ASSET PURCHASE AGREEMENT
THIS AGREEMENT is
made as of August 4, 2006, among NEENAH PAPER COMPANY OF CANADA, an
unlimited liability company incorporated under the laws of Nova
Scotia (“ Seller” or “NPCC ”), NPCC
HOLDING COMPANY, LLC, a limited liability company formed under the
laws of the State of Delaware (“ NPCC Holding ”
or “ Seller Parent ”) and EAGLE LOGGING INC., a
corporation incorporated under the laws of Ontario (“
Purchaser ” or “ Eagle Logging
”).
PRELIMINARY
STATEMENT
Purchaser desires
to purchase, and Seller desires to sell, substantially all of the
assets and properties owned by Seller and used exclusively by or in
connection with the business conducted by Seller in its Longlac
woodlands operations (the “ Longlac Woodlands
Operation ” or the “ Woodlands Business
”), for the consideration set forth below and the assumption
of Seller’s liabilities set forth below, subject to the terms
and conditions of this Agreement. Purchaser Indemnitors, as a
condition of Seller entering into this Agreement in favour of
Purchaser, are entering into certain indemnity obligations pursuant
to Article 8 of this Agreement
Concurrent with
the execution of this Agreement, the parties hereto have executed
an Asset Purchase Agreement (the “ Terrace Bay Asset
Purchase Agreement ”) in connection with the business
conducted by Seller at its Terrace Bay Pulp Mill (as defined in the
Terrace Bay Asset Purchase Agreement). Heretofore, Seller has
operated its Pulp Business and Woodlands Business as a single
business unit. Notwithstanding such operating history, at the
request of the Purchaser herein and the Purchaser in the Terrace
Bay Asset Purchase Agreement, Seller has agreed to transfer the
Assets of the Pulp Business and the Assets of the Woodlands
Business subject to the respective terms and conditions of this
Agreement and the Terrace Bay Asset Purchase 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:
“
Acquisition Payment ” has the meaning set out
in Section 2.6 ;
“
Acquisition Payment Adjustment ” has the
meaning set out in Section 2.8 ;
“
Affiliate ” means with respect to any Person, any
other Person directly or indirectly controlling, controlled by or
under common control with, such Person;
“
Agreement ” means this agreement including the
Preliminary Statement and schedules to this agreement, as amended,
supplemented or restated from time to time;
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“
Amended and Restated Pulp Supply Agreement ”
has the meaning set out in Section 6.1(a)(vii) ;
“ Ancillary
Agreements ” has the meaning set out in Section
4.12 ;
“ 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
or arbitrator having the force of law;
“ Asserted
Liability ” has the meaning set out in Section
8.3(a) ;
“ Assets
” has the meaning set out in Section 2.1 ;
“ Assumed
Contracts ” has the meaning set forth in Section
2.1(e) ;
“ Assumed
Liabilities ” has the meaning set forth in Section
2.3 ;
“Balance Sheet
Schedule” has the meaning set forth in Section
2.1(d);
“ Benefit
Plans ” means every benefit plan, program, agreement or
arrangement maintained or contributed to, or provided by Seller for
the benefit of any of the Employees, former Employees or retirees
or their respective dependants or beneficiaries including, without
limitation, any deferred compensation, incentive compensation,
bonus, share purchase, share option, restricted stock or other
stock plan, stock appreciation, phantom stock, savings plan or
program, Pension Plans, health or other medical, dental, life,
weekly indemnity coverage, short term or long term disability or
other insurance (whether insured or self-insured), supplementary
unemployment benefit plan, program, agreement or
arrangement.
“ Buchanan
” has the meaning set out on Page 1;
“ Business
Day ” means a day other than a Saturday, Sunday or
statutory holiday in the United States or Ontario;
“ Cap
Amount ” has the meaning set out in Section
8.4(a)(ii) ;
“ Claims
Notice ” has the meaning set out in Section 8.3(a)
;
“ Closing
” means the closing of the transaction contemplated hereby
scheduled to occur on the Closing Date;
“ Closing
Date ” means August 15, 2006 or any earlier date upon
which the last to be fulfilled or waived of the conditions set
forth in Article 6 (other than those conditions that by
their nature are to be satisfied at the Closing, but subject to the
fulfillment or waiver of those conditions) shall be satisfied or
waived in accordance with this Agreement, or such other date as may
be agreed to in writing between Seller and Purchaser, but no later
than September 29, 2006 without the mutual agreement of the
Parties;
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“ Collective
Agreement ” means the Collective Agreement and all
related documents, letters of understanding and letters of intent
incorporated into and forming part of the said Collective Agreement
listed in Section 3.1(l) ;
“Competition
Act” means the Competition Act
(Canada).
“
Confidentiality Agreement ” means the confidentiality
agreement between Seller and Buchanan dated August 22,
2005;
“ Continuation
Payment ” has the meaning set out in Section
2.8(b) ;
“ Deeds and
Assignments ” has the meaning set out in Section
2.11(a) ;
“ Eagle
Logging ” has the meaning set out on Page 1;
“ Effluent
Treatment System ” means all or any portion of any system
that transports, mixes, stabilizes, treats (actively and/or
passively), conveys or discharges the effluent from the Woodlands
Business, if any, including all manmade 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 Seller primarily in
connection with the Woodlands Business on a regular full-time,
part-time or temporary basis (including surge hires) in those
operations being transferred to Purchaser including any such
Employees on strike, lay-off or leave of absence, including
pregnancy and parental leave, and Inactive Employees and the term
“ Employee ” shall mean any of the
Employees;
“
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 or concerning the
protection of the natural environment 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 incurred or arising (whether arising or
being claimed before, on or after the Closing Date and whether
known or unknown at the date of this Agreement) as a result of the
Seller’s (or its predecessor owners’) operation, use,
ownership or other activity in any way related to the Woodlands
Business during the ownership of Seller and/or other Persons before
or after the Closing Date, any violation of any Environmental Law
or as a result of or in connection with any order, written claim or
demand, action, citation, fine or other proceeding by any
Governmental
3
Authority or by any
non-governmental third party, actual, pending or threatened, that
arises (i) with respect to or in connection with the Woodlands
Business, (ii) with respect to the Real Property or as a result of,
or in connection with, Seller’s ownership or operation of the
Real Property or the facilities or activities thereon or thereabout
on or prior to the Closing Date or Purchaser’s ownership or
operation of the Real Property or the facilities thereon or
thereabout after the Closing Date or (2) in connection with the
installation, use, operation or closure of, or in any way related
to, any Effluent Treatment System, or any part thereof, including
without limitation any receiving water of the Effluent Treatment
System or (iii) as a direct or indirect result of the removal by
Seller on or prior to the Closing Date of any Hazardous Substance
from the Real Property to any off-site waste disposal site,
off-site waste storage site or any other off-site facility or
location, or any handling, storage, treatment, recycling or
disposal of any such Hazardous Substance at such facilities or
locations;
“Former
Employees” has the same extended and comprehensive
meaning as “Employees” except that it refers to
those previously employed by Seller but not employed by Seller at
the Time of Closing;
“ Governmental
Authority ” means any domestic or foreign, federal,
provincial, municipal or local legislative, executive, judicial or
administrative body or Person having jurisdiction in the relevant
circumstances;
“ Hazardous
Substance ” means any substance or material that is
prohibited, controlled or regulated by any Governmental Authority
pursuant to Environmental Laws including pollutants, 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, and any wood and
wood waste, whether or not regulated by any Environmental
Law;
“ HSR Act
” has the meaning set out in Section 4.16(a)
;
“Inactive
Employees” means Employees who (i) immediately
prior to the Time of Closing are receiving WSIB disability benefits
or (ii) immediately prior to the Time of Closing are on leave or
off work due to disability, whether paid or unpaid, including any
such employees who were receiving weekly indemnity, short term or
long term disability wage replacement payments, and (iii) those who
had incurred but not reported a claim for any wage replacement
benefits relating to any injury or illness arising prior to the
Time of Closing;
“ Indemnifying
Party ” has the meaning set out in Section 8.3(a)
;
“
Indemnitee ” has the meaning set out in Section
8.3(a) ;
“ Instruments
of Assumption ” has the meaning set out in Section
2.11(b) ;
“ Intellectual
Property ” means the trade secrets, know-how and other
intellectual property of Seller or its Affiliates (other than
patents or trademarks) used primarily in the Woodlands Business as
of the Closing Date or the date hereof and expressly excludes
“Neenah Paper of Canada”, “NPCC”,
“Neenah Paper”, “NP”, “NPI” and
any variations thereof;
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“
Inventory ” has the meaning set out in Section
2.1(c) ;
“ knowledge ” with respect to Seller means the
actual personal knowledge, after due enquiry, of any of the persons
listed on Schedule 1.1 ;
“ 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;
“ Letter
of Intent ” has the meaning set out in Section
2.8 ;
“ lien or
other encumbrance ” means any lien, pledge, mortgage,
security interest, 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;
“ Losses
” means all losses, liabilities, damages, deficiencies, costs
or expenses (including, without limitation, interest legal fees and
disbursements of legal counsel) and “ Loss ”
means any one of such Losses;
“ Lucky
Star ” has the meaning set out on Page 1;
“ Non-Assigned
Contract ” has the meaning set out in Section
2.5(b) ;
“ Non-Assumed
Contracts ” has the meaning set out in Section
3.1(s)(i) ;
“ NPCC
” has the meaning set out on Page 1;
“ NPCC
Holding ” has the meaning set out on Page 1;
“ NPI
” has the meaning set out in Section 2.3(m)
;
“
OPEBs ” means every benefit plan, program, agreement
or arrangement maintained or contributed to or provided by Seller
for the benefit of any Retired Employee other than Pension
Plans;
“ Owned Real
Property ” has the meaning set out in Section
3.1(h)(i) ;
“Pension
Plan” means the Neenah Paper Canada Ontario
Pension Plan;
“Pension
Plans” means, collectively, the Neenah Paper
Canada Ontario Pension Plan and any other pension, retirement and
supplementary retirement plans, programs, agreements or
arrangements maintained or contributed to or provided by Seller for
the benefit of any of the Employees, former Employees or retirees
or their respective dependants or beneficiaries;
“
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;
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“ Permitted
Encumbrances ” means the encumbrances described in
Schedule 3.1(h)(ii) ;
“ Person
” means any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated
organization, Governmental Authority or other entity;
“
Pre-Closing Payment ” has the meaning set out
in Section 2.8 ;
“ Pulp
Business ” has the meaning set out in the Preliminary
Statement;
“ Purchase
Price ” has the meaning set out in Section 2.6
;
“ Purchaser
Indemnitors ” means Terrace Bay Pulp Inc., a corporation
incorporated under the laws of Ontario (“ Terrace Bay
Pulp ”), Buchanan Forest Products, Ltd., a corporation
incorporated under the laws of Ontario (“ Buchanan
”), and Lucky Star Holdings Inc., a corporation incorporated
under the laws of Ontario (“ Lucky Star ”),
collectively, and “ Purchaser Indemnitor ” means
any of the Purchaser Indemnitors individually, all of whom are
parties to this Agreement for purposes of Article 8
;
“ Purchaser
Required Consents ” means (a) all required approvals from
appropriate Governmental Authorities for the transfer, issuance or
reissuance of the Permits; and (b) receipt of clearances from
relevant competition/merger control authorities in Canada and the
United States .
“
Purchaser ” has the meaning set out on Page
1;
“ Purchaser
Basket Amount ” has the meaning set forth in Section
8.4(b)(i) ;
“ Purchaser
Cap Amount ” has the meaning set forth in Section
8.4(b)(ii) ;
“ 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;
“Resolutions”
means certified copies of resolutions adopted by the Board of
Directors of the Seller at meetings convened and held at which a
quorum was present and voting throughout; that remain in full force
and effect at the Time of Closing; and are in accordance with the
provisions of the charter and by-laws of the Seller and the laws
and regulations applicable to the Seller.
“ Retail Sales
Tax ” has the meaning set out in Section 2.10
;
“ Retained
Assets ” has the meaning set out in Section 2.2
;
6
“ Retained
Liabilities ” has the meaning set out in Section
2.4 ;
“Retired
Employee” means any Employee or Former 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 take retirement;
“ Safety
Law ” means any Applicable Law in existence on the date
of this Agreement relating to workplace health and
safety;
“ Seller
” has the meaning set out on Page 1;
“ Seller
Basket Amount ” has the meaning set forth in Section
8.4(a)(i) ;
“ Seller Cap
Amount ” has the meaning set forth in Section
8.4(a)(ii) ;
“ Seller
Parent ” has the meaning set out on Page 1;
“ Shared
Contract ” means a contract with a third Person that
directly benefits both Seller and Purchaser;
“
Taxes ” means any federal, provincial, local or
foreign, 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) ;
“ Terrace Bay
Asset Purchase Agreement ” has the meaning set out in the
Preliminary Statement;
“ Terrace Bay
Pulp Mill ” has the meaning set out in the Preliminary
Statement;
“ Terrace Bay
Pulp ” has the meaning set out on Page 1;
“ Time of
Closing ” means 11:00 a.m. (Toronto Time) on the Closing
Date;
“ Transition
Services Agreement” has the meaning set out in Section
4.12(b) ;
“ Woodlands
Business ” has the meaning set out in the Preliminary
Statement, including substantially all of the assets and properties
owned by Seller and used primarily by or in connection with the
business conducted by Seller at its Longlac woodlands
operations;
“
WSIB ” means Workplace Safety and Insurance
Board.
7
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 and Safety 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 Canada from time to time approved
by the Canadian Institute of Chartered Accountants, or any
successor institute, 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 money of Canada unless otherwise
specified.
1.7
Schedules*
The following
Schedules are attached to and form part of this
Agreement:
|
Schedule
|
|
Contents
|
|
1.1
|
|
Persons Having
Knowledge
|
|
2.1(d)
|
|
Balance Sheet
Schedule
|
|
2.9
|
|
Allocation of Purchase
Price
|
|
2.11(a)(iii)
|
|
Bill of Sale
|
|
2.11(b)(i)
|
|
Assumption
Agreement
|
|
3.1 (c)
|
|
No Material Adverse
Change
|
8
|
3.1 (d)
|
|
Compliance with Laws;
Permits
|
|
3.1(f)
|
|
Actions and
Proceedings
|
|
3.1(h)
|
|
Owned Real
Property
|
|
3.1(h)(ii)
|
|
Title to / Matters
Relating to Owned Real Property
|
|
3.1(i)(i)
|
|
Tenant Real Property
Leases
|
|
3.1(i)(ii)
|
|
Landlord Real Property
Leases
|
|
3.1(i)(iii)
|
|
Compliance with Real
Property Leases
|
|
3.1(j)
|
|
Real Property
Expropriation
|
|
3.1(k)
|
|
Title to Tangible
Assets
|
|
3.1(m)
|
|
Benefit
Plans
|
|
3.1(n)
|
|
List of Employees who
Receive Additional Types of
Compensation or Benefits
|
|
3.1(o)
|
|
List of Seller’s
WSIB Accounts
|
|
3.1(r)
|
|
Operations
|
|
3.1(s)(i)
|
|
Non Assumed
Contracts
|
|
3.1(s)(ii)
|
|
Contract
Matters
|
|
4.12(a)
|
|
Transition Services
Agreement
|
|
4.12(b)
|
|
Terrace Bay Asset
Purchase Agreement
|
|
4.13
|
|
Ordinary Course of
Business
|
|
5.1(c)
|
|
List Employees for whom
Purchaser Assumes No Responsibility
|
* The schedules listed
above have been omitted in accordance with Item 601(b)(2) of
Regulation S-K. The Company hereby undertakes to furnish
supplementally to the Securities and Exchange Commission a copy of
any omitted exhibits or schedules upon request.
ARTICLE 2- SALE AND
PURCHASE
2.1
Assets to be Sold and Purchased
Except as
otherwise provided in Section 2.2 , and upon the terms and
subject to the conditions herein set forth, at Closing, Seller
shall (and, if applicable, shall cause its Affiliates to) sell,
assign, transfer, convey and deliver to Purchaser, as of the Time
of Closing, the following properties, assets and other claims,
rights and interests of the Seller relating to the Woodlands
Business, except as listed on Schedules 2.1(a) through
2.1(q) attached hereto and incorporated herein by
reference:
(a)
all of the assets used primarily in the Woodlands Business on the
Closing Date (subject to transactions and adjustments in the
ordinary course of business, consistent with past practice, from
May 2, 2006 to the Closing Date);
(b)
all of the Owned Real Property;
(c)
all of Seller’s tangible personal property located in Ontario
relating primarily to the Woodlands Business on the Closing Date,
including (i) inventories of the Woodlands Business consisting of
raw materials (that are not already included in Balance Sheet
Schedule as set forth on Schedule 2.1(d) hereto; it being
understood that the Balance Sheet Schedule operates under this
Agreement to only transfer those assets and
9
liabilities used in
connection with the Woodlands Business), chemicals, maintenance and
finishing supplies, packaging materials, stores, spare parts and
similar items of inventory, but excluding finished goods
inventories (collectively, the “ Inventory ”),
and (ii) machinery, equipment and furniture;
(d)
the balance sheet items shown as acquired by the Purchaser, as set
forth on Schedule 2.1(d) hereto (the “ Balance
Sheet Schedule ”), in each case in respect of the
Woodlands Business as of the Closing;
(e)
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 Woodlands Business,
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 Woodlands Business (whether
or not there are any written contracts with respect thereto)
(collectively, the “ Assumed Contracts ”);
(f)
all books and records (other than accounting, tax or similar
records required for tax audit purposes) of Seller relating
primarily to the Woodlands Business, including all files,
documents, sales and other records, customer and supplier lists,
computer files and programs, operating data, environmental studies
and plans, maintenance records, personnel records, WSIB files and
all other employee or employment records, specifically including
those relevant to the administration or wind up of the Pension
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);
(g)
all of Seller’s site plans, surveys, soil and substratum
studies, architectural plans, as-built drawings, appraisals, and
electrical and mechanical plans and studies relating to the
Woodlands Business and the Real Property (subject to the right of
Seller to make copies of such items);
(h)
all assignable 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;
(j)
[Reserved];
(k)
all transferable Permits and certificates of approval relating to
the Woodlands Business;
(l)
[Reserved];
(m)
the goodwill of the Woodlands Business, including the right of the
Purchaser to represent itself as carrying on the Woodlands Business
in continuation of and in
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succession to the
Seller, but excluding any right to use the name “Neenah
Paper”, “Neenah Paper Company of Canada”,
“NP” and “NPCC” and any variants
thereof;
(n)
any trademarks, patents, trade secrets, know-how or other
Intellectual Property used primarily in the Woodlands Business as
mutually agreed upon by the parties prior to the Closing Date, but
excluding any right to use the name “Neenah Paper”,
“Neenah Paper Company of Canada”, “NP” and
“NPCC” and any variants thereof;
(o)
all other assets and properties of Seller relating primarily to the
Woodlands Business which are located at the Longlac Woodlands
Operation, or the Real Property on the Closing Date.
All of the foregoing
assets and properties to be sold, assigned, transferred, conveyed
and delivered to Purchaser hereunder (other than the Retained
Assets) are hereinafter referred to as the “ Assets
”. Purchaser shall purchase the Assets for the
consideration set forth in Section 2.6 and upon the other
terms and subject to the conditions set forth in this
Agreement.
2.2
Retained Assets
Anything in
Section 2.1 to the contrary notwithstanding, there shall be
excluded from the Assets to be 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, including the rights to
certain balance sheet items as set forth in the Balance Sheet
Schedule ( Schedule 2.1(d) ; it being understood that the
Balance Sheet Schedule operates under this Agreement to only retain
those assets and liabilities used in connection with the Woodlands
Business) in each case in respect of the Woodlands Business of the
Closing;
(b)
all rights to refunds, rebates or credits of any Taxes for all
periods (or partial periods) ending on or prior to the Closing Date
and all prepayments of Taxes for any period, whether ending prior
to, on or after the Closing Date, except as may otherwise be
provided in Section 2.9(c) ;
(c)
any insurance policies and all rights to refunds, rebates or
credits under such policies, including refunds or rebates from WSIB
and life insurance premiums paid by Seller prior to the Closing
Date;
(d)
any deposits or expenses which are prepaid at or prior to the
Closing Date;
(e)
cash, negotiable securities, certificates of deposit and other cash
equivalents, and accounts receivable, finished goods inventory and
current portion of deferred taxes;
(f)
the Non-Assumed Contracts and all rights of Seller thereunder;
11
(g)
any proceeds of litigation, actions or claims commenced by or
against the Seller in respect of the operation of the Woodlands
Business or the functioning, use or condition of the assets prior
to the Closing Date;
(h)
all shares in the capital of Seller; and
(i)
any and all assets relating to the Benefit Plans.
2.3
Liabilities of Seller Assumed by Purchaser
Purchaser shall,
upon the terms and subject to the conditions set forth herein,
assume, as of the Time of Closing, and shall perform or satisfy
thereafter:
(a)
all liabilities and obligations under the Assumed Contracts, Real
Property Leases, Permitted Encumbrances and transferable
Permits;
(b)
[Reserved];
(c)
[Reserved];
(d)
all Environmental Liabilities;
(e)
all obligations and liabilities in connection with the roads and
bridges used by Seller in connection with the Woodlands
Business;
(f)
all liabilities, obligations, claims, demands and causes of action
arising in respect of the operation of the Woodlands Business or
from the functioning, use and condition of the assets before or
after the Closing Date, including, but not limited to, all
liabilities, obligations, claims, demands and causes of action
arising in connection with obligations imposed by any Governmental
Authority or any third party, other than those specifically
excluded elsewhere in this Agreement;
(g)
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;
(h)
the employment related obligations and liabilities of Seller as set
out in Section 5.1 ;
(i)
[Reserved];
(j)
all other liabilities assumed by Purchaser as set forth on the
Balance Sheet Schedule; and
(k)
any other obligations or liabilities assumed by Purchaser as
provided for in this Agreement.
All of the foregoing
liabilities and obligations of Seller to be assumed by Purchaser
hereunder are hereinafter referred to as the “ Assumed
Liabilities ”.
12
2.4
Retained Liabilities
Purchaser shall
not assume, or in any way be liable or responsible for and the
Seller shall perform or satisfy:
(a)
any liability or obligation with respect to Taxes applicable to the
assets 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)
any liability or obligation with respect to:
(i)
employment and pension obligations and liabilities not assumed by
the Purchaser in Section 5.1 and all those retained by
Seller set out in Section 5.2 ;
(ii)
all liabilities assumed by Seller as set forth on the Balance Sheet
Schedule;
(iii)
any liability or obligation of Seller based upon or arising under
this Agreement;
(iv)
any liability of Seller relating to the Retained Assets; and
(v)
all liens and encumbrances currently secured against the
Assets.
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 ”. The
parties also agree to the prorations of certain assets and
liabilities as set forth on the Balance Sheet Schedule.
2.5
Non-Assignable Contracts or Licenses/Shared
Contracts
(a)
To the extent that
(i)
assignment hereunder by the Seller to Purchaser of any Real
Property Lease or Assumed Contract or
(ii)
transfer hereunder of books and records, is not permitted or is not
permitted without the consent (including, without limitation,
waiver of a right of first refusal or option right) 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 is not given or if such an
undertaking otherwise would constitute a breach of or cause a loss
of benefits thereunder. 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.
(b)
If and to the extent that Seller is unable to obtain any required
third party consent in respect of a Real Property Lease or Assumed
Contract (the “ Non-Assigned
13
Contracts ”)
contemplated by Section 2.5(a) above, Seller shall continue
to be bound by any such Non-Assigned Contract. In such event,
to the maximum extent permitted by law or the terms of the
Non-Assigned Contract,
(i)
Seller shall make the benefit of such Non-Assigned Contract
available to Purchaser with the intent that the Purchaser will be
in the same economic position as if such Non-Assigned Contract were
transferred to it, including holding any such Non-Assigned Contract
in trust for the Purchaser or acting as agent for the Purchaser or
entering into back to back arrangements with the Purchaser in
respect of such Non-Assigned Contract, and
(ii)
the assignment provisions of this Agreement shall operate to the
extent permitted by law or 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 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 such Non-Assigned Contract
performance, 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.
(c)
With respect to liabilities pursuant to, arising under or relating
to any 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.
14
If
Seller, on the one hand, or Purchaser on the other hand, receive
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 deliver, transfer or
otherwise afford such benefit or payment to the other
party.
(d)
If and when any third party consent contemplated by Section
2.5(b) above 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 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 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 the Seller in the same manner as to the Seller.
2.6
Acquisition Payment and Purchase
Price
In consideration of Seller’s sale,
assignment, transfer and conveyance of the Assets to Purchaser,
Purchaser shall pay Seller $1.00 in cash at the Closing (the
“ Purchase Price ”). In consideration of
Purchaser (and of the Purchaser and Purchaser Indemnitors under the
Terrace Bay Asset Purchase Agreement) acquiring the Assets,
assuming the Assumed Liabilities and offering employment to the
Employees on the terms set forth herein, Seller shall sell, assign,
transfer and convey the Assets to Purchaser at the Closing. It
is expressly understood and agreed that no separate payment will be
made by Seller to Purchaser under this Agreement. It is expressly
understood and agreed, and it is the intention of the parties, that
there is good and valid consideration for the sale of the Assets
and assumption of the Assumed Liabilities under this Agreement by
virtue of the agreements and obligations set forth herein and by
virtue of the Acquisition Payment being made to Purchaser’s
affiliate, Terrace Bay Pulp, pursuant to Section 2.6 the Terrace
Bay Asset Purchase Agreement (the “Acquisition
Payment”). The Acquisition Payment shall
be made to a trust account established by Terrace Bay Pulp who
shall, by separate agreement between Terrace Bay Pulp and
Purchaser, divide and/or allocate the Acquisition Payment between
itself and the Purchaser under this Agreement in accordance with
the assets and liabilities transferred to each entity
.
2.7
[Reserved]
2.8
[Reserved]
15
2.9
Allocation of Purchase Price; Taxes
(a)
The Purchase Price will be allocated in accordance with Schedule
2.9 .
(b)
Seller Parent, Seller and Purchaser, in filing their respective
income tax returns, will use the allocations of the Purchase Price
as set forth in Schedule 2.9 . In the event that after
exercising commercially reasonable best efforts to prepare
Schedule 2.9 , Seller and Purchaser are unable to finalize
the allocation referred to above by the date of execution of this
Agreement, such Schedule 2.9 may be developed and mutually
agreed to before or following the Closing Date.
(c)
Purchaser and Seller shall file all applicable transfer tax forms
and declarations in connection with the transactions contemplated
hereby. All Taxes applicable to the Assets for periods
beginning before and ending after the Closing Date, and any other
charges which are appropriate subjects for proration, shall be
prorated on a daily basis as of 12:01 a.m. on the Closing Date
between Seller and Purchaser; provided, however, that all 2006
property, ad valorem or similar Taxes shall be allocated to Seller
for the period (or partial periods) ending on the Closing Date
based on a daily proration of the most recent (as of the Closing
Date) ascertainable property, ad valorem or similar Taxes to be
prorated. Any amount of 2006 property, ad valorem or similar
Taxes not allocated to Seller shall be allocated to
Purchaser. Any refund of 2006 property, ad valorem or similar
Taxes (net of costs incurred to recover same) shall be prorated
between Seller and Purchaser in the same proportion.
2.10
Election
Seller and
Purchaser will on or before the Closing Date jointly execute an
election, in the prescribed form and containing the prescribed
information, to have subsection 167(1.1) of the Excise Tax Act
(Canada) apply to the sale and purchase of the Assets hereunder so
that no Tax is payable in respect of such sale and purchase under
Part IX of the Excise Tax Act (Canada). Purchaser will file
such election with the Minister of National Revenue within the time
prescribed by the Excise Tax Act (Canada). Additionally,
Purchaser and Seller consider that there is no value to the
tangible personal property included in the Assets and, accordingly,
no retail sales Tax (“ Retail Sales Tax ”) will
be payable by Purchaser on the Closing Date. In the event of
any reassessment by the Ministry of Finance (Ontario) that results
in any Retail Sales Tax becoming exigible or otherwise due and
payable, the amount of such Retail Sales Tax shall be payable by
Purchaser and Purchaser shall indemnify, defend and hold Seller and
its Affiliates harmless in any claim or proceeding by the Ministry
of Finance (Ontario) and as to any Tax, cost, expense, interest or
penalty that may be required to be paid with respect to the Retail
Sales Tax. The parties agree that the Purchaser shall pay any
land transfer Tax or fee exigible in respect of the transactions
conducted at the Closing and the Purchaser agrees to indemnify and
save harmless the Seller from any costs or damages incurred by the
Seller relating to any claims, proceedings or actions made against
Seller or any of its Affiliates in respect of land transfer Taxes
or fees.
16
2.11
Instruments of Conveyance and Assumption
(a)
In order to effectuate the sale, assignment, transfer and
conveyance of the Assets, the Seller shall, or shall cause its
Affiliates to, execute and deliver to Purchaser at the Time of
Closing:
(i)
one or more instruments of conveyance conveying the right, title
and interest of Seller in and to the Real Property, such
instruments to be in registrable form reasonably acceptable to
Purchaser’s solicitors; if requested by Purchaser, Seller
agrees that the instruments to be delivered on the Closing Date
shall contain signed statements contemplated under Section 50(22)
of the Planning Act;
(ii)
transfers and assignments to Purchaser of the transferable Permits,
including land use permits or licenses of occupation which
may be incapable of transfer or assignment, Seller shall surrender
the same to the Crown (in order to permit Purchaser’s
application for similar entitlements) and provide proof of said
surrender to Purchaser;
(iii)
one or more bills of sale, in the form attached hereto as
Schedule 2.11(a)(iii) ; and
(iv)
such other instruments of conveyance and other documents as
Purchaser shall reasonably deem necessary or appropriate to vest
in, or confirm to, Purchaser title to all of the Assets as
contemplated by this Agreement, in a form reasonably acceptable to
Seller and Purchaser (collectively with clauses (i) - (iii) above,
the “ Deeds and Assignments ”).
(b)
In order to effectuate the assumption of the Assumed Liabilities,
Purchaser shall execute and deliver to Seller at the Time of
Closing:
(i)
one or more instruments of assumption, in the form attached hereto
as Schedule 2.11(b)(i) , and
(ii)
such other documents, in a form reasonably acceptable to Seller and
Purchaser, as Seller shall reasonably deem necessary or appropriate
to confirm Purchaser’s assumption of the Assumed Liabilities
(collectively, with clause (i) above, the “ Instruments of
Assumption ”).
ARTICLE 3-
REPRESENTATIONS AND WARRANTIES
3.1
Seller’s and Seller Parent Representations and
Warranties
Seller and, as
applicable, Seller Parent each represent and warrant to Purchaser
as indicated below that:
17
(a)
Due Incorporation and Authority
(i)
Seller is an unlimited liability company duly organized, validly
existing and in good standing under the laws of the Province of
Nova Scotia and has all requisite corporate power and authority to
own, lease and operate its assets, properties and business and to
carry on its business as pre
