ASSET PURCHASE AGREEMENT

 

TABLE OF CONTENTS

 

Article 1 – INTERPRETATION			1
	1.1	Definitions	1
	1.2	Headings	10
	1.3	Extended Meanings	10
	1.4	Statutory References	10
	1.5	Accounting Principles	10
	1.6	Currency, Prices and Values	10
	1.7	Schedules	10
Article 2 – SALE AND PURCHASE			12
	2.1	Assets to be Sold and Purchased	12
	2.2	Retained Assets	14
	2.3	Liabilities of Seller Assumed by Purchaser	15
	2.4	Retained Liabilities	16
	2.5	Non-Assignable Contracts or Licenses/Shared Contracts	17
	2.6	Purchase Price	19
	2.7	Purchase Price Adjustment	19
	2.8	Allocation of Purchase Price; Taxes	23
	2.9	Section 167 Elections	23
	2.10	Section 85 Elections	23
	2.11	Instruments of Conveyance and Assumption	24
Article 3 – REPRESENTATIONS AND WARRANTIES			24
	3.1	Seller’s Representations and Warranties	24
	3.2	Survival of Seller’s Representations, Warranties and Covenants	40
	3.3	Purchaser’s Representations and Warranties	41
	3.4	Survival of Purchaser’s Representations, Warranties and Covenants	43
Article 4 – COVENANTS			43
	4.1	Governmental Filings	43
	4.2	Expenses	43
	4.3	Indemnification for Brokerage Commissions	43
	4.4	Access to Records	44
	4.5	Affiliation with Seller	44
	4.6	Further Assurances	44
	4.7	Mail and Money Received After Closing	45
	4.8	Delivery of Books and Records	45
	4.9	Use of Seller’s Trade Name	45
Article 5 – EMPLOYMENT AND BENEFIT PLAN ARRANGEMENTS			45
	5.1	Employees	45

 

 

	5.2	Pension and Retirement Plans and Benefit Plans	46
Article 6 – CLOSING ARRANGEMENTS			46
	6.1	Closing	46
Article 7 – GENERAL			47
	7.1	Time of the Essence	47
	7.2	Public Announcements	47
	7.3	Benefit of the Agreement	47
	7.4	Third Party Beneficiaries	47
	7.5	Entire Agreement	47
	7.6	Amendments and Waivers	47
	7.7	Assignment	48
	7.8	Notices	48
	7.9	Remedies Cumulative	49
	7.10	Governing Law	49
	7.11	Attornment	49
	7.12	Counterparts	49

 

 

ASSET PURCHASE AGREEMENT

 

THIS AGREEMENT is made as of June         , 2008, between NEENAH PAPER COMPANY OF CANADA, an unlimited company incorporated under the laws of Nova Scotia (“ Seller ”) and NORTHERN PULP NOVA SCOTIA CORPORATION, an unlimited company incorporated under the laws of Nova Scotia (“ Purchaser ”).

 

PRELIMINARY STATEMENT

 

Seller desires to sell, on a going concern basis, substantially all of the assets and properties owned by Seller, other than the Retained Assets (as defined herein), which are used exclusively by or in connection with (i) the business conducted by Seller at and only with respect to its Pictou County, Nova Scotia pulp mill (the “ Pictou Pulp Mill ” or the “ Pulp Business ”) and (ii) the business conducted by Seller in respect of its timberland properties in Nova Scotia (specifically excluding the Woodlands (as defined herein)), including the Debert Nursery (as defined herein) (the “ Woodlands Business ”, and collectively with the Pulp Business, the “ Purchased Businesses ”), and Purchaser desires to purchase the Purchased Businesses and assume substantially all of the related liabilities, other than the Retained Liabilities (as defined herein), for the consideration set forth below, subject to the terms and conditions of this Agreement.

 

NOW THEREFORE , in consideration of the premises and the covenants and agreements herein contained, the parties hereto agree as follows:

 

ARTICLE 1 – INTERPRETATION

 

1.1                                Definitions

 

In this Agreement, unless something in the subject matter or context is inconsistent therewith, the following terms shall have the respective meanings set out below and grammatical variations of such terms shall have corresponding meanings:

 

“ Affiliate ” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with, such Person, and for these purposes “control” is the power whether by contract or ownership of equity interests or otherwise to select a majority of the board of directors or other supervisory management authority of an Entity, whether directly or indirectly through a chain of Entities that are “controlled” within the foregoing meaning; provided, however, that for purposes of this Agreement, Seller and Purchaser shall be deemed not to be Affiliates of each other;

 

“ Agreement ” means this asset purchase agreement including the Preliminary Statement and Schedules to this agreement, as amended, supplemented or restated from time to time;

 

“ Ancillary Agreements ” means any written agreement to which Seller is or becomes a party in connection with the execution and delivery by Seller of, and as contemplated in any of, this Agreement, the Finance Purchase Agreement or the Share Purchase Agreement;

 

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“ Applicable Law ” means any applicable domestic or foreign, federal, provincial or local law, including any statute or subordinate legislation or treaty and any applicable rule, regulation, ordinance, requirement, order, Permit, judgment, injunction, award or decree or other binding requirement of a Governmental Authority having the force of law;

 

“ Assets ” has the meaning set out in Section 2.1;

 

“ Assumed Contracts ” has the meaning set forth in Section 2.1(f);

 

“ Assumed Liabilities ” has the meaning set forth in Section 2.3;

 

“ Benefit Plans ” means all plans, arrangements, agreements, programs, policies, practices or undertakings, whether oral or written, formal or informal, funded or unfunded, insured or uninsured, registered or unregistered, to which Seller is a party or bound or in which the Employees participate or under which Seller has, or will have, any liability or contingent liability or pursuant to which payments are made or benefits are provided, or an entitlement to payments or benefits may arise with respect to any of the Employees, Former Employees, Retired Employees, directors or officers, individuals working on contract with Seller or other individuals providing services to Seller of a kind normally provided by employees (or any spouses, dependants, survivors or beneficiaries of any such Persons), in each case relating to the Purchased Businesses, including the Pension and Retirement Plans but excluding Statutory Plans, Multi-Employer Plans and stock-based compensation plans;

 

“ Boat Harbour Documents ” has the meaning set out in Section 2.3(b);

 

“ Business Day ” means a day other than a Saturday, Sunday or statutory holiday in New York, New York, Atlanta, Georgia or Halifax, Nova Scotia;

 

“ Capital Projects ” means the planned capital expenditures program associated with the annual maintenance down for the Pictou Mill scheduled to occur in April and May 2008, as set forth on Schedule 1.1(f);

 

“ Canso ” means Canso Chemicals Limited, a corporation incorporated under the laws of the Province of Nova Scotia;

 

“ Closing ” means the closing of the transactions contemplated hereby;

 

“ Closing Date ” means the date hereof;

 

“ Collective Agreement ” has the meaning set out in Section 3.1(l)(i);

 

“ Contract ” means any agreement, indenture, contract, lease, deed of trust, licence, option, instrument or other commitment, whether written or oral;

 

“ Debert Nursery ” means the Debert Nursery office, storage buildings, greenhouses and seed orchards located at 381 Plains Road, Debert, Colchester County, Nova Scotia;

 

“ Deeds and Assignments ” has the meaning set out in Section 2.11(a)(iv);

 

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“ Distribution Agreement ” means the Distribution Agreement dated as of November 30, 2004 between Kimberly-Clark Corporation and NPI;

 

“ Down ” means the annual maintenance down at the Pictou Mill scheduled to occur in April and May 2008 as described in Schedule 1.1(g);

 

“ Effluent Treatment System ” means all or any portion of any system that transports, mixes, stabilizes, treats (actively or passively), conveys or discharges the effluent from the Pictou Pulp Mill, including (i) the under river pipeline, settling ponds, aerated stabilization basin and Boat Harbour and (ii) all man-made and natural drainage systems and appurtenances that connect or are otherwise related to such systems;

 

“ Employees ” means all individuals who immediately prior to the Time of Closing are employed by, or engaged on contract to provide employment services, or sales or other agents or representatives of Seller in connection with the Pulp Business or the Woodlands Business, whether on a regular full-time, part-time, casual or temporary basis (including surge hires) in those operations being sold to Purchaser, including any Inactive Employees, but excluding any employees of Seller in respect of the Terrace Bay, Ontario pulp mill or any other business or operation of Seller who, immediately prior to the Time of Closing, are not employed by Seller in connection with either of the Purchased Businesses;

 

“ Entity ” means a Person other than an individual;

 

“ Environmental Law ” means any Applicable Law or rule of common law in existence on the date of this Agreement or the Closing Date relating to the environment, the protection of the natural environment, human health or both, including those pertaining to (i) reporting, licensing, permitting, investigating, remediating and cleaning up any Release of Hazardous Substances or (ii) the manufacture, processing, distribution, use, treatment, storage, disposal, transport and handling of Hazardous Substances (provided that only for the purposes of the definition of “Environmental Liabilities” below, “Environmental Law” shall include changes to such Environmental Laws after the Closing Date);

 

“ Environmental Liabilities ” means all liabilities, obligations, claims, damages, responsibilities, costs and expenses (including legal costs, engineering, consulting and laboratory fees and expenses, capital expenditures, fines, penalties, financial responsibility for cleanup costs, corrective action, removal, remedial actions and response actions, and any other compliance, corrective, investigative or remedial measures required by any Environmental Law or as a result of any third party claims, judgments or settlements) existing on, or incurred or arising from and after, the Closing Date as a result of or in connection with:

 

(a)                                   the violation of any Environmental Law resulting from or in connection with the operation, use or ownership of the Assets (A) on or before the Closing Date, by Seller or, to the extent of Seller’s obligations on a several basis under the Distribution Agreement in respect of the Assets, by the predecessor owner thereof, or (B) after the Closing Date, by Purchaser; or

 

(b)                                  any order, written claim or demand, action, citation, fine or other proceeding by any Governmental Authority or by any non-governmental third party, actual,

 

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pending or threatened, pursuant to any Environmental Law with respect to or in connection with:

 

(i)     the operation, use or ownership of the Assets (A) on or before the Closing Date by Seller or, to the extent of Seller’s obligations on a several basis under the Distribution Agreement in respect of the Assets, by the predecessor owner thereof, or (B) after the Closing Date, by Purchaser;

 

(ii)    the ownership or operation of the Real Property or the facilities or activities thereon or thereabout (A) on or before the Closing Date by Seller or, to the extent of Seller’s obligations on a several basis under the Distribution Agreement in respect of the Real Property, by the predecessor owner thereof, or (B) after the Closing Date, by Purchaser; or

 

(iii)   the installation, use, operation or closure of, or in any way related to, any Effluent Treatment System, or any part thereof, including any receiving water of the Effluent Treatment System (A) on or before the Closing Date by Seller or, to the extent of Seller’s obligations on a several basis under the Distribution Agreement in respect of the Effluent Treatment System, by the predecessor owner thereof, or (B) after the Closing Date, by Purchaser;

 

“ ETA ” has the meaning set out in Section 2.9;

 

“ Excluded Forest Licenses ” has the meaning set out in Section 3.1(s)(ii);

 

“ Finance Purchase Agreement ” means the asset purchase agreement dated as of the date hereof between Seller and Azure Mountain Capital Financial Corporation;

 

“ Financial Statements ” means the Year End Financial Statements and the Interim Financial Statements;

 

“ Forest Licenses ” has the meaning set out in Section 3.1(s)(i);

 

“ Former Employees ” has the same extended and comprehensive meaning as “ Employees ” except that it refers to those individuals previously employed or engaged on contract by Seller but not employed or engaged on contract by Seller at the Time of Closing, excluding any former employees of the Terrace Bay, Ontario pulp mill or any other business or operation of Seller;

 

“ GAAP ” has the meaning set out in Section 1.5;

 

“ Governmental Authority ” means any domestic or foreign, federal, provincial, municipal, local or other governmental, quasi-governmental, legislative, executive, judicial or administrative body or person having jurisdiction in the relevant circumstances, including any governmental ministry, agency, branch, department, commission, board, tribunal, bureau or arbitrator;

 

“ Hazardous Substance ” means any substance or material that is prohibited, controlled or regulated by any Governmental Authority pursuant to Environmental Laws including pollutants,

 

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contaminants, dangerous goods or substances, controlled products, toxic or hazardous substances or materials or hazardous wastes, all as defined in or pursuant to any Environmental Law;

 

“ Inactive Employee ” means an Employee who, immediately prior to the Time of Closing, is: (i) receiving WCB disability benefits, (ii) on leave or off work due to disability, whether paid or unpaid, including any such Employee who is receiving weekly indemnity, short-term or long-term disability wage replacement payments, or (iii) on strike, lock-out, lay-off or leave of absence, including pregnancy and parental leave;

 

“ Instruments of Assumption ” has the meaning set out in Section 2.11(b)(ii);

 

“ Intellectual Property ” means trade or brand names, business names, trade-marks (including logos), trade-mark registrations and applications, service marks, service mark registrations and applications, copyrights, copyright registrations and applications, issued patents and pending applications and other patent rights, industrial design registrations, pending applications and other industrial design rights, trade secrets, proprietary information and know-how, equipment and parts lists and descriptions, instruction manuals, inventions, inventors’ notes, research data, blue prints, drawings and designs, formulae, processes, technology and other intellectual property, together with all rights under licences, registered user agreements, technology transfer agreements and other agreements or instruments relating to any of the foregoing, in each case relating to either of the Purchased Businesses and not comprising a Retained Asset as of the Closing Date or the date hereof and expressly excludes “Neenah Paper Company of Canada”, “NPCC”, “Neenah Paper”, “NP”, “NPI” and any variations thereof;

 

“ Interim Financial Statements ” means the financial statements of the Purchased Businesses as of and for the periods ended January 31, 2008, February 29, 2008 and March 31, 2008 presented in accordance with GAAP with the exception of the exclusion of the statement of cash flows, the statement of equity and the notes thereto and the exclusion from the income statement of pulp and currency hedging, miscellaneous transaction charges and corporate overhead allocations, a copy of which is annexed hereto as Schedule 1.1(a);

 

“ Inventory ” has the meaning set out in Section 2.1(d)(i);

 

“ Issued Shares ” has the meaning set out in Section 2.6(b);

 

“ ITA ” has the meaning set out in Section 2.10;

 

“ K-C Global ” means Kimberly-Clark Global Sales, Inc. and its successors and assigns;

 

“ knowledge ”, with respect to Seller, means the actual knowledge, after due enquiry, of any of the Persons listed on Schedule 1.1(b);

 

“ Landlord Real Property Leases ” has the meaning set out in Section 3.1(i)(ii);

 

“ Leased Real Property ” means the land, buildings and other improvements covered by the Tenant Real Property Leases;

 

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“ lien or other encumbrance ” or “ Encumbrance ” means any lien, pledge, hypothec, mortgage, security interest of any nature, adverse claim, reservation, easement, title retention agreement, claim, lease, charge, option, right of first refusal, easement, servitude, transfer restriction under any shareholder or similar agreement, encumbrance or any other restriction or limitation whatsoever, or any Contract to create any of the foregoing;

 

“ Losses ” means all fines, losses, liabilities, damages, deficiencies, costs or expenses (including interest, legal fees and disbursements of legal counsel) arising directly or indirectly as a consequence of such matter;

 

“ Material Adverse Change ” and “ Material Adverse Effect ” mean any event, change or effect that, when taken individually or together with all other adverse effects, will or is reasonably likely to have a materially adverse effect on the business, affairs, capitalization, assets, liabilities, results of operations, condition (financial or otherwise) or prospects of the Pulp Business or the Woodlands Business, in each case taken as a whole; provided, however, that effects or changes relating to:

 

(a)                                   changes in general political and economic conditions and changes affecting generally the industries and markets in which the Pulp Business or the Woodlands Business is conducted that, in any of the foregoing cases, do not affect the Pulp Business or the Woodlands Business, in each case taken as a whole, in a disproportionate manner relative to other participants in the same industry as the Pulp Business or the Woodlands Business;

 

(b)                                  the effect of any changes in applicable laws, regulations or accounting rules; and

 

(c)                                   the fact of the pendency of the transactions contemplated by this Agreement and the identity of Purchaser;

 

are not Material Adverse Changes or Material Adverse Effects and are not to be taken into account in determining whether a Material Adverse Change or a Material Adverse Effect has occurred;

 

“ Mill Accounts Receivables ” means the trade receivables of the Pulp Business as reflected in Seller’s general ledger accounts numbers 000-0321 and 000-0321-100;

 

“ Mill Inventories ” means the hardwood pulp inventory and the softwood pulp inventory of the Pulp Business as reflected in Seller’s general ledger accounts numbers 000-0631 and 000-0633, respectively;

 

“ MOU ” has the meaning set out in Section 2.3(b);

 

“ Multi-Employer Plans ” means plans, arrangements, agreements, programs, policies, practices or undertakings whether funded or unfunded, insured or uninsured, registered or unregistered, to which Seller is a party or bound or in which the Employees participate or under which Seller has, or will have, any liability or contingent liability, or pursuant to which payments are made, or benefits are provided to, or an entitlement to payments or benefits may arise with respect to any of its Employees, Former Employees or Retired Employees (or any spouses, dependants,

 

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survivors or beneficiaries of any such Persons) and to which Seller is required to contribute and which are not maintained or administered by Seller or any of its Affiliates;

 

“ Non-Assigned Contract ” has the meaning set out in Section 2.5(b);

 

“ Nova Scotia Forest Acts ” means the Crown Lands Act (Nova Scotia), the Forests Act (Nova Scotia) and the Scott Maritimes Limited Agreement (1965) Act (Nova Scotia) in effect on the date hereof and all amendments and supplements thereto and all regulations and rules made pursuant thereto and all policy statements, guidelines, orders and decisions relating thereto;

 

“ NPI ” means Neenah Paper, Inc., a corporation incorporated under the laws of Delaware;

 

“ OPEBs ” means every benefit plan, program, agreement or arrangement maintained or contributed to or provided by Seller for the benefit of any Retired Employee or their respective dependents or beneficiaries other than Pension Plans or the SERP;

 

“ Owned Real Property ” has the meaning set out in Section 3.1(h)(i);

 

“ Pension and Retirement Plans ” means, collectively, the Pension Plans, the OPEBs and the SERP;

 

“ Pension Plans ” means the Neenah Paper Canada Nova Scotia Hourly Pension Plan and the Neenah Paper Canada Nova Scotia Salaried Pension Plan;

 

“ Permits ” means all permits, consents, waivers, licences, certificates, approvals, authorizations, registrations, franchises, rights, privileges and exemptions or any item with a similar effect as the foregoing issued or granted by any Governmental Authority, other than the Forest Licenses;

 

“ Permitted Encumbrances ” means:

 

(a)                                   the reservations in any original grants from the Crown of any Real Property or interest therein which do not materially detract from the value of the Real Property concerned or materially impair its use in the operation of the Purchased Businesses;

 

(b)                                  undetermined or inchoate liens, charges and privileges incidental to current construction or current operations and statutory liens, charges, adverse claims, security interests or encumbrances of any nature whatsoever claimed or held by any Governmental Authority which have not at the time been filed or registered against the title to an Asset or served upon Seller pursuant to law or which relate to obligations not due or delinquent;

 

(c)                                   liens for taxes, assessments and governmental charges that are due but are being contested in good faith and diligently by appropriate proceedings and for the payment of which adequate provision has been made in the Interim Financial Statements;

 

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(d)                                  servitudes, easements, restrictions, rights-of-way and other similar rights in the Real Property or any interest therein, provided the same are not of such nature as to materially adversely affect the use or value of the property subject thereto;

 

(e)                                   security given in the ordinary course of the Purchased Businesses to any public utility, municipality or Governmental Authority or to any statutory or public authority in connection with the operations of the Purchased Businesses, other than security for borrowed money;

 

(f)                                     carriers’, mechanics’, warehousemen’s, suppliers’, repairers’, storers’ or similar possessory liens or encumbrances arising in the ordinary course of business of the Purchased Businesses in respect of Assumed Liabilities; and

 

(g)                                  the Encumbrances described in Schedule 1.1(c);

 

“ Person ” means any individual, corporation, company, unlimited company, limited liability company, partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Authority or other legal or business entity however designated or constituted;

 

“ Pictou Pulp Mill ” has the meaning set out in the Preliminary Statement;

 

“ PLFN ” means the Pictou Landing First Nation;

 

“ Project Wahoo Data Site ” means the online data site for Project Wahoo hosted by Merrill Corporation’s DataSite that contains due diligence materials made available by Seller relating to the Pulp Business;

 

“ Pulp Business ” has the meaning set out in the Preliminary Statement;

 

“ Purchase Price ” has the meaning set out in Section 2.6;

 

“ Purchased Businesses ” has the meaning set out in the Preliminary Statement;

 

“ Purchaser ” has the meaning set out on Page 1;

 

“ Purchaser Required Consents ” means the consents and approvals listed in Schedule 1.1(d);

 

“ Real Property ” means collectively the Owned Real Property and the Leased Real Property;

 

“ Real Property Leases ” means the Tenant Real Property Leases and the Landlord Real Property Leases;

 

“ Release ” means any release or discharge of any Hazardous Substance into the environment including any discharge, spray injection, inoculation, abandonment, deposit, spillage, leakage, seepage, pouring, emission, emptying, throwing, dumping, placing, exhausting, escape, leach, migration, dispersal, dispensing or disposal;

 

“ Retained Assets ” has the meaning set out in Section 2.2;

 

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“ Retained Liabilities ” has the meaning set out in Section 2.4;

 

“ Retained Litigation ” has the meaning set out in Section 2.2(i);

 

“ Retired Employee ” means any Employee who retires at (or who was retired before) the Time of Closing or who has by that time confirmed to Seller, orally or in writing, that he or she intends to retire;

 

“ Seller ” has the meaning set out on Page 1;

 

“ SERP ” means the Supplemental Retirement Benefit Plan for Neenah Paper Company of Canada, as applicable to the Employees or Retired Employees;

 

“ Share Purchase Agreement ” means the amended and restated share purchase agreement dated the date hereof between, among others, Seller, Northern Pulp NS LP and Azure Mountain Capital Financial LP;

 

“ Shared Contract ” has the meaning set out in Section 2.5(c);

 

“ Statutory Plans ” means statutory benefit plans that Seller is required to participate in or comply with, including the Canada and Québec Pension Plans and plans administered pursuant to applicable health tax, workers’ compensation insurance and employment insurance legislation;

 

“ Taxes ” means any federal, provincial, local or foreign, income, capital, branch, goods and services, value added, harmonized sales, gross receipts, property, sales, use, license, excise, franchise, employment, payroll, withholding, alternative or add-on minimum, ad valorem , or excise tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty, imposed by any Governmental Authority; provided, however, that in no event shall Taxes be deemed to include any transfer tax or capital gains tax payable in connection with the purchase and sale of the Assets;

 

“ Tenant Real Property Leases ” has the meaning set out in Section 3.1(i)(i);

 

“ Time of Closing ” means 10:00 a.m. in Nova Scotia on the Closing Date, with an effective Time of Closing for accounting purposes of 12:01 a.m. in Nova Scotia on the Closing Date;

 

“ WCB ” means the Workers Compensation Board (Nova Scotia);

 

“ Woodlands ” has the meaning set out in Section 2.2(g);

 

“ Woodlands Business ” has the meaning set out in the Preliminary Statement;

 

“ Working Capital ” means the current working capital assets of Seller relating to the Purchased Businesses other than the Mill Accounts Receivables, the Mill Inventories and cash and cash equivalents; and

 

“ Year End Financial Statements ” means the financial statements of the Purchased Businesses as of and for the years ended December 31, 2005, 2006 and 2007 presented in accordance with

 

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GAAP with the exception of the exclusion of the statement of cash flows, the statement of equity and notes thereto and the exclusion from the income statement of pulp and currency hedging, miscellaneous transaction charges and corporate overhead allocations, a copy of which is annexed hereto as Schedule 1.1(e).

 

1.2                                Headings

 

The division of this Agreement into articles and sections and the insertion of a table of contents and headings are for convenience of reference only and are not to affect the construction or interpretation of this Agreement.  The terms “hereof”, “hereunder” and similar expressions refer to this Agreement and not to any particular Article, Section or other portion hereof.  Unless something in the subject matter or context is inconsistent therewith, references herein to Articles and Sections are to Articles and Sections of this Agreement.

 

1.3                                Extended Meanings

 

In this Agreement words importing the singular number only include the plural and vice versa and words importing any gender include all genders.  Unless something in the subject matter or context is inconsistent therewith, the term “including” means “including without limiting the generality of the foregoing”.

 

1.4                                Statutory References

 

Unless something in the subject matter or context is inconsistent therewith and except with respect to Environmental Laws, each reference to any statute refers to that statute and to the regulations made under that statute, as now enacted or as the same may from time to time be amended, re-enacted or replaced.

 

1.5                                Accounting Principles

 

Wherever in this Agreement reference is made to a calculation to be made or an action to be taken in accordance with generally accepted accounting principles, such reference will be deemed to be to the generally accepted accounting principles in the United States from time to time (“ GAAP ”), applicable as at the date on which such calculation or action is made or taken or required to be made or taken.

 

1.6                                Currency, Prices and Values

 

All references to currency, prices and values (monetary, accounting, financial or otherwise) herein are to lawful currency of Canada unless otherwise specified.

 

1.7                                Schedules

 

(a)                                   The following Schedules are attached to and form part of this Agreement*:

 

Schedule			Contents
Schedule 1.1(a)		-	Interim Financial Statements
Schedule 1.1(b)		-	Knowledge of Certain Persons

 

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Schedule			Contents
Schedule 1.1(c)		-	List of Permitted Encumbrances
Schedule 1.1(d)		-	List of Purchaser Required Consents
Schedule 1.1(e)		-	Year End Financial Statements
Schedule 1.1(f)		-	List of Capital Projects
Schedule 1.1(g)		-	Description of Annual Maintenance Down
Schedule 2.1(d)(ii)		-	Part A: List of Machinery, Equipment and Furniture;
			Part B: List of Owned and Leased Vehicles
Schedule 2.1(f)		-	List of Assumed Contracts
Schedule 2.1(k)		-	List of Permits and Certificates of Approval
Schedule 2.1(m)		-	List of Trademarks, Patents, Industrial Designs,
			Licenses and Agreements
Schedule 2.2(d)		-	List of Retained Contracts
Schedule 2.2(g)		-	Woodlands Parcel Identification Numbers
Schedule 2.2(i)		-	Retained Litigation
Schedule 2.3(b)		-	List of Boat Harbour Documents
Schedule 2.4(b)		-	List of Retained Liabilities in respect of Employees,
			Former Employees and Retired Employees
Schedule 2.5(b)		-	List of Non-Assigned Contracts
Schedule 2.8		-	Allocation of Purchase Price
Schedule 2.10		-	Section 85(1) Tax Election Amounts
Schedule 3.1(c)		-	Ordinary Course; No Material Adverse Change
Schedule 3.1(d)		-	Compliance with Laws; Permits
Schedule 3.1(d)(iii)		-	List of Material Permits
Schedule 3.1(f)		-	Actions and Proceedings
Schedule 3.1(g)		-	List of Consents, Approvals, Actions, Filings and Notices
Schedule 3.1(h)(i)		-	Legal Description of Owned Real Property
Schedule 3.1(i)(i)		-	List of Tenant Real Property Leases
Schedule 3.1(i)(ii)		-	List of Landlord Real Property Leases
Schedule 3.1(i)(iii)		-	Compliance with Real Property Leases
Schedule 3.1(l)		-	List of Collective Agreements
Schedule 3.1(l)(v)		-	List of Employment Contracts ($100,000 or more)
Schedule 3.1(l)(vii)		-	Changes in Workers Compensation Rating Assessment
Schedule 3.1(m)(i)		-	List of Benefit Plans
Schedule 3.1(m)(ii)		-	List of Actions and Claims under Benefit Plans
Schedule 3.1(m)(v)		-	Pension Plan Wind-up Amounts (Distribution of Assets Pending)
Schedule 3.1(m)(ix)		-	List of OPEBs under Benefit Plans
Schedule 3.1(m)(xiii)		-	List of Amendments and Proposed Amendments to Benefit Plans
Schedule 3.1(o)		-	Location of Assets
Schedule 3.1(p)		-	Operations - Exceptions
Schedule 3.1(q)		-	Contracts - Exceptions
Schedule 3.1(s)(i)		-	List of Forest Licenses
Schedule 3.1(s)(ii)		-	List of Excluded Forest Licenses

 

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Schedule			Contents
Schedule 3.1(u)		-	Insurance Policies
Schedule 3.1(v)		-	Other Boat Harbour and Effluent Treatment System Documents
Schedule 3.1(aa)(i)		-	Changes in Customer Relationships
Schedule 3.1(bb)(i)		-	Compliance with Environmental Laws
Schedule 3.1(bb)(ii)		-	List of Environmental Permits
Schedule 3.1(bb)(iv)		-	Hazardous Substances
Schedule 3.1(bb)(v)		-	Written Notices of Non-Compliance with Environmental Laws

 

* The schedules listed above have been omitted in accordance with Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish to the Securities and Exchange Commission a copy of any omitted exhibits or schedules upon supplemental request.

 

(b)            Any matter disclosed on any of the Schedules hereto shall be deemed to be disclosed on each other Schedule hereto relating to such matters.

 

ARTICLE 2 – SALE AND PURCHASE

 

2.1           Assets to be Sold and Purchased

 

Seller hereby sells, assigns, transfers, conveys and delivers to Purchaser, as of the Time of Closing, all of the properties, assets and other claims, rights and interests of Seller and its Affiliates relating to the Purchased Businesses, other than the Retained Assets, including:

 

(a)            all of the property and assets owned or used by Seller in connection with or otherwise relating to the Purchased Businesses on the Closing Date, whether real or personal, tangible or intangible, of every kind and description wheresoever situate, as a going concern (subject to transactions and adjustments in the ordinary course of business, consistent with past practice, from the date of this Agreement to the Closing Date);

 

(b)            all of the Owned Real Property;

 

(c)            the shares of Canso owned by Seller;

 

(d)            all of Seller’s tangible personal property relating primarily to the Purchased Businesses on the Closing Date, including:

 

(i)     inventories of the Purchased Businesses consisting of raw materials, work-in-process, chemicals, maintenance and finishing supplies, packaging materials, stores, spare parts and similar items of inventory and, in respect

 

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of the Woodlands Business (but not the Pulp Business), the other current working capital assets of Seller relating thereto (including finished goods inventories and all accounts receivable, book debts and other debts due or accruing due to Seller in connection with the Woodlands Business) (collectively, the “ Inventory ”); and

 

(ii)    machinery, equipment, furniture, fixtures, furnishings, parts, tooling molds, dies, jigs or patterns and other fixed assets, including the machinery, equipment and furniture described in Part A of Schedule 2.1(d)(ii) and all trucks, cars and other vehicles (whether owned or leased) described in Part B of Schedule 2.1(d)(ii);

 

(e)            the Working Capital;

 

(f)             subject to Section 2.5, all of Seller’s rights, title and interest under all agreements, Contracts or commitments to which Seller is entitled in connection with the Purchased Businesses, including all unfilled purchase orders received by, and all forward commitments for supplies or materials made to, Seller in the usual and ordinary course of business for the Purchased Businesses, all consultant Contracts or commitments relating to the Collective Agreement, and the Benefit Plans (but excluding any stock-based compensation plans), in each case whether written or oral (collectively, the “ Assumed Contracts ”), including those described in Schedule 2.1(f);

 

(g)            all books and records (other than accounting, tax or similar records required for Seller’s tax audit purposes, copies of which will be provided to Purchaser) of Seller relating primarily to the Purchased Businesses, including all files, documents, sales and other records, customer and supplier lists, price lists, advertising materials, manufacturing data, production records, inventory records, computer files and programs, operating data, environmental studies and plans (including such studies and plans relating to the Pictou Pulp Mill, the Effluent Treatment System and Boat Harbour), maintenance records, personnel records, WCB files and all other employee or employment records, specifically including those relevant to the administration or wind-up of the Pension and Retirement Plans or Benefit Plans, insurance records, forest management planning records and associated computer records, and operational manuals (subject to the right of Seller to make copies of such books and records to the extent they relate to any business of Seller not being acquired by Purchaser hereunder or which Seller requires for purposes of complying with Applicable Law and to have future reasonable access to said books and records to the extent reasonably necessary);

 

(h)            all rights of Seller under or pursuant to all warranties, representations and guarantees made by suppliers, manufacturers and contractors in connection with the Assets;

 

(i)             subject to Section 2.5, all of Seller’s right, title and interest under the Real Property Leases;

 

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(j)             subject to Section 2.5, all of Seller’s right, title and interest under the Forest Licenses, other than the Excluded Forest Licenses;

 

(k)            subject to Section 2.5, all Permits and certificates of approval relating to the Purchased Businesses listed in Schedule 2.1(k);

 

(l)             the goodwill of the Purchased Businesses, including the right of Purchaser to represent itself as carrying on the Purchased Businesses in continuation of and in succession to Seller, but excluding any right to use the name “Neenah Paper”, “Neenah Paper Company of Canada”, “NP” and “NPCC” and any variants thereof except as contemplated in Section 4.9 or as otherwise agreed to by the parties in writing; and

 

(m)           the trademarks, patents and patent licence agreements described in Schedule 2.1(m) and any trade secrets, know-how or other Intellectual Property used primarily in the Purchased Businesses, but excluding any right to use the name “Neenah Paper”, “Neenah Paper Company of Canada”, “NP” and “NPCC” and any variants thereof except as contemplated in Section 4.9 or as otherwise agreed to by the parties in writing.

 

All of the foregoing assets and properties being sold, assigned, transferred, conveyed and delivered to Purchaser hereunder (other than the Retained Assets) are hereinafter referred to as the “ Assets ”.

 

2.2           Retained Assets

 

Anything in Section 2.1 to the contrary notwithstanding, there shall be excluded from the Assets being sold, assigned, transferred and conveyed to Purchaser hereunder and not included within the meaning of the term “Assets” (such excluded assets being referred to as the “ Retained Assets ”):

 

(a)            all rights of Seller under this Agreement, the Finance Purchase Agreement, the Share Purchase Agreement and the Ancillary Agreements;

 

(b)            all rights of Seller to refunds, rebates or credits of any Taxes relating to the Purchased Businesses for all periods (or partial periods) ending on or prior to the Closing Date, all refunds or returns of any overpayment or erroneous payment of Taxes by Seller prior to the Closing Date and all prepayments of Taxes by Seller for any period, whether ending prior to, on or after the Closing Date;

 

(c)            any insurance policies in respect of the Assets and prepayments in respect thereof, and all rights to refunds, rebates or credits under such policies;

 

(d)            the Contracts listed in Schedule 2.2(d) and all rights of Seller thereunder;

 

(e)            all minute books and stock ledgers of Seller;

 

(f)             all indebtedness to Seller of any Affiliate of Seller;

 

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(g)            Seller’s right, title and interest in the timberlands owned by Seller in Nova Scotia, including those that have the parcel identification numbers and descriptions set out on Schedule 2.2(g) (the “ Woodlands ”);

 

(h)            the Mill Accounts Receivables, the Mill Inventories and cash and cash equivalents of the Purchased Businesses;

 

(i)             proceeds of any litigation in respect of the Pictou Pulp Mill or the functioning, use or condition of the Assets prior to the Closing Date described in Schedule 2.2(i) (the “ Retained Litigation ”); and

 

(j)             except for the shares of Canso, the shares in the capital of or other equity or proprietary interests in any Person.

 

2.3           Liabilities of Seller Assumed by Purchaser

 

Purchaser hereby assumes, as of the Time of Closing, and agrees to hereafter perform or satisfy all liabilities and other obligations of Seller arising in respect of the operations of the Purchased Businesses or from the functioning, use and condition of the Assets before, on or after the Closing Date, other than those which constitute Retained Liabilities under this Agreement, including:

 

(a)            all liabilities and obligations of Seller under the Assumed Contracts, the Real Property Leases, the Permitted Encumbrances, the transferable Permits and the Forest Licenses, other than the Excluded Forest Licenses;

 

(b)            all Environmental Liabilities of Seller, including those arising under the Memorandum of Understanding dated September 27, 2001, between the PLFN and Kimberly-Clark Inc., as amended and assigned to Seller (the “ MOU ”), the Lease Agreement, the License Agreement, the Indemnity Agreement and the Water Supply Agreement in connection with the Memorandum of Understanding dated December 1, 1995 between Her Majesty The Queen in Right of the Province of Nova Scotia and Scott Maritimes Limited (predecessor-in-interest of Seller), and the other material letters and agreements relating to any of the foregoing documents listed in Schedule 2.3(b) (collectively, the “ Boat Harbour Documents ”);

 

(c)            any liability or obligation with respect to Taxes applicable to the Assets for any period (or partial period) beginning at or after the Closing Date;

 

(d)            the employment and Benefit Plan obligations and liabilities for the Employees of Seller and the Pension and Retirement Plans related obligations and liabilities of the Retired Employees and the Former Employees of Seller as set out in Sections 5.1 and 5.2(b); and

 

(e)            any and all obligations and liabilities of Seller, NPI and their Affiliates arising from and after the Time of Closing under that certain Amended and Restated Pulp

 

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Supply Agreement dated as of November 30, 2004 by and between NPI and K-C Global.

 

All of the foregoing liabilities and obligations of Seller being assumed by Purchaser hereunder are hereinafter referred to as the “ Assumed Liabilities ”.

 

2.4           Retained Liabilities

 

Notwithstanding anything to the contrary contained herein, Purchaser shall not hereby assume, or in any way be liable or responsible for, and Seller shall perform or satisfy:

 

(a)            any liability or obligation with respect to Taxes applicable to the Assets or the Purchased Businesses for any period (or partial period) ending prior to the Closing Date, whether or not due and payable prior to or after such time;

 

(b)            all liabilities and obligations of Seller to pay any amount to any Employee, Former Employee, Retired Employee or any other Person in connection with the sale of the Terrace Bay, Ontario pulp mill business or the sale or proposed sale of the Woodlands as described in Schedule 2.4(b);

 

(c)            the liabilities referred to in Section 5.2(a) as Retained Liabilities;

 

(d)            any liability or obligation of Seller under the MOU to transfer any real property to or for the benefit of the PLFN;

 

(e)            any liability or obligation of Seller for any amounts or costs paid or payable, including any Benefit Plan costs resulting from an order of a Governmental Authority, as a result of the termination of an employee of either of the Purchased Businesses by Seller during the period beginning on or after the date of the Share Purchase Agreement and ending immediately prior to the Closing;

 

(f)             all liabilities and obligations relating to the Retained Litigation; and

 

(g)            any liability or obligation of Seller:

 

(i)       based upon or arising under this Agreement, the Finance Purchase Agreement, the Share Purchase Agreement or the Ancillary Agreements;

 

(ii)      relating to or arising under or in respect of the Retained Assets, Seller’s operations and businesses (including its Terrace Bay, Ontario pulp mill business) not comprising part of the Purchased Businesses; and

 

(iii)     with respect to any lien or other encumbrance in respect of any of the Assets other than Permitted Encumbrances.

 

All of the foregoing liabilities and obligations of Seller not being assumed by Purchaser hereunder are hereinafter sometimes collectively referred to as the “ Retained Liabilities ”.

 

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2.5           Non-Assignable Contracts or Licenses/Shared Contracts

 

(a)            To the extent that:

 

(i)       assignment hereunder by Seller to Purchaser of any Real Property Lease, Assumed Contract, Permit or Forest License (but only to the extent such Forest License is not issued by or entered into with a Governmental Authority whose consent to assignment is required by Applicable Law) or

 

(ii)      transfer hereunder of books and records,

 

is not permitted or is not permitted without the consent of a third party, this Agreement shall not be deemed to constitute an undertaking to assign or transfer the same, as applicable, if such consent has not been given, is not hereafter given or if such an undertaking otherwise would constitute a breach of or cause a loss of benefits thereunder.  From and after the Closing, Seller shall use all commercially reasonable efforts (other than the payment of money or the deposit of funds by Seller on behalf of Purchaser) to obtain any and all such third party consents, and Purchaser shall reasonably cooperate with Seller in such efforts.

 

(b)            To the extent that Seller has been unable to obtain any required third party consent in respect of a Real Property Lease, Assumed Contract, Permit or Forest License (but only to the extent such Forest License is not issued by or entered into with a Governmental Authority whose consent to assignment is required by Applicable Law) as contemplated by Section 2.5(a) (each such Real Property Lease, Assumed Contract, Permit or Forest License is referred to as a “ Non-Assigned Contract ”), Seller shall continue to be bound by any such Non-Assigned Contract.  In such event, to the maximum extent permitted by Applicable Law and the terms of the Non-Assigned Contract, from and after the Closing:

 

(i)       Seller shall make the benefit of such Non-Assigned Contract available to Purchaser with the intent that Purchaser will be in the same economic position as if such Non-Assigned Contract had been transferred to it, including holding any such Non-Assigned Contract in trust for Purchaser or acting as agent for Purchaser or entering into back to back arrangements with Purchaser in respect of such Non-Assigned Contract; and

 

(ii)      the assignment provisions contemplated in this Agreement shall operate to the extent permitted by Applicable Law and the applicable Non-Assigned Contract to create a subcontract, sublease or sublicense with Purchaser whereby Purchaser will perform each relevant Non-Assigned Contract and be entitled to receive all related benefits, in accordance with its terms.  To the extent such subcontract, sublease or sublicense is created:

 

(A)           Purchaser shall pay, perform and discharge fully all obligations of Seller under any such Non-Assigned Contract from and after the Closing Date and shall indemnify Seller against any Losses

 

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incurred by Seller arising from Purchaser’s failure to pay, perform and discharge fully such obligations;

 

(B)            Seller shall, without further consideration therefor, pay and remit to Purchaser promptly any monies, rights and other consideration received by it in respect of the performance of such Non-Assigned Contract; and

 

(C)            Seller shall exercise or exploit its rights and options under all such Non-Assigned Contracts only as directed by Purchaser and at Purchaser’s expense and shall indemnify Purchaser against any Losses incurred by Purchaser arising from Seller’s failure to act in accordance with such directions.

 

(c)            With respect to liabilities pursuant to, arising under or relating to any Contract which is not intended to be assigned to Purchaser but under which Purchaser receives a benefit (a “ Shared Contract ”), such liabilities shall be allocated between Seller, on the one hand, and Purchaser on the other hand, as follows:

 

(i)       first, if a liability cannot be so allocated in respect of a benefit received by one party, the party receiving such benefit shall be responsible for such liability; and

 

(ii)      second, if a liability cannot be so allocated under Section 2.5(c)(i), such liability shall be allocated between the parties based on the relative proportions of total benefit received (over the term of the Shared Contract, measured as of the date of the allocation) under the relevant Shared Contract.  Notwithstanding the foregoing, each party shall be responsible for any and all liabilities arising out of or resulting from its breach of the relevant Shared Contract.

 

If Seller, on the one hand, or Purchaser, on the other hand, receives any benefit or payment under any Shared Contract that was intended for the other party, the party receiving such benefit or payment will use commercially reasonable efforts to promptly deliver, transfer or otherwise afford such benefit or payment to the other party.

 

(d)            Seller shall not amend, modify or terminate any Non-Assigned Contract without Purchaser’s prior written consent.  If and when any third party consent contemplated by Section 2.5(a) shall be obtained or any such Non-Assigned Contract shall otherwise become assignable, Seller shall promptly assign all of its rights and obligations thereunder or in connection therewith to Purchaser without payment of further consideration therefor, and Purchaser shall assume such rights and obligations.

 

(e)            To the extent any Permit or Forest License is not assignable, either by its terms or as a matter of law, Purchaser shall prepare and submit, and Seller shall use all reasonable efforts to cooperate with and assist Purchaser in preparing and

 

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submitting, any information, applications or filings required in connection with the reissuance to Purchaser of any such Permit.

 

(f)             The provisions of this Section 2.5 shall apply to Affiliates of Seller in the same manner as to Seller.

 

2.6           Purchase Price

 

Subject to the adjustments contemplated in Sections 2.7 and 2.8, the aggregate purchase price (the “ Purchase Price ”) payable by Purchaser to Seller for the Assets shall be $75,894,503, which shall be satisfied as follows:

 

(a)            Purchaser hereby assumes the Assumed Liabilities in accordance with Section 2.3;

 

(b)            the issuance by Purchaser to Seller of 57,474,073 no par value common shares of Purchaser (the “ Issued Shares ”) represented by share certificate no. 3 registered in the name of Seller, the receipt of which is hereby acknowledged by Seller; and

 

(c)            all purchase price adjustments pursuant to Section 2.7 shall be satisfied by the payment of cash as specified in Section 2.7.

 

2.7           Purchase Price Adjustment

 

(a)

 

(i)       The Purchase Price shall be adjusted as set forth in this Section 2.7, provi