such Law and in the context that refers to one or more
Persons, means that such Law applies to such Person or Persons or its or
their business, undertaking, property or securities and emanates from a
Government Authority, statutory body or regulatory authority having
jurisdiction over the Person or Persons or its or their business,
undertaking, property or securities;
(ppp) "Letter of Credit" has the meaning set out in Section 2.4(a);
(qqq) "Licences" means all Tenures, licences, permits, approvals, consents,
certificates, registrations and authorizations (whether governmental,
regulatory or otherwise) held by or granted to any Target Company as at the
date of this Agreement;
(rrr) "Material Adverse Effect" means an effect that results in or causes
or would reasonably be expected to result in or cause a material adverse
change in the Business Assets or the financial condition of the Business
taken as a whole after giving effect to any recoveries that may reasonably
be expected to be available after Closing other than any effect relating to
(i) general political, financial or economic conditions or the state of the
securities markets in general, (ii) the forestry industry in general
(including product supply, demand and pricing) and not specifically
relating to the Target or its Subsidiaries, the Purchaser or the Vendor,
(iii) the announcement of the transactions contemplated hereby, or (iv) any
labour disruption, strike, collective bargaining or other condition with
respect to any collective agreement that expires or has expired before the
Execution Date;
(sss) "NBSK" means northern bleached softwood kraft pulp;
(ttt) "Order" means an order, requirement or direction issued in writing by
a Government Authority, compliance with which is required pursuant to
Environmental Law;
(uuu) "Other Competition/Antitrust Compliance" means the compliance by the
Parties with all competition and antitrust laws in each jurisdiction in the
world where such compliance is required or desirable to give effect to the
transactions contemplated
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by this Agreement (other than Canadian Competition Waiting Period
Compliance and HSR Compliance) including the following:
(i) the Parties will have filed any notification that is necessary
pursuant to Regulation (EC) No 139/2004, and (1) a decision from the
European Commission pursuant to Article 6(1)(b) of Regulation (EC) No
139/2004 in terms reasonably satisfactory to the Purchaser will have
been obtained, declaring that the transactions contemplated by this
Agreement are compatible with the common market, or (2) a decision of
the European Commission pursuant to Article 10(6) of Regulation (EC)
No 139/2004 which is not subject to any conditions which are
unacceptable to both the Vendor and the Purchaser acting reasonably
will have been obtained; and
(ii) each national competition regulatory authority in the European
Union either will have declined jurisdiction in respect of, or will
have approved of, the transactions contemplated by this Agreement, all
applicable waiting periods will have expired, and any terms and
conditions attached to any approvals received, including the form of
any such terms and conditions, are acceptable to the Purchaser and the
Vendor, acting reasonably, and such approvals have not been rescinded
or amended;
(vvv) "Part 2 Exceptions" has the meaning set out in Section 5.4;
(www) "Parties" means the Purchaser and the Vendor, and "Party" means
either of them;
(xxx) "Periodic Amount" for a Pulp Period means the result obtained when
(i) one-half of the amount, if any, by which the Reference Price for
the Pulp Period exceeds the Threshold Price for the Pulp Period
is multiplied by
(ii) the number of ADMT of NBSK sold by the Target from its Xxxxxx
(100%) and Cariboo (50%) operations during the Pulp Period;
(yyy) "Permitted Encumbrances" means:
(i) Encumbrances for Taxes if such Taxes are not due and payable;
(ii) minor title defects or irregularities or servitudes, easements,
restrictions, encroachments, covenants, rights of way and other
similar rights or restrictions in real property or any interest
therein, whether registered or unregistered, provided the same are not
of such nature as to materially impair the operation of the Business
as currently conducted by the Target and its Subsidiaries;
(iii) registered agreements with the municipalities provided they have
been complied with or adequate security has been furnished to secure
compliance and
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provided that they do not, in the aggregate, materially impair the
operation of the Business as currently conducted by the Target and its
Subsidiaries;
(iv) undetermined or inchoate liens, charges and privileges (including
mechanics', construction, carriers', workers', repairers', storers' or
similar liens) which individually or in the aggregate are not
material, arising or incurred in the ordinary course of business of
the Business as currently conducted by the Target and its
Subsidiaries;
(v) statutory liens, charges, adverse claims, security interests or
Encumbrances of any nature whatsoever claimed or held by any
Government Authority that have not at the time been filed or
registered against the title to the asset or served upon the Vendor or
the Target pursuant to law or that relate to obligations not due or
delinquent, save and except for liens, charges, adverse claims,
security interests or Encumbrances related to Taxes which are due and
payable;
(vi) assignments of insurance provided to landlords (or their mortgage
holders) pursuant to the terms of any lease and liens or rights
reserved in any lease for rent or for compliance with the terms of
such lease;
(vii) security given in the ordinary course of business to any public
utility or Government Authority in connection with the operations of
the Business, other than security for borrowed money; and
(viii) the reservations, limitations and exceptions in any original
grants from the Crown of any real property or interest therein and
statutory exceptions to title that do not materially detract from the
value of the real property in the operation of the Business or
materially impair the operation of the Business as currently conducted
by the Target and its Subsidiaries; and
(ix) the Encumbrances listed in the Disclosure Statement.
(zzz) "Permitted Investment" means an account in the name of a Target
Company at, or a deposit certificate of, a Canadian chartered bank or a
bond, debenture, or other evidence of indebtedness of, or guaranteed by,
the Government of Canada or any province thereof, that has, in the case of
a deposit certificate, bond, debenture or other evidence of indebtedness a
date of maturity, or may be redeemed, not later than the day immediately
before the Closing Date;
(aaaa) "Permitted Payment" means, with respect to any Target Company at any
time, any declaration or payment of any cash dividend or other cash
distribution, direct or indirect, on account of any outstanding securities
of the Target Company;
(bbbb) "Person" includes any individual, firm, partnership, joint venture,
limited liability company, association, trust, trustee, executor,
administrator, legal personal representative, body corporate, corporation,
unincorporated association or organization, Government Authority, syndicate
or other entity, whether or not having legal status;
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(cccc) "Personal Information" means information about an identifiable
individual that is the subject of Applicable Privacy Laws;
(dddd) "Personal Property" has the meaning set out in Section 11 of
Schedule 3.1;
(eeee) "Phantom Plan" means the Target Employee Phantom Share Plan
established January 1, 1998, as amended;
(ffff) "Potential Remittance Amount" has the meaning set out in Section
2.4(a);
(gggg) "Pre-Closing Date Duty Refunds" means funds or credits received by
any of the Target Companies from time to time from any U.S. Government
Authority as refunds, returns or reimbursement in whole or in part, of
Duties paid during the period beginning May 22, 2002 to, but not including,
the Closing Date. "Pre-Closing Date Duty Refunds" include any amounts
received on account of interest earned on the above-noted deposits or
duties. In order to qualify as a "Pre-Closing Date Duty Refund", the Target
Company must have full right, title and interest in such funds free and
clear of all Encumbrances created prior to the Closing Date other than
those which apply to the Target Company's property generally and which have
been granted by the Target Company and in respect of such funds, the Target
Company is not prohibited or enjoined from disposing of such funds by any
order or injunction obtained by any U.S. Government Authority or member or
representative of the U.S. wood products manufacturing industry or any
other Person;
(hhhh) "Proceeding" has the meaning set out in Section 4.15(c);
(iiii) "Prohibited Activity" has the meaning set out in Schedule A;
(jjjj) "Prohibited Contract" has the meaning set out in Part 4 of the
Disclosure Statement;
(kkkk) "Pulp Amount" has the meaning set out in Section 2.2(c);
(llll) "Pulp Period" means the Quarter beginning on the first day of the
month following the Closing Date, or if the Closing Date occurs on the
first day of a month, on the Closing Date, and each Quarter immediately
following thereafter that ends on or before June 30, 2007, and if the last
such Quarter ends before June 30, 2007, the final Pulp Period will be the
period following such Quarter and ending on June 30, 2007;
(mmmm) "Pulp Sales Agreement" means an agreement in substantially the form
settled as between the Parties and initialled for identification by a
senior officer of each of them;
(nnnn) "Purchase Price" has the meaning set out in Section 2.2;
(oooo) "Purchased Share" means the one issued and outstanding common share
in the capital of the Target;
(pppp) "Purchaser" means Xxxx Xxxxxx Timber Co. Ltd.;
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(qqqq) "Purchaser Closing Exceptions" has the meaning set out in Section
5.5;
(rrrr) "Purchaser's Cost" has the meaning set out in Section 2.4(h)(i);
(ssss) "Quarter" means a period of three consecutive calendar months;
(tttt) "Rate of Exchange" for a period means the average of each rate of
exchange for converting a Canadian dollar into U.S. currency, or a U.S.
dollar into Canadian currency, as the case may be, published during each
Business Day of the period by the Bank of Canada as its "nominal noon
exchange rate";
(uuuu) "Real Property" has the meaning set out in Section 12 of Schedule
3.1;
(vvvv) "Receiver General" has the meaning set out in Section 2.4(c)(ii);
(wwww) "Reference Price" for a Pulp Period means the average price per ADMT
of NBSK reported for each month during that Pulp Period by Resource
Information Systems, Inc., before any large buyer and fidelity discounts,
for delivery to Europe; provided however that if such reference price is
unavailable or not published for any such monthly period, then the
Reference Price for such monthly period will mean the average North
American Transaction Price per ADMT of NBSK reported for such month by
Resource Information Systems, Inc., before any large buyer and fidelity
discounts, or if such North American Transaction Price is also unavailable
or not published in the applicable month, then the Reference Price will be
based on the average NBSK Reference Price per ADMT of NBSK reported for
such month by Resource Information Systems, Inc., before any large buyer
and fidelity discounts, and if all of the reference prices described herein
are unavailable or not published in the applicable month, the Parties will
designate a mutually acceptable alternative Reference Price which best
reflects the intent of the Parties at the date of this Agreement;
(xxxx) "Release" means discharge, spray, inject, inoculate, abandon,
deposit, spill, leak, seep, migrate, pour, emit, empty, throw, dump, place
or exhaust, and when used as a noun has a similar meaning;
(yyyy) "Remediation" has the meaning set out in Section 4.14;
(zzzz) "Remediation Standard" means the applicable numerical standard and
remediation protocol (whether resulting from an enacted statute,
promulgated regulation, guidance or policy document issued by a regulatory
agency, or developed on a case-by-case basis through a risk assessment or
other methodology required under applicable Environmental Law) that defines
the concentrations of Contaminants that may be permitted to remain in any
environmental media after a Remediation of a Release;
(aaaaa) "Representatives" has the meaning set out in Section 5.3;
(bbbbb) "Restricted Payment" means with respect to the Target at any time,
any direct or indirect redemption, retirement, purchase or other
acquisition for value of, or any direct or indirect purchase, payment or
sinking fund or similar deposit for the redemption,
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retirement, purchase or other acquisition for value of, or to obtain the
surrender of, any then outstanding securities of the Target;
(ccccc) "S 116(2) Certificate" has the meaning set out in Section 2.4(a);
(ddddd) "S 116(4) Certificate" has the meaning set out in Section
2.4(c)(i)(B);
(eeeee) "Share Sale" has the meaning set out in Section 2.4(a);
(fffff) "Subsidiary" means, in relation to an entity, any corporation or
other organization, whether incorporated or unincorporated, of which at
least a majority of the securities or interests having by the terms thereof
ordinary voting power to elect at least a majority of the board of
directors or others performing similar functions with respect to such
corporation or other organization that is directly or indirectly owned or
controlled by one or more Target Companies, and includes any corporation or
other organization the accounts of which are consolidated in the financial
statements of the Target;
(ggggg) "Target" means Weldwood of Canada Limited;
(hhhhh) "Target Companies" means the Target and its Subsidiaries other than
the Finance Company and "Target Company" means any of them;
(iiiii) "Target R&W's" has the meaning set out in Schedule 3.1, Part B,
Section 7;
(jjjjj) "Tax Act" means the Income Tax Act (Canada) as amended from time to
time;
(kkkkk) "Tax Authority" has the meaning set out in Section 4.15(a);
(lllll) "Tax Action" has the meaning set out in Section 24(h) of Schedule
3.1;
(mmmmm) "Tax Claim" has the meaning set out in Section 4.15;
(nnnnn) "Tax Issue" has the meaning set out in Section 4.15(a);
(ooooo) "Tax Refund Amount" means refunds and credits received by or
otherwise applied to the benefit of the Target Companies in respect of
Taxes for any period ending on or before the Closing Date and the after tax
amount of any interest thereon or otherwise applied to the benefit of the
Target Companies to the extent not reflected on the Closing Date Balance
Sheet;
(ppppp) "Taxes" means all taxes, duties, fees, premiums, assessments,
imposts, levies and other charges of any kind whatsoever imposed by any
Government Authority or under the laws of any jurisdiction, including those
in respect of income gross receipts, profits, sales or excise, goods and
services, value added, use, franchise, transfer, property, capital,
logging, stumpage, import and customs, social services, licenses,
withholding, payroll, health, employer health, employment, Canada or Quebec
Pension Plan, social security, workers' compensation, employment or
unemployment insurance or
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compensation, and other governmental charges and assessments, and includes
additions by way of penalties, interest and fines and other amounts with
respect thereto;
(qqqqq) "Tenures" means all forest licences, tree farm licences, timber
sales licences, forest management agreements, pulpwood agreements and other
forms of agreements held by the Target granting harvesting rights under the
B.C. Forest Act or under the Alberta Forests Act;
(rrrrr) "Third Party Claim" has the meaning set out in Section 4.7;
(sssss) "Threshold Claim" has the meaning set out in Section 4.4(a)(i);
(ttttt) "Threshold Price" for a Pulp Period means the greater of
(i) US$710, and
(ii) $950 converted to U.S. dollars at the Rate of Exchange for the
Pulp Period;
(uuuuu) "Time of Closing" means 10:00 a.m. (Vancouver time) on the Closing
Date or such other time as the Parties agree;
(vvvvv) "Total Duty Recovery Expenses" means, as at a particular date,
64.38% of the total of all legal, accounting and other expenses paid or
accrued by any of the Target Companies or the Purchaser after the Closing
Date and up to such date in connection with their respective commercially
reasonable efforts described in Section 5.12 to the extent not reflected on
the Closing Date Statements;
(wwwww) "Triggering Event Adjustment Amount" has the meaning set out in
Part 3 of the Disclosure Statement;
(xxxxx) "Vendor" means International Paper Company;
(yyyyy) "Vendor Closing Exceptions" has the meaning set out in Section
5.4(b);
(zzzzz) "Vendor Paid Expenses" has the meaning set out in Section 2.2(c);
and
(aaaaaa) "Wages and Benefits Accrual" means the amount accrued but unpaid
on the books and records of the Target Companies as of 12:01 a.m. on the
Closing Date in respect of potential increases in wages and benefits
payable under any collective agreement to which any of the Target Companies
is a party which replaces or extends a collective agreement that expires or
has expired before the Closing Date.
