EXHIBIT 2.1
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SHARE PURCHASE AGREEMENT
Dated as of February 1, 2004
Among
RIVERSIDE FOREST PRODUCTS LIMITED
as Purchaser
and
▇▇▇▇▇▇ ▇. ▇▇▇▇ LTD.
as Vendor
and
▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇ ▇. ▇▇▇▇
as Principals
[LOGO OMITTED]
BULL, HOUSSER & ▇▇▇▇▇▇
TABLE OF CONTENTS
1. INTERPRETATION........................................................2
1.1 DEFINITIONS........................................................2
1.2 CONSTRUCTION AND INTERPRETATION....................................7
1.3 BUSINESS DAY.......................................................8
1.4 USE OF THE WORD "INCLUDING"........................................8
1.5 USE OF THE WORDS "BEST KNOWLEDGE"..................................8
1.6 MATERIALITY........................................................8
1.7 GOVERNING LAW......................................................9
1.8 SEVERABILITY.......................................................9
1.9 TIME OF ESSENCE....................................................9
1.10 FORM OF PAYMENT...................................................10
1.11 SCHEDULES.........................................................10
2. PURCHASE AND SALE....................................................10
2.1 PURCHASE AND SALE COVENANT........................................10
2.2 PURCHASE PRICE....................................................10
2.3 PAYMENT OF PURCHASE PRICE.........................................10
2.4 ALLOCATION OF PURCHASE PRICE......................................10
2.5 WORKING CAPITAL ADJUSTMENT........................................11
2.6 ADJUSTMENT FOR COUNTERVAILING AND ANTI-DUMPING DUTIES.............14
2.7 PRE-CLOSING ADJUSTMENTS...........................................15
3. VENDOR'S REPRESENTATIONS AND WARRANTIES..............................15
3.1 CORPORATE AND SHARE REPRESENTATIONS...............................15
3.2 FINANCIAL AND TAX REPRESENTATIONS.................................17
3.3 POST STATEMENT DATE REPRESENTATIONS...............................20
3.4 ASSET REPRESENTATIONS.............................................21
3.5 CONTRACTUAL REPRESENTATIONS.......................................24
3.6 CUSTOMER AND SUPPLIER REPRESENTATIONS.............................26
3.7 EMPLOYEE REPRESENTATIONS..........................................26
3.8 EMPLOYEE BENEFITS REPRESENTATIONS.................................27
3.9 TIMBER TENURES....................................................28
3.10 GENERAL VENDOR REPRESENTATIONS....................................29
3.11 CERTIFICATES......................................................30
4. REPRESENTATIONS OF THE PURCHASER.....................................30
4.1 GENERAL REPRESENTATIONS...........................................30
4.2 PURCHASER'S SHARES................................................31
5. PRE AND POST CLOSING COVENANTS.......................................32
5.1 CONDUCT OF BUSINESS DURING INTERIM PERIOD.........................32
5.2 ACCESS FOR DUE DILIGENCE..........................................33
5.3 CONSENTS AND AUTHORIZATIONS.......................................34
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5.4 NOTICE OF UNTRUE REPRESENTATION OR WARRANTY.......................34
5.5 ACTIONS TO SATISFY CLOSING CONDITIONS.............................35
5.6 TRANSFER OF THE PURCHASED SHARES..................................36
5.7 CONFIDENTIALITY...................................................36
5.8 PRE-CLOSING TRANSACTIONS..........................................36
5.9 POST CLOSING MATTERS..............................................36
6. CONDITIONS OF CLOSING................................................37
6.1 PURCHASER'S CONDITIONS OF CLOSING.................................37
6.2 VENDOR'S CONDITIONS OF CLOSING....................................38
7. CLOSING..............................................................39
7.1 CLOSING DATE......................................................39
7.2 OPTIONAL EXTENSION OF CLOSING DATE................................39
7.3 PLACE OF CLOSING..................................................39
7.4 CLOSING DOCUMENTS.................................................39
7.5 CLOSING...........................................................41
7.6 WAIVER............................................................41
7.7 RISK OF LOSS......................................................41
8. INDEMNIFICATION......................................................42
8.1 RELIANCE..........................................................42
8.2 VENDOR'S INDEMNIFICATION..........................................42
8.3 PURCHASER'S INDEMNIFICATION.......................................44
8.4 SURVIVAL OF INDEMNITY.............................................44
8.5 LIMITATION OF INDEMNITY...........................................45
8.6 NOTICE AND CONDUCT OF THIRD PARTY CLAIMS..........................45
8.7 NOTICE OF CLAIMS AGAINST VENDOR...................................47
9. TERMINATION..........................................................47
9.1 TERMINATION BY PURCHASER..........................................47
9.2 TERMINATION BY VENDOR.............................................47
9.3 EFFECT OF WAIVER..................................................47
9.4 WITHOUT PREJUDICE.................................................48
9.5 BREAK FEE.........................................................48
10. VENDOR'S CONTINUED EXISTENCE.........................................48
10.1 CONTINUED EXISTENCE OF VENDOR.....................................48
11. GENERAL..............................................................48
11.1 SURVIVAL OF REPRESENTATIONS.......................................48
11.2 ACCESS TO BOOKS AND RECORDS.......................................49
11.3 COMMISSIONS, LEGAL FEES...........................................49
11.4 PUBLIC ANNOUNCEMENTS AND POST CLOSING CONFIDENTIALITY.............49
11.5 ASSIGNMENT........................................................49
11.6 ENUREMENT.........................................................49
11.7 NOTICES...........................................................49
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11.8 WAIVERS...........................................................50
11.9 FURTHER ASSURANCES................................................51
11.10 REMEDIES CUMULATIVE...............................................51
11.11 DELIVERY BY FAX...................................................51
11.12 COUNTERPARTS......................................................51
11.13 AMENDMENTS........................................................51
11.14 SUBMISSION TO JURISDICTION........................................51
11.15 ENTIRE AGREEMENT..................................................52
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SCHEDULE 1.1(H) MACHINERY, EQUIPMENT, FURNITURE AND SUPPLIERS
SCHEDULE 1.1(Y) ENVIRONMENTAL INDEMNITY AGREEMENT
SCHEDULE 1.1(KK) LANDS
SCHEDULE 1.1(TT) PERMITTED ENCUMBRANCES
SCHEDULE 1.1(KKK) WORKING CAPITAL
SCHEDULE 2.6 DUTY ADJUSTMENT CALCULATION
SCHEDULE 3.1(B) BUSINESS QUALIFICATION
SCHEDULE 3.1(D) SHARE CAPITAL OF SUBSIDIARIES AND SHARES OWNED
BY THE COMPANY
SCHEDULE 3.1(N) DIRECTORS AND OFFICERS
SCHEDULE 3.2(A) ANNUAL FINANCIAL STATEMENTS
SCHEDULE 3.2(I) GUARANTEES
SCHEDULE 3.2(J) TAX RETURNS
SCHEDULE 3.2(T) BANK ACCOUNTS AND POWERS OF ATTORNEY
SCHEDULE 3.3(A) EXCLUDED ASSETS AND PRE-CLOSING TRANSACTIONS
SCHEDULE 3.4(L) LEASES
SCHEDULE 3.4(N) INTELLECTUAL PROPERTY
SCHEDULE 3.4(O) FORMER PROPERTIES
SCHEDULE 3.5(A) PERMITS
SCHEDULE 3.5(B) MATERIAL CONTRACTS
SCHEDULE 3.5(B)
MATERIAL CONTRACTS
SCHEDULE 3.5(D) LITIGATION
SCHEDULE 3.5(F) INSURANCE
SCHEDULE 3.5(H) INDEBTEDNESS TO COMPANY
SCHEDULE 3.5(K) NATIVE LAND CLAIMS
SCHEDULE 3.6(D) CUSTOMER CLAIMS
SCHEDULE 3.7 EMPLOYEES
SCHEDULE 3.8 EMPLOYEE PLANS
SCHEDULE 3.9 TIMBER TENURES
SCHEDULE 3.10(B) VENDOR'S REQUIRED APPROVALS
SCHEDULE 4.1(D) PURCHASER'S REQUIRED APPROVALS
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SCHEDULE 7.4(I) OPINION OF VENDOR'S SOLICITOR
SCHEDULE 7.4(J) EMPLOYMENT AGREEMENT - ▇▇▇▇ ▇. ▇▇▇▇
SCHEDULE 7.4(Q) OPINION OF PURCHASER'S SOLICITOR
SHARE PURCHASE AGREEMENT
THIS AGREEMENT made the 1st day of February, 2004.
AMONG
▇▇▇▇▇▇ ▇. ▇▇▇▇ LTD., a company incorporated under the
laws of British Columbia having an office at Suite 800 -
1090 ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇
(the "VENDOR")
AND:
RIVERSIDE FOREST PRODUCTS LIMITED, a company incorporated
under the laws of British Columbia having an office at of
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
(the "PURCHASER")
AND:
▇▇▇▇ ▇. ▇▇▇▇, business person of Vancouver, British
Columbia
("▇▇▇▇")
AND:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, business person of Vancouver, British
Columbia
("▇▇▇")
(▇▇▇▇ and ▇▇▇, collectively the "PRINCIPALS")
WHEREAS:
A. The Vendor is the registered holder and beneficial owner of all of the
issued and outstanding shares of the Company;
B. At the Closing provided for herein the Company will be indebted to the
Vendor in the amount of the Vendor's Loans.
C. The Vendor wishes to sell, and the Purchaser wishes to purchase, the
Vendor's Shares and the Vendor's Loans.
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D. The Principals are the indirect legal and beneficial owners of all of
the issued and outstanding shares of the Vendor and will benefit
directly from the Vendor entering into this Agreement with the
Purchaser.
IN CONSIDERATION of the covenants and agreements in this Agreement, the Parties
agree as follows:
1. INTERPRETATION
1.1 DEFINITIONS
In this Agreement except as expressly provided or as the context otherwise
requires:
(a) "AAC" means the Company's allowable annual cut as allocated in
the Timber Tenures issued under the FOREST ACT;
(b) "ACCOUNTS RECEIVABLE" means all accounts receivable, notes
receivable and other debts due or accruing due to the Company;
(c) "AFFILIATE" has the meaning given to it in the COMPANY ACT
(British Columbia);
(d) "AGREEMENT" means this agreement including any recitals and
Schedules to this agreement, as amended, supplemented or
restated from time to time;
(e) "ANCILLARY AGREEMENTS" means all agreements, certificates and
other instruments delivered or given pursuant to this
Agreement;
(f) "APPLICABLE LAW" in respect of any Person, property,
transaction or event, means all laws, statutes, ordinances,
regulations, municipal by-laws, treaties, judgments and
decrees applicable to that Person, property, transaction or
event and, whether or not having the force of law, all
applicable official directives, rules, consents, approvals,
authorizations, guidelines, orders and policies of any
Governmental Authority having or purporting to have authority
over that Person, property, transaction or event and all
general principles of common law and equity but excluding all
Environmental Laws;
(g) "ARM'S LENGTH" has the meaning given to it in the TAX ACT as
at the Commitment Date;
(h) "ASSETS" means all property and assets of the Company of every
nature and kind and wheresoever situate including (i) the
Property, (ii) all machinery, equipment, accessories and
supplies of all kinds including those described in Schedule
1.1(h), (iii) all Inventories, (iv) all Accounts Receivable
and the full benefit of all security for the Accounts
Receivable, (v) all prepaid expenses, (vi) the Intellectual
Property, (vii) the Material Contracts, (vii) the Leases, and
(ix) the Books and Records but not including the Excluded
Assets;
(i) "ASSOCIATES" as describing the relationship between two
Persons, means that they are "related persons" as defined in
the TAX ACT;
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(j) "AUDITED WORKING CAPITAL STATEMENT" has the meaning given to
it in Section 2.5(a);
(k) "▇▇▇▇ 28" means the FORESTRY REVITALIZATION ACT (British
Columbia) ;
(l) "BEST EFFORTS" means the efforts that a prudent person who
desires to complete the transaction contemplated herein would
use in similar circumstances to ensure that a closing occurs
as expeditiously as possible but without the necessity of
assuming any material obligations or paying any material
amounts to third parties, other than amounts payable by the
Purchaser in connection with any financing transactions;
(m) "BOOKS AND RECORDS" means all books of account, tax records,
sales and purchase records, customer and supplier lists,
computer software, formulae, business reports, plans and
projections and all other documents, files, correspondence and
other information of the Company (whether or not in written,
printed, electronic or computer printout form);
(n) "BUILDINGS" means all material plant, buildings, structures,
erections, improvements, appurtenances and fixtures (including
fixed machinery and fixed equipment) situate on any of the
Lands;
(o) "BUSINESS" means the business of harvesting timber and
manufacturing and selling forest products as now conducted by
the Company;
(p) "BUSINESS DAY" means a day other than a Saturday, Sunday or
statutory holiday in British Columbia;
(q) "CANADIAN SECURITIES LAWS" means all Applicable Laws relating
to securities in each of British Columbia, Alberta,
Saskatchewan, Manitoba, Ontario, Quebec and Nova Scotia,
including applicable published policy statements, notices,
orders, rulings and other regulatory instruments of the
securities regulatory authorities of those provinces;
(r) "CLOSING" has the meaning given to it in Section 2.1;
(s) "CLOSING DATE" has the meaning given to it in Section 7.1 or
any other date to which the parties agree;
(t) "COMPANY" means Lignum Limited, a corporation amalgamated
under the laws of British Columbia;
(u) "COMMITMENT DATE" means the date of this Agreement first
written above;
(v) "DEPOSIT" has the meaning given to it in Section 7.2;
(w) "DUTY ADJUSTMENT" means the net amount (including interest)
calculated in accordance with Schedule 2.6 payable by the
Government of the United States of America to the Company, or
payable by the Company to the Government of
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the United States of America, on account of any rebate,
refund, adjustment, recalculation or reclassification of any
Softwood Duties;
(x) "EMPLOYEE PLAN" means any retirement, pension, RRSP, bonus,
profit sharing, incentive, phantom stock, stock purchase or
option, deferred compensation, severance or termination pay,
insurance, health care, disability, salary continuation, legal
benefits, vacation, incentive or other employee compensation
or benefit plan, trust, arrangement, agreement, policy or
practice (whether provided before or after retirement, funded
or insured or not, written or oral, formal or informal) which
is maintained or otherwise made available by the Company for
the benefit of any present or former employees, officers, or
directors of the Company;
(y) "ENVIRONMENTAL AGREEMENT" means the environmental agreement
between the Vendor and the Purchaser to be executed at the
Closing in the form attached as Schedule 1.1(y)
(z) "ENVIRONMENTAL LAWS" means all laws, statues, ordinances,
regulations, by-laws, judgements or decrees relating to
pollution, protection of the natural environment or human
health and safety in the workplace, including all common law,
the ENVIRONMENTAL ASSESSMENT Act (Canada), the TRANSPORTATION
OF DANGEROUS GOODS ACT (Canada), the FISHERIES ACT (Canada),
the CANADIAN ENVIRONMENTAL PROTECTION ACT (Canada), the
WORKERS COMPENSATION ACT (British Columbia), the WASTE
MANAGEMENT ACT (British Columbia), the ENVIRONMENTAL
ASSESSMENT ACT ( British Columbia), but excluding Applicable
Laws pertaining to silviculture and the harvesting of timber
from the Timber Tenures;
(aa) "EXCLUDED ASSETS" means the assets listed on Schedule 3.3(a)
that are to be sold or distributed by the Company before the
Closing;
(bb) "FINAL WORKING CAPITAL STATEMENT" has the meaning given to it
in Section 2.5(g);
(cc) "FINANCIAL STATEMENTS" has the meaning given to it in Section
3.2(a);
(dd) "FORMER PROPERTIES" means any real property which any of the
Company or its predecessors may have owned, leased or occupied
at any time but, at the Commitment Date, do not own, lease or
occupy;
(ee) "GAAP" means generally accepted accounting principles in
effect in Canada including the accounting recommendations
published in the Handbook of the Canadian Institute of
Chartered Accountants;
(ff) "GOVERNMENTAL AUTHORITY" means any domestic or foreign
government, including any federal, provincial, state,
territorial or municipal government, and any government
agency, tribunal, commission or other authority exercising
executive, legislative, judicial, regulatory or administrative
functions of, or pertaining to, government;
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(gg) "HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976 included in title 15 of the United States Code;
(hh) "INTELLECTUAL PROPERTY" means all trade-marks, trade names,
business names, service names, copyrights, patents, technology
rights, inventions, computer software, trade secrets,
know-how, industrial designs, domain names and other
industrial or intellectual property owned or used in
connection with the Business and all applications therefor,
including all licences or similar rights used by or granted to
the Company in connection therewith;
(ii) "INTERIM PERIOD" means the period between the Commitment Date
and the Closing Date;
(jj) "INVENTORY" means all inventory of the Company including raw
materials, work in progress, finished goods, supplies and
stores;
(kk) "LANDS" means the real property described in Schedule 1.1(kk)
including all rights-of-way, leases, licenses or rights of
occupation, easements or other similar rights used, owned or
enjoyed by the Company in connection with that real property;
(ll) "LEASES" has the meaning given to it in Section 3.4(l);
(mm) "LIEN" means any mortgage, lien, charge, adverse claim,
hypothec or encumbrance, whether fixed or floating, on, or any
security interest in, any property, whether real, personal or
mixed, tangible or intangible, any pledge or hypothecation of
any property, any deposit arrangement, priority, conditional
sale agreement, other title retention agreement or equipment
trust, capital lease or other security arrangements of any
kind (and including, in the case of shares or other
securities, shareholders agreements, voting trust agreements
and similar arrangements);
(nn) "MATERIAL CONTRACTS" means all contracts to which the Company
is a party which:
(1) are out of the ordinary course of business of the
Company involving cost, expense or liability in
excess of $50,000;
(2) are continuing agreements involving more than
$100,000 over the term of the agreement, including
for the purchase, lease or sale of products,
supplies, equipment or services;
(3) involve any interest in the Property;
(4) restrict or limit the ability of the Company to
engage in any business, compete with any Person,
operate its assets at maximum production capacity or
otherwise conduct its business;
(5) are in connection with any Employee Plan; or
6
(6) are otherwise material in the context of the nature
and size of the Company's business and operations or
the nature and size of the transactions contemplated
by this Agreement;
(oo) "NOTICE" means any notice, citation, directive, order, claim,
litigation, investigation, proceeding, judgment, letter or
other communication, written or oral, from any Person;
(pp) "OBJECTION" has the meaning given to it in Section 2.5(c);
(qq) "PARTIES" means all parties to this Agreement and "PARTY"
means any one of them;
(rr) "PERMITS" means any licence, permit, approval, consent,
operating authority, certificate, registration or
authorization issued by any Governmental Authority which is
required under Applicable Laws in the conduct of the Business;
(ss) "PERMITTED ACTION" means any suit, action, or other proceeding
in any way related to or arising out of this Agreement
commenced in the courts of British Columbia and all courts
having appellate jurisdiction over those courts, by any Party
to this Agreement against any other Party to this Agreement;
(tt) "PERMITTED ENCUMBRANCES" means, with respect to the Assets,
the Liens described in Schedule 1.1(tt);
(uu) "PERSON" means any natural person, sole proprietorship,
partnership, corporation, trust, joint venture, any
Governmental Authority or any incorporated or unincorporated
entity or association of any nature;
(vv) "PRE-CLOSING ADJUSTMENT" has the meaning given to it in
Section 2.7;
(ww) "PROPERTY" means the Lands and the Buildings;
(xx) "PURCHASE PRICE" has the meaning given to it in Section 2.2;
(yy) "PURCHASER'S SHARES" has the meaning given to it in Section
2.3(a);
(zz) "REQUIRED APPROVALS" means approvals, waivers, authorizations
or consents by any Governmental Authority or other Person and
declarations, filings or registrations with any Governmental
Authority or other Person required in connection with the
entering into and the performance of this Agreement including
any filings, approvals or consents required under the
COMPETITION ACT (Canada), the INVESTMENT CANADA ACT (Canada)
or the HSR ACT;
(aaa) "SOFTWOOD DUTIES" means the countervailing or anti-dumping
duties assessed by the Government of the United States of
America on shipments of goods to the United States made by the
Company on or before the WC Adjustment Date and which have
been paid or included as a current liability in the Working
Capital on or before the WC Adjustment Date;
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(bbb) "STATEMENT DATE" means the date set out in Section 3.2(a);
(ccc) "SUBSIDIARY" means Dagish Enterprises Ltd.;
(ddd) "TAX" or "TAXES" includes all taxes, surtaxes, duties, levies,
imposts, rates, fees, assessments, withholdings, dues and
other charges of any nature imposed by any Governmental
Authority (including income, capital (including large
corporations), withholding, consumption, sales, use, transfer,
goods and services or other value-added, excise, customs,
anti-dumping, stumpage, countervail, net worth, stamp,
registration, franchise, payroll, employment, health,
education, business, school, property, local improvement,
development, education development and occupation taxes,
surtaxes, duties, levies, imposts, rates, fees, assessments,
withholdings, dues and charges) together with all fines,
interest, penalties on or in respect of, or in lieu of or for
non-collection of, those taxes, surtaxes, duties, levies,
imposts, rates, fees, assessments, withholdings, dues and
other charges;
(eee) "TAX ACT" means the INCOME TAX ACT (Canada);
(fff) "TIMBER TENURES" means the agreements issued to the Company
under the FOREST Act (British Columbia) and described in
Schedule 3.9;
(ggg) "TIME OF CLOSING" means 10:00 a.m. on the Closing Date;
(hhh) "VENDOR'S LOANS" means all (and not less than all) of the
aggregate principal sum and all interest thereon of the loans
or other indebtedness of the Company to the Vendor at the
Closing and all evidence of and security for those loans;
(iii) "VENDOR'S SHARES" means all (and not less than all) of the
issued and outstanding shares of the Company;
(jjj) "WC ADJUSTMENT DATE" means January 31, 2004; and
(kkk) "WORKING CAPITAL" means Working Capital as defined in Schedule
1.1(kkk).
1.2 CONSTRUCTION AND INTERPRETATION
The division of this Agreement into sections, the insertion of headings and the
provision of a table of contents are for convenience only, do not form a part of
this Agreement and will not be used to affect the construction or interpretation
of this Agreement. Unless otherwise specified:
(a) each reference in this Agreement to "SECTION" and "SCHEDULE"
is to a Section of, and a Schedule to, this Agreement;
(b) each reference to a statute is deemed to be a reference to
that statute, and to the regulations made under that statute,
as amended, replaced or re-enacted from time to time;
8
(c) each reference to a ministry, office, agency or similar body
of any Governmental Authority is deemed to be a reference to
any successor or replacement of any such ministry, office,
agency or similar body;
(d) words importing the singular include the plural and vice versa
and words importing gender include all genders;
(e) each reference to "IN WRITING" or "WRITTEN" includes printed,
typewritten, faxed or otherwise capable of being visibly
reproduced at the point of reception;
(f) references to time of day or date mean the local time or date
in Vancouver, British Columbia,
(g) all references to amounts of money mean lawful currency of
Canada, and
(h) an accounting term has the meaning assigned to it, and all
accounting matters will be determined, in accordance with GAAP
consistently applied.
1.3 BUSINESS DAY
If under this Agreement any payment or calculation is to be made, or any other
action is to be taken, on or as of a day which is not a Business Day, the
payment or calculation is to be made, or that other action is to be taken, on or
as of the next day that is a Business Day.
1.4 USE OF THE WORD "INCLUDING"
The word "INCLUDING" when following any general term or statement will not be
construed as limiting the general term or statement to the specific matter
immediately following the word "including" or to similar matters, and the
general term or statement will be construed as referring to all matters that
reasonably could fall within the broadest possible scope of the general term or
statement.
1.5 USE OF THE WORDS "BEST KNOWLEDGE"
The words "BEST KNOWLEDGE", "TO THE BEST OF THEIR KNOWLEDGE", "TO THE KNOWLEDGE
OF" or "OF WHICH THEY ARE AWARE" or other similar expressions limiting the scope
of any representation, warranty, acknowledgement, covenant or statement by the
Vendor means that the Vendor has made such inquiries, including inquiries of the
Company, its officers or directors, as are reasonably necessary to enable the
Vendor to make the statement or disclosure.
1.6 MATERIALITY
For the purposes of this Agreement, the dollar amounts set forth throughout this
Agreement are a relevant factor (but not the only factor) in determining the
meaning of the term "MATERIAL" and, without limiting the generality of the
foregoing, an asset, cost, obligation, liability or other matter will be
considered to be "MATERIAL" if it:
(a) is a Material Contract;
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(b) has a replacement cost or fair market value in excess of
$50,000 (either individually or in the aggregate for the same
items);
(c) represents a current or potential cost, obligation or
liability which is in excess of $50,000 (either individually
or in the aggregate for the same items);
(d) is a Timber Tenure of any size or duration; or
(e) is otherwise material in the context of the nature and size of
the Company's business and operations or the nature and size
of the transactions contemplated by this Agreement.
1.7 GOVERNING LAW
This Agreement and each of the documents contemplated by or delivered under or
in connection with this Agreement are governed exclusively by, and are to be
enforced, construed and interpreted exclusively in accordance with, the laws of
British Columbia and the laws of Canada applicable in British Columbia which
will be deemed to be the proper law of the Agreement.
1.8 SEVERABILITY
Each provision of this Agreement is severable. If any provision of this
Agreement is or becomes illegal, invalid or unenforceable in any jurisdiction,
the illegality, invalidity or unenforceability of that provision will not
affect:
(a) the legality, validity or enforceability of the remaining
provisions of this Agreement; or
(b) the legality, validity or enforceability of that provision in
any other jurisdiction,
except that if:
(c) on the reasonable construction of this Agreement as a whole,
the applicability of the other provision presumes the validity
and enforceability of the particular provision, the other
provision will be deemed also to be invalid or unenforceable;
and
(d) as a result of the determination by a court of competent
jurisdiction that any part of this Agreement is unenforceable
or invalid and, as a result of this Section 1.8, the basic
intentions of the parties in this Agreement are entirely
frustrated, the parties will use all reasonable efforts to
amend, supplement or otherwise vary this Agreement to confirm
their mutual intention in entering into this Agreement.
1.9 TIME OF ESSENCE
Time is of the essence of this Agreement.
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1.10 FORM OF PAYMENT
References to payments to be made under this Agreement will be deemed to
contemplate payment by wire transfer issued by a Canadian chartered bank payable
at par in Vancouver, British Columbia and payable to the Person entitled to
receive payment.
1.11 SCHEDULES
The schedules attached to this Agreement will, for all purposes, be and form an
integral part of the Agreement.
2. PURCHASE AND SALE
2.1 PURCHASE AND SALE COVENANT
On the basis of the warranties, representations and covenants of the Vendor in
this Agreement and subject to the fulfilment of any condition that has not been
waived by the Party entitled to the benefit thereof, the Purchaser will purchase
from the Vendor and the Vendor will sell to the Purchaser the Vendor's Shares
and will assign to the Purchaser the Vendor's Loans at the Closing herein
provided for (the "CLOSING") free and clear of all Liens and on the terms and
conditions herein set out in this Agreement.
2.2 PURCHASE PRICE
Subject to adjustment in accordance with Sections 2.5, 2.6 and 2.7, the
aggregate price for the Vendor's Shares and the Vendor's Loans is $100,000,000
(the "PURCHASE PRICE").
2.3 PAYMENT OF PURCHASE PRICE
The Purchaser will pay to the Vendor the Purchase Price at the Closing in
accordance with Section 7.4 by:
(a) issuing to the Vendor or its nominee 630,994 common shares of
the Purchaser at a price of $15.848 per share on account of
$10,000,000 of the Purchase ; and
(b) paying the balance of $90,000,000 to the Vendor, subject to
adjustment in accordance with Sections 2.5, 2.6 and 2.7, by
wire transfer.
2.4 ALLOCATION OF PURCHASE PRICE
The Purchase Price will be allocated among the Vendor's Shares and the Vendor's
Loans as follows:
(a) to the Vendor's Loans, an amount equal to the aggregate amount
thereof outstanding on the Closing Date; and
(b) to the Vendor's Shares, the balance of the Purchase Price.
11
Neither the Purchaser nor the Vendor will take a position with any Governmental
Authority charged with the collection of any Taxes or in any judicial proceeding
which would be inconsistent with the terms of any such allocation without the
written consent of the other Parties.
2.5 WORKING CAPITAL ADJUSTMENT
The Purchase Price is subject to adjustment as follows:
(a) the Vendor will:
(1) cause ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, the auditors of the
Company, to prepare and deliver to the Purchaser on
or before February 20, 2004 an audited statement of
the Working Capital as at the WC Adjustment Date,
which will be prepared in accordance with GAAP
applied on a basis consistent with the Financial
Statements (except as required by the determination
of Working Capital under this Agreement), together
with the auditor's report thereon, showing in
reasonable detail the Working Capital of the Company
as of 11:59 p.m. on the WC Adjustment Date determined
in accordance with this Agreement (the "AUDITED
WORKING CAPITAL STATEMENT"); and
(2) within 3 Business Days of delivering the Audited
Working Capital Statement, deliver to the Purchaser
the Company's final internal unaudited financial
reporting package for the period ending January 31,
2004 prepared on a basis consistent in all material
respects with the final internal unaudited financial
reporting package for the period ending on the
Statement Date to be delivered to the Purchaser
pursuant to section 5.8;
(b) within 10 Business Days following receipt of the Audited
Working Capital Statement, the Purchaser will review the
Audited Working Capital Statement and the Vendor will provide
access, upon every reasonable request, to the Purchaser and
its professional advisors to the Assets and to all working
papers of the Vendor's auditors, accounting books and records
and the appropriate personnel to verify the accuracy,
presentation and other matters relating to the preparation of
the Audited Working Capital Statement;
(c) if the Purchaser has any objections to the Audited Working
Capital Statement on the basis that it contains any errors,
the Purchaser will so notify the Vendor setting out the
alleged error and the amount in dispute (each an "OBJECTION");
(d) the Purchaser will be deemed to have accepted the Audited
Working Capital Statement if it does not notify the Vendor of
the Purchaser's Objections within 10 Business Days following
receipt of the Audited Working Capital Statement;
(e) if the Purchaser delivers any Objections to the Audited
Working Capital Statement within the 10 Business Day period
referred to in paragraph (d), the Purchaser and Vendor will
work expeditiously and in good faith in an attempt to
12
resolve the Objections within a further period of 10 Business
Days after the date of delivery by the Purchaser to the Vendor
of its Objections and, failing resolution, the Objections will
be submitted for determination to an independent national firm
of chartered accountants mutually agreed to by the Purchaser
and the Vendor (and, failing such agreement between the
Purchaser and the Vendor within a further period of 2 Business
Days, such independent national firm of chartered accountants
will be PricewaterhouseCoopers, or if such firm is unable to
act, Ernst & Young). The firm of chartered accountants will be
deemed to be acting as experts and not as arbitrators and will
be asked to express their professional opinion within 10
Business Days as to whether or not the Objections are valid
and, if so, what adjustments to the Audited Working Capital
Statement must be made in order to correct the errors
identified in the Objections, but they will not be instructed
or required to themselves audit or value any aspect of the
Working Capital. The opinion expressed by such firm of
chartered accountants will be final and binding upon the
Parties and will not be subject to appeal, absent manifest
error;
(f) the Vendor and the Purchaser will each bear the fees and
expenses of their respective professional advisors in
preparing or reviewing, as the case may be, the Audited
Working Capital Statement and if a matter is referred to a
national firm of chartered accountants pursuant to this
Section 2.5, the costs and expenses of such firm of chartered
accountants will be borne equally by the Vendor and the
Purchaser;
(g) immediately following acceptance or deemed acceptance of the
Audited Working Capital Statement by the Purchaser or the
receipt by the Purchaser and Vendor of the opinion of a firm
of chartered accountants pursuant to Section 2.5(e), as the
case may be, the Vendor will deliver to the Purchaser a final
statement of the Working Capital (the "FINAL WORKING CAPITAL
STATEMENT") which will be created by taking the Audited
Working Capital Statement and making such adjustments thereto
as shall have been settled upon by agreement of the Purchaser
and Vendor or as are set out in (or which necessarily follow
from) the opinion rendered by the firm of chartered
accountants pursuant to Section 2.5(e). Absent manifest error
the Final Working Capital Statement will be final and binding
upon the Parties for the purposes of determining the Purchase
Price adjustment in subsection 2.5(h), but is without
prejudice to any claims made in respect of the
representations, warranties, covenants or indemnities made in
this Agreement;
(h) if the amount of Working Capital on the WC Adjustment Date as
shown on the Final Working Capital Statement less the net
Pre-Closing Adjustments to be made pursuant to Section 2.7:
(1) exceeds $30,000,000, then, prior to the Closing Date,
the Vendor will cause the Company to pay (or to
distribute assets) to or for the account of the
Vendor, or to ▇▇▇▇ or ▇▇▇, in such amount or value as
is necessary to reduce the Working Capital less the
net Pre-Closing Adjustments, after
13
taking into account any Tax consequences or benefits
to the Company of or from making the payment, to
$30,000,000;
(2) is less than $30,000,000, then the Purchase Price and
the portion of the Purchase Price to be paid in cash
to the Vendor at the Closing will both decrease by
the amount of the difference between the Working
Capital less the net Pre-Closing Adjustments and
$30,000,000;
(i) If the Final Working Capital Statement is not available before
the Closing then:
(1) the cash portion of the Purchase Price payable at
Closing under subsection 2.3(b) will be reduced by
$10,000,000 and such sum will be deposited in trust
with the Purchaser's solicitors, to be invested in an
interest bearing account and held for subsequent
adjustment of the Purchase Price based upon the Final
Working Capital Statement (the "WC HOLDBACK");
(2) The payments, distributions and adjustments made
under subsection 2.5(h) will be made at the Closing
on an interim basis using the Audited Working Capital
Statement in place of the Final Working Capital
Statement, mutatis mutandis;
(3) Within three (3) Business Days of receipt of the
Final Working Capital Statement, the Purchaser will
pay to the Vendor, on account of the Purchase Price,
the WC Holdback:
(A) less the amount by which the amount of the
Working Capital in the Final Working Capital
Statement is less than the amount of the
Working Capital as shown in the Audited
Working Capital Statement; or
(B) plus the amount by which the amount of the
Working Capital in the Final Working Capital
Statement exceeds the amount of the Working
Capital as shown in the Audited Working
Capital Statement;
(4) Interest earned on the WC Holdback while invested by
the Purchaser's solicitors will be allocated between
the Vendor and the Purchaser in proportion to their
respective share of the principal portion of the WC
Holdback; and
(5) The Purchase Price will be adjusted accordingly; and
(j) any adjustment to the Purchase Price pursuant to this Section
2.5 will be made in respect of the portion of the Purchase
Price allocated to the Vendor's Shares and any such adjustment
will not affect the allocation of the Purchase Price to the
Vendor's Loans.
14
2.6 ADJUSTMENT FOR COUNTERVAILING AND ANTI-DUMPING DUTIES
(a) If at any time after the Closing Date there is a Duty
Adjustment and such Duty Adjustment results in the Company:
(1) receiving a payment or payments from the Government
of the United States of America, the Purchase Price
will increase by an amount equal to the Duty
Adjustment and the Purchaser will pay the applicable
amount of that increase to the Vendor (or as
otherwise directed by the Vendor in writing) within
10 Business Days after the end of the calendar month
in which such Duty Adjustment is received by the
Company; and
(2) owing any additional amounts to the Government of the
United States of America, the Purchase Price will
decrease by an amount equal to the Duty Adjustment
and the Vendor will pay the applicable amount of that
decrease to the Purchaser within 10 Business Days
after the end of the calendar month in which such
Duty Adjustment is paid by the Company.
(b) The Purchaser and the Vendor will work expeditiously and in
good faith in an attempt to agree on the amount of any Duty
Adjustment resulting from any rebate, adjustment,
recalculation, or reclassification of any Softwood Duties and,
failing agreement, the matter will be submitted for
determination to an independent national firm of chartered
accountants mutually agreed to by the Purchaser and the Vendor
(and, failing such agreement within a further period of 2
Business Days, such independent national firm of chartered
accountants will be PricewaterhouseCoopers, or if such firm is
unable to act, Ernst & Young). The firm of chartered
accountants will be deemed to be acting as experts and not as
arbitrators. The determination of such firm of chartered
accountants will be final and binding upon the Parties and
will not be subject to appeal, absent manifest error;
(c) The Purchaser and the Vendor will each bear the fees and
expenses of their respective professional advisors in
determining the Duty Adjustment and if the matter is referred
to a national firm of chartered accountants pursuant to this
Section 2.6, the costs and expenses of such firm of chartered
accountants will be borne equally by the Vendor and the
Purchaser;
(d) The adjustment to the Purchase Price provided for in this
Section 2.6 will not apply unless within five (5) years after
the Closing Date:
(1) a Court of competent jurisdiction or an arbitral or
trade regulatory body has made an order or
determination that will result in a Duty Adjustment
being paid to or payable by the Company; or
(2) the U.S. Department of Commerce issues the final
results of its administrative review of the
countervailing duty order on Certain Softwood
15
Lumber Products from Canada for any review period
falling prior to the Closing Date and such results
have the effect of requiring a Duty Adjustment to be
paid to or payable by the Company; or
(3) the U.S. Department of Commerce issues the final
results of its administrative review of the
antidumping duty order on Certain Softwood Lumber
Products from Canada for any review period falling
prior to the Closing Date and such results have the
effect of requiring a Duty Adjustment to be paid to
or payable by the Company; or
(4) there is a bi-lateral settlement between the
governments of Canada and the United States of the
softwood lumber trade dispute relating to Softwood
Duty, and such settlement has the effect of requiring
a Duty Adjustment to be paid to or payable by the
Company,
regardless of when the Duty Adjustment may actually be paid or
become payable thereafter.
(e) If as a result of a Duty Adjustment it becomes necessary to
file an amended Tax return in respect of a period before the
Closing, the Parties will each cooperate with the other as
necessary to prepare and file such a Tax return.
2.7 PRE-CLOSING ADJUSTMENTS
The Purchase Price will be further adjusted at Closing by the Parties' best
estimate acting reasonably and in good faith and with the advice of their
respective professional advisors, of the financial impact on the Company and its
Working Capital of the transactions, payments and distributions as described on
Schedule 3.3(a), including any Taxes payable or Tax benefits (without
duplication) as a consequence of the distribution of Excluded Assets (the
"PRE-CLOSING ADJUSTMENT").
3. VENDOR'S REPRESENTATIONS AND WARRANTIES
As of the date of this Agreement, unless otherwise specified herein:
3.1 CORPORATE AND SHARE REPRESENTATIONS
The Vendor represents and warrants that:
(a) INCORPORATION. The Company is a corporation duly amalgamated
and the Subsidiary is a corporation duly incorporated and each
of them is duly organized and existing under the COMPANY ACT
(British Columbia), is not a reporting company and is a valid
and subsisting company in good standing with respect to filing
of annual reports with the Registrar of Companies of British
Columbia;
(b) BUSINESS QUALIFICATION. The Company carries on business in the
jurisdictions of British Columbia and Ontario and from time to
time has inventory located in
16
the jurisdictions identified on Schedule 3.1(b) (and such
other jurisdictions as inventory may be located between the
Statement Date and the Closing in the ordinary course of
business) and except where indicated on that Schedule, is duly
qualified, licensed or registered in such jurisdictions, and
does not carry on business or own or lease any assets and is
not required to be registered or qualified in any other
province or territory of Canada or in any other jurisdiction
and the Company has the corporate power to own, lease and
operate its property, carry on its business and perform its
obligations, if any, under this Agreement and each of the
Ancillary Agreements to which it is a party;
(c) AUTHORIZED AND ISSUED CAPITAL. The authorized capital of the
Company is 100,000 Common shares with a par value of $1 per
share of which there are issued and outstanding to the Vendor
as fully paid and non-assessable 45,000 Common shares;
(d) AUTHORIZED AND ISSUED CAPITAL OF SUBSIDIARIES. The authorized
and issued capital of the Subsidiary is described in Schedule
3.1(d);
(e) OWNERSHIP. The facts and information contained in the recitals
to this Agreement are true in every respect;
(f) VALID ISSUANCE AND TRANSFER. The Vendor's Shares are validly
issued and outstanding as fully paid and non-assessable in the
capital of the Company and have been issued in compliance with
all Applicable Laws. None of the Vendor's Shares have been
transferred by one Person to another except in full compliance
with all Applicable Laws, the constating documents of the
Company and any other applicable agreements;
(g) LIENS. The Vendor's Shares and Vendor's Loans are free and
clear of all Liens;
(h) AUTHORITY. The Vendor has good and sufficient right and
authority to enter into this Agreement on the terms and
conditions herein set forth and to implement this Agreement
and, in particular, to transfer to the Purchaser the legal
title and beneficial ownership of the Vendor's Shares and the
Vendor's Loans free and clear of all Liens;
(i) NO OPTIONS, ETC. No Person, other than the Purchaser has any
right, present or future, contingent or absolute (whether by
law, pre-emptive or contract), to purchase the Vendor's Shares
and the Vendor's Loans or to require the Company to issue any
share in its capital and, in particular, there are no
outstanding securities of the Company which are convertible
into shares in the capital of the Company and there are no
outstanding options on or rights to subscribe for any of the
unissued shares in the capital of the Company;
(j) VENDOR'S LOANS. The Vendor's Loans have not been previously
assigned and there is no outstanding option, right, commitment
or other agreement of any character obligating any Vendor to
sell, transfer, pledge or otherwise encumber the Vendors
Loans;
17
(k) CONSTATING DOCUMENTS. The memorandum and the articles of the
Company and have not been altered since February 9, 1993 and
the memorandum and articles of the Subsidiary has not been
altered since its incorporation except for an alteration of
the memorandum to change the name of that Subsidiary;
(l) OTHER INVESTMENTS. Except for shares owned by the Company in
the corporations listed on Schedule 3.1(d), the Company does
not own, and is not a party to any agreement to acquire,
directly or indirectly, any shares in the capital of, any
partnership interest in or any other equity interests in, any
Person, and neither the Company nor the Subsidiary has any
agreement to acquire, lease, or amalgamate with any other
business operations;
(m) SUBSIDIARIES. The Subsidiary is wholly owned by the Company;
(n) DIRECTORS AND OFFICERS. The directors and officers of the
Company and the Subsidiary are listed together with their
position in Schedule 3.1(n).
3.2 FINANCIAL AND TAX REPRESENTATIONS
The Vendor represents and warrants that:
(a) ANNUAL FINANCIAL STATEMENTS. The audited financial statements
of the Company for the fiscal year ending December 31, 2003
(the "STATEMENT DATE") attached to this Agreement as Schedule
3.2(a) (the "FINANCIAL STATEMENTS") were prepared by the
Company in accordance with GAAP applied on a basis consistent
with prior years except as noted in the Financial Statements,
were audited by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, are correct and accurate
in all material respects and present fairly the financial
condition and position of the Company in all material respects
as at the Statement Date and the results of its operations for
the year ended on the Statement Date;
(b) AUDITED WORKING CAPITAL STATEMENT. The Audited Working Capital
Statement to be delivered under Section 2.5 will have been
prepared in accordance with GAAP applied on a basis consistent
with the Financial Statements (except as required by the
determination of Working Capital under this Agreement), will
be audited by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, will be correct and accurate
in all material respects and present fairly the Working
Capital of the Company as at the WC Adjustment Date;
(c) WORKING CAPITAL. The amount of Working Capital of the Company
as at the WC Adjustment Date is consistent with amounts held
in accordance with its past practices and is sufficient for
the purposes of operating the Business in its present form and
at its present level of activity and for the purpose of
fulfilling, in accordance with their respective terms, all
purchase orders, projects and contractual obligations which
have been placed with or undertaken by the Company;
18
(d) ACCOUNTS RECEIVABLE. The Accounts Receivable shown in the
Financial Statements represent the total accounts receivable
of the Company as at the Statement Date after deducting
$5,571,844 for an allowance for doubtful accounts receivable
and are all debts which are owing and to the best of Vendor's
knowledge based on historic practices of the Business are
fully collectible by the Company within 90 days of the
Statement Date without set-off or counterclaim except to the
extent the debt has been allowed for as a doubtful account.
None of the Accounts Receivable represent monies for goods
sold on consignment or on approval;
(e) ALLOWANCE FOR DOUBTFUL ACCOUNTS. The provision for doubtful
Accounts Receivable in the Financial Statements is, and
collections since the Statement Date have proven them to be,
adequate based on historic practices of the Business;
(f) INVENTORIES. The Inventories shown in the Financial Statements
are valued therein at the lower of average cost and net
realizable value and none of the Inventories are obsolete or
unsaleable in the ordinary course of business except as
provided for in the Financial Statements;
(g) PREPAIDS AND DEPOSITS. As described in the Financial
Statements, the prepaid expenses shown in the Financial
Statements are comprised of goods and services paid for in
full and refundable deposits payable to the Company upon
termination of the applicable leases and contracts;
(h) LIABILITIES. Neither the Company nor the Subsidiary has any
material liabilities, contingent or otherwise, which are not
disclosed or reflected in Schedule 3.2(a) except those
incurred in the ordinary course of its business after the
Statement Date and there have been no payments after the
Statement Date of a liability of the Company existing as of
the Statement Date and not disclosed or reflected in the
Audited Working Capital Statement;
(i) GUARANTEES. Neither the Company nor the Subsidiary has
guaranteed, or agreed to guarantee, any debt, liability or
other obligation of any Person except as identified on
Schedule 3.2(i);
(j) TAX RETURNS. To the best of the Vendor's knowledge all Tax
returns and reports of each of the Company and the Subsidiary
required by law to be filed prior to the date hereof have been
filed within the times and in the manner prescribed by law and
are true, complete and correct and all Taxes have been paid or
accrued in the Financial Statements;
(k) TAX ASSESSMENTS. The Company has been reviewed, determined and
assessed for federal and provincial income taxes for all years
to and including the fiscal year ending December 31, 1998 and
the Company and the Subsidiary have been assessed with respect
to their returns for the year ended
19
December 31, 2002 and March 31, 2002, respectively, and a BC
Capital tax audit is currently being performed;
(l) TAX STATUS. Under the provisions of the Tax Act and the INCOME
TAX ACT (British Columbia), each of the Company and the
Subsidiary have been, since incorporation, and will be until
the Commitment Date, a Canadian-controlled private
corporation;
(m) PROVISION FOR TAXES. Adequate provision will have been made in
the Final Working Capital Statement for Taxes payable for the
period from January 1, 2004 to the WC Adjustment Date;
(n) EXTENSION AGREEMENTS. There are no agreements, waivers or
other arrangements providing for an extension of time with
respect to the filing of any Tax return by or payment of, any
Taxes by the Company or the Subsidiary;
(o) COLLECTIONS AND WITHHOLDINGS. The Company has collected or
withheld all material amounts required to be collected or
withheld by it on account of Taxes and has remitted the same
to the appropriate Governmental Authority in the manner and
within the time required under any applicable legislation or,
if it is not yet due, has provided for it in appropriate
accounts for payment when due;
(p) RULINGS. The Company has not received any written ruling
related to Taxes or entered into any agreement with a
Governmental Authority relating to Taxes;
(q) CONTINGENT TAX LIABILITIES. The Vendor, the Company and its
directors, officers and employees are not aware of any
contingent Tax liabilities of the Company or the Subsidiary or
any grounds which will prompt reassessment including
aggressive treatment of income and expenses in filing earlier
Tax returns;
(r) BOOKS AND RECORDS. The accounting and financial Books and
Records of the Company and the Subsidiary set out and disclose
all material financial transactions of the Company and the
Subsidiary and such transactions have been accurately recorded
in such Books and Records. The Books and Records are not
wholly or partly, recorded, stored or maintained or otherwise
held by any means (including any electronic, mechanical or
photographic process) not available to the Company in the
ordinary course of its business;
(s) MINUTE BOOKS. The minute books and corporate records of the
Company and the Subsidiary contain substantially complete and
accurate minutes of all meetings and proceedings of the
shareholders, directors and committees of the Company and the
Subsidiary, all meetings and proceedings were duly called and
held, and the share certificate books, registers of transfer,
registers of shareholders and registers of directors are
complete and accurate in all material respects;
(t) BANK ACCOUNTS AND POWERS OF ATTORNEY. Schedule 3.2(t) is a
correct and complete list of (i) the name of each bank in
which the Company has an account
20
or safety deposit box and the names of all persons authorized
to draw on the account or to have access to the safety deposit
box, and (ii) the names of all Persons holding powers of
attorney from the Company.
3.3 POST STATEMENT DATE REPRESENTATIONS
The Vendor represents and warrants that, since the Statement Date:
(a) ORDINARY COURSE. Except as disclosed on Schedule 3.3(a), the
Company and the Subsidiary have carried on its business in the
ordinary and normal course in a prudent, businesslike and
efficient manner and substantially in accordance with the
procedures and practice in effect on the Statement Date and,
without limiting the generality of the foregoing, except as
disclosed on Schedule 3.3(a) neither the Company nor the
Subsidiary has:
(1) sold, transferred or otherwise disposed of any Assets
except for (i) Assets which are obsolete and which
individually or in the aggregate do not exceed
$100,000, or (ii) Inventory sold in the ordinary
course;
(2) declared or paid any dividends or made any other
distribution of any kind;
(3) made any capital expenditures or commitments therefor
which in the aggregate exceed $200,000;
(4) waived or surrendered any right of material value;
(5) settled any Accounts Receivable of a material nature
at less than face value net of the reserve for that
account and has not written off as uncollectible any
Accounts Receivable which individually or in the
aggregate is material or engaged in transactions
giving rise to Accounts Receivable which would
involve materially incurred risks or expectation of
noncollection;
(6) failed to replenish or maintain the quality of its
Inventories and supplies in a normal and customary
manner consistent with past practice or made any
material purchase commitments in excess of the normal
and ordinary requirements of the Business or on terms
other than the normal and customary ones;
(7) compromised or settled any material litigation,
proceeding or governmental action relating to the
Assets, the Business or the Company;
(8) increased its indebtedness for borrowed money, except
in the ordinary course of business, or made any loan
or advance, or assumed, guaranteed or otherwise
become liable with respect of the liabilities or
obligation of any Person;
21
(9) entered into any transaction, contract or commitment
other than in the ordinary course of business except
that the Company has purchased shares in the capital
of Fibreco Inc. in the amount of $224,700;
(10) discharged or satisfied any Lien or paid any
obligation or liability of any of the Company or the
Subsidiary other than current liabilities in the
ordinary course of business; or
(11) agreed, authorized or otherwise committed to do any
of the foregoing;
(b) COMPENSATION AND BONUSES. Except as disclosed in Schedule
3.3(a) or in the normal course of business, neither the
Company nor the Subsidiary has paid or agreed to pay any
compensation, pension, bonus, share of profits or other
benefit to, or for the benefit of, any employee, director, or
officer of the Company or the Subsidiary and has not increased
the compensation paid or payable of any director, officer or
management employee;
(c) MAINTENANCE. The Company has maintained its plant, machinery
and equipment in as good condition as prevailed prior to the
Statement Date and has made all necessary preventative
maintenance, repairs and replacements;
(d) INSURANCE. The Company has maintained the same or
substantially the same full replacement cost insurance and
business interruption insurance coverage as was in place on
the Statement Date;
(e) MATERIAL CHANGE. There has been no material adverse change in
the affairs, assets, liabilities, financial condition or
business of the Company since the Statement Date, other than
any adverse change in the forest industry in the Interior of
British Columbia generally occurring since the Statement Date;
(f) ▇▇▇▇ 28. The Company has not received any payments from the
Government of British Columbia pursuant to ▇▇▇▇ 28;
3.4 ASSET REPRESENTATIONS
The Vendor represents and warrants that:
(a) BUSINESS. The Business is the only material business operation
carried on by the Company since amalgamation, and the property
and assets owned or leased by the Company are sufficient to
carry on the Business as previously conducted in its last
complete fiscal year;
(b) TITLE. The Company has good and marketable title to and
possession of all Assets used by the Company in carrying out
its Business including all the assets referred to in the
Financial Statements (except the Excluded Assets and those
disposed of since the Statement Date in the ordinary course of
business) and all assets acquired since the Statement Date,
free and clear of all Liens except Permitted Encumbrances, and
is not in default of any term of any Lien;
22
(c) NO OPTIONS, ETC. No Person has any agreement, option,
understanding or commitment or any right to purchase or
otherwise acquire from the Company any of the Assets other
than pursuant to purchase orders for Inventory sold in the
ordinary course of business;
(d) PROPERTY. The Company has good and marketable title to the
Property owned in fee simple, and good leasehold title to the
Property leased pursuant to the Leases, all free and clear of
all Liens except for Permitted Encumbrances, and to the best
of the Vendor's knowledge, the existing use of each Property
conforms to all relevant zoning regulations, development
controls, land use restrictions and regulations and other
Applicable Laws;
(e) LANDS. The Lands are fully serviced and have suitable access
to public roads and all means of ingress to and egress from
the Lands were built or installed in accordance and presently
fully comply with all lawful requirements of all applicable
Governmental Authorities and there are no improvements on any
adjoining lands occupied by Persons other than the Purchaser
which encroach on the Lands;
(f) OCCUPANCY. The Company has no indebtedness to any Person which
could affect the Company's right, to own and occupy and to
obtain revenue from the Property;
(g) MUNICIPAL TAXES. All municipal taxes, rates, levies and
assessments of every nature or kind in respect of the Property
for the calendar year 2003 and all preceding calendar years
have been paid in full and the Company has no present
obligation to pay moneys to any Governmental Authority in
connection with services, utilities or the like relating to
the Property in such calendar years;
(h) BUILDINGS. Each Building:
(1) is located wholly within the boundaries of the Lands;
(2) to the best of the Vendor's knowledge presently
complies with Applicable Law in all material respects
as may be required for carrying on its Business in
the manner in which it has been previously carried
on;
(3) to the best of the Vendor's knowledge was constructed
or installed in a good and workmanlike manner, has
been maintained since its completion in such manner
as a prudent owner would maintain it and is
structurally sound, in good repair and condition and
free of defect, except for reasonable wear and tear;
and
(4) is not subject to any material outstanding municipal
work orders, fire up-grading requirements, health
orders or other notices of building deficiencies from
any Governmental Authority which require the Company
to cure, repair or rectify any breach or
non-compliance of the Building or any use thereof;
23
(i) INFRINGEMENT. The location and existence of each of the
Buildings does not infringe the provisions of any easement,
right-of-way or Lien registered against or otherwise charging
or affecting the Property;
(j) EXPROPRIATION. The Vendor has not received any notice and has
no knowledge of any intention of any Governmental Authority to
expropriate all or any part of the Property or any intention
to alter zoning by-laws or official community plans or road or
traffic plans so as to affect or potentially affect the
Property or the operation thereof or access to or egress from
the Property;
(k) EQUIPMENT. The equipment and machinery listed in Schedule
1.1(h) constitutes all of the material equipment and machinery
used by the Company in its business, were substantially all
purchased new, and since their purchase (new or used) have
been maintained in a manner recommended by their manufacturers
and installers and are in normal operating condition and in a
state of reasonable maintenance and repair;
(l) LEASES. The Company is not a party to, and has not agreed to
become a party to, any lease with respect to real or personal
property other than the leases described in Schedule 3.4(l)
("LEASES"). The Company has good leasehold title to the lands
and equipment held by it under the Leases and has not made any
default in the performance of the terms of the Leases that
would entitle any of the lessors thereunder to terminate any
of the Leases or would render the Company liable in damages
and has not assigned or encumbered any Leases. Except for
Leases of equipment that are not material, each Lease has been
properly registered in the appropriate land registry office or
personal property registry. No waiver, indulgence or
postponement of the lessee's obligations under the Leases have
been granted by the lessor;
(m) NON-OWNED PROPERTY. The Vendor or its Associates do not own,
directly or indirectly, any property or assets which are used
by the Company or are necessary or useful in the conduct of
its businesses, except for subcontracting arrangements with
corporations owned as to 50% by the Company and disclosed on
the schedule Material Contracts;
(n) INTELLECTUAL PROPERTY. The Company is a registered holder of
the Intellectual Property listed in Schedule 3.4(n) and the
Company is not aware of any misleading or similar names to the
trademark or to the Company's name in use in any areas where
the business of the Company is conducted. The Vendor has no
knowledge of any infringement of the Intellectual Property of
the Company and is not aware of any infringement by the
Company of any intellectual property of any Person;
(o) FORMER PROPERTIES. To the actual knowledge of ▇▇▇▇, Schedule
3.4(o) lists all Former Properties.
24
3.5 CONTRACTUAL REPRESENTATIONS
The Vendor represents and warrants that:
(a) LICENSES AND PERMITS. Except as disclosed Schedule 3.5(a), the
Company and the Subsidiary holds all Permits including the
Permits set forth in Schedule 3.5(a), as may be required for
carrying on its Business in the manner in which it has
previously been carried on;
(b) CONTRACTS. The Company does not have any Material Contracts,
either oral, written or implied with any Person including
employees, agents, lessees, licensees, suppliers, officers or
directors except the leases described in Schedule 3.4(l) and
the contracts described in Schedule 3.5(b) and the Company has
complied with the terms and conditions of the Material
Contracts and is not aware of any defaults by the Company or
the other party to any such agreement;
(c) OTHER CONTRACTS. The Company has not breached any of the terms
or conditions of any contract (excluding the Material
Contracts) and, to the knowledge of the Vendor, all the
covenants to be performed by any other party to such contracts
have been fully performed;
(d) LITIGATION. Except as described in Schedule 3.5(d) there is no
basis for and there are no actions, suits, judgments,
investigations or proceedings outstanding or pending or, to
the best knowledge of the Vendor, threatened against or
affecting any of the Company and the Subsidiary at law or at
equity or before or by any Governmental Authority;
(e) COMPLIANCE WITH LAWS. The Company is not in breach of
Applicable Laws to which it is subject or which apply to it
except that, if required by Applicable Laws, the Company has
not registered to conduct business in certain jurisdictions as
described on Schedule 3.1(b) in which it maintains product
inventory;
(f) INSURANCE. The Company maintains the insurance policies
insuring the Company, its Subsidiaries and the Assets against
loss or damage by insurable hazards or risks on a replacement
cost basis that it reasonably considers to be prudent in light
of the business it conducts and the assets it owns, and:
(1) Schedule 3.5(f) contains a list of insurance policies
maintained by the Company setting out, in respect of
each policy, a description of the type of policy, the
name of insurer, the coverage allowance, the
expiration date, the annual premium and any pending
claims;
(2) the Company is not in default with respect to any of
the provisions contained in the insurance policies or
the payment of any premiums under the insurance
policies and has not failed to give any notice or to
present any claim under the insurance policies in a
due and timely fashion;
25
(3) there has not been any material adverse change in the
relationship of the Company with its insurers or the
availability of coverage pursuant to the policies;
(4) Schedule 3.5(f) lists any and all claims, with
reasonable particulars, made under any policies of
insurance maintained by or for the benefit of the
Company over the 5 calendar years immediately prior
to the Commitment Date; and
(5) copies of all insurance policies of the Company and
the most recent inspection reports received from
insurance underwriters have been delivered to the
Purchaser;
(g) MATERIAL ADVERSE EFFECT. As of the Statement Date the Company
has not experienced, and the Vendor is not aware of, any
occurrence or event which has had, or might reasonably be
expected to have, a material adverse effect on the Company's
Business or the results of its operations, other than any
material adverse change in the forest industry in the Interior
of British Columbia generally occurring before the Statement
Date;
(h) INDEBTEDNESS BY VENDOR. Except as disclosed in Schedule 3.5(h)
neither the Vendor nor any officer, director, employee or
shareholder of the Company are now indebted or under
obligation to the Company on any account whatsoever;
(i) INDEBTEDNESS TO VENDOR. Except for the Vendor's Loans, the
Company is not indebted or under any obligation to the Vendor
or its Associates on any account whatsoever;
(j) CANADIAN RESIDENT. The Vendor is a resident of Canada for all
purposes of the Tax Act; (K) NATIVE LAND CLAIMS. To the best
of the knowledge of the Vendor and except as disclosed in
Schedule 3.5(k), no claim of right, title or jurisdiction to
or over any lands, waters or products harvested therefrom has
been made against the Company or in respect of any of the
Assets by any aboriginal peoples by virtue of their status as
aboriginal peoples that:
(1) if successful, would materially adversely affect the
right of the Purchaser to use and enjoy the Assets in
the manner heretofore used and enjoyed by the
Company; and
(2) is not generally known by holders of timber tenures
in the ▇▇▇▇▇▇▇▇ Lake area;
(l) FOREIGN CORRUPT PRACTICES. To the knowledge of the Vendor,
neither the Company nor any agent, employee or other Person
acting on behalf of the Company has, directly or indirectly,
used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political
26
activity, made any unlawful payment to any government official
or employee or to any political party or campaign from
corporate funds, violated any provision of the CORRUPTION OF
FOREIGN PUBLIC OFFICERS ACT (Canada), as amended, or made any
bribe, rebate, payoff, influence payment, kickback or other
similar unlawful payment.
3.6 CUSTOMER AND SUPPLIER REPRESENTATIONS
The Vendor represents and warrants that:
(a) NO CHANGE TO LARGEST CUSTOMERS AND SUPPLIERS. Since December
31, 2003 there has been no termination or cancellation of, and
no material modification or change in, the business
relationship of the Company with its ten largest customers and
ten largest suppliers (by dollar amount);
(b) CONTINUATION. To the best of the knowledge of the Vendor the
benefits of any relationship with any of the major customers
or suppliers of the Company will continue after the Closing
Date in substantially the same manner as prior to the
Commitment Date;
(c) PRODUCT WARRANTIES. The Company has not provided or agreed to
provide any express warranties to its customers and, as at the
Statement Date, an adequate provision or reserve had been made
in the Financial Statements for all such warranties in
accordance with GAAP;
(d) CUSTOMER CLAIMS. Except as set out in Schedule 3.6(d), there
are no material outstanding or threatened claims or disputes
between the Company and its customers including claims for
back charges, rebates, price reductions for breaches of
product or service warranties or for product or service
liability for products manufactured or sold; and
(e) PREPAID DELIVERIES. Except to the extent accounted for in the
Financial Statements Working Capital, the Company is not
obligated to deliver goods to any Person for which the Company
has received payment in advance of delivery of such goods.
3.7 EMPLOYEE REPRESENTATIONS
The Vendor represents and warrants that:
(a) EMPLOYEES. The Company has 93 salaried employees and Schedule
3.7 contains a correct and complete list of each salaried
employee, director, independent contractor, consultant and
agent of the Company, whether actively at work or not, where
applicable their salaries, or consulting fees, positions, ages
and length of service;
(b) UNIONIZATION. Except as described in Schedule 3.7, the Company
is not a party to any collective agreement with any trade
union or other association of
27
employees and no attempt has been, or is being, made to
organize or certify the employees of the Company as a
bargaining unit;
(c) CERTIFICATION. The Company has not been certified by the
Labour Relations Board, or its predecessor, and the Company
has not voluntarily recognized any trade union or any other
employee association as bargaining agent for its employees
except as described in Schedule 3.7;
(d) SUCCESSORSHIP. Since the date of its amalgamation, the Company
is not a successor to any other legal entity in respect of any
collective agreement or proceeding under the LABOUR RELATIONS
CODE (British Columbia) or predecessor enactments;
(e) COMPLIANCE WITH LAWS. The Company is in compliance with all
Applicable Laws respecting employment and employment
practices, terms and conditions of employment, pay equity and
wages and hours of work;
(f) COMPLAINTS AND GRIEVANCE. The Company has not and is not
engaged in any unfair labour practice and no unfair labour
practice complaint, grievance or arbitration proceeding is
pending or, to the knowledge of the Vendor, threatened against
the Company except for employee grievances or mediation and
arbitration proceedings arising in the ordinary course of
business which are not material individually or collectively;
(g) DISABILITIES. No employees are on long term or short term
disability or any leave of absence and no employees are off
work and in receipt of workers' compensation benefits as of
the date hereof except as previously disclosed to the
Purchaser;
(h) LAID OFF EMPLOYEES. No employees are laid off except as
previously disclosed to the Purchaser; (I) NO ACCELERATION.
The consummation of the transactions contemplated by this
Agreement will not constitute an event under any Employee Plan
or individual agreement with a present or former employee that
will or may result in any severance or other payment or,
except as contemplated in Schedule 3.3(a), in the
acceleration, vesting or increase in benefits with respect to
any present or former employee.
3.8 EMPLOYEE BENEFITS REPRESENTATIONS
The Vendor represents and warrants that:
(a) EMPLOYEE PLANS. There are no Employee Plans affecting the
Company other than those specified in Schedule 3.8, each
Employee Plan has been registered, administered and maintained
in substantial compliance with its terms and with the
requirements prescribed by all laws, statutes, orders, rules,
directives and regulations that are applicable to such
Employee Plan, including the Tax Act,
28
("APPLICABLE EMPLOYEE PLAN LAWS") and all registrations,
reports, returns and other documents required to be filed with
any Governmental Authority or distributed to any Employee Plan
participant have been duly filed or distributed on a timely
basis;
(b) CONTRIBUTIONS. All contributions to, and payments from, each
Employee Plan have been made in a timely manner and in
accordance with the terms of the Employee Plan and Applicable
Employee Plan Laws and at the Closing all Employee Plans will
be fully funded as required by Applicable Employee Plan Laws,
the terms of Employee Plans and the terms of any agreements
made with affected employees;
(c) PAYMENTS. No assets (including surplus assets) have been paid
out of an Employee Plan except to a participant (or the
beneficiary of a participant) in such Employee Plan in
accordance with its terms and the Applicable Employee Plan
Laws;
(d) ACTUARIAL VALUATIONS. The Purchaser has been provided all
actuarial valuations, if any, prepared for each Employee Plan
since 1998;
(e) POST RETIREMENTS BENEFITS. There is no requirement in any
Employee Plan to provide post-retirement profit sharing,
medical or health benefits to employees;
(f) INVESTIGATIONS AND CLAIMS. To the best knowledge of the
Vendor, there are no impending investigations by any
Governmental Authority involving or relating to any Employee
Plan, no pending or threatened claims (except for claims for
benefits payable in the normal operation of the Employee
Plans), suits or proceedings relating to any Employee Plan and
there are not any facts that could reasonably be expected to
give rise to any such investigation, claim, suit or
proceeding;
(g) COMPLAINTS. No notice has been received by the Company of any
complaints or other proceedings of any kind involving the
Company or any of the employees of the Company before any
pension board or committee relating to any Employee Plan.
3.9 TIMBER TENURES
The Vendor represents and warrants that except as disclosed on Schedule 3.9:
(a) Each of the Timber Tenures is now recorded on the records of
the applicable Governmental Authority in the name of the
Company or the Subsidiary, as the case may be, all rentals,
stumpage, royalty waste assessments and other taxes,
assessments and costs arising under the Timber Tenures that
have been billed and are due and payable now are paid in full,
no notice of suspension, cancellation, reduction in term or
realization on any security deposited by the Company or the
Subsidiary in respect of any of the Timber Tenures is
outstanding and neither the Vendor nor the Company is aware of
any fact or
29
event that has occurred and could, in the reasonable
expectation of the Vendor or the Company, result in any such
suspension, cancellation, reduction in term or realization;
(b) The Company has observed and performed in all material
respects commensurate with good forest industry practice
prevailing in the ▇▇▇▇▇▇▇▇ Lake and 100 Mile House Timber
Supply Areas as at the date hereof, all covenants, agreements
and obligations on its part to be observed or performed under
the provisions of each of the Timber Tenures and all licenses,
authorizations, permits contracts, approved forest management,
operation and reforestation plans and other agreements
relating thereto, the FOREST ACT (British Columbia), the
FOREST PRACTICES CODE OF BRITISH COLUMBIA ACT (British
Columbia) and all other Applicable Laws, and the Company is
not aware of any breaches of any such obligations by
contractors working for the Company on the Timber Tenures
except as disclosed by the Vendor to the Purchaser in writing
before the Commitment Date;
(c) The Timber Tenures are subject to forest management, operating
and reforestation plans approved by the Ministry responsible
for the FOREST ACT (British Columbia) (where such approval is
required) and the Company and the Subsidiary and, where
applicable their contractors, have met all of their material
obligations under such plans except to the extent accrued in
the Financial Statements;
(d) Except in respect of the allowable annual cut reduction
imposed under ▇▇▇▇ 28 and notice of transfer of harvesting
rights under Forest Licence A55901 to new operating areas east
of the Fraser River, the Company and the Subsidiary have not
received any notice of intention by the Ministry responsible
for the FOREST ACT to alter or vary any provision, condition
or area of the Timber Tenures;
(e) All deposits under the Timber Tenures are in amounts and the
forms required by the FOREST ACT and the regulations
promulgated thereunder;
(f) The interests of the Company and the Subsidiary in the Timber
Tenures are free and clear of all Liens of any kind whatsoever
except Permitted Encumbrances; and
(g) The Company has not received any notice and is not otherwise
aware of any material breach of any of the timber cutting
rights or permits or forest management, operating,
reforestation or other plans issued or filed pursuant to any
of the Timber Tenures which has not been remedied or abandoned
by the person having authority to do so.
3.10 GENERAL VENDOR REPRESENTATIONS
The Vendor represents and warrants that:
30
(a) NO CONFLICT. The making of this Agreement and the completion
of the transactions contemplated hereby and the performance of
and compliance with the terms hereof does not conflict with or
result in the breach of, or the acceleration of, any terms,
provisions or conditions of or constitute a default under any
indenture, mortgage, deed of trust, agreement, lease,
franchise, certificate, or other instrument to which the
Company or the Vendor are a party or are bound provided that
the Required Approvals are obtained;
(b) AUTHORIZATIONS. Schedule 3.10(b) sets forth a true and
complete list of the Required Approvals required by the Vendor
in connection with the completion of the transactions,
performance of and compliance with the terms of this Agreement
by the Vendor or the Company;
(c) FULL DISCLOSURE. None of the Vendor's representations,
warranties or statements contained in this Agreement contain
any untrue statement of fact or omit to state any fact
necessary in order to make any such representations,
warranties or statements not misleading and all information
relating to the Company or the Subsidiary which is known or
would, on reasonable enquiry, be known to the Vendor and which
may be material to a purchase for value of the Vendor's Shares
and Vendor's Loans have been disclosed in writing to the
Purchaser and any such information arising on or before the
Closing Date will forthwith be disclosed in writing to the
Purchaser;
(d) ENFORCEABILITY. This Agreement has been duly executed and
delivered by the Vendor and is a legal, valid and binding
obligation of the Vendor, enforceable against the Vendor by
the Purchaser in accordance with its terms.
3.11 CERTIFICATES
All certificates of the Vendor delivered to the Purchaser and its
representatives pursuant to this Agreement, and the information contained in
each, will be deemed to be part of the representations and warranties of the
Vendor contained in this Section 3.
4. REPRESENTATIONS OF THE PURCHASER
4.1 GENERAL REPRESENTATIONS
The Purchaser represents and warrants that:
(a) CORPORATE STATUS. The Purchaser is a corporation duly
incorporated under the COMPANY ACT (British Columbia), is a
reporting company, is a valid and subsisting company in good
standing with respect to filing of annual reports with the
Registrar of Companies of British Columbia;
(b) AUTHORITY. The Purchaser has good and sufficient right and
authority to enter into this Agreement on the terms and
conditions herein set forth and to implement this Agreement
and, in particular, to purchase the Vendor's Shares and the
Vendor's Loans as contemplated herein;
31
(c) NO CONFLICT. The making of this Agreement and the completion
of the transactions contemplated hereby and the performance of
and compliance with the terms hereof does not conflict with or
result in the breach of, or the acceleration of, any terms,
provisions or conditions of or constitute a default under: (i)
the memorandum or articles of the Purchaser; (ii) any
indenture, mortgage, deed of trust, agreement, lease,
franchise, certificate or other instrument to which the
Purchaser is a party or is bound; or (iii) any term or
provision of any licenses, registrations or qualifications of
the Purchaser or any order of any Governmental Authority or
any Applicable Law provided that the Required Approvals are
obtained;
(d) AUTHORIZATIONS. Schedule 4.1(d) sets forth a true and complete
list of the Required Approvals required by the Purchaser in
connection with the completion of the transactions
contemplated herein;
(e) INVESTMENT CANADA. The Purchaser is not a non-Canadian as that
term is defined in the INVESTMENT CANADA ACT (Canada);
(f) FULL DISCLOSURE. None of the Purchaser's representations,
warranties or statements contained in this Agreement contain
any untrue statement of fact or omit to state any fact
necessary in order to make any such representations,
warranties or statements not misleading and all information
relating to the Purchaser which is known or would, on
reasonable enquiry, be known to the Purchaser and which may be
material to a purchase of the Vendor's Shares and Vendor's
Loans has been disclosed in writing to the Vendor and any such
information arising on or before the Closing Date will
forthwith be disclosed in writing to the Vendor;
(g) ENFORCEABILITY. This Agreement has been duly executed and
delivered by the Purchaser and is a legal, valid and binding
obligation of the Purchaser, enforceable against the Purchaser
by each the Vendor in accordance with its terms.
4.2 PURCHASER'S SHARES
The Purchaser represents and warrants that:
(a) CONSENTS. Prior to Closing, all consents, approvals, permits,
authorizations or filings as may be required under Canadian
Securities Laws necessary for the execution and delivery of
this Agreement and the issuance of the Purchaser's Shares will
have been made or obtained, as applicable;
(b) AUTHORIZED CAPITAL. The authorized capital of the Purchaser
consists of 25,000,000 common shares, of which 8,803,993
common shares are issued and outstanding as fully paid and
non-assessable;
(c) OPTIONS. As at the Closing Date, no holder of outstanding
securities of the Purchaser will be entitled to any
pre-emptive or any similar rights to purchase
32
and no rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, any unissued shares in
the capital or other unissued securities of the Purchaser are
outstanding;
(d) CORPORATE AUTHORITY. Prior to Closing, all necessary corporate
action will have been taken by the Purchaser validly to issue
the Purchaser's Shares as fully paid and non-assessable shares
in the capital of the Purchaser;
(e) REPORTING ISSUER. The Purchaser is a reporting issuer or
equivalent in British Columbia, Alberta, Saskatchewan,
Manitoba, Ontario, Quebec and Nova Scotia, is not in default
of any requirement of the Canadian Securities Laws of such
jurisdictions, and is not included on a list of defaulting
reporting issuers maintained by any of the securities
regulators of such jurisdictions;
(f) QUALIFYING ISSUER. The Purchaser is a "qualifying issuer" as
such term is defined in Multilateral Instrument 45-102 -
Resale of Securities;
(g) US REGISTRATIONS. The Purchaser is not registered with any
securities regulatory authority in the United States but will
become so registered in connection with the financing referred
to in Section 6.1(h) after that financing is completed;
(h) LISTING. The Purchaser's issued and outstanding common shares
are, and upon issuance the Purchaser's Shares will be, listed
and posted for trading solely on the Toronto Stock Exchange
and no order ceasing or suspending trading in any securities
of the Purchaser or the trading of any of the Purchaser's
issued securities is currently outstanding and no proceedings
for such purpose are, to the knowledge of the Purchaser,
pending or threatened;
(i) TSE APPROVAL. The issuance of the Purchaser's Shares has been
conditionally approved by the Toronto Stock Exchange, subject
only to customary post-issuance filing conditions; and
(j) TAX STATUS. The Purchaser is a taxable Canadian corporation as
defined in section 89 of the Tax Act.
5. PRE AND POST CLOSING COVENANTS
5.1 CONDUCT OF BUSINESS DURING INTERIM PERIOD
Except as disclosed in Schedule 3.3(a) or contemplated elsewhere in this
Agreement, during the Interim Period the Vendor will cause the Company and the
Subsidiary to carry on its business in the ordinary and normal course in a
prudent, businesslike, and efficient manner and substantially in accordance with
the procedures and practices in effect on the Statement Date and without
limiting the generality of the foregoing, during the Interim Period the Vendor
will not, and will not permit any of the Company or the Subsidiary to, without
the prior consent in writing of the Purchaser:
33
(a) purchase or sell, consume or otherwise dispose of any of its
Assets in connection with its Business except Inventories sold
in the ordinary course of business or which is not material to
the Business;
(b) enter into any material contract or assume or incur any
liability relating to or in any way affecting its Business
except in the ordinary course of business;
(c) settle any Accounts Receivable of a material nature at less
than face value net of the reserve for that account;
(d) waive or surrender any material right in connection with its
Business;
(e) discharge, satisfy or pay any Lien, obligation or liability in
connection with its Business except in the ordinary course of
business;
(f) make any capital expenditures or commitment therefor in
connection with its Business in excess of $50,000;
(g) issue any shares in its capital;
(h) increase or improve any compensation, pension, bonus, share of
profits or other benefit to, or for the benefit of, any
employee, director, or officer of the Company except in the
ordinary course of business;
(i) pay or declare any dividends, make any distributions, or
redeem or repurchase any of the Company's shares other than as
permitted in Section 2.5(h)(1) or described in Schedule
3.3(a); or
(j) alter the memorandum and articles of the Company
and the Vendor will cause the Company and the Subsidiary to:
(k) maintain insurance on its assets as they are insured on the
date hereof;
(l) use its Best Efforts to preserve and maintain the goodwill of
its Business; and
(m) do all necessary repairs and maintenance to its Assets and
take reasonable care to protect and safeguard those Assets in
the ordinary course consistent with past practice.
5.2 ACCESS FOR DUE DILIGENCE
During the Interim Period, the Vendor will cause the Company and the Subsidiary
at all reasonable times to permit representatives of the Purchaser reasonable
access to the Assets including the Lands and Buildings, the Material Contracts,
the Employee Plan documents, the Environmental Reports, other agreements, minute
books and share registers and to give the Purchaser and its representatives such
copies and information with respect thereto as may be reasonably required and to
permit the Purchaser to make such audit of the books of account of the Company
and the Subsidiary and physical verification of the Inventory of the Company and
34
the Subsidiary as the Purchaser may see fit. The Vendor will cause the Company
to cause its senior officers to discuss and answer fully any and all questions
relating to the business and affairs of the Company and the Subsidiary. Without
limiting the generality of the foregoing, promptly after the execution of this
Agreement the Vendor will deliver to the Purchaser a true and complete copy of
all wood chip sales and supply agreements of the Business, a detailed listing of
all Accounts Receivable as of the Statement Dateand a list of the ten largest
customers of the Company as at the Statement Date, by dollar amount, and the
history of sales to those customers in the previous three year period.
5.3 CONSENTS AND AUTHORIZATIONS
Both before and after the Closing Date, the Vendor will use Best Efforts to
assist the Purchaser in obtaining all Required Approvals, in form and terms
which are not materially adverse to the Purchaser or the Company, as are
necessary or required in order to permit the sale, transfer and assignment of
all of the right, title and interest of the Vendor in and to the Vendor's Shares
and the Vendor's Loans to the Purchaser. The Vendor and Purchaser will share
equally the fees paid to Governmental Authorities in connection with the
pre-merger notifications made under the HSR Act and the Competition Act
(Canada). Each Party will promptly inform the other upon receipt of any notice
or other communication from a Governmental Authority regarding the transactions
contemplated by this Agreement and if either Party receives a request for
additional information from a Governmental Authority with respect to the
transactions contemplated herein then such party will endeavour in good faith to
make, or cause to be made, as soon as reasonably practical and after
consultation with the other Party, an appropriate response in compliance with
such information request.
5.4 NOTICE OF UNTRUE REPRESENTATION OR WARRANTY.
During the Interim Period each of the Vendor and the Purchaser will promptly
notify the other if its senior executive officers or senior managers who are
reporting to those executive officers regarding due diligence matters obtain
actual knowledge that any of the representations or warranties of the Vendor in
this Agreement or in any Ancillary Agreement is or has become untrue or
incorrect (without regard to any knowledge qualification of the applicable
representation or warranty), and upon the giving of such notice with particulars
of the untrue or incorrect representation or warranty the following shall apply:
(a) senior officers of the parties shall meet (in person or by
telephone) and will negotiate in good faith and acting
reasonably the terms and conditions of an agreement that will
either:
(1) oblige the Vendor, at its cost, to carry out a course
of action to remedy the applicable facts or
circumstances in question to the reasonable
satisfaction of the Purchaser once the curative
actions are completed (and in that regard the parties
acknowledge and agree that the nature of the fact or
circumstance or of the course of action required to
remedy it may require some or all of the curative
actions to be taken after Closing
35
and that the Purchaser may require that security be
provided for the completion of such curative actions
after Closing); or
(2) adjust the Purchase Price.
If the parties are able to come to such an agreement and,
where applicable, the Vendor completes the course of action
agreed upon in all material respects, the Purchaser shall have
no further right or remedy with respect to the untrue or
incorrect representation or warranty other than any rights or
remedies that exist under such an agreement;
(b) if the parties are unable to come to an agreement in
accordance with clause (a), or if having come to an agreement
on a course of action the Vendor fails to remedy the fact or
circumstances as agreed before Closing (if applicable), then
the Purchaser may either:
(1) if it is entitled to do so pursuant to subsection
6.1(a), elect not to complete the purchase
contemplated by this Agreement, in which event the
Purchaser shall have no further right or remedy with
respect to the untrue or incorrect representation or
warranty; or
(2) complete the purchase contemplated by this Agreement
notwithstanding the untrue or incorrect
representation or warranty, in which event the
Purchaser shall have the rights and remedies set
forth in this Agreement or the applicable Ancillary
Agreement (as the case may be) arising from that
untrue representation or warranty (without regard to
any knowledge qualification of the applicable
representation or warranty).
Without limiting the foregoing, if a senior executive officer of the Purchaser
has actual knowledge that any of the representations or warranties of the Vendor
in this Agreement or in any Ancillary Agreement is or has become untrue or
incorrect, and fails to disclose that fact to the Vendor during the Interim
Period, the Purchaser shall not have any right or recourse against the Vendor
after Closing in respect of that particular breach of representation or
warranty.
5.5 ACTIONS TO SATISFY CLOSING CONDITIONS
The Vendor will use Best Efforts so as to ensure compliance with all of the
conditions set forth in Section 6.1 including ensuring that during the Interim
Period and at Closing, there is no breach of any of its representations and
warranties. The Purchaser will use Best Efforts so as to ensure compliance with
all of the conditions set forth in Section 6.2 including ensuring that during
the Interim Period and at Closing, there is no breach of any of its
representations and warranties. 5.6 TRANSFER OF THE PURCHASED SHARES
36
The Vendor will take all necessary corporate steps and corporate proceedings to
permit good title to the Vendor's Shares to be duly and validly transferred and
assigned to the Purchaser at the Closing, free of all Liens.
5.7 CONFIDENTIALITY
If for any reason the transaction herein provided for is not consummated, the
Purchaser will not and will not permit its Associates to:
(a) directly or indirectly, use for their own purposes any
information, trade secrets or confidential data relating to
the Company, the Subsidiary or the Business (including the
customers of the Business, its operations or the methods of
conducting the Business) discovered or acquired by the
Purchaser or its authorized representatives as a result of the
Vendor making available to the Purchaser or its authorized
representatives any of the information and materials in
connection with the transaction contemplated under this
Agreement;
(b) disclose, divulge or communicate, orally, in writing or
otherwise, any such information, trade secrets or confidential
data to any other Person except as may be required by
Applicable Laws, in which event the Purchaser will advise the
Vendor as far in advance as possible and will provide a draft
to the Vendor of the proposed disclosure;
and upon request by the Vendor, the Purchaser will forthwith return to the
Company or destroy all materials or documents containing any such information,
trade secrets or confidential data.
5.8 PRE-CLOSING TRANSACTIONS
Except as otherwise agreed by the Vendor and the Purchaser, the Vendor will
perform those obligations and transactions and make the payments and
distributions described on Schedule 3.3(a) to be performed before Closing in the
manner provided for therein.
5.9 POST CLOSING MATTERS
After Closing, the Vendor will:
(a) Until the later of two years after the Closing and the date
when ▇▇▇▇ ceases to be a director of the Purchaser, do all
reasonable acts and things to assist the Purchaser and the
officers and directors of the Company in continuing and
furthering the business and goodwill of the Company;
(b) perform those obligations and transactions as described on
Schedule 3.3(a) to be performed after Closing in the manner
provided therein.
37
6. CONDITIONS OF CLOSING
6.1 PURCHASER'S CONDITIONS OF CLOSING
The Purchaser's obligation to carry out the terms of this Agreement and to
complete the purchase referred to in Section 2.1 hereof is subject to the
conditions, each waivable unilaterally by the Purchaser at its election, that:
(a) all the representations and warranties of the Vendor contained
in this Agreement or in any certificate or other document
delivered to the Purchaser pursuant hereto, including the
Environmental Indemnity Agreement, will be true and correct in
all respects on or as of the Closing Date with the same force
and effect as if such representations and warranties had been
made on and as of the Closing Date, save and except those
representations and warranties that have been determined to be
or become untrue or incorrect during the Interim Period for
which either:
(1) the Vendor and Purchaser have made an agreement
regarding the untrue or incorrect representation or
warranty under Section 5.4(a); or
(2) the untrue or incorrect representation or warranty
represents an actual or potential financial cost,
loss or liability to the Purchaser or the Company
which is or would reasonably be expected to be less
than $5,000,000;
(b) all the obligations of the Vendor under Section 5.1 and all
other material obligations of the Vendor under this Agreement
or any Ancillary Agreement to be performed at or before the
Closing will have been so performed;
(c) except for pre-Closing transactions permitted under this
Agreement, at the Closing Date there will have been no
material adverse change in the affairs, assets, liabilities,
financial condition or business of the Company since the
Statement Date other than any material adverse change in the
forest industry in the Interior of British Columbia generally
occurring since the Statement Date, and the Minister of
Forests will not have expressed any present intention to
cancel any of the Timber Tenures if the control of the Company
changes by the sale of the Vendor's Shares as contemplated
herein;
(d) there will have been no material damage or destruction by fire
or other hazard to the whole or any material part of the
Assets of the Company in the Interim Period not covered by
insurance;
(e) no legal action or other proceeding by law or in equity will
be commenced or pending by any Person to enjoin or prohibit:
(1) the purchase and sale of the Vendor's Shares and the
Vendor's Loans contemplated hereby or the right of
the Purchaser to own the Vendor's Shares and the
Vendor's Loans; or
38
(2) the right of each of the Company to conduct its
operations and carry on its business in the normal
course as its Business and its operations have been
carried on in the past;
that, in the Purchaser's opinion, acting reasonably, would
have a reasonable probability of success or prevents the
availability of financing for the transactions contemplated by
this Agreement;
(f) the following agreements will have been terminated without
cost to the Company by the parties thereto as of the Closing
Date:
(1) any shareholders' or similar agreement;
(2) any management, consulting or similar agreement
between the Company and any other Person not dealing
at arm's length with the Vendor;
(3) any non-competition, confidentiality or similar
agreement between the Company and any other Person
not dealing at arm's length with the Vendor other
than those agreements in respect of which the Company
is the beneficiary and does not have any material
obligations; and
(4) any profit participation or similar agreement entered
into among the Company and its senior management
other than pension and lumber trader compensation
arrangements disclosed to the Purchaser in writing
before the Commitment Date;
(g) the Purchaser will have either obtained an Advance Ruling
Certificate under section 102 of the COMPETITION ACT (Canada)
or each of the Vendor and Purchaser will have filed all
notices and information required under Part IX of the
COMPETITION ACT and have satisfied any outstanding requests
for additional information from the Director of Investigation
and Research appointed under the COMPETITION ACT ("Director"),
and the applicable waiting periods and any extensions thereof
will have expired without the Director expressing a present
intention to restrain or challenge any part of the
transactions contemplated in this Agreement and any applicable
waiting period under the HSR Act relating to the transactions
contemplated under this Agreement will have expired or been
terminated;
(h) the Purchaser has completed and received the net proceeds of a
US$150,000,000 high yield debt financing substantially on the
terms described in the January 31, 2004 draft of the offering
memorandum for such financing.
6.2 VENDOR'S CONDITIONS OF CLOSING
The obligation of the Vendor to carry out the terms of this Agreement and to
complete the sale referred to in Section 2.1 hereof is subject to the
conditions, each waivable unilaterally by the Vendor at its election, that:
39
(a) the representations and warranties of the Purchaser contained
in this Agreement or in any certificate or other document
delivered to the Vendor pursuant hereto will be true and
correct in all material respects on or as of the Closing Date
with the same force and effect as if such representations and
warranties had been made on and as of the Closing Date; and
(b) all of the material obligations of the Purchaser under this
Agreement to be performed at or before the Closing will have
been so performed.
7. CLOSING
7.1 CLOSING DATE
Subject to satisfaction or waiver of all conditions of Closing set forth in
Article 6 and any extension of time under section 7.2, the closing date is, and
the Closing of the purchase and sale contemplated by this Agreement will take
place at 10:00 a.m. on, a Business Day ("CLOSING DATE") selected by the
Purchaser, with not less than 3 Business Days notice to the Vendor, on or before
March 15, 2004, or such earlier or later date as the parties hereto may agree in
writing.
7.2 OPTIONAL EXTENSION OF CLOSING DATE
If the conditions set forth in subsection 6.1(g) are not fulfilled before March
15, 2004, then the Purchaser may extend the Closing Date until March 29, 2004
upon payment of the sum of $5,000,000 to the Vendor as a non-refundable deposit
(the "DEPOSIT") toward the Purchase Price and then if:
(a) the Closing occurs, the Deposit will be credited to the
Purchase Price payable at Closing;
(b) the Closing does not occur for any reason except that the
conditions in subsections 6.1(a) or 6.1(b) are not fulfilled
or waived, the Deposit will be retained by the Vendor; and
(c) the Closing does not occur because the conditions in
subsections 6.1(a) or 6.1(b) are not fulfilled or waived, the
Deposit will be paid by the Vendor to the Purchaser.
7.3 PLACE OF CLOSING
The Closing will take place on the Closing Date at the offices of Bull, Housser
& ▇▇▇▇▇▇, 3000 - 1055 West Georgia Street, Vancouver, British Columbia, or such
other place as the Parties may agree in writing.
7.4 CLOSING DOCUMENTS
At the Closing, the Vendor will tender, or cause to be procured and tendered:
40
(a) a certificate of a senior director and officer of the Vendor
directed to the material accuracy as of the Closing Date of
the representations and warranties of the Vendor set forth in
Section 3 hereof that are not qualified by materiality, and
the accuracy as of the Closing Date of the representations and
warranties of the Vendor set forth in Section 3 hereof that
are qualified by materiality, and the material fulfilment at
the Closing of the covenants of the Vendor set forth in
Section 5 hereof and providing particulars of any inaccuracy
or non-performance;
(b) resignations in writing of ▇▇▇ as a director and officer and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as President of the Company;
(c) releases by the Vendor and each director or officer of the
Company so long as such releases to the Company will not
require those directors or officers who are at Arm's Length to
the Vendor to release the Company from any employment
obligation or any obligation to indemnify them for actions
taken in their capacity as directors or officers of the
Company;
(d) certified copies of resolutions of the directors of the
Company authorizing the transfer of the Vendor's Shares and
the registration of the Vendor's Shares in the name of the
Purchaser and authorizing the issue of new share certificates
representing the Vendor's Shares in the name of the Purchaser;
(e) all corporate records and books of account of the Company
including minute books, share register books, share
certificate books and annual reports;
(f) every common seal of the Company;
(g) share certificates in the name of the Vendor representing the
Vendor's Shares duly endorsed for transfer and duly executed
share certificates in the name of the Purchaser and its
nominees representing the Vendor's Shares;
(h) assignments of the Vendor's Loans in such form as the
Purchaser's solicitors may require together with all documents
or instruments evidencing or securing the indebtedness
comprising the Vendor's Loans;
(i) an opinion satisfactory to the Purchaser, acting reasonably,
from ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, the Vendor's solicitor, substantially
in the form attached as Schedule 7.4(i); and
(j) an employment agreement between ▇▇▇▇ and the Purchaser in the
form set out in Schedule 7.4(j) duly executed by ▇▇▇▇;
(k) consent of ▇▇▇▇ to act as a director of the Purchaser;
(l) the Environmental Agreement executed by the Vendor; and
(m) all such instruments or documents, duly executed, which in the
opinion of the Purchaser, acting reasonably, are necessary to
effect and evidence the transfer
41
of the Vendor's Shares and Vendor's Loans to the Purchaser
free and clear of all Liens,
and the Purchaser will tender and cause and procure to be tendered:
(n) a share certificate representing the Purchaser's Shares issued
in the name of the Vendor;
(o) certified copy of the resolutions of the directors of the
Purchaser authorizing the issuance of the Purchaser's shares;
(p) a wire transfer payable to the Vendor in the amount of the
cash portion of the Purchase Price;
(q) an opinion satisfactory to the Vendor, acting reasonably, from
Bull, Housser & ▇▇▇▇▇▇, the Purchaser's solicitor,
substantially in the form attached as Schedule 7.4(q);
(r) an employment agreement between ▇▇▇▇ and the Purchaser in the
form set out in Schedule 7.4(j) duly executed by the
Purchaser;
(s) the conditional approval of the TSX to the issuance of the
Purchaser's Shares; and
(t) certified copies of the resolutions of the directors of the
Purchaser appointing ▇▇▇▇ as an additional director; and
(u) the Environmental Agreement executed by the Purchaser.
7.5 CLOSING
The Closing will be effected by:
(a) the delivery to the Vendor of the items tendered by the
Purchaser; and
(b) the delivery to the Purchaser of all other tendered documents
and items.
7.6 WAIVER
The conditions set forth in Section 6.1 of this Agreement are for the exclusive
benefit of the Purchaser and may be waived by the Purchaser in writing in whole
or in part at or prior to the Closing and the conditions set forth in Section
6.2 of this Agreement are for the exclusive benefit of the Vendor and may be
waived by the Vendor in writing in whole or in part at or prior to the Closing.
7.7 RISK OF LOSS
If, during the Interim Period, all or any material part of the Assets are
destroyed or damaged by fire or any other casualty or are expropriated or seized
by any Governmental Authority except
42
pursuant to ▇▇▇▇ 28, the Vendor will forthwith notify the Purchaser and the
Purchaser may elect, by notice given within four Business Days of the Purchaser
receiving notice:
(a) in the case of destruction or damage, to reduce the Purchase
Price by an amount equal to the difference between the cost of
repair and any insurance proceeds, or, if destroyed or damaged
beyond repair, by an amount equal to the difference between
the replacement cost of the Assets so damaged or destroyed and
the insurance proceeds received or to be received in
connection therewith and to complete the purchase subject to
the Purchaser being satisfied that all proceeds of insurance
for such damage or destruction have been or will be paid to
the Company; or
(b) in the case of expropriation or seizure, to reduce the
Purchase Price by an amount equal to the difference between
the replacement cost of the Asset so expropriated or seized
and the amount of compensation for such expropriation and
seizure, subject to the Purchaser being satisfied that all
such compensation has been or will be paid to the Corporation;
or
(c) to terminate this Agreement and not complete the purchase in
which case all obligations of the Purchaser and the Vendor
(except for the respective obligations under Sections 5.7,
11.3 and 11.4 which will survive) will terminate immediately
upon the Purchaser giving notice as required herein, with no
further liability.
8. INDEMNIFICATION
8.1 RELIANCE
The Vendor acknowledges and agrees that the Purchaser has entered into this
Agreement relying on the representations, warranties, covenants and agreements
and other terms and conditions of this Agreement and that no information which
is now known, which may hereafter become known or which could upon investigation
have become known to the Purchaser or the Company or any of their present or
future officers, directors or professional advisors will in any way limit or
extinguish any rights any of them may have against the Vendor including any
right to indemnity under this Section 8 except as otherwise expressly provided
in this Agreement.
8.2 VENDOR'S INDEMNIFICATION
The Vendor will indemnify and save harmless each of the Purchaser, and its
current and former directors, officers, employees and current and future
affiliates (including the Company after the Closing Date) (the "PURCHASER'S
INDEMNIFIED PERSONS") from and against:
(a) any and all losses, claims, damages (including lost profits,
consequential damages, interest, penalties, fines and monetary
sanctions) liabilities and costs ("DAMAGES") incurred or
suffered by the Purchaser's Indemnified Persons or any of them
by reason of, resulting from, in connection with, or arising
in any manner whatsoever out of the breach of any warranty or
covenant or the inaccuracy of
43
any representation of the Vendor contained or referred to in
this Agreement or in any Ancillary Agreement;
(b) any and all Damages arising from any:
(1) assessment or re-assessment by a taxing authority of
the Company or any of its Tax returns relating to a
period ending prior to the WC Adjustment Date, except
to the extent accrued for in the Final Working
Capital Statement; or
(2) Taxes payable by the Company or directly by the
Purchaser as a result of a distribution of any
Excluded Assets or any other transactions by the
Company after the WC Adjustment Date described in
Schedule 3.3(a), except to the extent such Taxes have
been accounted for in the Final Working Capital
Statement or the Purchase Price adjustment in
subsection 2.5(h);
provided however that the claim for any Damages incurred or
suffered by the Purchaser's Indemnified Persons or any of them
pursuant to this clause 8.2(b) shall be reduced by the
following:
(3) if the actual Taxes payable after taking into account
any assessments or reassessments which reasonably
relate to the disposition of the Excluded Assets are
less than the amounts estimated in Schedule 3.3(a) as
the Tax cost arising from those transactions, the
difference between the Taxes payable as set out in
the said schedule and the actual Taxes payable which
reasonably relate to the disposition; and
(4) if the actual Taxes saved after taking into account
any assessments or reassessments which reasonably
relate to the bonuses and/or forgiven employee loans
as set out in Schedule 3.3(a) are more than the
amount estimated in Schedule 3.3(a) as the Tax saving
resulting from those transactions, the difference
between the actual Taxes saved and the Taxes saved as
set out in the said schedule; and
(c) any and all payments made on account of liabilities of the
Company, including contingent or unascertained liabilities,
arising or incurred:
(1) in respect of the operations of the Company on or
before the Statement Date which were not disclosed or
included in Financial Statements or the Final Working
Capital Statement; or
(2) under the September 1, 2001 guarantee of ▇▇▇▇
Investments Inc.'s obligations under a September 1,
2001 Lumber Sales Representation Agreement with
Longview Fibre Company.
44
For the purposes of this Section 8.2, "costs" includes lawyers' (on a solicitor
and his own client basis), accountants' fees and expenses, court costs, costs of
investigation, testing, repair, clean-up, restoration, and remediation and all
other out-of-pocket expenses.
8.3 PURCHASER'S INDEMNIFICATION
The Purchaser will indemnify and save harmless:
(a) the Vendor and its respective shareholders, current and former
directors, officers and employees (the "VENDOR'S INDEMNIFIED
PERSONS") from and against any and all Damages incurred or
suffered by the Vendor's Indemnified Persons by reason of,
resulting from, in connection with, or arising in any manner
whatsoever out of the breach of any warranty or covenant or
the inaccuracy of any representation of the Purchaser
contained or referred to in this Agreement or in any Ancillary
Agreement; and
(b) ▇▇▇▇ and ▇▇▇ from and against any and all Damages incurred or
suffered by either of them, to a maximum of $100,000 each, for
personal liabilities under Environmental Laws as a consequence
of their status as former directors and officers of the
Company for any breaches of Environmental Laws by the Company
that occurred before the Closing Date if the subject matter of
the breach is not known to the director seeking
indemnification and was not caused by or resulting from any
wilful act or gross negligence of that director.
8.4 SURVIVAL OF INDEMNITY
Any claim made by the Purchaser against the Vendor will be in writing and made:
(a) within 3 years from the Closing Date with respect to claims
other than claims (i) under Section 8.2(b); (ii) claims based
on a breach of any representation or warranty set out in
Section 3.1 (a), (c), (e), (f), (g), (h), (i) or (j) or fraud;
(b) with respect to claims based on a breach of any representation
or warranty set out in Section 3.1 (a), (c), (e), (f), (g),
(h), (i) or (j) or fraud, at any time such claims come to the
attention of the Purchaser; and
(c) with respect to claims under Section 8.2(b), within the period
commencing on the Closing Date and ending 90 days after the
date on which the applicable limitation period under any
applicable Tax legislation with respect to such Tax claim
expires with respect to any fiscal period which is relevant in
determining liability under Section 8.2(b);
and if not made within the time prescribed above will thereafter be barred.
45
8.5 LIMITATION OF INDEMNITY
Notwithstanding any inaccuracy or incorrectness of any provision in this
Agreement or any Ancillary Agreement, no claim for indemnification, damages or
other relief will be valid against the Vendor or the Purchaser except in
accordance with and subject to the following:
(a) the amount of the Damages will be on a net after-tax basis;
(b) no claim may be made against the Vendor or Purchaser for any
single item of loss or expense incurred or payable which is
less than $50,000; and
(c) no Damages are payable by the Vendor or the Purchaser unless
and until the aggregate of all claims against the Vendor or
Purchaser, as the case may be, exceeds $500,000; and
(d) neither party shall be obliged to indemnify the other for any
amount in respect of any facts, omissions or occurrences in
respect of which an adjustment by reason of or based on those
particular facts, omissions or occurrences has been made in
the Purchase Price (whether such adjustment was reflected in
the calculation of the Working Capital or otherwise) unless,
and then only to the extent that, the amount to be indemnified
exceeds such adjustment in the Purchase Price.
8.6 NOTICE AND CONDUCT OF THIRD PARTY CLAIMS
In the event of a claim (an "Indemnified Claim") being made by a third
party against the Purchaser or the Company in respect of which the
Vendor is or may be obligated, subject to sections 8.4 and 8.5, to
indemnify the Purchaser pursuant to section 8.2, the following
provisions shall apply.
(a) The Purchaser shall promptly give written notice to the Vendor
of any Indemnified Claim in respect of which the Purchaser
intends to claim for indemnification against the Vendor. Such
notice shall specify with reasonable particularity (to the
extent that the information is available) the nature of the
Indemnified Claim. No delay by the Purchaser in giving notice
of the Indemnified Claim to the Vendor will affect or diminish
the Purchaser's rights, if any, to indemnification by the
Vendor in respect of such Indemnified Claim except to the
extent the Vendor is actually prejudiced in the defence of the
Indemnified Claim by such delay.
(b) The Vendor may, at its own expense, assume control of the
negotiation, settlement and defence of such Indemnified Claim
and the Purchaser shall co-operate with the Vendor in respect
of such Indemnified Claim and the Vendor shall reimburse the
Purchaser for all the Purchaser's reasonable expenses as a
result of the Vendor's assumption of such Indemnified Claim
and arising from the Purchaser's co-operation.
(c) The Purchaser will have the right to participate in the
negotiation, settlement and defence of such Indemnified Claim
at its own expense and will have the right to
46
disagree on reasonable grounds with the Vendor's selection and
retention of counsel, in which case counsel satisfactory to
the Vendor and the Purchaser shall be retained by the Vendor.
If the Vendor fails to defend any Indemnified Claim within a
reasonable time, the Purchaser will be entitled to assume
control of the Indemnified Claim at the expense of the Vendor
and the Vendor will be bound by the results obtained by the
Purchaser with respect to such Indemnified Claim.
(d) In the event that any Indemnified Claim is of a nature such
that the Purchaser is legally bound or required by applicable
law to make a payment to any person (a "Third Party") with
respect to such Indemnified Claim before the completion of
settlement negotiations or related legal proceedings,
including the posting of any security to stay any process of
execution or judgment, the Vendor shall be obligated to make
such payment or post security therefor on behalf of the
Purchaser. If the Vendor fails to do so, the Purchaser may
make such payment or post security therefor and the Vendor
shall, forthwith after demand by the Purchaser, reimburse the
Purchaser for any such payment or cause the security to be
replaced and released. If the amount of any liability of the
Purchaser under the Indemnified Claim in respect of which such
a payment was made, as finally determined, is less than the
amount which was paid by the Vendor to the Purchaser, the
Purchaser shall, forthwith after receipt of the difference
from the Third Party, pay the amount of such difference to the
Vendor.
(e) Except in the circumstance contemplated by subsection 8.6(d)
above, and unless the Vendor fails to assume control of the
negotiation, settlement and defence of any Indemnified Claim,
the Purchaser shall not negotiate, settle, compromise or pay
any Indemnified Claim except with the prior written consent of
the Vendor (which consent shall not be unreasonably withheld).
(f) The Purchaser shall not permit any right of appeal in respect
of any Indemnified Claim to terminate without giving the
Vendor notice thereof and an opportunity to contest such
Indemnified Claim.
(g) The Purchaser and the Vendor shall co-operate fully with each
other with respect to Indemnified Claims, shall keep each
other fully advised with respect thereto (including supplying
copies of all relevant documentation promptly as it becomes
available) and shall each designate a senior officer who will
keep himself informed about and be prepared to discuss the
Indemnified Claim with his or her counterpart and with counsel
at all reasonable times.
(h) Notwithstanding the above provisions of this section 8.6, the
Vendor shall not settle any Indemnified Claim or conduct any
related legal or administrative proceeding in a manner which
would, in the opinion of the Purchaser, acting reasonably,
have a material adverse impact on the Purchaser or the
Company.
47
8.7 NOTICE OF CLAIMS AGAINST VENDOR
With respect to claims solely between the parties, the Purchaser shall
give notice to the Vendor of the claim specifying in reasonable detail
the factual basis for the claim or demand and the amount thereof (if
known and quantifiable), and the Vendor shall have thirty (30) days
after that notice to make such investigation of the claim as the Vendor
deems necessary or desirable. For the purposes of such investigation,
the Purchaser shall, and shall cause the Company and the Subsidiary to,
make available to the Vendor and its authorized representatives the
information relied upon by the Purchaser to substantiate the claim. If
the Vendor and the Purchaser agree at or prior to the expiration of the
thirty (30) day period (or any mutually agreed upon extension thereof)
to the validity and amount of such claim, the Vendor shall immediately
pay to the Purchaser the full amount of the claim. If the Vendor and
the Purchaser do not agree within the thirty (30) day period (or any
mutually agreed upon extension thereof), the Purchaser may seek the
appropriate remedy at law or in equity;
9. TERMINATION
9.1 TERMINATION BY PURCHASER
If any of the conditions set forth in Sections 6.1 have not been fulfilled or
waived at or before the Closing, the Purchaser may terminate this Agreement by
notice in writing to the Vendor whereupon the Purchaser will be released from
all obligations except for its obligations under Sections 5.7, 9.5, 11.3 and
11.4 which will survive.
9.2 TERMINATION BY VENDOR
If either:
(a) any of the conditions set forth in Sections 6.2 have not been
fulfilled or waived at or before the Closing; or
(b) before the Closing any person has made a proposal or offer
regarding any takeover bid for all of the outstanding shares
of, or an arrangement, amalgamation or other business
combination with the Purchaser, and the proposal or offer is
not frivolous;
then the Vendor may terminate this Agreement by notice in writing to the
Purchaser whereupon the Vendor will be released from all obligations hereunder
except for its obligations under Sections 11.3 and 11.4 which will survive.
9.3 EFFECT OF WAIVER
A waiver by either the Purchaser or the Vendor of any one or more of the
conditions referred to Section 9.1 or Section 9.2 will be without prejudice to
its right to terminate in respect of any other non-fulfillment of any other of
the conditions.
48
9.4 WITHOUT PREJUDICE
Termination by the Purchaser pursuant to Section 9.1 or by the Vendor pursuant
to Section 9.2 will be without prejudice to the right, subject to the
limitations, exceptions and restrictions set out in this Agreement, to recover
damages for any misrepresentations, breach of warranty or non-fulfillment of any
covenant or agreement of the other, except that if the Vendor is paid the fee
described in section 9.5 it shall have no other rights or remedies against the
Purchaser under this Agreement except under sections 5.7, 11.3 and 11.4.
9.5 BREAK FEE
If either:
(a) all the conditions set forth in section 6.1 have been
fulfilled or waived by the Purchaser except for:
(1) the Purchaser's debt financing condition in
subsection 6.1(h); or
(2) the condition in Section 6.1(c) that the Minister of
Forests has not expressed a present intention to
cancel any of the Timber Tenures if the control of
the Company changes;
and the Purchaser has terminated this Agreement under Section
9.1; or
(b) the Vendor has terminated this Agreement pursuant to Section
9.2(b),
and the Purchaser has not extended the Closing Date and paid the Deposit in
accordance with Section 7.2, then the Purchaser will pay the sum of $5,000,000
to the Vendor within five Business Days.
10. VENDOR'S CONTINUED EXISTENCE
10.1 CONTINUED EXISTENCE OF VENDOR
In consideration of the Closing, the Principals jointly and severally covenant
and agree with and in favor of the Purchaser that for a period of seven (7)
years after the Closing Date they will take or cause to be taken all necessary
corporate steps and proceedings to maintain the corporate existence of the
Vendor in good standing.
11. GENERAL
11.1 SURVIVAL OF REPRESENTATIONS
The representations, warranties, covenants and agreements of the Vendor and the
Principals contained in this Agreement and any Ancillary Agreement will survive
the closing of the transactions contemplated herein and, subject to Section 8.4,
remain in full force and effect notwithstanding any waiver by the Purchaser
unless such waiver was made after notice in writing by the Vendor to the
Purchaser setting forth the breach.
49
11.2 ACCESS TO BOOKS AND RECORDS
For a period of six years from the Closing Date or longer if required by
Applicable Law, the Purchaser will retain all original accounting Books and
Records relating to the Company and the Subsidiary for the period prior to the
Closing Date, but the Purchaser will not be responsible or liable to the Vendor
for any accidental loss, destruction or damage of or to any such Books and
Records if it has acted prudently and reasonably and has devoted the same care
to the preservation of such Books and Records as it has to its own. So long as
such Books and Records are retained by the Purchaser pursuant to this Agreement,
the Vendor will have the reasonable right to inspect and make copies (at their
own expense) of them during normal business hours and upon reasonable notice for
any proper purpose and without undue interference to the business operations of
the Company or the Purchaser. The Purchaser will have the right to have its
representatives present during any such inspection.
11.3 COMMISSIONS, LEGAL FEES
Each of the Parties will bear the fees and disbursements of the respective
lawyers, accountants and consultants engaged by them in connection with this
Agreement and will not cause or permit any such fees or disbursements to be
charged to the Company after the WC Adjustment Date.
11.4 PUBLIC ANNOUNCEMENTS AND POST CLOSING CONFIDENTIALITY
The Parties will consult with each other before issuing any press release or
making any other public announcement with respect to this Agreement or the
transactions contemplated herein and neither the Vendor nor the Purchaser will
issue any press release or make any public announcement without the prior
consent of the other except to the extent required by law. After the Closing,
the parties will keep confidential all information in their possession or under
their control relating to other parties unless such information is or becomes
generally available to the public other than as a result of a disclosure in
violation of this Agreement.
11.5 ASSIGNMENT
No Party will assign this Agreement, or any part of this Agreement, without the
consent of the other Party, which consent may not be unreasonably withheld or
delayed. Any purported assignment without the required consent is not binding or
enforceable against any Party.
11.6 ENUREMENT
This Agreement enures to the benefit of and binds the Parties and their
respective successors, heirs, executors, administrators, personal and legal
representatives and permitted assigns.
11.7 NOTICES
Each notice to a Party must be given in writing. A notice may be given by
delivery to an individual or by fax, and will be validly given if delivered on a
Business Day to an individual at the following address, or, if transmitted on a
Business Day by fax addressed to the following Party:
50
(a) if to the Purchaser:
Name: Riverside Forest Products Limited
Address: ▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇
Attention: Chief Financial Officer
Fax No.: 250.861.6991
With a copy to:
Name: Bull, Housser & ▇▇▇▇▇▇
Address: P.O. Box 11130
3000 - ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Fax No.: 604.641.4949
(b) if to the Vendor, ▇▇▇▇ or ▇▇▇:
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇ Ltd., ▇▇▇▇ ▇. ▇▇▇▇ or
▇▇▇ ▇. ▇▇▇▇, as the case may be
Address: c/o Grossman & ▇▇▇▇▇▇▇
800 - ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
P.O. Box 55
Vancouver, British Columbia
V6E 3V7
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax No.: 604.683.8602
or to any other address, fax number or individual that the party designates. Any
Notice:
(c) if validly delivered, will be deemed to have been given when
delivered;
(d) if validly transmitted by fax before 3:00 p.m. (local time at
the place of receipt) on a Business Day, will be deemed to
have been given on that Business Day, and
(e) if validly transmitted by fax after 3:00 p.m. (local time at
the place of receipt) on a Business Day, will be deemed to
have been given on the Business Day after the date of the
transmission.
11.8 WAIVERS
No waiver of any provision of this Agreement is binding unless it is in writing
and signed by all the Parties except that any provision which does not give
rights or benefits to particular Parties may be waived in writing, signed only
by those parties who have rights under, or hold the benefit of, the provision
being waived if those Parties promptly send a copy of the executed waiver to all
other parties. No failure to exercise, and no delay in exercising, any right or
remedy under this Agreement will be deemed to be a waiver of that right or
remedy. No waiver of any breach of any provision of this Agreement will be
deemed to be a waiver of any subsequent breach of that provision or of any
similar provision.
51
11.9 FURTHER ASSURANCES
Before and after the Closing Date, each Party will execute and deliver promptly
at the other Party's expense and request all further documents and take all
further action reasonably necessary or appropriate to give effect to the
provisions and intent of this Agreement and to complete the transactions
contemplated by this Agreement.
11.10 REMEDIES CUMULATIVE
The rights and remedies under this Agreement are cumulative and are in addition
to and not in substitution for any other rights and remedies available at law or
in equity or otherwise. No single or partial exercise by a Party of any right or
remedy precludes or otherwise affects the exercise of any other right or remedy
to which that Party may be entitled.
11.11 DELIVERY BY FAX
Any Party may deliver an executed copy of this Agreement by fax but that Party
will immediately dispatch by delivery in person to the other Parties an
originally executed copy of this Agreement.
11.12 COUNTERPARTS
This Agreement and all documents contemplated by or delivered under or in
connection with this Agreement may be executed and delivered in any number of
counterparts with the same effect as if all Parties had all signed and delivered
the same document and all counterparts will be construed together to be an
original and will constitute one and the same agreement.
11.13 AMENDMENTS
Except as permitted for certain waivers in Section 11.8, no amendment,
supplement, restatement or termination of any provision of this Agreement is
binding unless it is in writing and signed by each Person that is a party to
this Agreement at the time of the amendment, supplement, restatement or
termination.
11.14 SUBMISSION TO JURISDICTION
Each of the Parties irrevocably submits to the exclusive jurisdiction of the
courts of British Columbia in any Permitted Action and each party to this
Agreement waives, and will not assert by way of motion, as a defence, or
otherwise, in any Permitted Action, any claim that:
(a) that Party is not subject to the jurisdiction of the courts of
British Columbia;
(b) the Permitted Action is brought in an inconvenient forum;
(c) the venue of the Permitted Action is improper; or
(d) any subject matter of the Permitted Action may not be enforced
in or by the courts of British Columbia.
52
In any suit or action brought to obtain a judgment for the recognition or
enforcement of any final judgment rendered in a Permitted Action, no party to
this Agreement will seek any review with respect to the merits of any Permitted
Action, whether or not that party appears in or defends the Permitted Action.
11.15 ENTIRE AGREEMENT
This Agreement and all documents contemplated by or delivered under or in
connection with this Agreement, constitute the entire agreement between the
parties with respect to the subject matter of this Agreement and supersede all
prior agreements, negotiations, discussions, undertakings, representations,
warranties and understandings, whether written or oral, express or implied,
statutory or otherwise.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first written above.
RIVERSIDE FOREST PRODUCTS LIMITED
Per:_________________________________
Authorized Signatory
Per:_________________________________
Authorized Signatory
▇▇▇▇▇▇ ▇. ▇▇▇▇ LTD.
Per:_________________________________
Authorized Signatory
Per:_________________________________
Authorized Signatory
53
SIGNED, SEALED AND DELIVERED by ▇▇▇▇ ▇. ▇▇▇▇ in the )
presence of: )
)
)
) (seal)
----------------------------------------------------- ------------------------------------------------
Name ) ▇▇▇▇ ▇. ▇▇▇▇
)
-----------------------------------------------------
Address )
)
-----------------------------------------------------
)
)
-----------------------------------------------------
Occupation )
)
SIGNED, SEALED AND DELIVERED by ▇▇▇ ▇▇▇▇ in the )
presence of: )
)
)
) (seal)
----------------------------------------------------- ------------------------------------------------
Name ) ▇▇▇ ▇▇▇▇
)
-----------------------------------------------------
Address )
)
-----------------------------------------------------
)
)
-----------------------------------------------------
Occupation )
)
SCHEDULE 1.1(h)
MACHINERY, EQUIPMENT, FURNITURE AND SUPPLIERS
See attached Fixed Asset Detail Report dated December 16, 2003.
SCHEDULE 1.1(y)
ENVIRONMENTAL INDEMNITY AGREEMENT
See attached.
SCHEDULE 1.1(kk)
LANDS
NO. NATURE OF INTEREST DESCRIPTION
1. Fee Simple LEGAL: ▇▇▇/▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, Except Parcel A (2858M).
PID: ▇▇▇-▇▇▇-▇▇▇
INTEREST: Fee simple.
2. Leasehold LEGAL: ▇▇▇▇ ▇ ▇▇▇ ▇, ▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇,
▇▇▇▇ ▇▇.
PID:
INTEREST: Lease between the Company and
Mottistone Holdings dated December 6, 2001 for
Suite 1200 and 1100, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
3. Leasehold LEGAL: ▇▇▇ ▇, ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Plan PGP 45932
PID: ▇▇▇-▇▇▇-▇▇▇
INTEREST: Lease between the Company and BCR
Properties Ltd. dated for reference January 1,
1999 regarding ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (▇▇▇▇ site)registered in the
Prince ▇▇▇▇▇▇ ▇▇▇▇ Title Office under PS18800.
4. LEGAL: Parcel A (C4643) of District ▇▇▇ ▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇.▇▇▇▇▇, 17893, 17894, 18517, 18527, 19309,
20286, 20297, 20804, 21396, 21514, 21836, 23606,
24947, 25483, 25558, 25706, 26349, 26673, 26680,
27800, 28155, 28256, 28412, 28413, 28479, 28759,
28917, 29225, 30893, 31172, 31526, 31588, 32202,
34004, PGP35691 and PGP38208
PID: ▇▇▇-▇▇▇-▇▇▇
INTEREST:
5. Leasehold LEGAL: ▇▇▇ ▇, ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Plan PGP 38141
PID: ▇▇▇-▇▇▇-▇▇▇
INTEREST: Lease between the Company and BCR
Properties Ltd. dated effective September 1,
1994 regarding property at ▇▇▇▇▇▇▇ ▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
(vehicle wash).
6. Leasehold LEGAL: ▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
District (from official plan 12T1690)
PID:
INTEREST: Lease between the Company and the
Province of British Columbia (Ministry of
Environment, Lands and Parks) No. 514643, dated
September 1, 1995 regarding a 7.12 hectare
parcel of land.
2
7. Leasehold LEGAL: All that tract situated in ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇ ▇▇▇▇▇ for sanitary
landfill purposes.
PID:
INTEREST: Landfill
8. Leasehold Lease, dated October 23, 2000, between the
Company and Piedmont Hawthorne Canada Inc. (the
"LANDLORD"), for 1,618 sq. ft. of exclusively
designated office and workshop space and
2,626,.5 sq. ft. of non-exclusive,
non-designated hangar space at Vancouver
Aerocentre, Vancouver International Airport.
9. License LEGAL: District ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
PID:
INTEREST: License number 514897 issued for
gravel removal.
10. License LEGAL: DL 6995 Cariboo District (from official
plan 37T1292)
PID:
INTEREST: License of Occupation between the
Company and the Province of British Columbia
(Ministry of Environment, Lands and Parks) No.
514691, commencing January 15, 1996.
11. License LEGAL: ▇▇▇ ▇, ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ PGP 38208
PID: ▇▇▇-▇▇▇-▇▇▇
INTEREST: Access Road License Agreement dated
effective September 1, 1994 between the
Purchaser and the Company.
12. License LEGAL: Certain of the lands and tracks of BC
Rail Partnership at BC Rail Partnership Mile
No. 313.10 to 314.45 and overcrossings at
Mile 313.10, 313.35 and 314.45.
PID:
INTEREST: BC Rail Partnership Crossing Agreement
dated June 11, 2001 between BC Rail Partnership
and the Company.
SCHEDULE 1.1(tt)
PERMITTED ENCUMBRANCES
1. LANDS
(a) Financial charges:
(1) Against ▇▇▇ ▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Plan PGP 45932
(PID 024-856-096)
(A) Mortgage, HSBC Bank Canada, October 30, 2001, PS36708
(2) Against ▇▇▇▇▇ ▇▇▇▇▇/▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Except
Parcel A (2858M)
(A) Mortgage, HSBC Bank Canada, December 13, 1978, N42562.
(B) Mortgage, HSBC Bank Canada, May 8, 1985, W11957x.
Supplemental to mortgage no. 1.
(C) Mortgage, HSBC Bank Canada, August 19, 1988, PB34193.
Supplemental to mortgage no. 1.
(D) Mortgage, HSBC Bank Canada, January 28, 2000, PP3139.
(b) Reservations, limitations, provisos and conditions expressed in the
original Crown grants of the fee simple lands and the following
statutory exceptions to title.
(c) Endorsements identified on certificate of title in favour of
Governmental Authorities which are not unique to the particular
registered owner relative to the permitted use of fee simple lands.
(d) Charges granted by public utilities in respect of their interest in fee
simple lands.
(e) Liens for property taxes, charges, rates, duties, levies and
assessments which are not yet due.
(f) Undetermined or inchoate Liens and charges incidental to current
construction or current operation which have not been filed or
registered in accordance with Applicable Law or of which written notice
has not at the time been duly given in accordance with Applicable Law
or which relate to obligations not at the time due or delinquent.
(g) Liens incidental to the conduct of the Business which, in the
aggregate, do not materially detract from the value of the Assets or
materially impair the use of the Assets in the Business.
(h) Any claim of right, title or jurisdiction which may be made or
established to or over any lands or waters by any aboriginal peoples by
virtue of and relying solely upon their status as aboriginal peoples.
2
2. PERSONAL PROPERTY
BASE
REGISTRATION EXPIRY REGISTRATION
NO. SECURED PARTY DATE DATE NUMBER DESCRIPTION
------------------------------------------------------------------------------------------------------------------------------
1. Hong Kong Bank of Canada March 26, 1992 Infinity 3918149 All present and future debts,
claims, demands, monies and choses
in action, all books of account,
all security for debts, all
judgments and mortgages
2. Hong Kong Bank of Canada March 26, 1992 Infinity 3918196 All of the debtor's present and
after-acquired personal property
and an uncrystallized floating
charge on land as well as a
specific vehicle and collateral
described in the attached Exhibit 1
3. Hong Kong Bank of Canada March 26, 1992 Infinity 3918199 All of the debtor's present and
after-acquired personal property
and an uncrystallized floating
charge on land
4. Hong Kong Bank of Canada March 26, 1992 Infinity 3918203 All of the debtor's present and
after-acquired personal property
and an uncrystallized floating
charge on land and vehicle
collateral over ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
2794B ▇▇▇▇ ▇▇▇▇▇▇ # ▇▇▇▇
▇. ▇▇▇▇ ▇▇▇▇ Bank of Canada March 26, 1992 Infinity 3918207 All the debtor's present and
after-acquired personal property
and an uncrystallized floating
charge on land
6. IBM Canada Ltd. November 13, November 13, 7965101 All present and after-acquired
1988 2003 goods supplied by the secured party
(ie. office machines)
7. HSBC Bank of Canada January 27, 2000 January 27, 8674991 All of the debtor's present and
2010 after-acquired personal property in
an uncrystallized floating charge
on land
3
BASE
REGISTRATION EXPIRY REGISTRATION
NO. SECURED PARTY DATE DATE NUMBER DESCRIPTION
------------------------------------------------------------------------------------------------------------------------------
8. HSBC Bank of Canada October 27, 2000 October 27, 9145462 Vehicle Collateral - Raygo ▇▇▇▇▇▇
2006 Log Stacker, Serial # 109249
9. VW Credit Canada Inc. December 29, 2000 December 29, 9240055 2001 Audi A6 2.8
▇▇▇▇ ▇▇▇▇▇▇ # ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
10. HSBC Bank Canada March 7, 2001 March 7, 2007 9441980 Two telecommunication systems NEAX
2000 IVS2 PBX
11. Cariboo Chevrolet July 3, 2001 July 3, 2005 9539517 Specific vehicle collateral
Oldsmobile Pontiac described in the attached Exhibit 2
12. The Bank of Nova Scotia September 10, September 10, ▇▇▇▇▇▇▇ Postponement Agreement in respect
2001 2006 of all present and after-acquired
accounts, demands and choses in
action, now or hereafter due to
Lignum from Chendi Enterprises Ltd.
13. The Bank of Nova Scotia October 26, 2001 October 26, 033361A Postponement Agreement in respect
2006 of all present and after-acquired
accounts, demands and choses in
action, now or hereafter due to
Lignum from Chendi Enterprises Ltd.
14. Caterpillar Financial December 17, 2001 December 17, 128033A Vehicle collateral:
Services Limited 2007 2001 Caterpillar 950G
Serial # ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
15. Cariboo Chevrolet June 15, 2002 June 15, 2006 451875A Vehicle collateral:
Oldsmobile Pontiac Buick 2002 Chevrolet Silverado
GMC Ltd. Serial # ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
16. Cariboo Chevrolet June 15, 2002 June 15, 2006 451898A Vehicle collateral:
Oldsmobile Pontiac Buick 2002 Chevrolet Silverado
GMC Ltd. Serial # ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
4
BASE
REGISTRATION EXPIRY REGISTRATION
NO. SECURED PARTY DATE DATE NUMBER DESCRIPTION
------------------------------------------------------------------------------------------------------------------------------
17. Caterpillar Financial October 10, 2002 October 10, 665145A Vehicle collateral:
Services Limited 2008 CAT 966G Wheel Loader
Serial # 3ZS00537
18. Cariboo Chevrolet May 14, 2003 May 14, 2007 047001B Vehicle collateral:
Oldsmobile Pontiac Buick 2003 Chevrolet Silverado
GMC Ltd. Serial #▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
19. Cariboo Chevrolet May 14, 2003 May 14, 2007 047018B Vehicle collateral:
Oldsmobile Pontiac Buick 2003 Chevrolet Silverado
GMC Ltd. Serial #▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
20. Cariboo Chevrolet May 14, 2003 May 14, 2007 047021B Vehicle collateral:
Oldsmobile Pontiac Buick 2003 Chevrolet Silverado
GMC Ltd. Serial #▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
21. VW Credit Canada Inc. July 21, 2003 July 21, 2008 170596B Vehicle collateral:
2003 Audi A4 3.0L Q Avant
Serial #▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
22. Jade Equipment Co. Ltd. August 29, 2003 February 25, 245997B Vehicle collateral:
2004 1982 Champion 740 Grader
Serial #15102
EXHIBIT 1
---------
----------------------------------------------------------------------------------------------------
MAKE/MODEL YEAR SERIAL #
----------------------------------------------------------------------------------------------------
DODGE FIRE TRUCK DD7 1946 90069051
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ CARRIER SM20 1956 1737
▇▇▇▇▇▇▇▇▇ CARRIER SM20 1969 0005
▇▇▇▇▇ LOG LOADER H120C 1973 363301
WELDCO MDL 30 LOG GRAPPLE 1175-E-3
SCOOPMOBILE MODEL LD7 LDR 1963 229
ELAN SNOWMBL MODEL 205T 1974 300707325
▇▇▇▇▇ PAYLDR MODEL H80B 1973 350103C001666
10 TON ▇▇▇▇▇▇▇ FKLFT # 109 1972 7721057
▇▇▇▇▇ FKLFT MOD CHY160BD 1969 191096
▇▇▇▇▇ FKLFT MOD CHY1425BD 1972 291166
▇▇▇▇▇▇▇ FKLFT AR10 #100 5741249
▇▇▇▇▇▇▇ FKLFT AR10 #101 5741250
RAYGO ▇▇▇▇▇▇ LOG ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
ELAN SKIDOO 1976 301500152
ARCTIC CAT PANTHUR SNMBL 1974 4018198
5
EXHIBIT 1
---------
----------------------------------------------------------------------------------------------------
MAKE/MODEL YEAR SERIAL #
----------------------------------------------------------------------------------------------------
MERCURY TRUCK 1956 1813530TK 19832
INTERNATIONAL TRUCK 1962 CW237744
GMC 4X4 PICKUP 1965 5K92504607960B
GMC TRUCK ▇▇▇▇ ▇▇▇▇▇▇▇1287
CATERPILLAR 980 WHL LDR 89P4895
DODGE FARGO DUMP TRUCK (Discharged) 1968 T81H12T502275
▇▇▇▇▇ MDL 250 HYD LOG LDR 8826
▇▇▇▇▇ TRUCK 6113164
CAT 930 FKLFT MODEL 3304 1976 41K6772
1H TRUCK MODEL 1HC 1210 1973 B 13205H 272999
FORD TRUCK MODEL F250 F25Y RN 45249
CATERPILLAR 950 FKLFT 73J5590
SCOOPMOBILE MODEL LD5 LDR 295
CATERPILLAR MOD 966C LDR 30K1537
CATERPILLAR MOD 966C LDR 30K1005
HYSTER FL MODEL RC-160 A7P3045C
HYSTER FL MODEL SC-180 (Discharged) 115458
TOWMOTOR FKLFT ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇-▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇-▇▇▇ ▇▇ FKLFT 38995-11P
SPEEDER CORP ▇▇▇▇▇ ▇▇-68 6AR632
WABCO MODEL 660 GRADER 1968 660B 15217
DW 21 SCRAPER 69C 1536
DW 21 SCRAPER 69C 1232
CAT D6 1959 9U 29579
▇▇▇▇ DEER TD450B ▇▇▇▇▇▇-▇
▇▇▇▇ ▇▇▇▇▇▇▇ MODEL 205T 1974 300707317
ARCTIC CAT 3000 9027099
YAMAHA SNOWMOBILE 1981 8L2059399
YAMAHA SNOWMOBILE 1981 8L2059431
DODGE 1 TON 1973 D 31BJ 35050057
WEST ▇▇▇▇▇▇ ▇▇▇▇▇ 410SR 1963 S410SR ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
TRAXCAVATOR 931B 1983 29Y1075
▇▇▇▇▇▇ BIG WHEEL FKLFT SP616007
▇▇▇▇▇▇ BIG WHEEL FKLFT SP616044
EXHIBIT 2
---------
----------------------------------------------------------------------------------------------------
MAKE/MODEL YEAR SERIAL #
----------------------------------------------------------------------------------------------------
CHEVROLET3/4TON 4X4 2001 ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
CHEVROLET3/4TON 4X4 2001 ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
GMC 3/4TON 4X4 2001 ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
CHEVROLET3/4TON 4X4 2001 ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
SCHEDULE 1.1(kkk)
WORKING CAPITAL
For the purposes of this Agreement "Working Capital" means the current assets of
the Company on January 31, 2004 less the current liabilities on that date, as
calculated in accordance with GAAP consistent with the Financial Statements,
subject to the following:
(a) the annuities currently on the Company's balance sheet will be included
in current assets at their fair market value, and the related future
income taxes recorded in the Financial Statements and any Taxes payable
as a result of the fair market value being different than the book
value will be included in current liabilities;
(b) all current and long term bank debt will be included in the current
liabilities;
(c) the Vendor's Loans will be excluded from the calculation of Working
Capital; and
(d) the current portion of unearned revenue received under the Company's
chip contracts will be excluded from the calculation of Working
Capital. The amount of subsequent income tax payable that reasonably
related to the current portion of such unearned revenue will be
included in the calculation of Working Capital.
SCHEDULE 2.6
DUTY ADJUSTMENT CALCULATION
Total CVD and ADD at the commitment date A
========
Percentage of duties to be refunded as determined by a settlement B
========
Duty refund
A x B C
--------
Add interest (if any) D
--------
Less: Bonuses and other expenses (Note 1) E
--------
-----------
C + D - E G
--------
Less: Income taxes - 35.62% H
--------
-----------
Duty adjustment
G - H
Note 1: Contingent payments to salesman, stumpage adjustment, brokerage fees
and other expenses incurred by Lignum. ▇▇▇▇ ▇▇▇▇ to identify and
quantify the contingent payments to salesman. Such payments to be
made no later than immediately before the duty adjustment is paid.
SCHEDULE 3.1(b)
BUSINESS QUALIFICATION
1. JURISDICTIONS IN WHICH INVENTORY IS LOCATED:
Missouri, Texas, California, Oregon, Alabama, Arizona, Colorado, Connecticut,
Florida, Georgia, North Carolina, New Mexico, Oklahoma, Louisiana, Nevada and
Tennessee
2. EXCEPTIONS AS TO QUALIFICATION, LICENSING OR REGISTRATION:
The Company is not currently registered to carry on business in Missouri, Texas,
California, Oregon, Alabama, Arizona, Colorado, Connecticut, Florida, Georgia,
North Carolina, New Mexico, Oklahoma, Louisiana, Nevada and Tennessee.
SCHEDULE 3.1(D)
SHARE CAPITAL OF SUBSIDIARIES AND
SHARES OWNED BY THE COMPANY
1. SUBSIDIARY
The authorized capital of the Subsidiary is 10,000 Common shares without par
value, of which there are issued and outstanding to the Company as fully paid
and non-assessable 2 Common shares.
2. OTHER SHARES OWNED
-----------------------------------------------------------------------------------------------------------------
NAME OF CORPORATION NUMBER AND KIND OF SHARES OWNED BY THE COMPANY
-----------------------------------------------------------------------------------------------------------------
Chendi Enterprises Ltd. 1 Common share without par value
-----------------------------------------------------------------------------------------------------------------
Dagish Enterprises Ltd. 2 Common shares without par value
-----------------------------------------------------------------------------------------------------------------
Ecolink Forest Services Ltd. 100 Common shares without par value
-----------------------------------------------------------------------------------------------------------------
Stswecemcemc Enterprises Ltd. 50 Common shares without par value
-----------------------------------------------------------------------------------------------------------------
Tsi'bas Forest Services Ltd. 50 Common shares without par value
-----------------------------------------------------------------------------------------------------------------
Fibreco Export Inc. 303,654 (to be amended to add recent subscriptions by the Company()
-----------------------------------------------------------------------------------------------------------------
SCHEDULE 3.1(n)
DIRECTORS AND OFFICERS
1. THE COMPANY:
DIRECTORS
---------
▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
OFFICERS
--------
▇▇▇▇ ▇. ▇▇▇▇, Chairman and Chief Executive Officer
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President and Chief Operating Officer
▇▇▇▇ ▇. ▇▇▇▇▇▇, Executive Vice-President, Chief Financial Officer and Secretary
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Vice-Chairman
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Vice-President Marketing
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Vice-President Environmental and Government Affairs
▇▇▇▇▇ Fear, Vice-President Information Services
▇▇▇ ▇▇▇▇▇▇, Vice-President and General Manager Operations
▇▇▇▇ ▇▇▇▇▇▇▇▇, Vice-President Forestry and Chief Forester
2. THE SUBSIDIARY:
DIRECTORS
---------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
OFFICERS
--------
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, Secretary and Treasurer
SCHEDULE 3.2(a)
ANNUAL FINANCIAL STATEMENTS
See attached statements for the year ended December 31, 2003.
SCHEDULE 3.2(i)
GUARANTEES
1. The Company is a guarantor of the obligations of ▇▇▇▇ Investments Inc.
to Longview Fibre Company (see Schedule 3.3(a)).
2. The Company has caused its bank to establish a letter of credit in
favour of the Ministry of Forests in the amount of $368,700, as
security for certain silviculture obligations of the Subsidiary.
SCHEDULE 3.2(j)
TAX RETURNS
The Company has not filed a Washington State (USA) state tax return.
SCHEDULE 3.2(t)
BANK ACCOUNTS AND POWERS OF ATTORNEY
1. BANKS:
--------------------------------------------------------------------------------------------------------------------
INSTITUTION ACCOUNT ACCOUNT NO. LOCKBOX NO.
--------------------------------------------------------------------------------------------------------------------
HSBC Bank Canada Vancouver General - Cdn 037252-020
--------------------------------------------------------------------------------------------------------------------
Vancouver General - U.S. 491557-002
--------------------------------------------------------------------------------------------------------------------
Salaried Payroll 005008-040
--------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ Lake General 005008-020
--------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ Lake Hourly Payroll 005008-030
--------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ Fargo Bank 4159583509 40012
--------------------------------------------------------------------------------------------------------------------
Northern Trust 312 991 75044
--------------------------------------------------------------------------------------------------------------------
The Bank of Nova Scotia ▇▇▇▇▇▇▇▇ Lake ▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------------------------------------------------------------------------------------
FIA 51110 0051012
--------------------------------------------------------------------------------------------------------------------
2. SIGNING AUTHORITIES:
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇ LAKE ACCOUNTS ONLY:
---------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ Fear ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
3. POWERS OF ATTORNEY:
The Company grants powers of attorney to its customs brokers in the ordinary
course of its and their businesses, for use in connection with the clearance of
the Company's shipments of products out of Canada and into foreign markets.
Neither the Vendor nor the Company is aware of any other powers of attorney
which have been granted by the Company and which are currently in effect.
SCHEDULE 3.3(a)
EXCLUDED ASSETS AND PRE-CLOSING TRANSACTIONS
The Vendor will, and will cause the Company to, undertake the reorganizational
steps listed below under "Pre-Closing Transactions, in the following manner
(except as otherwise disclosed to and approved by the Purchaser, acting
reasonably).
The Vendor and the Purchaser will each use their Best Efforts to implement the
transactions listed below as Pre- and Post-Closing Transactions and as
Post-Closing Transactions (according to their respective obligations set out
below) and, where applicable below, the Purchaser will cause the Company to
perform any of the actions contemplated for it in this schedule which are to
occur after Closing:
PRE-CLOSING TRANSACTIONS
--------------------------------------------------------------------------------------------------------------------
ADJUSTMENT TO BE MADE
TO THE PURCHASE PRICE
TRANSACTION TO BE UNDERTAKEN INCREASE
(DECREASE)
--------------------------------------------------------------------------------------------------------------------
WITHDRAWAL OF SAFE INCOME AND LOAN BACK TO THE COMPANY
Immediately prior to Closing, the Company will declare a dividend equal to the NIL
maximum amount of "safe income" available to be distributed from the Company
in respect of operations up to the Statement Date (not to exceed $45,000,000),
which will be paid in cash to the Vendor. A "daylight loan" or similar
arrangement may be required in order to implement this step.
The Vendor will, immediately following receipt of that dividend, loan it back to
the Company on a demand, interest-free basis (such loan to become part of the
Vendor's Loans assigned on Closing).
--------------------------------------------------------------------------------------------------------------------
2
--------------------------------------------------------------------------------------------------------------------
ADJUSTMENT TO BE MADE
TO THE PURCHASE PRICE
TRANSACTION TO BE UNDERTAKEN INCREASE
(DECREASE)
--------------------------------------------------------------------------------------------------------------------
TRANSFER OF NON-CORE BUSINESS ASSETS
ASSETS TO BE TRANSFERRED
Palm Springs - 50% interest in a house located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, having an estimated fair market value of CDN$303,100, to be
sold for cash. $303,100.00
Whistler - condominium unit located at #9 - 4628 Blackcomb Way, Whistler, British
Columbia, having an estimated fair market value of $934,250.00, to be sold for cash. $934,250.00
Automobiles - as follows:
YEAR MAKE AND MODEL FAIR MARKET VALUE
---- -------------- -----------------
1969 ▇▇▇▇▇▇ Drophead $17,550.00
1965 Chevrolet Corvette $35,750.00
1957 Ford Thunderbird $29,250.00
All automobiles will be sold for cash: $ 82,550.00
--------------------------------------------------------------------------------------------------------------------
TAX CONSEQUENCES TO THE COMPANY
The sale of these assets will result in additional taxes payable by the Company ($251,692.00)
of $251,692.00.
--------------------------------------------------------------------------------------------------------------------
DIVIDENDS TO THE VENDOR TO REMOVE FUNDS GENERATED BY ASSET SALES
Taxable dividend: $767,961.00
(1,068,208.00)
Tax-Free Dividend: $300,247.00
NET ADJUSTMENT NIL
--------------------------------------------------------------------------------------------------------------------
3
--------------------------------------------------------------------------------------------------------------------
ADJUSTMENT TO BE MADE
TO THE PURCHASE PRICE
TRANSACTION TO BE UNDERTAKEN INCREASE
(DECREASE)
--------------------------------------------------------------------------------------------------------------------
DISPOSITION OF EMPLOYEE LOANS
LOANS TO BE REPAID
--------------------------------------------------------------------------------
PORTION INCLUDED
IN WORKING
BORROWER CIVIC ADDRESS CURRENT PRINCIPAL CAPITAL
--------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇ 1814 ▇▇▇▇ Road, Bowen $827,483.03 $ 41,400.00
Island, B.C.
--------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇/▇
▇▇▇▇▇▇, ▇.▇. above
--------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ included N/A
▇▇▇▇▇▇ Kesland Vancouver, B.C. above
--------------------------------------------------------------------------------
▇▇▇ ▇▇▇▇ ▇-▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇.▇. $361,615.31 $ 33,124.90
--------------------------------------------------------------------------------
▇▇▇▇▇/▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, $490,056.68 $490,056.68
▇▇▇▇▇▇ Northistler B.C.
--------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇ N/A $$37,997.18 $ 37,997.18
--------------------------------------------------------------------------------
NET ADJUSTMENT: $1,114,575.00
-----------------------------------------------------------------------------------------------------------------------
4
--------------------------------------------------------------------------------------------------------------------
ADJUSTMENT TO BE MADE
TO THE PURCHASE PRICE
TRANSACTION TO BE UNDERTAKEN INCREASE
(DECREASE)
--------------------------------------------------------------------------------------------------------------------
LOANS TO BE FORGIVEN
--------------------------------------------------------------------------------
PORTION INCLUDED
IN WORKING
BORROWER CIVIC ADDRESS CURRENT PRINCIPAL CAPITAL
--------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, $145,000.00 $145,000.00
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Lake, B.C.
--------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ N/A $$36,507.95 $$36,507.95
--------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇., $382,377.16 $382,377.16
▇▇▇▇▇▇▇▇ West Vancouver, B.C.
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ N/A $ 21,888.00 $ 21,888.00
--------------------------------------------------------------------------------
Gross adjustment ($585,773.00)
Less tax saved as a result of forgiven
loans: 208,652.00
------------
Net Adjustment ($377,121.00) ($377,121.00)
--------------------------------------------------------------------------------------------------------------------
LOANS TO BE RETAINED BY THE COMPANY
--------------------------------------------------------------------------------
BORROWER REASON CURRENT PRINCIPAL
--------------------------------------------------------------------------------
▇▇▇ ▇▇▇▇▇▇ Vehicle loan $ 28,211.97
--------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇ Vehicle loan $ 8,237.60
--------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇ Vehicle loan $ 22,167.00
--------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ Housing loan $300,000.00
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and Housing loan $350,000.00
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------------------------------------------------------
NET ADJUSTMENT: NIL
These loans are part of the employment arrangements with these employees and
will remain in place after Closing. The loans are repayable on demand. The
vehicle loans are amortized on an annual basis through partial forgiveness,
which is taxed in the hands of the employee as a benefit. The housing loans have
no fixed terms of repayment
--------------------------------------------------------------------------------------------------------------------
5
--------------------------------------------------------------------------------------------------------------------
ADJUSTMENT TO BE MADE
TO THE PURCHASE PRICE
TRANSACTION TO BE UNDERTAKEN INCREASE
(DECREASE)
--------------------------------------------------------------------------------------------------------------------
PAYMENT OF EMPLOYEE BONUSES
The following bonuses to employees will be paid in cash:
▇▇▇▇ ▇. ▇▇▇▇ $1,477,000.00
▇▇▇ ▇. ▇▇▇▇ $1,477,000.00
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇: $2,000,000.00
▇▇▇▇ ▇▇▇▇▇▇: $1,000,000.00
-------------
Gross Adjustment: $5,954,000.00
Tax reduction as a result of bonus payments: ($2,120,815.00)
--------------
NET ADJUSTMENT: $3,833,185.00* ($3,833,185.00)
* ▇▇▇▇ ▇▇▇▇▇▇ may elect to have his loans forgiven and to reduce his bonus by an
equivalent amount. There would be no effect on Working Capital as a result of
such a change.
-----------------------------------------------------------------------------------------------------------------------
NET ADJUSTMENT TO THE PURCHASE PRICE: ($3,095,731.00)
-----------------------------------------------------------------------------------------------------------------------
RELEASE OF ARTCO LEASE
The Lease will be released prior to Closing. The Vendor has initiated the
process of dissolving and winding-up 654899 British Columbia Ltd. ("Artco"),
effective January 1, 2004, and the Vendor will be the owner of all of the
artworks formerly owned by Artco from that date and will be free to deal with
such artworks before and after Closing as it sees fit. It is anticipated that
the artworks may remain in the Vancouver office on a storage basis after the
Closing, subject to any necessary insurance arrangements being made at the
Vendor's expense.
RELEASE OF SHAREHOLDERS BUY/SELL AGREEMENT
The Buy/Sell Agreement among the Company, the Vendor, ▇▇▇▇ and ▇▇▇ dated
September 29, 2001 will be terminated prior to Closing (or at the Vendor's
option the agreement may remain in place but the Company will be released
therefrom such that it will have no further obligations thereunder after
Closing).
6
DELIVERY OF INTERNAL MANAGEMENT FINANCIAL INFORMATION PACKAGE
The Vendor will deliver to the Purchaser by February 4, 2004 the Company's final
internal unaudited financial reporting package prepared by management of the
Company for the period ended December 31, 2003.
PRE- AND POST-CLOSING TRANSACTIONS
INVESTMENT IN CHASYN WOOD TECHNOLOGIES INC.
The Vendor, the Purchaser and the Company will, all parties acting reasonably,
develop a structure whereby the Vendor's investment in Chasyn (through 598283
B.C. Ltd.) will be able to be realized from the first monies flowing from
Chasyn, whether pursuant to payment on account of its current accounts
receivable owing to the Company or from payment on account of its loan owing to
598283 B.C. Ltd., until such time as the Vendor has recouped an amount equal to
its loan balance of $1,899,420.
CONTRACTUAL ARRANGEMENTS WITH LONGVIEW FIBRE COMPANY
The Vendor will use its Best Efforts to cause the following to occur:
1. A senior Company executive (likely ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ but possibly ▇▇▇▇▇
▇▇▇▇▇▇▇▇) will contact ▇▇▇▇▇ ▇▇▇▇▇▇, Senior Vice President, Timber, of
Longview subsequent to signing this Agreement, but coinciding with the
public announcement, to confirm the Company's desire to continue the
sales arrangement.
2. The Company will provide the thirty (30) days written notice of the
pending change of control of the Company, to comply with the current
undertakings agreement.
3. Senior Company executives will visit ▇▇▇▇▇ ▇▇▇▇▇▇ to explain the
impending changeover and solidify the current marketing arrangement.
4. The Vendor will use its Best Efforts to transfer the Longview contract
from ▇▇▇▇ Investments Inc. to a subsidiary of the Purchaser or will
assign all proceeds (less any costs incurred in connection with the
Longview agreement) from ▇▇▇▇ Investments Inc. to the Company until the
next review date, August 31,2004.
5. If, as part of the process of transferring the contract to a Purchaser
subsidiary, the Purchaser is required to enter into any contracts or
undertakings with Longview similar to those between the Company and
Longview, it will do so.
REMOVAL OF INDIVIDUAL PENSION PLANS
The Vendor will use its Best Efforts to remove all of the Individual Pension
Plans listed in Schedule 3.8 from the Company prior to the Closing, except the
Individual Pension Plans and Retirement Compensation Arrangements for ▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇. The parties acknowledge that such removal may not be able
to be implemented prior to the Closing if requisite consents or approvals of
Government Authorities have not been obtained or other technical requirements
cannot be completed by
7
that date, and in that event the Vendor shall remain obligated to complete the
removal as soon as is reasonably possible after Closing.
POST-CLOSING TRANSACTIONS
ACCOUNTS RECEIVABLE OWING BY JACKPINE FOREST PRODUCTS LTD. AND RELATED COMPANIES
CURRENT STATUS
--------------
Debenture loan to Jackpine by the Company: $1,500,000 at January 31, 2004
Logging Advances made to Jackpine by the +/- $566,729* at January 31, 2004
Company:
Account Receivable owing by Jackpine to the +/- $220,830* at January 31, 2004
Company from post-CCAA filing
operations (net of offset payables):
Accounts Receivable restricted by CCAA and $1,959,950
fully reserved for at December 31, 2003:
* These accounts are subject to daily change as logging and lumber purchase/sale
activities are ongoing
ARRANGEMENTS REGARDING PRE-CCAA FILING ACCOUNT RECEIVABLE
---------------------------------------------------------
STEP 1 Upon (and subject to), Jackpine Group being released from CCAA
and there being resolution to trade file, the Jackpine Group will
again be "bankable" and will be able to receive a bank line of
credit in anticipation of CVD/AD deposits and/or Jackpine will
receive its share of the CVD/AD deposits refunded as a result of
the settlement.
STEP 2 Jackpine will then begin paying down of the Company account
receivable that was restricted under the CCAA proceeding
($1,959,950). The other accounts receivable and logging advances
and recoveries are anticipated to continue in the ordinary course
of business)
STEP 3 To the extent that the Company and/or the Purchaser accumulates
receipts from Jackpine on account of the restricted receivable in
amounts of $250,000, it will calculate its income tax obligation
arising from those collections, and remit the net amount to the
Vendor.
STEP 4 This process will be repeated until the full amount of
$1,959,950 has been recovered by the Company and/or the Purchaser
and the net amount remitted to the Vendor.
PREPARATION AND FILING OF SECTION 85 ROLLOVER ELECTION FORM
The Vendor will at its expense prepare, and present for execution by the
Purchaser not less than 10 Business Days before the deadline for its filing with
Canada Customs and Revenue Agency, a joint election in the prescribed form
pursuant to subsection 85(1) of the Tax Act with respect to the disposition of
the Vendor's Shares to the Purchaser at an agreed amount stipulated by the
Vendor, which agreed amount will be within the limits required by subsection
85(1) of the Tax Act. The Purchaser will execute such election form and return
it to the Vendor within 5 Business Days of its presentation.
8
PREPARATION OF TAX RETURNS
The Vendor will prepare on the Company's behalf and file within the time limited
therefor the Company's Canadian income tax, British Columbia logging tax and US
federal and state tax returns (collectively, the "Returns") for its fiscal year
ended December 31, 2003. The Vendor will present the Returns for execution by
the Company not less than 20 Business Days before the deadline for their filing
with Canada Customs and Revenue Agency and other applicable bodies, and the
Purchaser will cause the Company to execute such return and return it to the
Vendor within 10 Business Days of its presentation.
The Vendor, the Company and the Purchaser will work cooperatively to prepare the
"change of control" financial statements and Returns for the Company, all
parties acting reasonably, and the Vendor shall be entitled to review all such
financial statements and Returns prior to filing. The costs of the "change of
control" financial statements and Returns shall be borne by the Company. If any
of the parties has any objections to the "change of control" financial
statements or Returns it shall so advise the other parties at least 20 Business
Days before the deadline for filing the tax return with Canada Customs and
Revenue Agency and the parties will meet as expeditiously as possible and will
attempt to settle the objections, all parties acting reasonably. If the parties
are unable to come to an agreement on the matter, it shall be referred for
determination by an independent third party chartered accountant in the same
manner as provided in the Agreement for settlement of Objections to the Working
Capital, MUTATIS MUTANDIS.
SCHEDULE 3.4(l)
LEASES
1. All leasehold interests in the Lands set out in Schedule
1.1(pp).
2. Lease dated June 15, 2001 between HSBC Bank Canada and the
Company for two NEAX 2000 IVS2 PBX telephone systems
(Vancouver and ▇▇▇▇▇▇▇▇ Lake).
3. Lease dated November 6, 2000 between HSBC Bank Canada and the
Company for a Raygo ▇▇▇▇▇▇ Log Stacker s/n 109249 and related
equipment.
4. Nine (9) leases dated at various dates between Cariboo
Chevrolet Oldsmobile Pontiac Buick GMC Ltd. and the Company,
as follows:
-------------------------------------------------------------------------------------------------------
MAKE SERIAL NO. DRIVER FLEET FINAL LEASE MONTHLY RENT RESIDUAL YEARS
NUMBER PAYMENT DATE (WITHOUT TAX) VALUE
-------------------------------------------------------------------------------------------------------
2003 Chev 4x4 ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇-▇▇-▇▇▇ 06/12/07 $714.21 $4,000.00 4
-------------------------------------------------------------------------------------------------------
2003 Chev 4x4 ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇-▇▇-▇▇▇ 06/12/07 $714.21 $4,000.00 4
-------------------------------------------------------------------------------------------------------
2003 Chev 4x4 ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇-▇▇-▇▇▇ 06/12/07 $714.21 $4,000.00 4
-------------------------------------------------------------------------------------------------------
2002 Chev 4x4 ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇-▇▇-▇▇▇ 06/07/06 $674.01 $4,000.00 4
-------------------------------------------------------------------------------------------------------
2002 Chev 4x4 ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇-▇▇-▇▇▇ 06/07/06 $674.01 $4,000.00 4
-------------------------------------------------------------------------------------------------------
2001 Chev 4x4 ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇-▇▇-▇▇▇ 06/20/05 $717.56 $4,000.00 4
Crew Cab
-------------------------------------------------------------------------------------------------------
2001 Chev 4x4 ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇-▇▇-▇▇▇ 06/07/05 $694.83 $4,000.00 4
-------------------------------------------------------------------------------------------------------
2001 GMC 4x4 ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇-▇▇-▇▇▇ 06/01/05 $754.67 $4,000.00 4
-------------------------------------------------------------------------------------------------------
2001 Chev 4x4 ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇-▇▇-▇▇▇ 06/07/04 $883.18 $4,000.00 3
-------------------------------------------------------------------------------------------------------
5. Vehicle leases with VW credit Canada Inc. as follows:
(a) 2001 Audi A6 2.8 ▇▇▇▇▇▇ # ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ (▇▇▇
Registration December 29, 2000, 9240055)
(b) 2003 Audi A4 3.0L Q Avant Serial #▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ (PPR
Registration July 21, 2003, 170596B)
6. Lease dated March 18, 2003 among 654899 British Columbia Ltd.,
the Company and the Vendor by which the Company has agreed to
lease 48 works of art from Artco.
SCHEDULE 3.4(n)
INTELLECTUAL PROPERTY
None.
SCHEDULE 3.4(o)
FORMER PROPERTIES
1. The Company has operated in the Cariboo since 1947. Up until 1960 there
were various ▇▇▇▇ mill sites around Quesnel, Likely and ▇▇▇▇▇▇▇▇ Lake
which have long been inactive. There were permanent installations at
Quesnel and ▇▇▇▇▇▇▇▇ Lake starting in approximately 1960. The Quesnel
operations were sold to Weldwood in the mid-1960s and make up their
sawmill and plywood division at Quesnel. The ▇▇▇▇▇▇▇▇ Lake facilities
were consolidated at the current location in the early 50s by which
time the Quesnel operations had ceased.
2. The Company had operations in the Southern Interior from the early 60s
to the mid-70s. The operations were centered at Salmon Arm and
consisted of two divisions - one in the Town of Salmon Arm and one at
▇▇▇▇▇▇ Valley. The Salmon arm plant was destroyed by fire in the early
70s and the ▇▇▇▇▇▇ Valley operations were sold to Drew Sawmills in
approximately 1975. Drew operated these facilities until declaring
bankruptcy some time in the early 80s.
3. The Company also operated a sawmill at Tatlayoko Lake (75 miles west of
▇▇▇▇▇▇▇▇ Lake) which was destroyed by fire in 1974. This site is now
part of a provincial park and is a wildlife refuge. The Company and a
major conservation group restored this site in the 1980s.
4. In more recent times, the Company acquired a small sawmill in 1973
called Gunsveit Lumber Products, in the Chimney Creek area. The site
was cleaned up at that time.
5. The Company's final acquisition was Komori Lumber Company in 1974. The
site at 70 Mile was cleaned up and closed in 1975.
SCHEDULE 3.5(a)
PERMITS
PERMITS HELD BY THE COMPANY:
1. Amended Waste Management Permit PA03283 for air emissions dated April
25, 2003 (following the application submitted April 14, 1999).
2. Amended Waste Management Permit PR07206 for shared landfill held
jointly with the Purchaser dated July 17, 1995.
3. Gas Permit (permit # IAC00242 expiring July 31, 2004).
4. Boiler and Vessel Certificate and General Supervision Certificate.
5. City of ▇▇▇▇▇▇▇▇ Lake Business License.
6. City of Vancouver Business License.
7. Timber Tenures as listed in Schedule 3.9.
EXCEPTIONS:
1. See Schedule 3.1(b) Business Qualification
SCHEDULE 3.5(b)
MATERIAL CONTRACTS
SCHEDULE 3.5(B)
MATERIAL CONTRACTS
1. Buy/Sell Agreement among ▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, the Vendor, the Company
and others dated September 26, 2001.
2. Side letter dated September 26, 2001.
3. British Columbia (Minister of Environment Lands and Parks) Licence of
Occupation (514691)for a landfill site.
4. British Columbia (Minister of Environment Lands and Parks) Lease
(514643)for a logging camp.
5.
6. Innovative Forest Practices Agreement.
7. Hauling Contract dated March 18, 2003 -Lignum Seniority Truckers
Agreement with attached seniority lists.
8. Lease of Artwork dated March 18, 2003 among 654899 BRITISH COLUMBIA
LTD., the Company and the Vendor.
9. Recipient Agreement (# 2225) dated May 2, 2003 between the Company and
PricewaterhouseCoopers LLP.
10. Joint Power Line Agreement dated June 7, 2001 between the Purchaser and
the Company.
11. Conditional Sales Agreement dated October 8, 2002 between the Company
and Caterpillar Financial Services Limited for a Caterpillar Wheel
Loader (966G).
12. Lease dated October 30, 2000 between the Company and HSBC Bank Canada
for Raygo ▇▇▇▇▇▇ Log Stacker.
13. Nine (9) leases dated at various dates between Cariboo Chevrolet
Oldsmobile Pontiac Buick GMC Ltd. and the Company referred to in
Schedule 3.4(l) Leases.).
14. Lease dated May 25, 2000 the Company and Sandtronic Business Systems
for a Sharp AR-507 Digital Image Copier .
15. HSBC Bank Canada Master Lease Agreement regarding NEAX 2000 IVS2 PBX
telephone system in Vancouver and ▇▇▇▇▇▇▇▇ Lake offices.
16. Aircraft Purchase Agreement dated March 1, 2000 between Centara
Aviation Inc. and the Company.
17. Lease dated January 1, 1999 between the Company and BCR Properties
Limited..
18. Lease dated September 1, 1994 between the Company and BCR Properties
Limited.
19. Crossing Agreement dated effective June 11, 2001 between the Company,
BC Rail Partnership and BC Rail.
2
20. Access Road License Agreement dated effective September 1, 1994 between
the Purchaser and the Company.
21. Interim Access Road License Agreement dated effective September 8, 1999
between the Purchaser and the Company.
22. Lease (1200 - ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇▇) dated December 6, 2001
between the Company and Mottistone Holdings Ltd.
23.
24. Employment Services Agreement dated March 31, 2003, between the Company
and ▇.▇. ▇▇▇▇▇▇▇▇ Inc regarding ▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
25. Employee Indemnification Agreements regarding directorships of joint
venture companies:
(a) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ (Chendi Enterprises Ltd., Dagish
Enterprises Ltd., Ecolink Forest Services Ltd., Stswecemcemc
Enterprises Ltd. and Tsi'Bas Forest Services Ltd.);
(b) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (Ecolink Forest Products Ltd.);
(c) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (Chendi Enterprises Ltd., Natasewed
Enterprises Ltd. and Tsi'Bas Forest Services Ltd.);
(d) ▇▇▇ ▇▇▇▇ (Tsi Bas);
(e) ▇▇▇▇ ▇▇▇▇▇ (Ecolink);
(f) ▇▇▇ ▇▇▇▇▇▇▇ (Chendi and Ecolink);
(g) ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ (Stswecemcemc); and
(h) ▇▇▇ ▇▇▇▇▇▇▇▇ (Chendi, Tsi Bas, Natasewed and Ecolink).
(i)
26. Insurance policies, as follows:
----------------------------------------------------------------------------------------
INSURER POLICY NO. SCOPE
----------------------------------------------------------------------------------------
Lumberman's Underwriting 603959 All Property (other than stock in US)
Alliance
----------------------------------------------------------------------------------------
Lumberman's Underwriting 316280 Stock located at various US locations
Alliance
----------------------------------------------------------------------------------------
Zurich 8830974 Accident - Property Damage and
Business Interruption (related to the
HSBC Debenture)
----------------------------------------------------------------------------------------
AXA Pacific 1188191 Commercial General Liability (Claims
arising from diversified forestry
operations)
----------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ Canada 9134758 Primary Umbrella
----------------------------------------------------------------------------------------
Chubb 79753271 1st Umbrella Excess
----------------------------------------------------------------------------------------
3
----------------------------------------------------------------------------------------
INSURER POLICY NO. SCOPE
----------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ Canada ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ Excess
----------------------------------------------------------------------------------------
ACE/Hartford Fire/Liberty 360AC-361815 CAIM All Clear Aircraft Policy (1981
Mutual British Aerospace HS 125-700A)
----------------------------------------------------------------------------------------
ING ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇-▇▇▇▇▇ Public Liability (In Mexico for aircraft of
foreign registration)
----------------------------------------------------------------------------------------
Chubb 30208153 Insures Artco's art collection
----------------------------------------------------------------------------------------
27. Shareholder Agreements with joint venture company shareholders:
(a) Canoe Creek Indian Band dated August 31, 1999;
(b) Alkali Band;
(c) Alexis Creek Band;
(d) Canoe Creek Band; and
(e) Tl'etinqox-tin Government Office.
28. Logging Agreements with Jackpine Forest Products Ltd. ("JACKPINE") and
related companies:
(a) AGREEMENT BETWEEN JACKPINE AND THE COMPANY FOR TSL A46503
DATED July 25, 1995;
(b) AGREEMENT BETWEEN REDWOOD VALUE-ADD Products Ltd. ("REDWOOD")
Jackpine AND THE COMPANY FOR TSL A44185 DATED September 28,
1995;
(c) AGREEMENT BETWEEN JACKPINE AND THE COMPANY FOR TSL A43902
DATED January 10, 1996;
(d) AGREEMENT BETWEEN THE COMPANY AND Jackpine FOR TSL A71312
dated October 17, 2003;
(e) AGREEMENT BETWEEN THE COMPANY AND JACKPINE ENGINEERED WOOD
PRODUCTS INC. ("JEWP") ▇▇▇ ▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇ AND TSL A61353
dated September 5, 2002; and
(f) AGREEMENT BETWEEN THE COMPANY, Jackpine AND JEWP. ▇▇▇ ▇▇
▇▇▇▇▇▇ AND TSL A71312.
29. Security and Loan Agreements with Jackpine Forest Products Ltd.:
(a) General Security Agreements:
(i) dated May 3, 1995 from Jackpine to the Company;
(ii) dated August 1, 1995 from Redwood to the Company; and
(iii) dated July 25, 2000 from JEWP to the Company.
(b) Loan Agreement dated May 28, 1998 among the Company, Jackpine,
Redwood and ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇");
(c) Cross-Guarantees dated April 5, 2000:
(i) from Jackpine to the Company
(ii) from Redwood to the Company
(iii) from JEWP to the Company;
4
(d) ▇▇▇▇▇▇ Group Undertaking and Direction (versions from each of
the Jackpine shareholders are held);
(e) May 15, 1998 letter agreement between the Company and Bank of
Montreal regarding offset of timber advances;
(f) July 24, 1998 Inter-Creditor Agreement between the Company and
Bank of Montreal;
(g) September 29, 1999 letter agreement between the Company and
Jackpine regarding a postponement requested by GE Capital
Canada Equipment Financing ("GE") in connection with a new
financing arrangement;
(h) Mortgage from Jackpine to the Company dated May 10, 1995
((PJ015415);
(i) Mortgage from Jackpine to the Company dated November 29, 1999
(PN045623);
(j) Priority Agreements from the Company in favour of GE and
2762617 BC Ltd. (General Electric Canada Real Estate Finance
Inc.) regarding Jackpine security:
(i) September 29, 1999 regarding the May 3, 1995
mortgage;
(ii) September 29, 1999 regarding the GSA's;
(iii) August 3, 2000 regarding certain specific equipment;
and
(iv) March 20, 2003 regarding the November 29, 1999 and
May 3, 1995 mortgages and a new mortgage granted to
2762617 BC Ltd.;
(k) Agreement dated January 31, 2003 among Jackpine, JEWP, ▇▇▇▇▇▇,
Bank of Montreal, GE Canada Equipment Financing G.P. and the
Company;
(l) September 4, 2003 letter from the Company to Jackpine
regarding possible additional timber advances;
(m) September 8, 2003 Letter Agreement between the Company, Bank
of Montreal Jackpine, JEWP, Redwood, ▇▇▇▇▇▇ and Trustee of the
Jackpine Employee Profit Sharing Fund;
(n) September 11, 2003 letter agreement between the Company and
Jackpine regarding logging advance, with Promissory Note from
Jackpine for the advance; and
(o) November 14, 2003 letter agreement between the Company and
Jackpine regarding Debtor in Possession advance.
30. Specific Forest License Security Agreement dated November 13, 2003 from
Jackpine and JEWP.
31. Exclusive Distribution Agreement dated March 1,2001 among the Company,
Jackpine and JEWP..
32.
33. Relationship with Longview Fibre Company regarding sales representation
in the US market:
(a) Lumber Sales Representation Agreement dated September 1, 2001;
(b) Undertakings of Affiliated Corporations dated September 1,
2001;
5
(c) Guaranty dated September 1, 2001; and
(d) First Amendment to Lumber Sales Agreement dated September 1,
2003.
34. Operating and Modification of Operating Agreement dated April 11, ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇▇ ▇▇ Ltd., 598283 BC Ltd.,
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and the Company.
(a)
35. Grade Stamp Licensing Agreements:
(a) Dated May, 2000 between Cariboo Lumber Manufacturers
Association and the Company; and
(b) Dated July, 2003 between Council of Forest Industries and the
Company.
36. Power Agreements:
(a) Agreement for New Transmission Companies dated as of November
20, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Hydro and Power Authority
and the Company; and
(b) Electricity Supply Agreement dated as of November 19, ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Hydro and Power Authority and the
Company.
37. Natural Gas Agreements:
(a) Commending November 1, 2003 between Direct Energy Marketing
Limited and the Company; and
(b) Dated September, 2003 between Terasen Gas inc. and the
Company.
38.
39.
40. Agreement dated October 5, 2001 between the Company and Interwrap
Industries Inc. (lumber covers)
41. Agreement dated June 1, 2000 between the Company and Petro-Canada (fuel
supply agreement).
42. Agreement dated July 16, 2002 between the Company and ▇▇▇▇▇ ▇▇▇▇▇
d.b.a. Quality Excavating and Construction.
43. Agreement dated July 16, 2002 between the Company and Signode Canada
Ltd.
44. Agreement dated July 16, 2002 between the Company and Tetra Ventures
Ltd.
45. Agreement dated September 13, 2002 between the Company and ▇▇▇ Unraul
and ▇▇▇▇▇▇ Unraul d.b.a. Done-Rite Janitorial .
46. Agreement dated March 17, 2003 between the Company and WWF Canada.
47. Memorandum of Understanding dated January 23, 2003 between the Company
and Ducks Unlimited Canada.
48. Protocol Agreement dated December 20, 2002 between the Company and
Xats'ull (Soda Creek) First Nation.Shareholders Agreement with Fibreco
Export Inc.
6
49. Agreement dated June 30, 1993 between the Company and NW Energy
(▇▇▇▇▇▇▇▇ Lake) Corp.Letter of Intent between the Company and Pinnacle
Pellet WL Inc.
50. Chip Supply Agreements:
------------------------------------------------------------------------------------------------------------
BUYER AND AGREEMENT DATE WHOLE LOG RESIDUAL EXPIRY AUTOMATIC
VOLUME (ODT/YR.) LOG DATE OR BUYER
APPROX. VOLUME OPTION
(ODT/YR.) TO RENEW?
APPROX.
------------------------------------------------------------------------------------------------------------
Canadian Forest Products Ltd. 33,000 100,000 Dec. 31, No
January 1, 2002 2016
------------------------------------------------------------------------------------------------------------
Cariboo Pulp and Paper 65,000 Dec. 31, No
January 1, 1998, as modified by the letter 2004
agreement dated July 7, 1998
------------------------------------------------------------------------------------------------------------
Fibreco Export Inc., October 13, 2000, as 5,443 Dec. 31, No
modified by the letter from Fibreco dated March (5,000 BDU) 2005
13, 2001
(increasing to
9,471 ODTs /
8,700 BDUs on
January 1,
2004)
------------------------------------------------------------------------------------------------------------
51. Contracts (partly oral and partly written) with Trucking Contractors:
(a) ▇▇▇▇▇ Hrynkewich Logging;
(b) ▇▇▇▇▇▇▇ Holdings;
(c) Bosworth Trucking;
(d) ▇. ▇▇▇▇▇;
(e) Longhorn Trucking;
(f) Delan Contracting;
(g) Ash Construction;
(h) Thunder Mountain Enterprises;
(i) ▇▇▇ ▇▇▇▇▇▇▇▇▇;
(j) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇;
(k) ▇▇▇▇ ▇▇▇▇▇▇ Contracting;
7
(l) ▇▇▇▇▇ ▇▇▇▇ Contracting;
(m) D.J Trucking;
(n) ▇▇▇ ▇▇▇▇▇▇ Trucking;
(o) O.B. Trucking; and
(p) K & L Contracting.
52. Contracts (essentially oral) with Harvesting Contractors:
(a) San ▇▇▇▇ Logging;
(b) Jordef Enterprises;
(c) ▇▇▇▇▇▇▇ Contracting;
(d) Chendi Enterprises Ltd.;
(e) R&D Logging;
(f) Ecolink Forest Services;
(g) ▇▇▇▇▇▇ Logging;
(h) Kinwood Contracting;
(i) Doerksen Logging;
(j) ▇. ▇▇▇▇▇▇▇ Logging;
(k) ▇▇▇▇▇ Creek Contracting;
(l) ▇▇▇ ▇▇▇▇▇ Contracting;
(m) EWD Logging;
(n) Nilsson Select Contracting;
(o) ▇▇▇ ▇▇▇▇▇▇▇ Logging;
(p) B.S. Salvage;
(q) Borland Creek Contracting;
(r) ▇▇▇▇▇▇ Lake Contracting;
(s) AI Contracting;
(t) K ▇▇▇▇▇ Logging;
(u) Double J Contracting; and
(v) Kalaco Contracting.
53. Regular engagements or retainers of consultants, as listed in Schedule
3.7 Employee Plans.
54. Employment and pension arrangements as listed in Schedule 3.7 Employees
and Schedule 3.8 Employee Plans.
55. The Timber Tenures.
SCHEDULE 3.5(d)
LITIGATION
1. See Schedule 3.5(k).
2. The Crown has made a claim for approximately $25,000 against Jackpine
Forest Products Ltd. for costs incurred in connection with a forest
fire in 2001 which was started by the equipment of a Company
contractor. The insurer for the Company has taken the initial position
that insurance coverage is not available. The Crown has not pursued
the matter in several months.
3. The Company has filed an Appearance in proceedings commenced by
Jackpine Forest Products Ltd. and its related companies pursuant to
the COMPANIES CREDITORS ARRANGEMENT ACT. See also Schedule 3.3(a).
4. The Company, while not a party to the action nor having been
threatened in that regard, has been voluntarily assisting one of its
customers, Canex, with legal expenses which Canex has incurred in
connection with a claim by the United States government that Canex
acted inappropriately in connection with certain pre-manufactured
trusses which it purchased from the Company. The Company has been
willing to assist with the legal expenses in order to enable its
customer to survive and to continue to purchase goods from the
Company. The amount contributed by the Company to date has been
approximately $20,000.
5. A former Forester employed by the Company, ▇▇▇▇▇▇ ▇▇▇▇▇, has commenced
a wrongful dismissal action against the Company. The action is being
actively defended by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (▇▇▇ ▇▇▇▇▇, Q.C.) on the Company's
behalf. The Company expects to be successful in its defence of the
claim, but even if it is not any potential award is not expected to be
material in light of the relatively short duration of the Plaintiff's
employment.
SCHEDULE 3.5(F)
INSURANCE
1. INSURANCE POLICIES MAINTAINED BY THE COMPANY:
---------------------------------------------------------------------------------------------------------------
INSURER POLICY NO. SCOPE ANNUAL PREMIUM
---------------------------------------------------------------------------------------------------------------
Lumberman's Underwriting 603959 All Property (other than stock in US) $454,635
Alliance
---------------------------------------------------------------------------------------------------------------
Lumberman's Underwriting 316280 Stock located at various US locations $17,360
Alliance
---------------------------------------------------------------------------------------------------------------
Zurich 8830974 Accident - Property Damage and Business $12,000
Interruption (related to the HSBC Debenture)
---------------------------------------------------------------------------------------------------------------
AXA Pacific 1188191 Commercial General Liability (Claims arising $80,605
from diversified forestry operations)
---------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ Canada 9134758 Primary Umbrella $18,800
---------------------------------------------------------------------------------------------------------------
Chubb 79753271 1st Umbrella Excess $15,000
---------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ Canada ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ Excess $4,500
---------------------------------------------------------------------------------------------------------------
ACE/Hartford Fire/Liberty 360AC-361815 CAIM All Clear Aircraft Policy (1981 British $58,485
Mutual Aerospace HS 125-700A)
---------------------------------------------------------------------------------------------------------------
ING ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇-▇▇▇▇▇ Public Liability (In Mexico for aircraft of $85.00
foreign registration)
---------------------------------------------------------------------------------------------------------------
Chubb 30208153 Insures Artco's art collection $7,570
---------------------------------------------------------------------------------------------------------------
2. PARTICULARS OF CLAIMS MADE UNDER ANY POLICIES OF INSURANCE MAINTAINED BY
OR FOR THE BENEFIT OF THE COMPANY OVER THE 5 CALENDAR YEARS IMMEDIATELY
PRIOR TO THE COMMITMENT DATE:
2.1 The Crown has made a claim for approximately $25,000 against Jackpine
Forest Products Ltd. for costs incurred in connection with a forest fire
in 2001 which was started by the equipment of a Company contractor. The
insurer for the Company has taken the initial position that insurance
coverage is not available. The Crown has not pursued the matter in
several months.
2.2 In 2003 the Company made a claim under its insurance for damage incurred
in a fire at the ▇▇▇▇▇▇▇▇ Lake plant. That claim has been settled in full
and the Company has received the full amount of its claim.
SCHEDULE 3.5(h)
INDEBTEDNESS TO COMPANY
See Schedule 3.3(a).
SCHEDULE 3.5(k)
NATIVE LAND CLAIMS
1. A possible First Nations claim has been raised by the Tsilhqot'in
National Government against all lumber companies in the ▇▇▇▇▇▇▇▇ Lake
area, alleging that their forest licences may be wholly or partially
located within the Tsilhqot'in National Territory over which
aboriginal title is asserted. It is not possible to determine the
validity or impact of the Tsilhqot'in National Government's alleged
claims on the Company at this time.
2. The Company has received correspondence from the Whispering Pines
/Clinton Indian Band asking that they be consulted and accommodated as
part of the process for renewal of the Company's Forest License
A20003. The Company has responded to the correspondence to advise the
Band that the Company understands and expects that the Ministry of
Forests will be in consultation with the Band and that the Company
expects to be brought into the process by the Ministry at the
appropriate time.
3. The Company has received correspondence from the High Bar First Nation
asking that they be consulted and accommodated as part of the process
for renewal of any of the Company's Forest Licenses which impact the
"traditional territories" claimed by that Band. The correspondence was
also signed by representatives of the Canim Lake Band, Canoe Creek
Band, Soda Creek Band and ▇▇▇▇▇▇▇▇ Lake Band. The Company has
contacted the Band to acknowledge receipt of this correspondence but
has taken no further action.
4. The Company has received correspondence from the Ministry of Forests
to the effect that the Ministry intends to offer the Company
replacement Forest Licenses for the Company's existing Forest Licenses
AA20018 and A20003 once the Province has completed a consultation
process with any affected First Nations.
SCHEDULE 3.6(d)
CUSTOMER CLAIMS
None.
SCHEDULE 3.7
EMPLOYEES
1. SALARIED EMPLOYEES:
As set out on the attached printout.
2. INDEPENDENT CONTRACTORS AND OUTSIDE CONSULTANTS WHO BILLED MORE THAN
$25,000 IN 2003 (OR MORE THAN $75,000 IN RESPECT OF MILL PARTS AND
SUPPLIES):
VANCOUVER:
--------------------------------------------------------------------------------
CONSULTANT/CONTRACTOR 2003 GROSS ▇▇▇▇▇▇▇▇
--------------------------------------------------------------------------------
FBM Consulting Enterprises $ 93,972
--------------------------------------------------------------------------------
Global Public Affairs 72,211
--------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 32,418
--------------------------------------------------------------------------------
Cortex Consultants 25,835
--------------------------------------------------------------------------------
Capital West Partners 153,359
--------------------------------------------------------------------------------
Fibretech Manufacturing 40,290
--------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 24,481
--------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 180,000
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇ Humjan 72,000
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ LAKE:
--------------------------------------------------------------------------------
CONSULTANT/CONTRACTOR 2003 GROSS ▇▇▇▇▇▇▇▇
--------------------------------------------------------------------------------
TOP SUPPLIERS FOR MILL PARTS, SUPPLIES AND CONSUMABLES
--------------------------------------------------------------------------------
BC Hydro $ 990,365
--------------------------------------------------------------------------------
Petro-Canada 566,543
--------------------------------------------------------------------------------
Interwrap Industries 566,297
--------------------------------------------------------------------------------
Terasen Gas 299,921
--------------------------------------------------------------------------------
Finning Tractor 216,745
--------------------------------------------------------------------------------
Tasco Supplies 178,557
--------------------------------------------------------------------------------
Signode Canada 148,086
--------------------------------------------------------------------------------
Interior Lathing 116,125
--------------------------------------------------------------------------------
Carbide Tool Works 91,105
--------------------------------------------------------------------------------
2
--------------------------------------------------------------------------------
CONSULTANT/CONTRACTOR 2003 GROSS ▇▇▇▇▇▇▇▇
--------------------------------------------------------------------------------
TOP CONTRACTORS FOR OPERATIONS
--------------------------------------------------------------------------------
Tetra Ventures 248,614
--------------------------------------------------------------------------------
Done Rite Janitorial 118,109
--------------------------------------------------------------------------------
Triple P Sanitation 42,703
--------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 21,371
--------------------------------------------------------------------------------
Cariboo Controls 18,661
--------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 15,574
--------------------------------------------------------------------------------
TOP CONTRACTORS FOR WOODLANDS
--------------------------------------------------------------------------------
LOGGERS:
--------------------------------------------------------------------------------
San ▇▇▇▇ Logging 5,879,045
--------------------------------------------------------------------------------
Jordef Enterprises 5,002,741
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇ Contracting 1,704,513
--------------------------------------------------------------------------------
Chendi Enterprises Ltd. 1,421,030
--------------------------------------------------------------------------------
R&D Logging 1,285,753
--------------------------------------------------------------------------------
Ecolink Forest Services 1,221,359
--------------------------------------------------------------------------------
▇▇▇▇▇▇ Logging 402,174
--------------------------------------------------------------------------------
Kinwood Contracting 367,829
--------------------------------------------------------------------------------
Doerksen Logging 271,845
--------------------------------------------------------------------------------
▇. ▇▇▇▇▇▇▇ Logging 249,968
--------------------------------------------------------------------------------
▇▇▇▇▇ Creek Contracting 240,517
--------------------------------------------------------------------------------
▇▇▇ ▇▇▇▇▇ Contracting 186,196
--------------------------------------------------------------------------------
EWD Logging 174,681
--------------------------------------------------------------------------------
Nilsson Select Contracting 166,728
--------------------------------------------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇ Logging 151,645
--------------------------------------------------------------------------------
B.S. Salvage 130,003
--------------------------------------------------------------------------------
Borland Creek Contracting 105,969
--------------------------------------------------------------------------------
▇▇▇▇▇▇ Lake Contracting 79,801
--------------------------------------------------------------------------------
AI Contracting 65,193
--------------------------------------------------------------------------------
K ▇▇▇▇▇ Logging 61,032
--------------------------------------------------------------------------------
Double J Contracting 56,902
--------------------------------------------------------------------------------
Kalaco Contracting 41,309
--------------------------------------------------------------------------------
3
--------------------------------------------------------------------------------
CONSULTANT/CONTRACTOR 2003 GROSS ▇▇▇▇▇▇▇▇
--------------------------------------------------------------------------------
TRUCKERS: (SENIORITY ONLY)
--------------------------------------------------------------------------------
▇▇▇▇▇ Hrynkewich Logging 814,607
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇ Holdings 656,594
--------------------------------------------------------------------------------
Bosworth Trucking 619,404
--------------------------------------------------------------------------------
▇. ▇▇▇▇▇ 614,418
--------------------------------------------------------------------------------
Longhorn Trucking 577,607
--------------------------------------------------------------------------------
Delan Contracting 321,354
--------------------------------------------------------------------------------
Ash Construction 274,533
--------------------------------------------------------------------------------
Thunder Mountain Enterprises 265,726
--------------------------------------------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇▇▇ 220,318
--------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 160,863
--------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇ Contracting 144,848
--------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇ Contracting 117,639
--------------------------------------------------------------------------------
D.J Trucking 104,855
--------------------------------------------------------------------------------
▇▇▇ ▇▇▇▇▇▇ Trucking 63,559
--------------------------------------------------------------------------------
O.B. Trucking 43,392
--------------------------------------------------------------------------------
K & L Contracting 23,033
--------------------------------------------------------------------------------
FORESTRY:
--------------------------------------------------------------------------------
DWB Forestry Consultants 985,963
--------------------------------------------------------------------------------
Inland Timber Management 444,330
--------------------------------------------------------------------------------
Aspen Valley Ranch 426,460
--------------------------------------------------------------------------------
Walk About Enterprises 351,439
--------------------------------------------------------------------------------
Cariboo Forest Consultants 215,433
--------------------------------------------------------------------------------
Esketemcemc First Nation 193,023
--------------------------------------------------------------------------------
▇▇▇▇▇ Contracting 128,438
--------------------------------------------------------------------------------
Quality Excavating 74,882
--------------------------------------------------------------------------------
Soda Creek First Nation 70,909
--------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇ Forestry 67,690
--------------------------------------------------------------------------------
Terra Archeology 62,574
--------------------------------------------------------------------------------
Paragon Resources 57,314
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇ Bros Logging 53,174
--------------------------------------------------------------------------------
Ken's Custom Grading 28,989
--------------------------------------------------------------------------------
Bigfoot Consulting 28,440
--------------------------------------------------------------------------------
Canoe Creek Indian Band 25,708
--------------------------------------------------------------------------------
Chiltech Forestry 20,573
--------------------------------------------------------------------------------
Lake Excavating 19,289
--------------------------------------------------------------------------------
4
3. COLLECTIVE AGREEMENTS AND MEMORANDA OF UNDERSTANDING WITH UNIONS AND/OR
GROUPS OF CONTRACTORS:
The Company is a party to the Master Agreement with the Industrial Wood and
Allied Workers of Canada ("IWA") for the British Columbia Interior Region (as
part of the Interior Forest Labour Relations Association).
The following is a listing of the current understandings or agreements in place:
o L of U ratified, but unsigned dated June 24, 2003
o Memorandum of Agreement for years 2003 - 2009
o Letter of Agreement trades - boot allowance
o Memo - Re: Call-Ins dated May 8, 2003
o ▇. ▇▇▇▇▇▇▇▇ Stat holiday agreement
o Mechanical Maintenance agreement dated Dec 16, 2002
o Apprenticeship Tuition dated Dec 16, 2002
o HD Shop Shifting schedule dated Oct 29, 2002
▇ ▇ ▇▇▇▇▇▇ - Bereavement Leave dated Sept 16, 2002
o Letter of Understanding Training program dated Nov 5, 2001
o Stat holidays for casual employees dated Apr 10, 2001
o Holiday Pay agreement dated Jan, 2001
▇ ▇ ▇▇▇▇▇▇ Grievance dated Dec 12, 2000
o Bereavement Leave Step Grandparents, etc dated Apr 13, 2000
o Agreement temp electrician dated Nov 1, 1999
o Grievance K ▇▇▇▇▇▇▇▇/J Mcafee dated Oct 1, 1999
o ▇▇ ▇▇▇▇▇▇ Grievance - Stat Holiday Pay dated Sept 29, 1999
o Letter of Understanding Apprenticeship Program dated Apr 27, 1999
o Plant Committee meeting call-ins / lockouts dated Mar 11, 1999
o First aid Premiums for designated FA tickets dated Sept 30, 1998
o Memorandum of Agreement planer mill tech training dated Jan 24,
1997
o ▇▇▇▇ ▇▇▇▇▇ 3rd step grievance dated July 21, 1995
o Sawmill graveyard CNS shifts dated Oct 17, 1994
o Electrical Shifting dated May 24, 1991
o Call-Ins dated Jan 24, 1991
o Right of Reference ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ dated Dec 28, 1990
o Leaves of Absence dated Oct 24, 1989
o Shift vacancy notice for trades dated Apr 12, 1989
o Agree on clause inclusion into collective agreement dated Apr 4,
1989
o Contract Yard Grader dated Mar 16, 1989
o Addendum to grievance dated Jan 18, 1989
o Walk Out Summary Aug, 1988
o Interpretation ▇▇▇▇▇▇ Povelofskie dated Jun 28, 1988
o Shift Agreement dated Nov 25, 1987
o Training Program dated Nov 18, 1987
o Overtime by seniority dated Nov 18, 1987
o Lignum and IWA issues dated Oct 6, 1987
o Lignum and IWA Contracting Out letter of understanding dated Feb 5,
1987
5
o Compassionate Leave Letter of Understanding dated May 6, 1985
o Letter of Understanding Grinderman and Sawfilers dated Mar 16, 1981
o IWA and N-C FLRA Floating Holiday dated Dec 4, 1978
o Letter of Understanding Job Evaluation dated July 3, 1975
The Company is party to a Trucking Agreement with the group of truckers
identified above as the "Seniority Truckers", for whom the IWA acted as agent in
negotiations. Each of the truckers remains as an independent contractor, but the
Trucking Agreement governs the process for allocating work among those truckers
and fixing hauling rates.
A tentative agreement on hauling rates was reached on January 22, 2004 and a
copy of the tentative agreement, signed by the Trucking Committee and being
circulated for signature top the truckers, has been delivered to the Purchaser.
SCHEDULE 3.8
EMPLOYEE PLANS
EMPLOYEE PENSION ARRANGEMENTS:
1. The Company maintains a group RRSP, into which it makes contributions
equal to 8% of employees' gross earnings pursuant to Group Annuity
Policy GA 10074-1-RSP/LIRA between Clarica Life Insurance Company and
Lignum Limited to provide benefits according to this Policy to the
Annuitants of the Retirement Savings Plan and Locked-in Retirement
Account effective January 1, 1993 and amended and reissued effective
December 1, 2001
2. In addition to the group RRSP, there are certain individual pension
plans and retirement compensation arrangements, as follows:
(a) Pension Plan effective December 1, 1987 (updated Plan document as
at March, 1999);
(b) Pension Trust Agreement appointing trustees pursuant to the
pension plan;
(c) Individual Pension Plan Trust for Designated Employees dated
January 1, 1997, appointing trustees for the individual pension
plans;
(d) Individual Pension Plan effective January 1, 1992. restated
January 2001 and Pension Trust Agreement for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ made
as of December 1, 1993 and Pension Trust Agreement date January
1, 1997 ;
(e) Individual Pension Plan effective January 1, 1994, as amended on
September 26, 1994, December 7, 1995 and August 29, 1998 and
Pension Trust Agreement for ▇▇▇▇▇▇ ▇▇▇▇▇▇ dated January 1, 1994,
;
(d) Individual Pension Plan effective June 30, 1998 and Pension Plan
Trust Agreement for ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ made as of June 30, 1998;
and
(e) Individual Pension Plan effective January 1, 2003 and Pension
Trust Agreement for ▇▇▇▇ ▇▇▇▇▇▇ made as of January 1, 2003
The Company has established Retirement Compensation Arrangements in favour of
▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇. These arrangements do not involve any ongoing
financial obligation of the Company.
All employees are entitled to coverage under the Company's standard extended
health and benefits plan, including standard dental, pharmaceutical and extended
medical benefits.
TRADER PROFIT SHARING ARRANGEMENTS:
The Company's lumber trader employees are entitled to revenue participation on
the following bases:
The lumber sales arrangements vary with the products and customer base.
Wholesale commissions are supplemented by an annual allocation for mill support,
business development
2
and company performance. The annual allocation is
discretionary but has fluctuated between $200,000-$300,000 per year depending on
the mill support allocation, extent of business development and overall
corporate performance.
The following are the current details for the lumber sales personnel:
SENIOR LUMBER SALES STAFF
▇▇▇▇▇ ▇▇▇▇▇▇▇: 35% on first $400,000 of wholesale contribution, 37 1/2% on the
next $400,000 and 40% on any additional. Base salary of $100,000 is covered by
mill support allocation, company performance and wholesale contribution before a
performance bonus is paid.
▇▇▇ ▇▇▇▇: 40% on all wholesale contribution. Base salary of $110,000 is covered
by the wholesale contribution before a performance bonus is paid. His commission
remuneration includes a selective mill sales commitment.
▇▇▇▇▇▇▇ ▇▇▇▇▇: Currently on part-time status in connection with a maternity
leave. 35% on first $400,000 of wholesale contribution, 37 1/2% on the next
$400,000 and 40% on any additional. Base salary of $45,000 (pending return to
full-time work) plus a parking allowance are covered by wholesale sales
commission, mill support allocation and company performance before a performance
bonus is paid.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇: 28% on all wholesale contribution. Base salary of $85,000 plus
a vehicle allowance of $6,000 is covered by mill support allocation, company
performance and wholesale contribution before a performance bonus is paid.
▇▇▇ ▇▇▇▇▇▇: Main responsibility is marketing volume under Longview contract on a
share of commission basis plus 35% on any additional wholesale up to $400,000
and 37 1/2% on any additional. The sales/marketing commission on Longview sales
is 45% of the commission received on the Longview contract until August 31,2004
and then the percentage reduces to 35%. Base salary of $102,000 is covered by
the mill support allocation, company performance, Longview commissions and
wholesale contribution before a performance bonus is paid.
▇▇▇▇ ▇▇▇▇▇: Main responsibility is marketing Jackpine Engineered Wood Inc.'s
EZSPAN product and providing Jackpine Group with wholesale lumber raw material
supplies and coordinating lumber deliveries from the ▇▇▇▇▇▇▇▇ Lake sawmill.
Wholesale commissions are at 32% of the first $400,000 contribution and at 35%
on any additional. Base salary of $85,000 plus a parking allowance are covered
by sales commissions, mill support allocation and company performance before a
performance bonus is paid.
JUNIOR LUMBER SALES STAFF
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇: 35% on first $400,000 of wholesale contribution, 37 1/2% on the
next $400,000 and 40% on any additional. Base salary of $60,000 plus a parking
allowance are covered by wholesale sales commission, mill support allocation and
company performance before a performance bonus is paid.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇: 35% on first $400,000 of wholesale contribution, 37 1/2% on
the next $400,000 and 40% on any additional. Base salary of $52,000 (subject to
review in early 2004) is covered by wholesale commission, mill support
allocation and company performance before a performance bonus is paid.
3
TEAM MSR - (▇▇▇▇▇ ▇▇▇▇▇▇, (Team Leader) and ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇) -
operate as a team but with specific priority accounts.
▇▇▇▇▇ ▇▇▇▇▇▇▇: 35% on first $400,000, 37 1/2% on next $400,000 and 40% on any
additional. Base salary of $78,000 (subject to review in early 2004) plus a
parking allowance are covered by wholesale sales commission, mill support
allocation and company performance before a performance bonus is paid.
▇▇▇ ▇▇▇▇▇: 35% on first $400,000, 37 1/2% on next $400,000 and 40% on any
additional. Base salary of $80,000 plus a parking allowance are covered by
wholesale sales commission, mill support allocation and company performance
before a performance bonus is paid.
▇▇▇▇▇ ▇▇▇▇▇▇: Team MSR gross commission contribution minus commission
contributions allocated to ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇ are the basis for Craig's
commission calculation. 35% on the first $400,000, 37 1/2% on the next $400,000,
40% on the next $400,000, 42 1/2% on the next $400,000 and 45% on any additional
over $1,600,000. Base salary of $175,000 plus various perks approximating
$21,000 are covered by wholesale sales commissions, mill support allocation,
business development and company performance before a performance bonus is paid.
CONTRACTOR BENEFIT COST-SHARING ARRANGEMENTS:
The Company has agreed to contribute 50% of the costs of certain benefits
provided by certain of its contractors to their employees, as follows:
Jordef: $2,352.00 per month
R&D: $ 734.00 per month
▇▇▇▇▇▇▇: $ 570.00 per month
These benefits include extended health, dental, life insurance and AD&D for all,
and for hourly employees also include wage indemnity. For principals and
salaried staff, long term disability is included.
EMPLOYEE INDEMNIFICATION AGREEMENTS REGARDING DIRECTORSHIPS OF JOINT VENTURE
COMPANIES:
(a) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ (Chendi Enterprises Ltd., Dagish Enterprises
Ltd., Ecolink Forest Services Ltd., Stswecemcemc Enterprises Ltd. and
Tsi'Bas Forest Services Ltd.)
(b) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (Ecolink Forest Products Ltd.)
(c) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (Chendi Enterprises Ltd., Natasewed Enterprises Ltd.
and Tsi'Bas Forest Services Ltd.)
(d) ▇▇▇ ▇▇▇▇ (Tsi Bas)
(e) ▇▇▇▇ ▇▇▇▇▇ (Ecolink)
(f) ▇▇▇ ▇▇▇▇▇▇▇ (Chendi and Ecolink); and
(g) ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ (Stswecemcemc)
SCHEDULE 3.9
TIMBER TENURES
1. Forest License A55901, together with Amendments Nos. 1 and 2 thereto
2. Approved commitment schedule dated June 16, 1997, setting out
commitments on FL A55901
3. Forest License A20018
4. Forest License A20003
5. Forest Licence A49779 (Held by the Subsidiary. The License has now
expired (some remaining volume was transferred to other licenses held
by the Company) and the only remaining obligations under this License
relate to silviculture, in respect of which the Company has posted a
letter of credit with the Ministry of Forests.
QUALIFICATIONS:
1. The Ministry of Forested is investigating the following alleged
contraventions by the Company of the FOREST PRACTICES CODE:
DATE PARTICULARS
---- -----------
July 24, 2001 Forwarder operated under wet conditions
causing excessive rutting over a 50m section
of trail.
March 16, 2002 ▇▇▇▇▇▇▇-fir harvest limit in SP exceeded.
August 20, 2002 Improperly installed drainage structure.
(Rip rap not installed in accordance with
plan).
September 5, 2003 Decks left behind spreading MPB into
standing timber.
September 5, 2003 Contractor built road not on plan.
2. See Schedule 3.5(k) regarding First Nations issues.
3. The Company has received correspondence from the Ministry of Forests
confirming the Ministry's intention to offer replacements for FL 20018
and 20003 once the Ministry completes its process of consultation with
First Nations.
SCHEDULE 3.10(b)
VENDOR'S REQUIRED APPROVALS
1. Consent to change of control of the Company is required from Mottistone
Holdings Ltd. pursuant to the lease between the Company and Mottistone
Holdings dated December 6, 2001 for Suite 1200 and 1100, ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
2. Consent of Longview Fibre Company is required to an assignment of the
Lumber Sales Representation Agreement dated September 1, 2001 and to a
change of control of the Company. 30 days prior written notice must be
given.
3. The Vendor is required to pre-notify the Competition Bureau regarding
the transactions contemplated by this Agreement in accordance with the
merger pre-notification provisions of the Competition Act (Canada), and
to refrain from completing the merger until the applicable waiting
periods have expired.
4. The Vendor is required to file certain required information with the
United States government regarding the Vendor, the Company and the
transactions contemplated by this Agreement in accordance with the
provisions of the HSR Act, and to refrain from completing the merger
until the applicable waiting periods have expired or until an earlier
clearance is issued.
5. Consent to change of control of the Company is required from Piedmont
Hawthorne pursuant to the lease between the Company and Piedmont
Hawthorne for the aircraft hangar and office space.
SCHEDULE 4.1(d)
PURCHASER'S REQUIRED APPROVALS
1. The Purchaser is required to pre-notify the Competition Bureau
regarding the transactions contemplated by this Agreement in
accordance with the merger pre-notification provisions of the
Competition Act (Canada), and to refrain from completing the merger
until the applicable waiting periods have expired.
2. The Purchaser is required to file certain required information with
the United States government regarding the Purchaser and the
transactions contemplated by this Agreement in accordance with the
provisions of the HSR Act, and to refrain from completing the merger
until the applicable waiting periods have expired or until an earlier
clearance is issued.
3. The Purchaser is required to obtain approval of the Toronto Stock
Exchange to the issuance of shares of the Purchaser to the Vendor at
the Closing (obtained).
SCHEDULE 7.4(i)
OPINION OF VENDOR'S SOLICITOR
o, 2004
Riverside Forest Products Limited
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Dear Sirs/Mesdames:
RE: SALE BY ▇▇▇▇▇▇ ▇. ▇▇▇▇ LTD. TO RIVERSIDE FOREST PRODUCTS LIMITED OF ALL
OF THE ISSUED AND OUTSTANDING SHARES OF LIGNUM LIMITED
We have acted as counsel to ▇▇▇▇▇▇ ▇. ▇▇▇▇ Ltd. (the "Vendor") and Lignum
Limited (the "Company") in connection with the transactions contemplated in the
Share Purchase Agreement dated February 1, 2004 between Riverside Forest
Products Limited (the "Purchaser") and the Vendor (the "Share Purchase
Agreement"), and in such capacity we have been asked to render our opinion in
connection with the sale by the Vendor of all of the issued and outstanding
shares of the Lignum Limited (the "Company").
Capitalized terms used in this letter and not defined have the meaning given to
them in the Share Purchase Agreement. This opinion is being delivered to you
pursuant to Section o of the Share Purchase Agreement.
We have examined originals or copies, certified or identified to our
satisfaction, of the constating documents of the Company and the Vendor and of
such corporate records of the Company and the Vendor, certificates of public
officials, officers of the Company and the Vendor and such other documents, and
have considered such questions of law and made such other investigations, as we
have deemed relevant or necessary as a basis for the opinions hereinafter
expressed. As to certain matters of fact relevant to our opinions herein, we
have relied on a certificate of a senior officer of each of the Company and the
Vendor of even date herewith, a copy of which has been delivered to you.
In such examinations, we have assumed the genuineness of all signatures, the
legal capacity of all individuals, the authenticity of all documents submitted
to us as originals and the conformity to authentic original documents of all
documents submitted to us as certified, conformed or photostatic copies or
facsimiles thereof.
2
Whenever any opinion set forth herein is based on a state of facts and is
qualified by the phrase "to the best of our knowledge", "is aware", "known to
us", "has knowledge" or "to the knowledge", or the negative of any such phrases,
it is intended to indicate that during the course of our representation of the
Company and the Vendor in respect of the transactions which are the subject of
the opinion, no information has come to the attention of lawyers in this firm
who are actively engaged in the transactions which are the subject of this
opinion which has given them actual knowledge that such state of facts does or
does not exist. We have not undertaken any independent investigation or reviewed
any files in our possession to determine the existence or absence of such facts,
and no inference as to our knowledge of the existence or absence of such facts
should be drawn from the fact of our representation of the Company and the
Vendor.
We are solicitors qualified to carry on the practice of law in the Province of
British Columbia and express no opinion as to any laws, or matters governed by
any laws, other than the laws of the Province of British Columbia and the
federal laws of Canada applicable therein.
In expressing the opinions set forth in paragraphs 1 and 2 below, we have relied
solely on Certificates of Good Standing dated o, 2004 issued by the British
Columbia Registrar of Companies.
The following opinions are also subject to the following qualifications:
(a) the enforceability of any document may be limited by
applicable bankruptcy, reorganization, winding up, insolvency,
moratorium or other laws of general application affecting the
enforcement of creditor's rights from time to time in effect;
(b) no opinion is expressed as to any specific remedy that might
be granted, imposed or rendered and, in particular, no opinion
is expressed as to the availability of equitable remedies for
the enforcement of any provision of any documents;
(c) the enforceability of provisions that purport to sever any
provision that is prohibited or unenforceable under the
applicable law without affecting the enforceability or
validity of the remainder of such document would be determined
only in the discretion of the court; and
(d) the effect of a vitiating factor such as mistake,
misrepresentation, fraud, duress or undue influence.
We understand that the reliances, limitations and assumptions expressed in the
preceding paragraphs are satisfactory to you.
Based and relying upon and subject to the foregoing, it is our opinion that:
3
1. The Company is a company duly amalgamated under the COMPANY ACT
(British Columbia) and is in good standing with respect to the filing
of annual reports with the British Columbia Registrar of Companies.
2. The Vendor is a company duly incorporated under the COMPANY ACT
(British Columbia) and is in good standing with respect to the filing
of annual reports with the British Columbia Registrar of Companies.
3. The Vendor has the requisite corporate power and authority to execute,
deliver and perform its obligations under the Share Purchase Agreement.
4. The Share Purchase Agreement has been duly and validly authorized by
the Vendor and duly executed and delivered by an authorized officer of
the Vendor, and constitutes a legal, valid and binding obligation of
the Vendor, enforceable against the Vendor in accordance with its
terms.
5. The authorization, execution, delivery and performance by the Vendor of
the Share Purchase Agreement do not and will not conflict with, and do
not and will not result in a breach of, the memorandum or articles of
the Vendor or the Company as in existence as of the date hereof.
6. Except as disclosed in or pursuant to the Share Purchase Agreement, we
are not aware of any action, proceeding or governmental investigation
pending, or threatened in writing, against the Company and which is
required to be disclosed in the Share Purchase Agreement.
7. The authorized capital of the Company consists of 100,000 Common shares
with a par value of $1.00 per share, of which 45,000 shares are validly
issued and outstanding as fully paid and non-assessable (the "Shares").
8. All of the Shares are duly and validly registered in the name of the
Vendor.
9. To our knowledge, there are no outstanding options, warrants or other
convertible securities of the Vendor or the Company entitling any
person to purchase shares in the capital of the Vendor.
10. To our knowledge, except as contained in the Share Purchase Agreement,
there are no agreements or understandings (i) between the Company and
any of its shareholders or (ii) between or among any of the Company's
or the Vendor's shareholders which affect, restrict or relate to
voting, giving of written consents, dividend rights or transferability
of shares with respect to the Shares.
11. All necessary corporate action has been taken to permit the Shares to
be duly and validly registered in the name of the Purchaser.
4
This opinion is rendered solely to the addressees listed above in connection
with the Share Purchase Agreement and may not be used or relied upon by you for
any other purpose or used or relied upon by any other person without our prior
written consent.
Yours truly,
SCHEDULE 7.4(j)
EMPLOYMENT AGREEMENT - ▇▇▇▇ ▇. ▇▇▇▇
See attached.
SCHEDULE 7.4(q)
OPINION OF PURCHASER'S SOLICITOR
o, 2004
▇▇▇▇▇▇ ▇. ▇▇▇▇ Ltd.
▇▇▇▇-▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇-▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Dear Sirs/Mesdames:
RE: PURCHASE BY RIVERSIDE FOREST PRODUCTS LIMITED FROM ▇▇▇▇▇▇ ▇. ▇▇▇▇ LTD.
OF ALL OF THE ISSUED AND OUTSTANDING SHARES OF LIGNUM LIMITED
We have acted as counsel to Riverside Forest Products Limited (the "Purchaser")
in connection with the transactions contemplated in the Share Purchase Agreement
dated February 1, 2004 (the "Share Purchase Agreement") between Riverside and
▇▇▇▇▇▇ ▇. ▇▇▇▇ Ltd. (the "Vendor") and in such capacity we have been asked to
render our opinion in connection with the purchase by the Purchaser of all of
the issued and outstanding shares of Lignum Limited (the "Company") and the
issuance and sale by the Purchaser to the Vendor or its nominee of o common
shares in the capital of the Purchaser (the "Shares") as part of the
consideration for such purchase.
Capitalized terms used in this letter and not defined have the meaning given to
them in the Share Purchase Agreement. This opinion is being delivered to you
pursuant to Section o of the Share Purchase Agreement.
We have examined originals or copies, certified or identified to our
satisfaction, of the constating documents of the Purchaser and of such corporate
records of the Purchaser, certificates of public officials, officers of the
Purchaser and such other documents, and have considered such questions of law
and made such other investigations, as we have deemed relevant or necessary as a
basis for the opinions hereinafter expressed. As to certain matters of fact
relevant to our opinions herein, we have relied on a certificate of a senior
officer of the Purchaser of even date herewith, a copy of which has been
delivered to you.
In such examinations, we have assumed the genuineness of all signatures, the
legal capacity of all individuals, the authenticity of all documents submitted
to us as originals and the conformity to authentic original documents of all
documents submitted to us as certified, conformed or photostatic copies or
facsimiles thereof.
2
Whenever any opinion set forth herein is based on a state of facts and is
qualified by the phrase "to the best of our knowledge", "is aware", "known to
us", "has knowledge" or "to the knowledge", or the negative of any such phrases,
it is intended to indicate that during the course of our representation of the
Purchaser in relation of the transactions which are the subject of the opinion,
no information has come to the attention of lawyers in this firm who are
actively engaged in the transactions which are the subject of this opinion which
has given them actual knowledge that such state of facts does or does not exist.
We have not undertaken any independent investigation or reviewed any files in
our possession to determine the existence or absence of such facts, and no
inference as to our knowledge of the existence or absence of such facts should
be drawn from the fact of our representation of the Purchaser.
We are solicitors qualified to carry on the practice of law in the Province of
British Columbia and express no opinion as to any laws, or matters governed by
any laws, other than the laws of the Province of British Columbia and the
federal laws of Canada applicable therein.
For the purposes of this opinion, the term "Applicable Securities Laws" means
the SECURITIES ACT (British Columbia) ("BCSA"), the rules and regulations
thereunder and the rules, instruments and policies of the British Columbia
Securities Commission ("BCSC").
In expressing the opinion set forth in paragraph 1 below, we have relied solely
on a Certificate of Good Standing dated o, 2004 issued by the British Columbia
Registrar of Companies.
In expressing the opinion set forth in paragraph 2, we have relied solely on a
certificate dated o, 2004 issued by the BCSC.
In expressing the opinion set forth in paragraph 5, insofar as such opinion
relates to the number of issued and outstanding shares of the Purchaser, we have
relied solely on a certificate of Computershare Trust Company of Canada dated o,
2004, a copy of which has been delivered to you.
In expressing the opinions set forth in paragraph 9, we have assumed:
(a) that the Vendor is purchasing the Shares as principal; and
(b) there has been no advertising in connection with the issue and
sale of the Shares in printed public media of general and
regular paid circulation, or on radio, television or
telecommunications, including electronic display, or
otherwise.
In expressing the opinions set forth in paragraph 12, we have relied solely on a
letter of The Toronto Stock Exchange (the "Exchange") dated January 9, 2004.
The following opinions are also subject to the following qualifications:
(a) the enforceability of any document may be limited by
applicable bankruptcy, reorganization, winding up, insolvency,
moratorium or other laws of general
3
application affecting the enforcement of creditor's rights
from time to time in effect;
(b) no opinion is expressed as to any specific remedy that might
be granted, imposed or rendered and, in particular, no opinion
is expressed as to the availability of equitable remedies for
the enforcement of any provision of any documents;
(c) the enforceability of provisions that purport to sever any
provision that is prohibited or unenforceable under the
applicable law without affecting the enforceability or
validity of the remainder of such document would be determined
only in the discretion of the court; and
(d) the effect of a vitiating factor such as mistake,
misrepresentation, fraud, duress or undue influence.
We understand that the reliances, limitations and assumptions expressed in the
preceding paragraphs are satisfactory to you.
Based and relying upon and subject to the foregoing, it is our opinion that:
1. The Purchaser is a company duly incorporated under the COMPANY ACT
(British Columbia), and is in good standing with respect to the filing
of annual reports with the British Columbia Registrar of Companies.
2. The Purchaser is a "reporting issuer" as defined in the BCSA and is not
in default of filing financial statements required by the BCSA or
paying prescribed fees and charges.
3. The Purchaser has the requisite corporate power and authority to
execute, deliver and perform its obligations under the Share Purchase
Agreement.
4. The Share Purchase Agreement has been duly and validly authorized by
the Purchaser and duly executed and delivered by an authorized officer
of the Purchaser, and constitutes a legal, valid and binding obligation
of the Purchaser, enforceable against the Purchaser in accordance with
its terms.
5. The authorized capital of the Purchaser consists of 25,000,000 common
shares without par value, of which 8,803,993 are validly issued and
outstanding as fully paid and non-assessable.
6. To our knowledge, there are no outstanding options, warrants or other
convertible securities of the Purchaser entitling any person to
purchase shares in the capital of the Purchaser.
7. The authorization, execution, delivery and performance by the Purchaser
of the Share Purchase Agreement and the issue and sale of the Shares do
not and will not conflict with, and do not and will not result in a
breach of, the memorandum or articles of the Purchaser as in existence
as of the date hereof.
8. The Shares have been duly authorized and validly allotted and issued by
the Purchaser to the Vendor and are outstanding as fully paid and
non-assessable shares in the capital of the Purchaser.
9. The issue and sale of the Shares to the Vendor have been effected in
such a manner as to be exempt from the registration and prospectus
requirements of Applicable Securities Laws and no prospectus is
required nor are any other documents required to be filed, proceedings
taken or approvals, permits, consents or authorizations of regulatory
authorities obtained under Applicable Securities Laws to permit the
issuance, sale and delivery of the Shares by the Purchaser to the
Vendor, other than the execution and filing by or on behalf of the
Purchaser, within 10 days after the Closing Date, of a report prepared
on Form 45-103F4 prepared and executed in accordance with Applicable
Securities Laws and filed with the BCSC together with the requisite
filing fees and fee checklist.
10. No prospectus is required and no other documents are required to be
filed, proceedings taken or approvals, permits, consents, orders or
authorizations of regulatory authorities obtained under Applicable
Securities Laws in connection with the first trade of the Shares made
by the Vendor through registrants registered under Applicable
Securities Laws who have complied with such Applicable Securities Laws
or in circumstances in which there is an exemption from the
registration requirements of Applicable Securities Laws, provided that
at the time of such trade:
(a) the Purchaser is and has been a reporting issuer in a
jurisdiction listed in Appendix B of Multilateral Instrument
MI 45-102 ("MI 45-102") for the four months immediately
preceding the trade;
(b) at least four months have elapsed from the date of
distribution of the Shares to the Vendor;
(c) the certificates representing the Shares bore the legend
required by subsection 2.5(2) of MI 45-102;
(d) such trade is not a "control distribution" as defined in MI
45-102;
(e) no unusual effort is made to prepare the market or to create a
demand for the securities that are the subject of the trade
and no extraordinary commission or consideration is paid to a
person or company in respect of such trade;
(f) if the seller is an insider or officer of the Purchaser, the
seller has no reasonable grounds to believe that the Purchaser
is in default of securities legislation; and
(g) such trade is not a transaction or series of transactions
involving a purchase and sale or repurchase and resale in the
course of or incidental to a "distribution" as defined in
Applicable Securities Laws.
5
11. The Purchaser is a "qualifying issuer" as defined in MI 45-102.
12. The Purchaser's common shares are listed and posted for trading on the
Exchange. The Exchange has accepted notice of the issuance of the
Shares and has conditionally approved the listing of the Shares,
subject to the filing and review of customary post-closing
documentation and the payment of the required listing fees within the
specified time periods.
This opinion is rendered solely to the addressees listed above in connection
with the transactions contemplated by the Share Purchase Agreement and may not
be used or relied upon by you for any other purpose or used or relied upon by
any other person without our prior written consent.
Yours truly,