<PAGE>   1


                                                    EXHIBIT 2.1




                    DOMTAR CANADIAN GYPSUM PRODUCTS BUSINESS





                            ASSET PURCHASE AGREEMENT
                                    BETWEEN
                                  DOMTAR INC.
                                      AND
                          GEORGIA-PACIFIC CORPORATION





                             DATED NOVEMBER 8, 1995
<PAGE>   2





                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                              PAGE
   <S>           <C>                                                                           <C>
   ARTICLE 1.        DEFINITIONS AND PRINCIPLES OF INTERPRETATION   . . . . . . . . . . . . .  1
          1.1    Definitions  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1
          1.2    Number and Gender  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
          1.3    Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
          1.4    Schedules  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
          1.5    Governing Law  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
          1.6    Amendment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
          1.7    Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
          1.8    Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
          1.9    Table of Contents and List of Schedules  . . . . . . . . . . . . . . . . . .  16
          1.10   Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
          1.11   Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
          1.12   Delays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16

   ARTICLE 2.        PURCHASE AND SALE AND PURCHASE PRICE   . . . . . . . . . . . . . . . . .  16
          2.1    Purchase and Sale  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
          2.2    Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
          2.3    Payment of Purchase Price  . . . . . . . . . . . . . . . . . . . . . . . . .  17
          2.4    Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
          2.5    Tax Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
          2.6    Goods and Services Tax Election  . . . . . . . . . . . . . . . . . . . . . .  18
          2.7    Adjustment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . .  18

   ARTICLE 3.        TRANSFER OF BUSINESS AND PURCHASED ASSETS  . . . . . . . . . . . . . . .  21
          3.1    Transfer and Delivery  . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
          3.2    Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
          3.3    Consents to Assignments  . . . . . . . . . . . . . . . . . . . . . . . . . .  22
          3.4    Assumption of Assumed Liabilities  . . . . . . . . . . . . . . . . . . . . .  22
          3.5    Non-Assumed Liabilities  . . . . . . . . . . . . . . . . . . . . . . . . . .  22

   ARTICLE 4.        REPRESENTATIONS AND WARRANTIES OF THE VENDOR   . . . . . . . . . . . . .  23
          4.1    Incorporation and Authorization  . . . . . . . . . . . . . . . . . . . . . .  23
          4.2    Enforceability of the Agreement  . . . . . . . . . . . . . . . . . . . . . .  23
</TABLE>
<PAGE>   3
                                      -2-

<TABLE>
   <S>           <C>                                                                           <C>
          4.3    No Conflict  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23
          4.4    No Option  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
          4.5    Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
          4.6    Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
          4.7    Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
          4.8    Real Properties  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
          4.9    Equipment, Rolling Stock and Inventory . . . . . . . . . . . . . . . . . . .  26
          4.10   Operating Permits  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
          4.11   Books and Records  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
          4.12   Contracts  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
          4.13   Insurance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  28
          4.14   Intellectual Property  . . . . . . . . . . . . . . . . . . . . . . . . . . .  28
          4.15   Environmental Matters  . . . . . . . . . . . . . . . . . . . . . . . . . . .  29
          4.16   Employees, Pension and Other Benefit Plans . . . . . . . . . . . . . . . . .  31
          4.17   Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  33
          4.18   Absence of Material Changes  . . . . . . . . . . . . . . . . . . . . . . . .  34
          4.19   Vendor's Residence . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  35
          4.20   Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  35
          4.21   Full Disclosure  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  35
          4.22   Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  36
          4.23   Gypsum Rock Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . .  36

   ARTICLE 5.        REPRESENTATIONS AND WARRANTIES OF THE PURCHASER  . . . . . . . . . . . .  36
          5.1    Incorporation and Authorization  . . . . . . . . . . . . . . . . . . . . . .  36
          5.2    Enforceability of the Agreement  . . . . . . . . . . . . . . . . . . . . . .  36
          5.3    No Conflict  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  36
          5.4    Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  37

   ARTICLE 6.        EMPLOYEES AND BENEFIT PLANS  . . . . . . . . . . . . . . . . . . . . . .  37
          6.1    Employees  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  37
          6.2    Benefit Plans  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  40
          6.3    Pension Plans  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  42
          6.4    Canada and Quebec Savings Bonds  . . . . . . . . . . . . . . . . . . . . . .  45
          6.5    Employee Share Purchase and Executive Stock Option and Purchase Plans  . . .  46
          6.6    Subsidized Mortgage Plans  . . . . . . . . . . . . . . . . . . . . . . . . .  46
          6.7    Cooperation with Respect to Employee Notices . . . . . . . . . . . . . . . .  46

   ARTICLE 7.        REAL PROPERTIES  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  47

   ARTICLE 8.        NON-COMPETITION  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  47
          8.1    Non-Competition  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  47
          8.2    Permitted Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .  47
</TABLE>
<PAGE>   4
                                      -3-

<TABLE>
   <S>           <C>                                                                           <C>
          8.3    Limited Exception for Incidental Acquisitions  . . . . . . . . . . . . . . .  47

   ARTICLE 9.        COVENANTS OF THE VENDOR  . . . . . . . . . . . . . . . . . . . . . . . .  48
          9.1    Maintenance and Preservation of Business . . . . . . . . . . . . . . . . . .  48
          9.2    Notice of Cessation in Ordinary Course . . . . . . . . . . . . . . . . . . .  50
          9.3    Access for Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . .  50
          9.4    Maintain Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  50
          9.5    Corporate Proceedings for Transfer . . . . . . . . . . . . . . . . . . . . .  52
          9.6    Adjustment Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . .  52
          9.7    Sale of Enterprises  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  52
          9.8    Retail Sales Tax Certificates  . . . . . . . . . . . . . . . . . . . . . . .  52
          9.9    Tax Returns Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . .  52
          9.10   Operation of Business After the Second Fixture Date  . . . . . . . . . . . .  53
          9.11   Guarantees, Letters of Credit  . . . . . . . . . . . . . . . . . . . . . . .  53

   ARTICLE 10.       COVENANTS OF THE PURCHASER   . . . . . . . . . . . . . . . . . . . . . .  54
          10.1   Tax Returns Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . .  54
          10.2   Use of Name  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  54
          10.3   Key Employee Retention Program . . . . . . . . . . . . . . . . . . . . . . .  54
          10.4   Sale of Enterprises  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  55
          10.5   No Interference  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  55
          10.6   Guarantees, Letters of Credit  . . . . . . . . . . . . . . . . . . . . . . .  55
                                                                                                 
   ARTICLE 11.       CONDITIONS OF CLOSING  . . . . . . . . . . . . . . . . . . . . . . . . .  55
          11.1   Purchaser's Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . .  55
                 11.1.1   Representations and Warranties Remain Correct . . . . . . . . . . .  55
                 11.1.2   Performance of Obligations  . . . . . . . . . . . . . . . . . . . .  57
                 11.1.3   Permits, Consents and Approvals . . . . . . . . . . . . . . . . . .  57
                 11.1.4   Corporate and Other Proceedings . . . . . . . . . . . . . . . . . .  58
                 11.1.5   Trade-Marks Agreement . . . . . . . . . . . . . . . . . . . . . . .  58
                 11.1.6   Domtar Gypsum Inc.  . . . . . . . . . . . . . . . . . . . . . . . .  58
                 11.1.7   Opinion of Vendor's Counsel . . . . . . . . . . . . . . . . . . . .  58
                 11.1.8   Litigation  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  59
                 11.1.9   Rescission  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  59
                 11.1.10  Waiver by Purchaser . . . . . . . . . . . . . . . . . . . . . . . .  59
          11.2   Vendor's Conditions  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  59
                 11.2.1   Representations and Warranties Remain Correct . . . . . . . . . . .  59
                 11.2.2   Performance of Obligations  . . . . . . . . . . . . . . . . . . . .  60
                 11.2.3   Corporate and Other Proceedings . . . . . . . . . . . . . . . . . .  60
                 11.2.4   Goods and Services and Sales Taxes  . . . . . . . . . . . . . . . .  60
                 11.2.5   Domtar Gypsum Inc.  . . . . . . . . . . . . . . . . . . . . . . . .  60
                 11.2.6   Opinion of Purchaser's Counsel  . . . . . . . . . . . . . . . . . .  61
</TABLE>
<PAGE>   5
                                      -4-

<TABLE>
   <S>           <C>                                                                           <C>
                 11.2.7   Rescission  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  61
                 11.2.8   Waiver by Vendor  . . . . . . . . . . . . . . . . . . . . . . . . .  61

   ARTICLE 12.       SURVIVAL AND RELIANCE ON REPRESENTATIONS AND WARRANTIES AND 
                     INDEMNIFICATION  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  61
          12.1   Survival and Reliance  . . . . . . . . . . . . . . . . . . . . . . . . . . .  61
          12.2   Survival of Liability for Representations and Warranties . . . . . . . . . .  62
          12.3   Indemnification by the Vendor  . . . . . . . . . . . . . . . . . . . . . . .  63
          12.4   Indemnification by the Purchaser . . . . . . . . . . . . . . . . . . . . . .  64
          12.5   Indemnification against Third Party Claims . . . . . . . . . . . . . . . . .  65
          12.6   Indemnification after Insurance and Other Recoveries . . . . . . . . . . . .  66
                 12.6.1   Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  66
                 12.6.2   Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . .  67
          12.7   Vendor's Maximum Liability . . . . . . . . . . . . . . . . . . . . . . . . .  67
          12.8   Details of Claims  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  68
          12.9   Indemnification Sole Remedy  . . . . . . . . . . . . . . . . . . . . . . . .  68

   ARTICLE 13.       CLOSING  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  68

   ARTICLE 14.       TERMINATION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  69
          14.1   Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  69
          14.2   Continuing Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . .  70

   ARTICLE 15.       MISCELLANEOUS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  70
          15.1   Notices  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  70
          15.2   Public Announcement  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  71
          15.3   Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  71
          15.4   Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . .  71
          15.5   Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  72
          15.6   Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  72
          15.7   No Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . .  72
          15.8   Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  72
</TABLE>
<PAGE>   6

                          ASSET PURCHASE AGREEMENT

                 THIS AGREEMENT made as of November 8, 1995

BETWEEN:                     DOMTAR INC., a company incorporated under the laws
                             of Canada 

                                                                  (the "VENDOR")

AND:                         GEORGIA-PACIFIC CORPORATION, a company 
                             incorporated under the laws of Georgia

                                                               (the "PURCHASER")

                 WHEREAS the Vendor owns all the assets relating to the
Business;

                 WHEREAS the Vendor desires to sell, assign and transfer to the
Purchaser who desires to purchase, the Business and Purchased Assets subject
and pursuant to the provisions hereof;

                 NOW, THEREFOR, THIS AGREEMENT WITNESSES that in consideration
of the mutual covenants and agreements herein set out and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties covenant and agree as follows:

ARTICLE 1.       DEFINITIONS AND PRINCIPLES OF INTERPRETATION

         1.1     Definitions
                 For the purposes of this Agreement and any other agreement or
                 document entered into pursuant hereto or thereto and any
                 notice, consent, direction or other communication required or
                 permitted to be given pursuant hereto or thereto, the
                 following words and phrases shall have the following meanings
                 ascribed to them respectively, unless the subject matter or
                 context otherwise requires:

                 (A)      "ACCOUNTS RECEIVABLE" means all accounts and notes
                          receivable, trade accounts, book debts and other
                          debts due or accruing to the Vendor with respect to
                          the Business.
<PAGE>   7

                                      -2-

                 (B)      "ADJUSTMENT ARBITRATOR" means the Person, if any,
                          chosen pursuant to Section 2.7 hereof to make the
                          final determination of the adjustment to the Purchase
                          Price.

                 (C)      "ADJUSTMENT BALANCE SHEET" means the balance sheet of
                          the Vendor with respect to the Business as at the
                          Adjustment Date which shall be prepared in accordance
                          with Section 2.7.4 hereof.

                 (D)      "ADJUSTMENT DATE" means the earlier of the Closing
                          Date and the Second Fixture Date.

                 (E)      "ADJUSTMENT PAYMENT DATE" means the later of (i) the
                          fifth (5th) Business Day from and after the final
                          determination (and, if determined by the Adjustment
                          Arbitrator, delivery to the Parties) of the
                          adjustment (if any) to the Purchase Price, as
                          provided in Section 2.7 hereof and (ii) the Closing
                          Date.

                 (F)      "AFFILIATE" of any specified Person means any Person
                          directly or indirectly controlling or controlled by
                          or under direct or indirect common control with such
                          Person.  For the purposes of this definition,
                          "CONTROL" when used with respect to any Person means
                          the power to direct the management and policies of
                          such Person, directly or indirectly, whether through
                          the ownership of voting securities, by contract or
                          otherwise; and the terms "CONTROLLING" and
                          "CONTROLLED" have meanings correlative to the
                          foregoing.

                 (G)      "AGREEMENT" means this agreement entitled "ASSET
                          PURCHASE AGREEMENT" and all agreements or documents
                          supplemental hereto or in amendment or confirmation
                          hereof; "HEREIN", "HEREOF", "HERETO", "HEREUNDER" and
                          similar expressions mean and refer to this Agreement
                          and not to any particular article or section hereof;
                          "ARTICLE", "SECTION" or other subdivision of this
                          Agreement means and refers to the specified article,
                          section or other subdivision of this Agreement.

                 (H)      "AMOUNTS" has the meaning ascribed thereto in Section 
                          6.3.4 hereof.

                 (I)      "ASSUMED LIABILITIES" means all the obligations and
                          liabilities of the Vendor incurred solely in
                          connection with, and in the ordinary course of, the
                          Business in a manner consistent with the past
                          practices for the Business of the Vendor to the
                          extent the same exist or come into existence at or
                          after the Effective Time, but excluding the Excluded
                          Liabilities.
<PAGE>   8

                                      -3-

                 (J)      "BOOKS AND RECORDS" means all books, records, files
                          and documentation of the Vendor primarily relating to
                          or used or held for use by the Vendor with respect to
                          the Business or Purchased Assets (as original copies
                          or, if such books, records, files or documentation
                          are relevant to both the Business and the businesses
                          of the Vendor other than the Business, as photostatic
                          copies).

                 (K)      "BUSINESS" means the business presently conducted by
                          the Vendor at and from its facilities in Canada set
                          out in SCHEDULE 1.1(k) and known as Domtar Canadian
                          Gypsum Products Business.

                 (L)      "BUSINESS DAY" means a day other than a Saturday,
                          Sunday or any other day on which the principal banks
                          located in Montreal, Canada or Atlanta, Georgia, are
                          not open for business during normal banking hours.
                          Whenever any payment to be made or any action to be
                          taken pursuant to this Agreement is required to be
                          made or taken on a day other than a Business Day,
                          such payment shall be made or such action shall be
                          taken on the next succeeding Business Day.

                 (M)      "CLAIMS" has the meaning ascribed thereto in Section 
                          12.3.1 hereof.

                 (N)      "CLOSING" means the consummation of the sale by the
                          Vendor and the purchase by the Purchaser of the
                          Business and Purchased Assets by the transfer and
                          delivery of instruments of transfer and documents of
                          title thereto and the payment of the Purchase Price
                          on the Closing Date as provided herein.

                 (O)      "CLOSING DATE" means the day which is the Closing
                          Date pursuant to the Share Purchase Agreement.

                 (P)      "CLOSING PLACE" means the offices of the Purchaser's
                          headquarters, or such other location as the Vendor
                          may designate upon at least five (5) Business Days'
                          notice to the Purchaser, subject to the Purchaser's
                          right to reject such designated location if such
                          designation would impose an unreasonable burden on
                          the Purchaser.

                 (Q)      "CONFIDENTIALITY AGREEMENT" means the confidentiality
                          agreement between the Vendor and the Purchaser dated
                          August 30, 1995.
<PAGE>   9

                                      -4-

                 (R)      "CONSENT" has the meaning ascribed thereto in Section 
                          3.2 hereof.

                 (S)      "CONTRACTS" means all written or oral outstanding
                          contracts (other than insurance contracts or
                          policies), agreements, deeds, negotiable instruments,
                          bid, performance, surety, custom or other bonds,
                          leases, licenses, commitments, covenants and
                          warranties to which the Vendor is entitled or under
                          which it is bound with respect to the Business, and
                          all amendments and modifications thereto.

                 (T)      "EFFECTIVE TIME" means 12:01 a.m. on the Closing Date.

                 (U)      "EMPLOYEES" means, as at the date of determination,
                          the Salaried Employees and Unionized Employees.

                 (V)      "EMPLOYEES ON MEDICAL LEAVE" means those of the
                          Employees (other than the Retired Employees) who, as
                          at the date of determination, are absent from work
                          because of disability or are otherwise incapable of
                          working in their regular duties or who have claimed
                          that they are so disabled or incapable of working as
                          at such date.

                 (W)      "EMPLOYEES ON LONG-TERM MEDICAL LEAVE" means, as at
                          the date of determination, all Employees on Medical
                          Leave other than Employees on Short-Term Medical
                          Leave.

                 (X)      "EMPLOYEES ON SHORT-TERM MEDICAL LEAVE" means, as at
                          the date of determination, Employees on Medical Leave
                          who are receiving or are eligible for short-term
                          salary continuation benefits under the Laws or the
                          Vendor's Employee Plans or would be so eligible if
                          their illnesses or injuries were not covered by
                          workers' compensation.

                 (Y)      "ENVIRONMENT" means soil, land, water and air in
                          their natural state including, without limitation,
                          land surface or subsurface strata, surface water,
                          ground water and ambient air.

                 (Z)      "ENVIRONMENTAL AUTHORITIES" means all federal,
                          provincial or state ministries or federal,
                          provincial, state or local governmental bodies or
                          regulatory agencies, foreign or domestic, charged
                          with enforcing any of the Environmental Laws.

                 (AA)     "ENVIRONMENTAL CLAIMS" has the meaning ascribed
                          thereto in Section 12.7.1 hereof.
<PAGE>   10

                                      -5-

                 (BB)     "ENVIRONMENTAL LAW" means all applicable federal,
                          provincial, state or local codes, laws, statutes,
                          regulations, decrees, orders and by-laws, in force
                          and applicable to the Vendor with respect to the
                          Business (otherwise than as a result of retroactive
                          application of a subsequent legislative or regulatory
                          change or enactment adopted after the Adjustment
                          Date) as at the date with respect to which such
                          defined term is used, in respect of the protection of
                          the quality of the Environment and the health and
                          safety of employees including, without limitation,
                          those relating to the Release of Hazardous Substances
                          into the Environment or the manufacture, processing,
                          distribution, use, treatment, storage, disposal,
                          transport or handling of Hazardous Substances.

                 (CC)     "ENVIRONMENTAL NOTICE" means any notice of
                          investigation, notice of non-compliance or written
                          order from any of the Environmental Authorities,
                          including any notice of contamination or clean-up
                          requirements.

                 (DD)     "ENVIRONMENTAL PERMITS" means all permits, licenses,
                          certificates and authorizations of, and registrations
                          with, any of the Environmental Authorities pursuant
                          to any of the Environmental Laws, issued or granted
                          to the Vendor for the purpose of conducting the
                          Business as presently conducted, set out in SCHEDULE
                          1.1(DD).

                 (EE)     "EQUIPMENT" means all machinery, equipment,
                          forklifts, tools, computer systems (hardware and
                          software), furnishings, accessories and office
                          supplies owned or ordered for purchase by the Vendor
                          with respect to the Business and whether situated at
                          the Locations, in transit, ordered but not delivered,
                          warehoused or wherever situated, and all assignable
                          warranties of any Person covering all or any part
                          thereof.

                 (FF)     "EXCLUDED LIABILITIES" means any liability or
                          obligation of the Vendor which is:

                          (i)       required by U.S. GAAP to be reserved for in
                                    the Adjustment Balance Sheet and which is
                                    not so reserved for;

                          (ii)      listed in SCHEDULE 12.3.2;

                          (iii)     the Vendor's tax liabilities for income
                                    tax, payroll tax and other taxes for all
                                    taxation periods up until the Effective
                                    Time; or
<PAGE>   11

                                      -6-

                          (iv)      any employment, compensation or employee
                                    benefit obligation not specifically assumed
                                    by the Purchaser under Article 6 of this
                                    Agreement,

                          in each case, to the extent that such liability or
                          obligation is not reserved for in the Adjustment
                          Balance Sheet.

                 (GG)     "FINANCIAL STATEMENTS" means the historical income
                          and cash flow statements of the Vendor with respect
                          to the Business for the twelve (12) months ended
                          December 31, 1994 extracted from the Vendor's audited
                          financial statements for such period and the
                          unaudited historical income and cash flow statements
                          of the Vendor with respect to the Business for the
                          six (6) months ended June 30, 1995, respectively, and
                          the related notes thereto, set out in SCHEDULE
                          1.1(GG).

                 (HH)     "FINANCIAL STATEMENTS DATE" means June 30, 1995.

                 (II)     "FIRST CORE REPRESENTATIONS" means (i) those
                          representations and warranties contained in Sections
                          4.1, 4.2, 4.3.1, 4.6.1, 4.6.2, 4.7.1, 4.20 and 4.21
                          hereof and (ii) all other representations and
                          warranties of the Vendor but with all references to
                          Laws (other than the Income Tax Act (Canada) and the
                          Supplemental Pension Plans Act (Quebec)) and
                          Environmental Laws being limited to those in effect
                          on or before the First Fixture Date.

                 (JJ)     "FIRST FIXTURE DATE" means May 23, 1996.

                 (KK)     "GOODWILL" means the goodwill of the Vendor with
                          respect to the Business including, without
                          limitation, the goodwill associated with the
                          Intellectual Property and customer lists and the
                          right of the Purchaser to represent itself as
                          conducting the Business in continuation of, and in
                          succession to, the Vendor.

                 (LL)     "HAZARDOUS SUBSTANCES" means all contaminants issued
                          or discharged in the Environment in a greater
                          quantity or concentration than that provided for in
                          any of the Environmental Laws or the presence of
                          which in the Environment is prohibited pursuant to
                          any of the Environmental Laws.  For the purposes of
                          this definition, "CONTAMINANTS" means all solid,
                          liquid or gaseous matter, micro-organism, sound,
                          vibration, ray, heat, water, radiation or a
                          combination of any of them that adversely alters the
                          quality of the Environment.
<PAGE>   12

                                      -7-

                 (MM)     "INDEMNIFIED CLAIMS" means the Purchaser's
                          Indemnified Claims and the Vendor's Indemnified
                          Claims.

                 (NN)     "INDEMNITEE" and "INDEMNITOR" have the respective
                          meanings ascribed thereto in Section 12.5.1 hereof.

                 (OO)     "INITIAL PERIOD" has the meaning ascribed thereto in
                          Section 6.3.10 hereof.

                 (PP)     "INITIAL 30-DAY PERIOD" has the meaning ascribed
                          thereto in Section 2.7.4 hereof.

                 (QQ)     "INTELLECTUAL PROPERTY" means all patents, copyrights
                          (including renewal rights thereto), trade-marks,
                          service marks, trade names, industrial designs
                          (registered and unregistered and including
                          applications therefor and distinguishing guise) and
                          all other confidential information, improvements,
                          discoveries, data, trade secret information,
                          inventions, patterns, drawings, technical
                          information, research and development works,
                          concepts, methods, processes, procedures, know-how
                          and other intellectual property (in whatever medium
                          or support) owned or actively used by the Vendor with
                          respect to the Business.

                 (RR)     "INTERIM BALANCE SHEET" means the unaudited balance
                          sheet of the Vendor with respect to the Business as
                          at June 30, 1995, and the related notes thereto, set
                          out in SCHEDULE 1.1(RR).

                 (SS)     "INVENTORY" means all inventories, finished goods,
                          work-in-progress, raw materials, operating supplies,
                          shipping supplies, maintenance items, spare and
                          replacement parts and advertising materials owned or
                          ordered for purchase by the Vendor for use or sale in
                          the Business and whether situated at the Locations,
                          on consignment, in transit, ordered but not
                          delivered, warehoused or wherever situated.

                 (TT)     The "KNOWLEDGE" of the Vendor means the knowledge of
                          the Persons listed in SCHEDULE 1.1(TT).

                 (UU)     "LAW" means all applicable federal, provincial, state
                          or local codes, laws, statutes, regulations, decrees,
                          orders and by-laws, in force and applicable to the
                          Vendor with respect to the Business (otherwise than
                          as a result of retroactive application of a
                          subsequent legislative or regulatory change or
                          enactment adopted after the Adjustment Date) as at
                          the date with respect to which such defined term is
<PAGE>   13

                                      -8-

                          used, but excluding Environmental Law.

                 (VV)     "LEASED REAL PROPERTIES" means all real and immovable
                          properties leased by the Vendor as tenant, with
                          respect to the Business, as set out in SCHEDULE
                          1.1(VV).

                 (WW)     "LIENS" means all liens, prior claims, privileges,
                          security interests, hypothecs, mortgages, pledges,
                          charges, encumbrances, easements and servitudes,
                          leases, licenses, options, claims, rights, ownership
                          or title retention agreements, conditional sale
                          agreements, rights of first refusal, leasing, sale
                          and leaseback agreements and all other agreements
                          that in substance secure payment or performance of an
                          obligation.

                 (XX)     "LOCATIONS" means the Real Properties and the Leased 
                          Real Properties.

                 (YY)     "MATERIAL ADVERSE EFFECT" means, with respect to any
                          event, act, condition or occurrence of whatever
                          nature (including any adverse determination in any
                          litigation, arbitration, or governmental
                          investigation or proceedings), whether singly or in
                          conjunction with any other event, act, condition or
                          occurrence, whether or not related, a material
                          adverse change in, or a material adverse effect upon,
                          any of (i) the legality, validity or enforceability
                          of this Agreement or the ability of the Vendor to
                          execute and deliver this Agreement and consummate the
                          transactions contemplated hereby, or (ii) the
                          financial condition, results of operations, cash
                          flows, business or properties of (a) if for purposes
                          of determining compliance with Section 11.1, the
                          Corporation and its Subsidiaries (as such terms are
                          defined in the Share Purchase Agreement) and of the
                          Vendor with respect to the Business, taken as a
                          whole, and (b) for all other purposes (including for
                          purposes of the indemnities of Section 12.3), the
                          Vendor with respect to the Business.

                 (ZZ)     "MATERIAL CONTRACTS" means those of the Contracts
                          which (a) require (or, in the absence of a default,
                          may require) an expenditure by or to the Vendor in
                          excess of $500,000, and (b) are:

                          (i)     not in the ordinary course of the Business;

                          (ii)    title retention, conditional sales, leasing,
                                  sale and leaseback, loan, credit or security
                                  agreements or other agreements that in
<PAGE>   14

                                      -9-

                                  substance secure payment or performance of 
                                  an obligation;

                          (iii)   guarantees, sureties, promissory notes or 
                                  other negotiable instruments;

                          (iv)    related to Intellectual Property or computer
                                  software;

                          (v)     leases for the Leased Real Properties;

                          (vi)    personal and movable property leases and
                                  licenses of the Vendor as lessee or licensee
                                  thereunder, other than those referred to in
                                  paragraphs (ii) or (iv) of this Section;

                          (vii)   with Affiliates or Subsidiaries of the Vendor;

                          (viii)  federal, provincial or local government or
                                  governmental body contracts, tenders or bids
                                  and bonds therefor;

                          (ix)    non-competition or confidentiality agreements
                                  or other agreements in restriction of trade;

                          (x)     franchise and distribution agreements;

                          (xi)    utility supply agreements; or

                          (xii)   raw material purchase and supply agreements,

                          including, without limitation, those set out in 
                          SCHEDULE 1.1(ZZ).

                 (AAA)    "OPERATING PERMITS" means all permits, licenses,
                          certificates and authorizations of, and registrations
                          with, any federal, provincial or local government or
                          governmental body or regulatory agency pursuant to
                          any of the Laws, issued or granted to the Vendor for
                          the purpose of conducting the Business as presently
                          conducted, set out in SCHEDULE 1.1(AAA), but
                          excluding the Environmental Permits.

                 (BBB)    "OWNER'S EQUITY" has the meaning ascribed thereto and
                          is determined pursuant to the formula set out in
                          SCHEDULE 1.1(BBB).

                 (CCC)    "PARTIES" means the Vendor and the Purchaser
                          collectively and "PARTY" means either one of them.
<PAGE>   15

                                      -10-

                 (DDD)    "PERMITTED ENCUMBRANCES" means

                          (i)     all liens, prior claims, privileges, security
                                  interests, hypothecs, mortgages and charges
                                  for real and immovable property taxes
                                  contested in good faith by appropriate
                                  proceedings for which adequate reserves are
                                  being maintained or which are incurred in the
                                  ordinary course of the Business in connection
                                  with real and immovable property construction
                                  or renovation or with workers or with
                                  workers' compensation, unemployment
                                  insurance, social security, retirement and
                                  other similar legislation;

                          (ii)    all easements and servitudes (including,
                                  without limitation, easements and servitudes
                                  for public utility services);

                          (iii)   all encroachments, restrictive covenants and
                                  licenses;

                          (iv)    all site plan agreements, subdivision 
                                  agreements and leases;

                          (v)     all minor irregularities of title; and

                          (vi)    all by-laws, planning acts, building 
                                  restrictions and zoning regulations,

                          which affect the Real Properties and which (a)
                          individually would cost less than $50,000 to correct,
                          and (b) both individually and in the aggregate, are
                          of a minor nature and do not impair the use of those
                          of the Real Properties which are so affected for the
                          purpose of conducting the Business as presently
                          conducted.

                 (EEE)    "PERSON" means an individual, partnership, joint
                          venture, association, cooperative, corporation,
                          public utility, trust or a government or any
                          department, body or agency thereof or any other
                          entity with juridical personality.

                 (FFF)    "PREPAID EXPENSES" means all expenses paid by the
                          Vendor with respect to the Business or Purchased
                          Assets up to the Effective Time in respect of or for
                          any period which expires after the Effective Time.

                 (GGG)    "PURCHASED ASSETS" means the following assets:

                          (i)     the Real Properties;

                          (ii)    the Equipment;
<PAGE>   16

                                      -11-

                          (iii)   the Rolling Stock;

                          (iv)    the Inventory;

                          (v)     the Accounts Receivable;

                          (vi)    the Prepaid Expenses;

                          (vii)   the Contracts;

                          (viii)  the Operating Permits;

                          (ix)    the Environmental Permits;

                          (x)     subject to the provisions of Section 10.2 
                                  hereof, the Intellectual Property;

                          (xi)    the Goodwill; and

                          (xii)   the Books and Records.

                 (HHH)    "PURCHASE PRICE" has the meaning ascribed thereto in
                          Section 2.2 hereof.

                 (III)    "PURCHASER PROTECTED PERSONS" has the meaning
                          ascribed thereto in Section 12.3.1 hereof.

                 (JJJ)    "PURCHASER'S COUNSEL" means Purchaser's Senior
                          Vice-President - Law and General Counsel.

                 (KKK)    "PURCHASER'S EMPLOYEE PLANS" has the meaning ascribed
                          thereto in Section 6.2.2 hereof.

                 (LLL)    "PURCHASER'S INDEMNIFIED CLAIMS" has the meaning
                          ascribed thereto in Section 12.3.1 hereof.

                 (MMM)    "REAL PROPERTIES" means all real and immovable
                          properties owned by the Vendor with respect to the
                          Business, together with all plants, buildings,
                          structures, improvements and appurtenances thereon or
                          thereto and forming part thereof and all servitudes,
                          easements and rights of way in favour thereof, set
                          out in SCHEDULE 1.1(MMM).

                 (NNN)    "RELEASE" means releasing, spilling, leaking,
                          pumping, pouring, emitting, emptying, discharging,
                          injecting, escaping, leaching, disposing or dumping.
<PAGE>   17

                                      -12-


                 (OOO)    "RETIRED EMPLOYEES" means all former employees of the
                          Vendor with respect to the Business, who, as at the
                          date of determination, have rights under the Vendor's
                          Employee Plans, provided, however, that no Employee
                          on Long-Term Medical Leave shall be deemed to be a
                          Retired Employee.

                 (PPP)    "RIGHTS" has the meaning ascribed thereto in Section 
                          3.2 hereof.

                 (QQQ)    "ROLLING STOCK" means all automobiles, trucks,
                          trailers, material handling equipment and other
                          rolling stock owned or ordered for purchase by the
                          Vendor with respect to the Business and whether
                          situated at the Locations, in transit, ordered but
                          not delivered, warehoused or wherever situated, set
                          out in SCHEDULE 1.1(QQQ), and all assignable
                          warranties of any Person covering all or any part
                          thereof.

                 (RRR)    "SALARIED EMPLOYEES" means all the employees
                          (including, for greater certainty, those of the
                          Employees on Medical Leave who are not Unionized
                          Employees), other than the Unionized Employees, who,
                          as at the date of determination, are employed in the
                          Business by the Vendor.

                 (SSS)    "SAVINGS BONDS PROGRAMS" has the meaning ascribed
                          thereto in Section 6.4 hereof.

                 (TTT)    "SECOND CORE REPRESENTATIONS" means those
                          representations and warranties contained in Sections
                          4.1, 4.2, 4.3.1.1(a), 4.3.1.2, 4.4, 4.7.1 and (to the
                          extent necessary for any Vendor's Employee Plans to
                          be in compliance with the Income Tax Act (Canada) and
                          the Supplemental Pension Plans Act (Quebec)) 4.16
                          hereof.

                 (UUU)    "SECOND FIXTURE DATE" means the day which is the
                          Second Fixture Date pursuant to the Share Purchase
                          Agreement.

                 (VVV)    "SHARE PURCHASE AGREEMENT" means the share purchase
                          agreement for the sale of all the issued and
                          outstanding shares of Domtar Gypsum Inc. entered into
                          concurrently herewith between, on the one hand, the
                          Vendor, Domtar Industries Inc. and Domtar Gypsum Inc.
                          and, on the other hand, the Purchaser.

                 (WWW)    "SUBSIDIARY" of any Person means any corporation more
                          than 50% of whose shares of stock having general
                          voting power under ordinary circumstances to elect a
                          majority of the board of directors of such
                          corporation, irrespective of whether or not at the
                          time stock of any other class or classes shall have
                          or might have voting power by reason of the happening 

<PAGE>   18

                                      -13-

                          of any contingency, is owned or controlled directly or
                          indirectly by such Person or by any other Subsidiary
                          of such Person.

                 (XXX)    "SUBSIDIZED MORTGAGE PLANS" has the meaning ascribed
                          thereto in Section 6.6 hereof.

                 (YYY)    "SUPPORT INSTRUMENTS" has the meaning ascribed
                          thereto in Section 9.11.

                 (ZZZ)    "TERMINATION DATE" has the meaning ascribed thereto
                          in Section 14.1 hereof.

                (AAAA)    "THIRD PARTY CLAIM" means any demand or statement or
                          any notice or overt threat thereof which has been
                          made on or communicated to a Party by or on behalf of
                          any other Person and which, if maintained or
                          enforced, will or might result in a Claim of the
                          nature described in either Section 12.3 or 12.4
                          hereof.

                (BBBB)    "TRADE-MARKS AGREEMENT" has the meaning ascribed
                          thereto in Section 11.1.5 hereof.

                (CCCC)    "TRANSFERRING EMPLOYEES" means those of the Salaried
                          Employees at the Effective Time (i) who receive and
                          accept offers of employment from the Purchaser and
                          (ii) who are not Employees on Long-Term Medical
                          Leave.

                (DDDD)    "TRANSITIONAL PERIOD" has the meaning ascribed
                          thereto in Section 6.3.6 hereof.

                (EEEE)    "UNIONIZED EMPLOYEES" means all the employees
                          (including, for greater certainty, those of the
                          Employees on Medical Leave who were covered by a
                          collective agreement at the commencement of their
                          medical leaves) and who, as at the date of
                          determination, are employed in the Business by the
                          Vendor under a collective agreement.

                (FFFF)    "UNIONIZED NON-LEAVE EMPLOYEES" means, as at the date
                          of determination, those Unionized Employees who are
                          not Employees on Long-Term Medical Leave.

                (GGGG)    "U.S. GAAP" means generally accepted accounting
                          principles, as of December 31, 1994, set forth in the
                          opinions and pronouncements of the Accounting
                          Principles Board and the American Institute of
                          Certified Public Accountants and statements and 

<PAGE>   19

                                      -14-

                          pronouncements of the Financial Accounting Standards 
                          Board (or agencies with similar functions of 
                          comparable stature and authority within the 
                          accounting profession) or in such other statements by 
                          such other entity as may be in general use by 
                          significant segments of the accounting profession.

               (HHHH)     "VENDOR PROTECTED PERSON" has the meaning ascribed
                          thereto in Section 12.4 hereof.

               (IIII)     "VENDOR'S COUNSEL" means Ogilvy Renault.

               (JJJJ)     "VENDOR'S EMPLOYEE PLANS" means all employee benefit
                          and pension plans, all other bonus, deferred
                          compensation, retirement, savings, excess benefit,
                          stock option or purchase, retention, termination,
                          severance and incentive plans, contracts, programs,
                          funds, arrangements or practices and all other plans,
                          contracts, programs, funds, arrangements or
                          practices, that provide or may provide money (other
                          than as current salary or wages), services, property
                          or other benefits, whether written or oral and
                          whether funded or unfunded, including, without
                          limitation, any that have been frozen or terminated
                          since the Financial Statements Date, and any trust,
                          escrow or similar agreement related thereto, whether
                          written or oral and whether funded or unfunded, which
                          are established or maintained by the Vendor with
                          respect to any of its Employees or Retired Employees,
                          independent contractors, directors, officers or
                          shareholders or with respect to which the Vendor has
                          made or is required to make payments, transfers or
                          contributions.

               (KKKK)     "VENDOR'S INDEMNIFIED CLAIMS" has the meaning
                          ascribed thereto in Section 12.4 hereof.

               (LLLL)     "VENDOR'S PENSION PLANS" means the Vendor's pension
                          plans for the Salaried Employees and Unionized
                          Employees, respectively set out in SCHEDULE 4.16.3.

         1.2     Number and Gender

                 Words (including, without limitation, words and phrases
                 defined herein) importing the singular include the plural and
                 vice versa; and words (including, without limitation, words
                 and phrases defined herein) importing gender include all
                 genders.

<PAGE>   20

                                      -15-

         1.3     ENTIRE AGREEMENT

                 This Agreement, together with the agreements entered into, and
                 other documents delivered, pursuant hereto or concurrently
                 herewith constitute the entire agreement between the Parties
                 on the subject matter hereof and supersede all prior
                 agreements, understandings, negotiations and discussions,
                 whether written or oral, of the Parties on the subject matter
                 hereof, other than the Confidentiality Agreement, and there
                 are no warranties, representations, undertakings, obligations,
                 covenants, conditions or other agreements between the Parties
                 in connection with the subject matter hereof except as
                 specifically provided herein or therein.

         1.4     SCHEDULES

                 The Schedules referred to herein and attached hereto form an
                 integral part of this Agreement.  Nothing set out in the
                 Schedules shall be deemed to establish a standard of
                 materiality.

         1.5     GOVERNING LAW

                 This Agreement shall be governed by, and construed in
                 accordance with, the laws of the Province of Ontario and the
                 laws of Canada applicable therein.

         1.6     AMENDMENT

                 No supplement or amendment of this Agreement shall be binding
                 upon the Parties unless expressly provided in a document duly
                 executed by the Parties.

         1.7     WAIVER

                 The failure by either Party, at any time or for any period of
                 time, to require performance by the other Party of any of the
                 latter's respective obligations under this Agreement shall not
                 affect the former's rights thereafter to require such
                 performance.  No waiver by either Party of any of the
                 provisions of this Agreement shall constitute or be deemed to
                 constitute a waiver of any other provision hereof (whether or
                 not similar) nor shall such waiver constitute a continuing
                 waiver unless otherwise expressly provided in a document duly
                 executed by the Parties.

         

<PAGE>   21

                                      -16-

         1.8     HEADINGS

                 The Article, Section and other subdivision headings contained
                 herein are included for convenience of reference only, are not
                 intended to be full or accurate descriptions of the content
                 thereof and shall not affect or be utilized in the
                 construction or interpretation of this Agreement.

         1.9     TABLE OF CONTENTS AND LIST OF SCHEDULES

                 The table of contents and list of Schedules preceding this
                 Agreement are included for convenience of reference only and
                 shall not affect or be utilized in the construction or
                 interpretation of this Agreement.

         1.10    CURRENCY

                 Unless otherwise indicated herein, all dollar amounts referred
                 to in this Agreement are in legal currency of the United
                 States of America and all dollar signs ($) used herein refer
                 to such currency.  If for the purposes of any payment required
                 to be made in order to give effect to the provisions hereof it
                 is necessary to convert a sum of money in United States of
                 America currency into Canadian currency or vice versa, the
                 applicable rate of exchange shall be the spot buying rate of
                 exchange of Mellon Bank in Pittsburgh, Pennsylvania, at 12
                 noon on the date such payment is due.

         1.11    SEVERABILITY

                 If any provision of this Agreement shall be held illegal,
                 invalid or unenforceable by any competent court or tribunal in
                 any relevant jurisdiction, such illegality, invalidity or
                 unenforceability shall attach only to such provision in such
                 jurisdiction and such provision shall be severed herefrom and
                 be ineffective to the extent of such illegality, invalidity or
                 unenforceability and shall not affect or impair or render
                 illegal, invalid or unenforceable such provision in any other
                 jurisdiction or any other provision of this Agreement in any
                 jurisdiction.

         1.12    DELAYS

                 In calculating the delay or period of time within or following
                 which any act is to be done or step taken pursuant to this
                 Agreement, the day which marks the start of such delay or
                 period shall be excluded from such calculation.

ARTICLE 2.       PURCHASE AND SALE AND PURCHASE PRICE



<PAGE>   22

                                      -17-

         2.1     PURCHASE AND SALE

                 Upon the terms and subject to the conditions of this
                 Agreement, the Vendor shall sell, assign and transfer to the
                 Purchaser and the Purchaser shall purchase, assume and accept
                 from the Vendor, at the Closing but with effect as at the
                 Effective Time, all of the Vendor's right, title and interest
                 in, to or under the Business and Purchased Assets for the
                 Purchase Price and upon the terms and conditions herein
                 contained.

         2.2     PURCHASE PRICE

                 The purchase price for the Business and Purchased Assets shall
                 be, subject to the adjustments, if any, pursuant to the
                 provisions of Section 2.7 hereof, the amount of Seventy
                 Million Dollars ($70,000,000) (plus, if the Closing occurs
                 after the Second Fixture Date, interest on such amount at the
                 prime rate of Mellon Bank, as defined in Section 2.7.3 hereof,
                 calculated from the Second Fixture Date until paid in full)
                 (the "PURCHASE PRICE").  The Purchase Price and the Assumed
                 Liabilities shall be allocated by the Parties to the Business
                 and Purchased Assets as set out in SCHEDULE 2.2, and each
                 Party agrees to file its income tax returns in accordance with
                 such allocation.

         2.3     PAYMENT OF PURCHASE PRICE

                 The Purchaser shall pay the Purchase Price at the Closing, at
                 the Closing Place, by wire transfer for, or certified cheque
                 in, the amount of the Purchase Price payable to the Vendor or
                 as directed by the Vendor.

         2.4     TRANSFER TAXES

                 The Purchaser shall be liable for and pay, within the time
                 specified therefor, any and all federal, provincial and local
                 taxes (including, without limitation, goods and services,
                 sales, transfer and value added taxes), duties or other like
                 imposts and charges (including, without limitation, penalties
                 and interest) payable upon and in relation to the sale,
                 assignment and transfer of the Business and Purchased Assets
                 by the Vendor to the Purchaser pursuant hereto and all other
                 transactions pursuant to this Agreement, except for any income
                 tax payable by the Vendor.

         2.5     TAX ELECTION

                 The Parties shall jointly make, execute and file, in a manner
                 consistent with SCHEDULE 2.2, an election under Section 22 of
                 the Income Tax Act (Canada) and the corresponding provisions
                 of all applicable provincial statutes in respect of the sale,

<PAGE>   23

                                      -18-

                 assignment and transfer of the Accounts Receivable, in each
                 case, on the forms and within the delays prescribed for such
                 purposes, and shall also prepare and file all of their
                 respective tax returns in a manner consistent with the
                 election stipulated in this Section 2.5.

         2.6     GOODS AND SERVICES TAX ELECTION

                 The Parties shall jointly make and execute an election under
                 Section 167 of the Excise Tax Act (Canada) and Section 75 of
                 the Quebec Sales Tax Act on the forms prescribed for such
                 purposes along with any documentation necessary or desirable
                 in order to effect the transfer of the Business and Purchased
                 Assets by the Vendor without payment of any Goods and Services
                 Tax ("GST") or Quebec Sales Tax ("QST").  The Purchaser shall
                 file the election forms referred to in this Section 2.6,
                 together with any documentation necessary or desirable to give
                 effect to such election, with Revenue Canada and the Ministere
                 du Revenu du Quebec, respectively, together with the
                 Purchaser's GST and QST returns for the reporting period in
                 which the transactions provided for herein are consummated.
                 Notwithstanding such election, in the event that it is
                 determined by Revenue Canada or by the Ministere du Revenu du
                 Quebec that there is a GST or QST liability of the Purchaser
                 to pay GST or QST on all or part of the Business or Purchased
                 Assets, such GST or QST, as the case may be, shall, unless
                 already collected from the Purchaser and remitted by the
                 Vendor be forthwith remitted by the Purchaser to Revenue
                 Canada or the Ministere du Revenu du Quebec, as the case may
                 be.  Should the Vendor be assessed by Revenue Canada or the
                 Ministere du Revenu du Quebec for any such GST or QST
                 liability, the Purchaser shall indemnify and hold harmless the
                 Vendor for all taxes, interest and penalties which the Vendor
                 may be required to pay.

         2.7     Adjustment of Purchase Price

                 2.7.1    An adjustment, if any, based on U.S. GAAP, with
                          respect to the Purchase Price shall be made as of the
                          Adjustment Date as follows:

                          2.7.1.1     if the value of the Owner's Equity as
                                      determined by the Adjustment Balance
                                      Sheet exceeds the value of the Owner's
                                      Equity as determined by the Interim
                                      Balance Sheet, the Purchaser shall pay to
                                      the Vendor, as an adjustment to the
                                      Purchase Price, the amount of such
                                      excess; and

<PAGE>   24

                                      -19-

                          2.7.1.2     if the value of the Owner's Equity as
                                      determined by the Interim Balance Sheet
                                      exceeds the value of the Owner's Equity
                                      as determined by the Adjustment Balance
                                      Sheet, the Vendor shall pay to the
                                      Purchaser, as an adjustment to the
                                      Purchase Price, the amount of such
                                      excess.

                 2.7.2    The amount of any adjustment payable in accordance
                          with the provisions of this Section 2.7 shall bear
                          interest at the prime rate of Mellon Bank calculated
                          from the Adjustment Date until paid in full, and the
                          amount of any such adjustment and interest accrued
                          thereon shall be paid, subject to Section 2.7.4, on
                          the Adjustment Payment Date by wire transfer or
                          certified cheque payable to or as directed by the
                          Party entitled thereto pursuant to the provisions of
                          this Section 2.7.  If the Adjustment Payment Date is
                          the Closing Date, the adjustment may be added to or
                          netted against the Purchase Price, as the case may
                          be.

                 2.7.3    For the purposes hereof, the "prime rate of Mellon
                          Bank" means the prime rate of Mellon Bank announced
                          by said Bank from time to time in Pittsburgh,
                          Pennsylvania, as its reference rate of interest
                          (commonly known as its prime rate) for commercial
                          loans made by said Bank in the United States in
                          United States of America dollars.

                 2.7.4    Within sixty (60) days after the Adjustment Date, the
                          Vendor shall (i) prepare the Adjustment Balance
                          Sheet, a calculation of Owner's Equity pursuant
                          thereto, and a calculation, in accordance with this
                          Section 2.7, of the Purchase Price adjustment (if
                          any) and (ii) deliver to the Purchaser a copy of such
                          Adjustment Balance Sheet and calculations.  If the
                          Purchaser is satisfied that the Purchase Price
                          adjustment as calculated and submitted by the Vendor
                          has been properly calculated, the Purchaser shall so
                          notify the Vendor.  If the Purchaser disagrees with
                          such calculation of the Purchase Price adjustment
                          (whether such objection relates to the mathematical
                          calculation thereof or of Owner's Equity, to the
                          Adjustment Balance Sheet or its preparation, or any
                          combination thereof) calculated by the Vendor, then
                          the Purchaser shall deliver to the Vendor, within
                          thirty (30) days after delivery to the Purchaser of
                          the Vendor's calculation of the Purchase Price
                          adjustment (the "INITIAL 30-DAY PERIOD"), a written
                          description of any adjustment proposed by the
                          Purchaser to such calculation, and the Vendor and the
                          Purchaser shall negotiate in good faith to resolve

<PAGE>   25

                                      -20-

                          any disagreement with respect thereto.  If the
                          Purchaser fails to give the Vendor notification
                          within the Initial 30-Day Period of any objection to
                          such calculation of the Purchase Price adjustment (or
                          gives objections only to portions thereof), then such
                          calculation (or the part not objected to) shall be
                          binding upon the Parties.  Any undisputed amount
                          shall be paid promptly on or before the later of (i)
                          the Closing Date or (ii) the fifth (5th) Business Day
                          after the Initial 30-Day Period.  If the Vendor and
                          the Purchaser have not resolved any such disagreement
                          (or portion thereof) within fifty (50) days following
                          the date on which the Purchaser receives the Vendor's
                          proposed adjustment to the Purchase Price, then such
                          disagreement shall be submitted to the Adjustment
                          Arbitrator for a final and binding resolution of the
                          disagreement and calculation of the final Purchase
                          Price adjustment.  The costs and expenses for the
                          services of the Adjustment Arbitrator shall be borne
                          by the Party whose position in the dispute submitted
                          to the Adjustment Arbitrator has the greatest dollar
                          discrepancy from the calculation determined by the
                          Adjustment Arbitrator.

                          The Adjustment Arbitrator shall be chosen as follow:

                          (i)     if the amount of the dispute is less than or
                                  equal to $1,000,000, the Adjustment
                                  Arbitrator shall be KPMG-Peat Marwick in
                                  Chicago; or

                          (ii)    if the amount of the dispute is in excess of
                                  $1,000,000, then three arbitrators shall be
                                  chosen from a list of ten (10) disinterested
                                  accountants in Chicago or its vicinity
                                  compiled by the American Arbitration
                                  Association, with the Vendor and the
                                  Purchaser alternatively striking a name from
                                  such list until only three names remain.  The
                                  Vendor shall have the right to strike the
                                  first name, and such right shall be exercised
                                  within five (5) Business Days after the list
                                  is presented to both the Vendor and the
                                  Purchaser.  Thereafter in turn, the Purchaser
                                  and the Vendor shall have two (2) Business
                                  Days after notification to it of the last
                                  name stricken by the other Party, to strike a
                                  name from the list until only three (3) names
                                  are left.  The arbitrators shall be those
                                  three (3) Persons whose names remain after
                                  the above process.  If any such Person cannot
                                  or does not serve as an arbitrator, then such
                                  Person shall be replaced by the Person whose
                                  name was last stricken who is available.  If
                                  any Party fails to strike a name from the
                                  list within the allotted time, then the other 

<PAGE>   26

                                      -21-

                          Party shall have the right to name the three 
                          arbitrators.

                          Each of the Parties represents and warrants to the
                          other Party that it has disclosed to the other Party
                          all significant business and other relationships that
                          it has had with KPMG-Peat Marwick on or after January
                          1, 1993.

                          The Adjustment Balance Sheet shall present fairly the
                          financial position of the Vendor with respect to the
                          Business, and shall be based on the books and records
                          of the Vendor which will be kept, and such Adjustment
                          Balance Sheet shall be calculated, in accordance with
                          U.S. GAAP applied on a basis consistent with the
                          period covered by the Financial Statements and the
                          Interim Balance Sheet.  All liabilities, contingent
                          or otherwise, of the Vendor with respect to the
                          Business which are required to be reflected or
                          reserved against in the Adjustment Balance Sheet
                          shall be reflected therein.

ARTICLE 3.       TRANSFER OF BUSINESS AND PURCHASED ASSETS

         3.1     TRANSFER AND DELIVERY

                 Subject to the provisions of Sections 3.2 and 3.3 hereof, at
                 the Closing, the Vendor shall execute and deliver to the
                 Purchaser all such instruments of transfer and documents of
                 title as shall be necessary to transfer title to the Business
                 and Purchased Assets to the Purchaser, and shall deliver to
                 the Purchaser possession of the Business and Purchased Assets,
                 in each case, with effect as at the Effective Time.

         3.2     ASSIGNMENT

                 Nothing in this Agreement shall be construed as a sale,
                 assignment or transfer, or an attempted sale, assignment or
                 transfer, of any of the Contracts, Accounts Receivable,
                 Operating Permits, Environmental Permits or other Purchased
                 Assets (collectively, the "RIGHTS") if such Right can only be
                 obtained or exercised by the Purchaser if it is re-issued or
                 issued to the Purchaser by a Person (if such re-issuance or
                 issuance has not been obtained) or if such Right is not
                 saleable, assignable or transferable without the consent,
                 approval, registration, filing, application, notice, transfer,
                 order, qualification, waiver or other action of any kind of a
                 Person (a "CONSENT") (if such Consent has not been obtained)
                 and such sale, assignment or transfer or attempted sale,
                 assignment or transfer would constitute a breach of such Right
                 or of any agreement or instrument by which the Vendor is bound
                 with respect to such Right.  The Vendor hereby represents and

<PAGE>   27

                                      -22-

                 warrants that set forth on SCHEDULE 3.2 is a true, correct and
                 complete list of all Consents, the failure of which to obtain
                 prior to the Closing Date might reasonably be expected to have
                 a Material Adverse Effect.

         3.3     CONSENTS TO ASSIGNMENTS

                 The Vendor shall exercise its best efforts to obtain, and
                 cooperate with the Purchaser for the purpose of obtaining, all
                 Consents of all Persons necessary for the sale, assignment or
                 transfer by the Vendor to the Purchaser of the Rights
                 (including, without limitation, the re-issuance or issuance in
                 the name and for the benefit of the Purchaser of the Operating
                 Permits and Environmental Permits or of permits, licenses,
                 certificates and authorizations to replace those of the
                 Operating Permits or Environmental Permits which are
                 non-saleable, non-assignable or non-transferable).  If any
                 Person whose Consent is required does not consent to the sale,
                 assignment or transfer of any of the Rights from the Vendor to
                 the Purchaser, the Vendor shall, at the request of the
                 Purchaser and to the extent permitted by the Laws and
                 Environmental Laws, enforce, use, carry-out and comply with
                 such Right against such Person as mandatary and agent, and for
                 the exclusive benefit of, the Purchaser, provided that the
                 Vendor shall not be liable for any loss (including, without
                 limitation, loss of profits or economic loss) or damages
                 (including, without limitation, indirect, consequential or
                 incidental damages) suffered or incurred by the Purchaser as a
                 result of the failure to obtain any Consent to the sale,
                 assignment or transfer of the Rights (including, without
                 limitation, the re-issuance or issuance in the name and for
                 the benefit of the Purchaser of the Operating Permits and
                 Environmental Permits or of permits, licenses, certificates
                 and authorizations to replace those of the Operating Permits
                 or Environmental Permits which are non-saleable,
                 non-assignable or non-transferable) or arising from any such
                 attempted sale, assignment or transfer.

         3.4     ASSUMPTION OF ASSUMED LIABILITIES

                 The Purchaser shall assume and become liable for, and shall
                 pay, perform, discharge, satisfy and fulfil, in a timely
                 manner and strictly in accordance with their terms, the
                 Assumed Liabilities as at and with effect from the Effective
                 Time.

         3.5     NON-ASSUMED LIABILITIES

                 The Vendor shall remain liable for, and pay, perform,
                 discharge, satisfy and fulfill, in a timely manner and
                 strictly in accordance with their terms, all its liabilities 

<PAGE>   28

                                      -23-

                 relating to the Business that are not Assumed Liabilities.

ARTICLE 4.       REPRESENTATIONS AND WARRANTIES OF THE VENDOR

         The Vendor represents and warrants to the Purchaser as follows:

         4.1     INCORPORATION AND AUTHORIZATION

                 The Vendor is a corporation duly incorporated, organized,
                 validly existing and in good standing under the laws of Canada
                 and has full capacity, power and authority, corporate and
                 otherwise, to execute, deliver and perform this Agreement and
                 to consummate the transactions contemplated hereby, and has
                 been duly authorized to execute and become a party to this
                 Agreement and to consummate the transactions provided herein
                 or pursuant hereto.

         4.2     ENFORCEABILITY OF THE AGREEMENT

                 This Agreement constitutes a legal, valid and binding
                 obligation of the Vendor enforceable against it in accordance
                 with its terms, except to the extent that the enforcement
                 hereof may be limited by bankruptcy, insolvency, arrangement,
                 reorganization, moratorium or other similar laws relating to
                 creditors' rights generally and general principles of equity
                 (regardless of whether enforceability is considered in a
                 proceeding in equity or at law).

         4.3     NO CONFLICT

                 4.3.1        Neither the entering into of this Agreement nor
                              the consummation by the Vendor of any of the
                              transactions contemplated hereby shall:

                              4.3.1.1      with or without the giving of notice
                                           or the lapse of time, or both,
                                           violate, conflict with, or result in
                                           a breach or default under, or cause
                                           the termination of, (a) any of the
                                           provisions of the articles of
                                           incorporation, articles of
                                           amendment, certificates in respect
                                           thereto, by-laws or other charter
                                           documents of the Vendor or of any
                                           written shareholders agreement or
                                           shareholders, stock or voting trust
                                           to which the Vendor is a party or
                                           (b) any Law or Environmental Law to
                                           which the Vendor is subject;

<PAGE>   29

                                      -24-

                              4.3.1.2      with or without the giving of notice
                                           or the lapse of time, or both,
                                           violate, conflict with, or result in
                                           a breach or default under, or cause
                                           the termination of, any written
                                           Contract, except for such
                                           violations, conflicts, breaches,
                                           defaults, or terminations which are
                                           not likely to have a Material
                                           Adverse Effect; or

                              4.3.1.3      result in the creation or imposition
                                           of any Lien upon the Purchased 
                                           Assets.

                 4.3.2        There are no judicial, quasi-judicial,
                              administrative, quasi-administrative or
                              arbitration proceedings pending against the
                              Vendor which, if adversely determined, may
                              interfere with the sale, assignment, transfer or
                              delivery of the Business and Purchased Assets or
                              the consummation of any of the transactions
                              herein provided.

         4.4     NO OPTION

                 No Person has any agreement, option or right capable of
                 becoming an agreement or option to acquire the Business or any
                 of the Purchased Assets, or that would restrict the ability of
                 the Vendor to transfer the Purchased Assets to the Purchaser
                 hereunder, other than pursuant to purchase orders for
                 Inventory accepted by the Vendor in the ordinary course of the
                 Business.

         4.5     BUSINESS

                 Except as set out in SCHEDULE 4.5, the Vendor is conducting
                 the Business in compliance with all Laws of each jurisdiction
                 in which it presently conducts the Business and is duly
                 qualified, licensed or registered in each jurisdiction in
                 which the nature of the Business or the Purchased Assets makes
                 such qualification, licensing or registration necessary,
                 except where the failure to so comply or to be so qualified,
                 registered or licensed is not likely to have a Material
                 Adverse Effect.

         4.6     FINANCIAL STATEMENTS

                 4.6.1        The Financial Statements present fairly, in all
                              material respects, the results of operations and
                              cash flows of the Business, for the periods
                              covered by the relevant statements forming part
                              of the Financial Statements.

<PAGE>   30

                                      -25-

                 4.6.2        The Interim Balance Sheet presents fairly, in all
                              material respects, the financial position of the
                              Business as at the date thereof.

                 4.6.3        The Financial Statements and the Interim Balance
                              Sheet are based on the books and records of the
                              Vendor which have been kept, and such Financial
                              Statements and Interim Balance Sheet have been
                              calculated, in accordance with U.S. GAAP applied
                              on a consistent basis throughout the periods
                              involved.

                 4.6.4        There are no liabilities, contingent or
                              otherwise, of the Vendor with respect to the
                              Business not reflected in the Financial
                              Statements or Interim Balance Sheet or in the
                              notes thereto which are required to be disclosed
                              therein in accordance with U.S. GAAP.

         4.7     PURCHASED ASSETS

                 4.7.1        Subject to Permitted Encumbrances and except as
                              set out in SCHEDULE 4.7, the Vendor owns and
                              possesses the Purchased Assets with good and
                              marketable title thereto free and clear of all
                              Liens and also with registered or recorded title
                              to the Real Properties and the Vendor has the
                              exclusive right to possess, sell, assign and
                              transfer the Purchased Assets.

                 4.7.2        Except as otherwise expressly provided in this
                              Agreement, the Purchased Assets are sold,
                              assigned and transferred by the Vendor to the
                              Purchaser and purchased, assumed and accepted by
                              the Purchaser without any warranty whatsoever
                              including, for greater certainty, any legal,
                              statutory, contractual or customary warranty.

                 4.7.3        The Purchased Assets include all tangible
                              personal and real properties necessary to permit
                              the Purchaser to conduct the Business in the same
                              manner as such Business has been conducted by the
                              Vendor since December 31, 1994, without any need
                              for replacement, refurbishment or repair
                              otherwise than in the ordinary course of Business
                              and in a manner consistent with the past
                              practices of the Vendor for the Business.

         4.8     REAL PROPERTIES

                 4.8.1        Subject to Permitted Encumbrances, the Real
                              Properties and the use of the Leased Real
                              Properties do not violate, contravene or breach 

<PAGE>   31

                                      -26-

                              and are used in compliance with the Laws, except 
                              for such violations, contraventions, breaches and
                              non-compliances which, individually or in the 
                              aggregate, are not likely to have a Material 
                              Adverse Effect.  Except as set out in SCHEDULE 
                              4.8.1 or except for Permitted Encumbrances, there
                              does not exist (i) any encroachment by any 
                              building or structure not owned by the Vendor on 
                              the Real Properties nor any encroachment by any 
                              of the buildings and structures constituting 
                              part of or located on the Real Properties on any 
                              real property not included in the Real Properties 
                              or (ii) any condemnation proceedings or, to the 
                              best of the Vendor's knowledge, any threat 
                              thereof relating to the Real Properties which, 
                              in either case, is likely to have a Material 
                              Adverse Effect.  The Real Properties and the 
                              Leased Real Properties are in compliance with 
                              the Planning Act (Ontario) and all comparable 
                              legislation in the other Canadian jurisdictions.

                 4.8.2        All personal property taxes, ad valorem taxes,
                              real and immovable property taxes, surtaxes,
                              charges, levies, rates, duties and assessments,
                              whether general or special, and real and
                              immovable property mutation taxes due and payable
                              pursuant to the Laws with respect to the Real
                              Properties before the Adjustment Date and any
                              interest and penalties thereon or adjustments
                              thereto, have been paid by the Vendor or such
                              taxes, surtaxes, charges, levies, rates, duties
                              and assessments shall be reflected and reserved
                              against in the Adjustment Balance Sheet.

                 4.8.3        The buildings, plants and structures included in
                              the Real Properties are in good condition and
                              repair and are adequate for the conduct of the
                              Business as conducted by the Vendor since
                              December 31, 1994, except for normal wear and
                              tear and normal usage.

         4.9     EQUIPMENT, ROLLING STOCK AND INVENTORY

                 4.9.1        The Equipment and Rolling Stock and the equipment
                              leased by the Vendor under the lease, leasing or
                              sale and leaseback agreements forming part of the
                              Material Contracts (other than any idle item
                              thereof) are in good condition and repair and are
                              adequate for the conduct of the Business as
                              conducted by the Vendor since December 31, 1994,
                              except for normal wear and tear and normal usage.

<PAGE>   32

                                      -27-

                 4.9.2        The Inventories reflected in the Interim Balance
                              Sheet or subsequently acquired and properly
                              included in the Adjustment Balance Sheet are
                              reflected therein at the lower of cost or market
                              value in accordance with U.S. GAAP and are, in
                              all material respects, of good and marketable
                              quality and in sufficient quantity for the
                              conduct of the Business as presently conducted,
                              and the reserves for obsolete or surplus
                              inventories reflected on the Interim Balance
                              Sheet and Adjustment Balance Sheet are and shall
                              be adequate as at the respective dates thereof in
                              accordance with U.S. GAAP consistently applied.

                 4.9.3        The Accounts Receivable reflected in the Interim
                              Balance Sheet are, and the Accounts Receivable
                              that will be reflected in the Adjustment Balance
                              Sheet will be, reflected therein in accordance
                              with U.S. GAAP and are and will be bona fide,
                              have been and will be properly recorded in the
                              ordinary course of the Business and represent
                              amounts due for goods or services sold or
                              rendered in the ordinary course of the Business.
                              The reserves for doubtful accounts reflected on
                              the Interim Balance Sheet and Adjustment Balance
                              Sheet are and shall be adequate as at the
                              respective dates thereof in accordance with U.S.
                              GAAP consistently applied.

         4.10    OPERATING PERMITS

                 Except as set out in SCHEDULE 4.10, the Operating Permits are
                 all the material permits, licenses, certificates and
                 authorizations of, and registrations with, any federal,
                 provincial or local governmental body or regulatory agency
                 necessary to conduct the Business as presently conducted, and
                 the Operating Permits are in good standing and the Vendor is
                 in compliance in all material respects thereunder.

         4.11    BOOKS AND RECORDS

                 The Books and Records include all such books, records, files
                 and documentation as are reasonably necessary for the conduct
                 of the Business as presently conducted.  The Books and Records
                 have been maintained in accordance with sound business
                 practices and present fairly, in all material respects, the
                 matters referred to therein.

         4.12    CONTRACTS

                 4.12.1       Except as set out in SCHEDULE 1.1(ZZ) OR 4.12,
                              the Material Contracts have been entered into in
                              the ordinary course of the Business and are in
                              full force and effect.  No material default,

<PAGE>   33

                                      -28-

                              violation or breach on the part of the
                              Vendor exists in respect of the Material
                              Contracts and, to the best of the Vendor's
                              knowledge, no event exists which, in the case of
                              any default, violation or breach but for the
                              lapse of time, the giving of notice, or both,
                              would entitle the other contracting Person to
                              terminate any of the Material Contracts or would
                              have a Material Adverse Effect.

                 4.12.2       To the best of the Vendor's knowledge, there is
                              no default, violation or breach under any of the
                              Material Contracts on the part of the other
                              contracting Person.

                 4.12.3       True, correct and complete copies of all Material
                              Contracts, including any amendments thereto, have
                              been made available to the Purchaser, along with
                              a detailed description and explanation of all
                              oral Material Contracts.

                 4.13     INSURANCE

                 4.13.1       The Vendor, the Business and the Purchased Assets
                              are insured with financially sound and reputable
                              insurers against claims, losses and damages from
                              all reasonably foreseeable liability, hazards and
                              risks, to such extent and in such amounts and
                              with such deductible amounts therefrom as is
                              customary for reasonably prudent Persons
                              operating like businesses and owning like
                              properties, all as provided for in and by the
                              policies and contracts of insurance set out in
                              SCHEDULE 4.13.

                 4.13.2       All such policies and contracts of insurance are
                              in full force and effect, and the Vendor is in
                              good standing and compliance with respect to each
                              such policy or contract to which it is a party.
                              The Vendor has not received notice of any pending
                              or threatened cancellation of any such insurance
                              or of any premium increase.  Except as set out in
                              SCHEDULE 4.13, there are no pending claims
                              against such insurance as to which insurers are
                              defending under reservation of rights or have
                              denied liability, and there exists no claim under
                              such insurance that has not been properly filed
                              with such insurers by the Vendor.

         4.14    INTELLECTUAL PROPERTY

                 4.14.1       SCHEDULE 4.14 sets out a true and complete list
                              of all registered patents and copyrights and all
                              registered or unregistered trade-marks, service
                              marks, trade-names and industrial designs 


<PAGE>   34

                                      -29-

                              (including, in each case, any registrations or 
                              applications therefor) owned or actively used by 
                              the Vendor with respect to the Business.  With 
                              respect to any patent, copyright, trade-mark, 
                              service mark, trade name or industrial design 
                              listed in SCHEDULE 4.14 which is not owned 
                              in its entirety by the Vendor and included 
                              within the Intellectual Property to be
                              transferred pursuant hereto, the Vendor has (i)
                              identified in SCHEDULE 4.14 the owner of the
                              subject patent, copyright, trade-mark, service
                              mark, trade-name or industrial design and (ii)
                              delivered to the Purchaser true and correct
                              copies of the licenses or other agreements
                              authorizing the Vendor's use thereof.  Except as
                              specifically disclosed in SCHEDULE 4.14, no
                              rights under any such licenses or agreements will
                              be terminated, limited or otherwise adversely
                              affected as a result of the transactions
                              contemplated hereunder.

                 4.14.2       Except as set out in SCHEDULE 4.14, there is not
                              any claim existing or, to the best of the
                              Vendor's knowledge, threatened of adverse
                              ownership, invalidity or other opposition to or
                              conflict with any of the patents, copyrights,
                              trade-marks, service marks, trade-names and
                              industrial designs (including, in each case, any
                              registrations or applications therefor) listed in
                              SCHEDULE 4.14, nor does the conduct of the
                              Business by the Vendor breach any registered or,
                              to the best of the Vendor's knowledge,
                              unregistered patent, copyright, trade-mark,
                              service mark, trade-name or industrial design or
                              any other intellectual property right owned by
                              any other Person.

         4.15    ENVIRONMENTAL MATTERS

                 Except as set out in SCHEDULE 4.15:

                 4.15.1       The Environmental Permits are all the permits,
                              licenses, certificates and authorizations of, and
                              registrations with, any of the Environmental
                              Authorities pursuant to the Environmental Laws
                              necessary to conduct the Business substantially
                              as presently conducted.  The Environmental
                              Permits are in full force and effect and the
                              Vendor is in substantial compliance in all
                              respects thereunder.  The Vendor is in compliance
                              with the Environmental Laws applicable to the
                              conduct of the Business, except to the extent
                              such non-compliance would not constitute a
                              Material Adverse Effect.

<PAGE>   35

                                      -30-

                 4.15.2       There is no claim, suit, action or other
                              proceeding, including appeals and applications
                              for review, outstanding or pending or, to the
                              best of the Vendor's knowledge, threatened
                              against the Vendor in respect of the Business or
                              Purchased Assets pursuant to any of the
                              Environmental Laws.  To the best of the Vendor's
                              knowledge, no facts or circumstances exist which
                              are reasonably likely to give rise to such a
                              claim, suit, action or other proceeding which
                              would have a Material Adverse Effect.

                 4.15.3       The Vendor has not caused the Release of any
                              Hazardous Substances on or from the Locations,
                              except in such a manner or quantity as would not
                              constitute a violation of any of the
                              Environmental Laws or Environmental Permits or
                              would not reasonably be expected to result in a
                              Material Adverse Effect.

                 4.15.4       The Vendor has maintained in respect of the
                              Business and Purchased Assets records
                              substantially in the manner and for the time
                              periods required by the Environmental Laws and
                              Environmental Permits.

                 4.15.5       The Vendor has no knowledge of any fact or
                              circumstance that is likely to prohibit or
                              prevent the issuance to the Purchaser of any of
                              the permits, licenses, certificates and
                              authorizations of, and registrations with, any of
                              the Environmental Authorities pursuant to any of
                              the Environmental Laws, which are necessary for
                              the Purchaser to conduct the Business
                              substantially as presently conducted.

                 4.15.6       The Vendor has not received any Environmental
                              Notice pursuant to any of the Environmental Laws
                              and, to the best of the Vendor's knowledge, there
                              are no facts or circumstances that would result
                              in the issuance of an Environmental Notice (i)
                              which would require that capital expenditures in
                              excess of $1,000,000 in the aggregate be made in
                              respect of the Business or Purchased Assets as a
                              condition of compliance with all of the
                              Environmental Laws or Environmental Permits, or
                              (ii) to the effect that any of the Environmental
                              Permits is about to be made subject to
                              limitations or conditions or revoked.

                 4.15.7       The Vendor has delivered to the Purchaser true,
                              correct and complete copies of all material
                              environmental audit reports which have been
                              prepared in respect of the Business in the
<PAGE>   36

                                      -31-

                              five (5) year period ending on the date of this 
                              Agreement by or for the Vendor and which are in 
                              its possession.

         4.16    EMPLOYEES, PENSION AND OTHER BENEFIT PLANS

                 4.16.1       SCHEDULE 4.16.1 lists, as at the date of this
                              Agreement, (i) all the Employees together with
                              their respective positions, years of employment
                              and rates of remuneration, (ii) all the Employees
                              on Medical Leave who are receiving benefits under
                              the Law or the Vendor's Employee Plans, together
                              with their respective entitlement under the
                              Vendor's Employee Plans, and (iii) the Retired
                              Employees.  All Employees who are Employees on
                              Medical Leave and Employees on Short-Term Medical
                              Leave, as at the date of this Agreement, are
                              included (without limitation) and specifically so
                              designated in SCHEDULE 4.16.1.

                 4.16.2       Except as set out in SCHEDULE 4.16.2, the Vendor
                              is not, with respect to the Business, a party to
                              or bound by any collective bargaining agreement
                              or any other agreement with, or commitment to,
                              any union of employees or any contract of
                              employment, written or oral, with any of its
                              Employees.  The bargaining agents set out in
                              SCHEDULE 4.16.2 are the exclusive bargaining
                              agents of the Unionized Employees at the Vendor's
                              plants and the conditions governing the working
                              conditions of the Unionized Employees are
                              determined by the collective agreements set out
                              in SCHEDULE 4.16.2 between the Vendor and the
                              said unions.

                 4.16.3       The only Vendor's Employee Plans are those set
                              out in SCHEDULE 4.16.3 and except as set out in
                              SCHEDULE 4.16.3 the Vendor is not, with respect
                              to the Business, a party to nor operates any
                              other employee benefit or pension plan, bonus,
                              deferred compensation, retirement, savings,
                              excess benefit, stock option or purchase,
                              retention, termination, severance or incentive
                              plan, contract, program, fund, arrangement or
                              practice or any other trust, escrow or similar
                              agreement related thereto with respect to any of
                              its Employees, Retired Employees, directors,
                              officers or shareholders or with respect to which
                              the Vendor has made or is required to make
                              payments, transfers or contributions.  The
                              Vendor's Employee Plans are duly registered where
                              required by, and are in good standing under, the
                              Laws, and each of the pension plans thereunder
                              are in a funding status as set out in SCHEDULE
                              4.16.3.
<PAGE>   37

                                      -32-

                 4.16.4       The Vendor has delivered to the Purchaser true,
                              complete and up-to-date copies of all documents
                              embodying or summarizing the Vendor's Employee
                              Plans including, without limitation, all
                              amendments thereto, all funding agreements
                              thereunder, all summaries of the Vendor's
                              Employee Plans provided by the Vendor to any of
                              its Employees, Retired Employees, directors,
                              officers or shareholders and all material
                              communications received from or sent to the
                              regulatory authorities as well as the most recent
                              actuarial valuation filed with the regulatory
                              authorities for the Vendor's Employee Plans for
                              which valuations are required.

                 4.16.5       No promise or commitment has been made by the
                              Vendor (i) to amend any of the Vendor's Employee
                              Plans or to provide increased benefits thereunder
                              to any of its Employees, Retired Employees,
                              directors, officers or shareholders except
                              pursuant to the requirements, if any, of the
                              Vendor's Employee Plans or collective bargaining
                              agreements, nor (ii) to establish any new
                              employee benefit or pension plan or bonus,
                              deferred compensation, retirement, savings,
                              excess benefit, stock option or purchase,
                              retention, termination, severance or incentive
                              plan, contract, program, fund, arrangement or
                              practice or any new trust, escrow or similar
                              agreement related thereto with respect to any of
                              its Employees, Retired Employees, directors,
                              officers or shareholders.  Except as set out in
                              SCHEDULE 4.16.5, no actual amendment to any plan,
                              policy or arrangement referenced in this Section
                              4.16.5 has been adopted by the Vendor since the
                              Financial Statements Date.

                 4.16.6       Each of the Vendor's Employee Plans has been
                              maintained, operated and administered in material
                              compliance with its terms and all related
                              documents or agreements and in compliance with
                              the Laws.

                 4.16.7       All required employer contributions, premium
                              payments and source-deducted employee
                              contributions under the Vendor's Employee Plans
                              have been made and remitted to the funding agents
                              thereunder including, without limitation, all
                              current service costs and special payments within
                              the time prescribed by the relevant Vendor's
                              Employee Plan and the Laws.
<PAGE>   38

                                      -33-

                 4.16.8       All insurance premiums required with respect to
                              the Vendor's Employee Plans have been paid, made,
                              accrued or booked within the time prescribed by
                              the relevant Vendor's Employee Plan and the Laws.

                 4.16.9       All benefits, expenses and other amounts due and
                              payable to or under the Vendor's Employee Plans,
                              and all contributions, transfers or payments
                              required to be made to the Vendor's Employee
                              Plans, have been paid, made, accrued or booked
                              within the time prescribed by the relevant
                              Vendor's Employee Plan and the Laws.

                 4.16.10      Except as set out in SCHEDULE 4.16.10, the Vendor
                              has not, with respect to the Business, taken any
                              "contribution holiday" with respect to, nor has
                              withdrawn any amount from, the Vendor's Employee
                              Plans.

                 4.16.11      There are no material claims pending or, to the
                              best of the Vendor's knowledge, threatened by or
                              on behalf of any of the Vendor's Employee Plans
                              or by any Employee other than routine claims for
                              benefits.

                 4.16.12      Except as set out in SCHEDULE 4.16.12, (i) there
                              is no strike, lockout, or other labour trouble
                              (including, but not limited to, any work slowdown
                              or work stoppage) pending or, to the best of the
                              Vendor's knowledge, threatened which,
                              individually or in the aggregate, could
                              reasonably be expected to have a Material Adverse
                              Effect; (ii) there is no union election pending
                              or, to the best of the Vendor's knowledge,
                              threatened nor, to the best of the Vendor's
                              knowledge, is any union conducting any organizing
                              campaign with respect to any of the Employees;
                              and (iii) there is no outstanding grievance under
                              any collective bargaining agreement or unfair
                              labour practice charge pending or, to the best of
                              the Vendor's knowledge, threatened which,
                              individually or in the aggregate, could
                              reasonably be expected to have a Material Adverse
                              Effect.

         4.17    LITIGATION

                 Except as set out in SCHEDULE 4.17:

                 4.17.1       there is not any suit, action, claim or other
                              proceeding or investigation pending or, to the
                              best of the Vendor's knowledge, threatened
                              against or affecting the Vendor or to which the
                              Vendor is a party, with respect to the Business
                              in or before or by any judicial, quasi-judicial,



<PAGE>   39

                                      -34-

                              administrative or quasi-administrative court,
                              tribunal, arbitrator, agency or other
                              governmental body.  Except as described in
                              SCHEDULE 4.17, none of such matters, if adversely
                              determined, is likely to have a Material Adverse
                              Effect;

                 4.17.2       there is not any order, decree, injunction or
                              judgment of any judicial, quasi-judicial,
                              administrative or quasi-administrative court,
                              tribunal, arbitrator, agency or other
                              governmental body against or affecting the Vendor
                              with respect to the Business.

         4.18    ABSENCE OF MATERIAL CHANGES

                 Except as set out in SCHEDULE 4.18, the Business has been
                 conducted by the Vendor since the Financial Statements Date in
                 the ordinary course and in a manner consistent with the
                 practices applied during the periods specified in the
                 Financial Statements, and since the Financial Statements Date,
                 except as set out in SCHEDULE 4.18, the Vendor has not, with
                 respect to the Business:

                 4.18.1       incurred or discharged any obligation or
                              liability (whether accrued, absolute or
                              contingent) other than in the ordinary course of
                              and in a manner consistent with the Vendor's past
                              practices for the Business;

                 4.18.2       entered into any transaction, contract,
                              agreement, indenture, instrument or commitment
                              other than in the ordinary course of and in a
                              manner consistent with the Vendor's past
                              practices for the Business;

                 4.18.3       suffered or incurred any damage, destruction,
                              loss or liability (whether or not covered by any
                              insurance), any strike, lock-out or other labour
                              trouble such as slow down or work stoppage, or
                              any loss of any of its employees, customers,
                              suppliers or distributors which, individually or
                              in the aggregate, has had a Material Adverse
                              Effect;

                 4.18.4       suffered any shortage or cessation or
                              interruption of raw materials, supplies or
                              utilities which, individually or in the
                              aggregate, has had a Material Adverse Effect;

                 4.18.5       made any change in its accounting principles,
                              policies and practices as utilized in the
                              preparation of the Financial Statements;
<PAGE>   40

                                      -35-

                 4.18.6       granted to any customer any allowance or discount
                              or changed its pricing, credit or payment
                              policies other than in the ordinary course of and
                              in a manner consistent with the Vendor's past
                              practices for the Business;

                 4.18.7       incurred any indebtedness, liability or
                              obligation (absolute, accrued, contingent or
                              otherwise) other than in the ordinary course of
                              and in a manner consistent with the Vendor's past
                              practices for the Business, or permitted any of
                              the Purchased Assets to be subject to a Lien;

                 4.18.8       sold, leased or otherwise disposed of any of the
                              Purchased Assets or any right, title or interest
                              therein other than in the ordinary course of and
                              in a manner consistent with the Vendor's past
                              practices for the Business;

                 4.18.9       committed to any capital expenditure project or
                              made any investment, in either case in excess of
                              $1,000,000, not disclosed to the Purchaser prior
                              to the date of this Agreement or consented to by
                              the Purchaser; or

                 4.18.10      authorized or agreed to do any of the foregoing
                              matters referred to in this Section 4.18.

         4.19    VENDOR'S RESIDENCE

                 The Vendor is not a non-resident for the purposes of the
                 Income Tax Act (Canada) and the Taxation Act (Quebec).

         4.20    FINDER'S FEE

                 No Person has, or as a result of any of the transactions
                 contemplated hereby shall have, as a result of any commitment
                 of the Vendor towards such Person any right, interest or claim
                 against or upon the Purchaser or any of its properties or the
                 Purchased Assets for any commission, fee or other compensation
                 as broker or finder or for services in any similar capacity.

         4.21    FULL DISCLOSURE

                 The Vendor has made or caused to be made due enquiry with
                 respect to each of the representations and warranties
                 contained in this Agreement and in any other agreement
                 delivered by the Vendor to the Purchaser pursuant hereto and
                 for the purposes hereof, and none of the same intentionally
                 contains any untrue statement of a material fact or
                 intentionally omits to state a material fact necessary to make
<PAGE>   41

                                      -36-

                 any of the representations or warranties contained herein not 
                 misleading.

         4.22    REGISTRATION

                 The Vendor is registered for the purposes of Part IX of the
                 Excise Tax Act (Canada) and Chapter VIII of the Quebec Sales
                 Tax Act and its registration numbers are as follows:

                 Federal:         101438984

                 Quebec:          1001613819

         4.23    GYPSUM ROCK RESERVES

                 SCHEDULE 4.23 sets forth a true, complete and correct report,
                 as of the date thereof, of all reserves of gypsum rock (i)
                 owned by Domtar Gypsum Inc. or (ii) owned by the Vendor and to
                 be transferred to the Purchaser as part of the Purchased
                 Assets.

ARTICLE 5.       REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

         The Purchaser represents and warrants to the Vendor as follows:

         5.1     INCORPORATION AND AUTHORIZATION 

                 The Purchaser is a corporation duly incorporated, organized,
                 validly existing and in good standing under the laws of
                 Georgia and has full capacity, power and authority, corporate
                 and otherwise, to execute, deliver and perform this Agreement
                 and to consummate the transactions contemplated hereby, and
                 has been duly authorized to execute and become a party to this
                 Agreement and to consummate the transactions provided herein
                 or pursuant hereto.

         5.2     ENFORCEABILITY OF THE AGREEMENT

                 This Agreement constitutes a legal, valid and binding
                 obligation of the Purchaser enforceable against it in
                 accordance with its terms, except to the extent that the
                 enforcement hereof may be limited by bankruptcy, insolvency,
                 arrangement, reorganization, moratorium or other similar laws
                 relating to creditors' rights generally and general principles
                 of equity (regardless of whether enforceability is considered
                 in a proceeding in equity or at law).

         5.3     NO CONFLICT
<PAGE>   42

                                      -37-

                 5.3.1        Neither the entering into of this Agreement nor
                              the consummation by the Purchaser of any of the
                              transactions contemplated hereby shall, with or
                              without the giving of notice or the lapse of
                              time, or both, violate, conflict with, or result
                              in a breach or default under, or cause the
                              termination of, any of the provisions of the
                              articles of incorporation, articles of amendment,
                              certificates in respect thereto, by-laws or other
                              charter documents of the Purchaser or of any
                              written shareholders agreement or shareholders,
                              stock or voting trust to which the Purchaser is a
                              party or any Law to which the Purchaser is
                              subject.

                 5.3.2        There are no judicial, quasi-judicial,
                              administrative, quasi-administrative or
                              arbitration proceedings pending against the
                              Purchaser which, if adversely determined, may
                              interfere with the purchase of or payment for the
                              Business and Purchased Assets or the consummation
                              of any of the transactions herein provided.

         5.4     FINDER'S FEE

                 No Person has, or as a result of any of the transactions
                 contemplated hereby shall have, as a result of any commitment
                 of the Purchaser towards such Person, any right, interest or
                 claim against or upon the Vendor or any of its properties for
                 any commission, fee or other compensation as broker or finder
                 or for services in any similar capacity.

ARTICLE 6.       EMPLOYEES AND BENEFIT PLANS

         6.1     EMPLOYEES

                 6.1.1        Except as otherwise provided in this Article 6,
                              all liabilities to the Employees or the Retired
                              Employees, determined as at the Effective Time,
                              or any other Person relating to the employment
                              of, or services rendered by, such Employees or
                              Retired Employees up to the Effective Time
                              (including all liabilities for (i) compensation
                              for services rendered by the Employees or Retired
                              Employees up to the Effective Time and related
                              employment and withholding taxes and (ii)
                              benefits accrued under the Vendor's Employee
                              Plans as at the Effective Time), shall be
                              Excluded Liabilities and shall be the sole and
                              complete responsibility of the Vendor.
<PAGE>   43

                                      -38-

                 6.1.2        Except as otherwise provided in this Article 6,
                              all liabilities to the Unionized Non-Leave
                              Employees, Transferring Employees or any other
                              Person, relating to the employment of, or
                              services rendered by, such Employees from and
                              after the Effective Time, shall be the sole and
                              complete responsibility of the Purchaser.

                 6.1.3        The Purchaser shall continue the employment of
                              the Unionized Employees as at the Effective Time
                              in conformity with the terms and conditions of
                              the applicable collective agreements set out in
                              SCHEDULE 4.16.2, as in effect at the Effective
                              Time and as amended from time to time by
                              agreement of the Purchaser and the bargaining
                              agents under the collective agreements.  The
                              Purchaser shall assume the collective agreements
                              effective as at the Effective Time and shall
                              perform fully all rights, duties and obligations
                              pursuant to such collective agreements from and
                              after the Effective Time.  The Vendor shall
                              retain any liabilities existing up to the
                              Effective Time under the collective agreements.

                              Subject to the provisions of Section 6.1.4, the
                              Purchaser shall offer employment to (a) the
                              Salaried Employees as determined as of the date
                              of this Agreement (as listed on SCHEDULE 4.6.1)
                              and (b) any Salaried Employees hired by the
                              Vendor between the date of this Agreement and the
                              Effective Time with the advance knowledge and
                              approval of the Purchaser; provided, however,
                              that notwithstanding the foregoing, the Purchaser
                              may, in its sole discretion, elect not to offer
                              employment to up to thirty (30) Salaried
                              Employees.  Any offer of employment to such
                              Salaried Employees shall be under such terms and
                              conditions as the Purchaser, in its sole
                              discretion, may determine; provided that such
                              offer shall include: (i) participation in
                              employee benefit plans comparable to those
                              provided to the Purchaser's similar-situated
                              Canadian employees; (ii) credit for past service
                              (as defined in Section 6.2.3); and (iii) waiver
                              of any pre-existing condition exceptions under
                              the Purchaser's medical plans.  Notwithstanding
                              anything in this Section 6.1.3 to the contrary,
                              the Purchaser shall have no obligation to offer
                              employment to (i) any Salaried Employee as at the
                              date of this Agreement who voluntarily terminates
                              employment prior to the Effective Time or who is
                              terminated by the Vendor for business reasons not
                              related to this Agreement or for cause prior to
                              the Effective Time and (ii) Salaried Employees on 



<PAGE>   44

                                      -39-

                              Long-Term Medical Leave at the Effective Time.

                 6.1.4        From and after the Effective Time, the employment
                              or cost of termination of employment of, or
                              severance obligations to or future compensation
                              to, the Transferring Employees and severance
                              obligations for those who refuse the Purchaser's
                              offer of employment, shall be the sole
                              responsibility of the Purchaser.  For the
                              purposes of this Section 6.1 "severance
                              obligations" include, without limitation, claims
                              for severance pay, termination pay, notice
                              obligation, pay in-lieu of notice, damages for
                              wrongful or constructive dismissal or loss of
                              benefits, or other similar liabilities including
                              attorney's fees or judgements or settlements in
                              lieu of judgements, rendered in respect of a
                              termination of employment.  The Vendor shall
                              retain all responsibility for severance
                              obligations with respect to the Salaried
                              Employees (up to thirty (30)) to whom the
                              Purchaser makes no offer of employment.

                 6.1.5        The Purchaser shall be responsible for workers'
                              compensation obligations for Unionized Employees
                              and Transferring Employees, pursuant to the Laws,
                              with respect to injuries and illnesses occurring
                              after the Effective Time.  All other workers'
                              compensation obligations, with respect to the
                              Employees, pursuant to the Laws, other than the
                              Employees on Short-Term Medical Leave (subject to
                              Section 6.1.6 hereof), at the Effective Time
                              shall be the responsibility of the Vendor.

                 6.1.6        The Vendor shall retain responsibility for all
                              benefits liabilities (including, without
                              limitation, medical, long-term disability,
                              severance obligations (as defined in Section
                              6.1.4), workers' compensation and vacation pay)
                              with respect to Employees on Long-Term Medical
                              Leave at the Effective Time and, from and after
                              the effective date of transfer to long-term
                              medical leave status, the Employees on Short-Term
                              Medical Leave at the Effective Time who
                              thereafter transfer directly to long-term medical
                              leave status.

                 6.1.7        Subject to Section 6.1.5, the Purchaser shall be
                              responsible for all benefits liabilities
                              (including, without limitation, medical,
                              long-term disability, severance obligations (as
                              defined in Section 6.1.4), workers' compensation
                              and vacation pay) with respect to Employees on
                              Short-Term Medical Leave at the Effective Time
                              until the termination of their short-term medical
<PAGE>   45

                                      -40-

                              leave or their transfer to a long-term 
                              medical leave status.

         6.2     BENEFIT PLANS

                 6.2.1        With effect as at the Effective Time, the
                              Unionized Non-Leave Employees, Transferring
                              Employees and Retired Employees shall cease to
                              participate in, or be covered by or entitled
                              under, the Vendor's Employee Plans and shall
                              cease to accrue benefits thereunder.

                 6.2.2        As soon as practicable after the Closing Date,
                              but in any event within six (6) months of the
                              Closing Date, the Purchaser shall, subject to the
                              provisions of Section 6.3 hereof, establish or
                              designate, with effect at the Effective Time,
                              employee benefit and pension benefit plans
                              covering the Unionized Non-Leave Employees,
                              Transferring Employees and Retired Employees (the
                              "PURCHASER'S EMPLOYEE PLANS").  Pension benefits
                              enjoyed by the Retired Employees up to the
                              Effective Time shall be continued after the
                              Effective Time by the Purchaser (subject to the
                              completion of the transfers contemplated in
                              Section 6.3), but will be administered through a
                              pension plan of the Purchaser's selection.  Other
                              Retired Employee benefits shall be administered
                              by the Purchaser in accordance with the terms of
                              the applicable Vendor's Employee Plans and
                              applicable Laws.

                 6.2.3        With respect to the Transferring Employees, the
                              Purchaser and the Purchaser's Employee Plans
                              shall recognize all years of past service for
                              purposes of (i) participation in the Purchaser's
                              Employee Plans, (ii) determining the amount, if
                              any, of short- or long-term disability or
                              severance benefits due, (iii) for purposes of
                              vesting (including, without limitation,
                              eligibility for early retirement, disability and
                              benefit option and forms) under any pension plan,
                              (iv) determining vacation entitlement under the
                              Purchaser's applicable vacation policy and (v)
                              service awards.  The Transferring Employees will
                              also receive credit toward any deductible under
                              the Purchaser's medical plans for expenses
                              incurred under the Vendor's corresponding plans
                              and shall not be subject to any pre-existing
                              condition limitation.  For purposes of this
                              Section 6.2.3, "past service" means continuous
                              service with regard to the Business (i) as an
                              Employee of the Vendor and (ii) as an employee of
<PAGE>   46

                                      -41-

                              predecessor companies prior to the acquisition of
                              the Business by the Vendor, but only to the
                              extent that such service is recognized, for
                              similar purposes immediately prior to the
                              Effective Time.

                 6.2.4        Subject to the provisions of Sections 6.1.6 and
                              6.3 and effective as of the completion of the
                              assets transfers contemplated in Section 6.3, the
                              Purchaser shall cause to be assumed by the
                              Purchaser's Employee Plans which receive such
                              asset transfers all the obligations of the
                              Vendor's Employee Plans which are pension plans
                              with respect to the Unionized Non-Leave
                              Employees, Transferring Employees and Retired
                              Employees as at the Effective Time.  Prior to the
                              completion of the assets transfers described in
                              Section 6.3, the Vendor's Employee Plans shall
                              retain all liability with respect to such
                              obligations, as specified in more detail in
                              Section 6.3.5.

                              Except as otherwise specifically provided in this
                              Article 6 (and subject, in particular, but
                              without limitation, Section 6.1.6 with respect to
                              Employees on Medical Leave), the Purchaser's
                              Employee Plans which are employee plans shall be
                              responsible for the following benefits payments
                              with respect to the Unionized Non-Leave
                              Employees, Transferring Employees and Retired
                              Employees and their covered dependants, subject
                              to the terms and conditions of the particular
                              plan:  (i) claims for health care benefits with
                              respect to expenses incurred by, services
                              performed for or supplies or pharmaceuticals
                              provided to such Persons after the Effective
                              Time; and (ii) claims for life insurance,
                              accidental death and dismemberment and short- and
                              long-term disability benefits with respect to
                              death, disability or injury arising or occurring
                              after the Effective Time.  The Vendor's Employee
                              Plans shall be responsible for all other employee
                              plan claims incurred up to the Effective Time (of
                              the types referenced in this paragraph) of
                              Employees and Retired Employees and their
                              dependants.  In all cases, the amount and types
                              of benefits payable shall be determined in
                              accordance with the terms of the affected
                              Purchaser or Vendor Employee Plan.

                              Division of responsibility between the Purchaser
                              and the Vendor for other types of employee
                              benefit plans, programs and arrangements shall be
                              determined in accordance with Sections 6.1.1,
                              6.1.2 and 6.1.4.
<PAGE>   47

                                      -42-

                 6.2.5        Subject to the terms of the Purchaser's Employee
                              Plans, the Unionized Non-Leave Employees,
                              Transferring Employees and, if applicable,
                              Retired Employees shall be eligible to
                              participate in, be covered by and accrue benefits
                              under the Purchaser's Employee Plans from and
                              after the Effective Time.

                 6.2.6        The Vendor shall deliver to the Purchaser at the
                              Closing, the entire employment record of each of
                              the Unionized Non-Leave Employees, Transferring
                              Employees and Retired Employees including,
                              without limitation, the summary of the benefit
                              records of the Unionized Non-Leave Employees,
                              Transferring Employees and Retired Employees
                              under the Vendor's Employee Plans and all
                              information required to administer the
                              Purchaser's Employee Plans to the extent
                              permitted by the Laws.

         6.3     PENSION PLANS

                 6.3.1        Without in any way detracting from its
                              obligations under Section 6.2 hereof and
                              notwithstanding the provisions of Section 6.1
                              hereof, and subject to the completion of the
                              transfer contemplated in Section 6.3.2 hereof,
                              the Purchaser assumes all responsibility for all
                              pension benefits accrued to the Unionized
                              Non-Leave Employees, Transferring Employees and
                              Retired Employees under the Vendor's Pension
                              Plans up to the Effective Time.

                 6.3.2        Subject to the registration of the Purchaser's
                              pension plans and all necessary regulatory
                              approvals and further subject to the provisions
                              of this Section 6.3, the Vendor shall transfer or
                              cause to be transferred to the Purchaser's
                              pension plans from the Vendor's Pension Plans,
                              the amounts determined under this Section with
                              respect to all the benefits accrued by the
                              Unionized Non-Leave Employees, Transferring
                              Employees and Retired Employees under the
                              Vendor's Pension Plans up to the Effective Time,
                              such transfer to occur no later than sixty (60)
                              Business Days after receipt of the last required
                              regulatory approval.

                 6.3.3        The Parties confirm that upon the completion of
                              the transfer contemplated in Section 6.3.2
                              hereof, the Vendor and the Vendor's Pension Plans
                              shall be completely discharged of all of their
                              respective obligations with respect to the
                              pension benefits accrued by the Unionized
                              Non-Leave Employees, Transferring Employees and 

<PAGE>   48

                                      -43-

                              Retired Employees under the said plans up to the 
                              Effective Time.

                 6.3.4        As soon as practicable after the Closing Date,
                              but no later than sixty (60) Business Days after
                              the Closing Date, the Vendor shall initiate the
                              procedure leading to the division of the Vendor's
                              Pension Plans in order to allow for the transfer
                              of the amounts contemplated in Section 6.3.2
                              hereof (the "AMOUNTS").

                 6.3.5        Until the transfer of the Amounts is completed
                              pursuant to Section 6.3.2 hereof, the Vendor
                              shall administer and be liable for all
                              obligations with respect to all benefits accrued
                              to the Unionized Non-Leave Employees,
                              Transferring Employees and Retired Employees up
                              to the Effective Time, and shall make all
                              benefits payments, under the Vendor's Pension
                              Plans and the Amounts shall be adjusted
                              accordingly as at the date of the actual
                              transfer.

                 6.3.6        The Vendor shall not make, without the prior
                              written consent of the Purchaser, any
                              modification to the Vendor's Pension Plans
                              between the Effective Time and the date of the
                              actual transfer of the Amounts (the "TRANSITIONAL
                              PERIOD"), if such modifications would affect the
                              Amounts, the benefits accrued to the Unionized
                              Non-Leave Employees, Transferring Employees and
                              Retired Employees up to the Effective Time or the
                              contributions with respect to such benefits.
                              Notwithstanding anything in this Section 6.3.6 to
                              the contrary, if a change proposed by the Vendor
                              is mandated by the Law, the Vendor need not
                              obtain the Purchaser's prior approval (but prior
                              notice is still required) unless the latest
                              effective date of the change permitted by Law (as
                              applied to the Vendor Pension Plan in question)
                              falls more than sixty (60) days after the date on
                              which the requirement of the Law was first
                              published or the requirement of the Law may be
                              satisfied in more than one way.

                 6.3.7        For the purposes of Section 6.3.2 hereof, the
                              Amounts shall equal the projected benefit
                              obligation under the Vendor's Pension Plans in
                              respect of the Unionized Non-Leave Employees,
                              Tranferring Employees and Retired Employees.  The
                              Amounts shall be determined as at the Effective
                              Time using the same funding actuarial methods and
                              assumptions as those used in the actuarial
                              valuations of the Vendor's Pension Plans as at 

<PAGE>   49

                                      -44-

                              May 1, 1994 and filed with the Regie des rentes 
                              du Quebec as set out in SCHEDULE 6.3.7.

                              For the purposes of this Section 6.3.7, the
                              projected benefit obligation will be calculated
                              on the basis that the temporary formulas set out
                              in the actuarial valuations referred to in the
                              preceding paragraph of this Section 6.3.7 are
                              permanent and that salary projections will be
                              extended without limit in accordance with normal
                              actuarial practice.  In case of any ambiguity,
                              this paragraph of Section 6.3.7 shall prevail
                              over SCHEDULE 6.3.7.  The Vendor undertakes to
                              amend the Vendor's Pension Plans prior to the
                              Closing Date so as to give effect to the
                              provisions contained in the preceding sentence.

                 6.3.8        The Vendor shall be responsible for the division
                              of the Vendor's Pension Plans in accordance with
                              the Laws, including the preparation of the
                              relevant actuarial reports.  These reports shall
                              be completed within a period of five (5) months
                              from and after the Effective Time and a copy of
                              these reports shall be delivered to the Purchaser
                              prior to their filing with the relevant
                              regulatory authorities.

                 6.3.9        The Purchaser's actuary shall have sixty (60)
                              Business Days from receipt of such actuarial
                              reports to complete its review pursuant to the
                              standards set forth in Section 6.3.10 and to
                              report its findings to the Purchaser and the
                              Vendor.  No filings with any regulatory body of
                              any kind (including for greater certainty, but
                              without limitation, actuarial reports) regarding
                              the division of the Vendor Pension Plans may be
                              made without prior review and approval of the
                              entire filing by the Purchaser.  If the
                              Purchaser's actuary contests the Vendor's
                              actuary's calculations, a final determination
                              shall be made by an independent third party
                              actuary acceptable to the Parties, and each Party
                              shall be responsible for one half of the cost of
                              such final determination by such independent
                              third party actuary.

                 6.3.10       During the Transitional Period, the Amounts and
                              all adjustments thereof shall be credited with
                              interest at the following rates:

                          (i)       for the period ending on the date of
                                    determination of the last known rate of
                                    return of the pension fund of the relevant
                                    Vendor's Pension Plan (the "INITIAL
                                    PERIOD"), the rates of return of the 
                                    

<PAGE>   50

                                      -45-

                                    pension fund of said relevant Vendor's 
                                    Pension Plan; and

                          (ii)      from the end of the Initial Period to the
                                    date of the actual transfer of the Amounts,
                                    investment return rate assumed under the
                                    actuarial assumptions set out in SCHEDULE
                                    6.3.7.

                              The transfer of the Amounts and the adjustments
                              shall be made as set out in SCHEDULE 6.3.10.

                 6.3.11       The Vendor shall indemnify and hold the Purchaser
                              and the Purchaser's Employee Plans harmless
                              against any claims, liabilities and expenses
                              (including, for greater certainty and without
                              limitation, attorney's fees) arising from the
                              failure of the Vendor's Pension Plans to be in
                              compliance with applicable Laws (including,
                              without limitation, those pertaining to
                              registration standards and favourable tax
                              treatment of registered plans) at the time of the
                              asset transfers.

         6.4     CANADA AND QUEBEC SAVINGS BONDS

                 Canada and Quebec savings bonds purchase programs (the
                 "SAVINGS BONDS PROGRAMS") have been instituted by the Vendor
                 for the benefit of its Employees.  The Unionized Non-Leave
                 Employees and Transferring Employees listed in SCHEDULE 6.4
                 participate in the Savings Bonds Programs and their
                 contributions for the purchase of such bonds are deducted from
                 their salaries.  The Vendor shall continue to administer the
                 Savings Bond Programs following the Effective Time, but shall
                 assign to the Purchaser, at the Closing but with effect as at
                 the Effective Time, the right to collect the payments due from
                 the said participating Employees with respect to the Savings
                 Bonds Programs.  The Purchaser shall assume responsibility for
                 collecting the payments due from the said participating
                 Employees with respect to the Savings Bonds Programs and shall
                 remit to the Vendor such collected funds within thirty (30)
                 Business Days following the end of the calendar month in which
                 they are collected.  The Purchaser's obligation in this regard
                 shall continue until the said participating Employees are no
                 longer employed by the Purchaser or, if earlier, have paid in
                 full the amounts remaining to be paid, under the Savings Bonds
                 Programs in effect as of the Effective Time.

                 The Vendor, immediately upon its receipt of the bonds, shall
                 distribute them to the said participating Employees.  The
                 Purchaser will cooperate with the Vendor by providing to the
                 Vendor any changes of address with respect to the said 

<PAGE>   51

                                      -46-

                 participating Employees and by notifying the Vendor of
                 the termination of the employment of any of the said
                 participating Employee.  Upon the receipt by the Vendor of
                 such contributions withheld by the Purchaser from the pay of
                 the said participating Employees, the Vendor shall forever
                 release the Purchaser from any liability pertaining thereto.

         6.5     EMPLOYEE SHARE PURCHASE AND EXECUTIVE STOCK OPTION AND 
                 PURCHASE PLANS

                 The Vendor shall terminate, as at the Effective Time, its
                 Employee Share Purchase Plans and Executive Stock Option and
                 Purchase Plans set out in SCHEDULE 4.16.3 insofar as the
                 Employees and Retired Employees are concerned and shall be
                 responsible for all benefits accrued as at the Effective Time
                 by the Employees and Retired Employees entitled to such
                 benefits under such plans.

         6.6     SUBSIDIZED MORTGAGE PLANS

                 The Purchaser shall assume the Vendor's obligations as at the
                 Effective Time under the Subsidized Mortgage Plans set out in
                 SCHEDULE 6.6 (the "SUBSIDIZED MORTGAGE PLANS") with respect to
                 affected Transferring Employees listed in such Schedule.  The
                 Purchaser shall also maintain for such Transferring Employees
                 the life insurance covering them in connection with their
                 mortgage subsidy in the event equal to the outstanding
                 principal amount as at the Effective Time for a period which
                 shall continue so long as such affected Transferring Employees
                 remain eligible for a mortgage subsidy under the Subsidized
                 Mortgage Plans.

         6.7     COOPERATION WITH RESPECT TO EMPLOYEE NOTICES

                 The Parties acknowledge that between the time of execution of
                 this Agreement and the Effective Time, it may be necessary
                 from time to time for the Purchaser to give written notices
                 for various purposes to the Employees regarding their future
                 employment with the Purchaser.  The Purchaser agrees not to
                 disseminate any such notices without having first consulted
                 with and obtained the consent of the Vendor, which consent
                 shall not be unreasonably withheld, and the Vendor agrees to
                 cooperate fully in the timely dissemination of such notices
                 upon request by the Purchaser.

<PAGE>   52

                                      -47-

ARTICLE 7.       REAL PROPERTIES

         The Vendor shall cause to be conducted, at its cost, title searches
         and the Vendor shall deliver to the Purchaser, on or prior to the
         Closing Date, title opinions with respect to the Real Properties,
         dated the Closing Date in form and substance satisfactory to the
         Purchaser's Counsel.

ARTICLE 8.       NON-COMPETITION

         8.1     NON-COMPETITION

                 From and after the Closing Date, the Vendor shall not, for a
                 period of five (5) years, on its own behalf or on behalf of
                 any other Person, directly or indirectly, in any capacity
                 whatsoever including, without limitation, as employer,
                 principal, mandator, agent, mandatary, joint venturer,
                 partner, shareholder or other equity holder, independent
                 contractor, manufacturer, seller, licensor, licensee,
                 franchisor, franchisee, distributor, consultant, supplier or
                 trustee or by or through any Person, conduct or be engaged in
                 or have financial interests in any gypsum wallboard business
                 in the United States of America or in Canada.

         8.2     PERMITTED ACTIVITIES

                 Notwithstanding the provisions of Section 8.1 hereof, the
                 Vendor shall not be prohibited from owning an interest, as
                 passive investor, in any gypsum wallboard business provided
                 that the interest owned, whether directly or indirectly, by
                 the Vendor in such business, if any, shall not exceed 10% of
                 all the outstanding equity securities of any Person whose
                 equity securities are listed on a recognized securities
                 exchange and with whom the Vendor does not have any connection
                 whatsoever except for such ownership interest.

         8.3     LIMITED EXCEPTION FOR INCIDENTAL ACQUISITIONS

                 Notwithstanding the provisions of Section 8.1 hereof, the
                 Vendor shall not be prohibited from acquiring assets (or a
                 controlling stock interest) of a Person where the assets of
                 such Person include gypsum wallboard assets (the "ACQUIRED
                 GYPSUM ASSETS"), provided that if the gross revenues generated
                 by the Acquired Gypsum Assets during the last full fiscal year
                 period (the "GROSS REVENUES") exceed $35,000,000, the Vendor
                 shall offer to sell the Acquired Gypsum Assets to the
                 Purchaser.  Such offer to the Purchaser shall be made by the
                 Vendor promptly upon the execution by the Vendor of a binding
                 agreement to purchase such assets (but in no event less than
                 thirty (30) days prior to closing the acquisition contemplated 

<PAGE>   53

                                      -48-

                 by such agreement). If the Purchaser elects to purchase
                 the Acquired Gypsum Assets, the Vendor and Purchaser shall
                 negotiate in good faith the price to be paid by the Purchaser
                 to the Vendor for the Acquired Gypsum Assets.  If the Vendor
                 and the Purchaser cannot agree upon the terms and conditions
                 of such sale, then the Vendor shall use its commercially
                 reasonable efforts to sell the Acquired Gypsum Assets to a
                 third party within two (2) years after negotiations with the
                 Purchaser cease, but no such sale shall be on terms and
                 conditions in the aggregate more favourable to the third party
                 than those offered to the Purchaser.  If the Gross Revenues
                 are less than or equal to $35,000,000, then the Vendor need
                 not offer the Acquired Gypsum Assets to the Purchaser, but if
                 the Vendor determines to sell the Acquired Gypsum Assets prior
                 to the fifth (5th) anniversary of the Closing, the Vendor
                 shall first offer the Acquired Gypsum Assets to the Purchaser
                 following the procedures set out in the preceding sentences of
                 this Section 8.3.

ARTICLE 9.       COVENANTS OF THE VENDOR

         The Vendor covenants and agrees with the Purchaser as follows:

         9.1     MAINTENANCE AND PRESERVATION OF BUSINESS

                 From and after the date hereof to the Closing Date or the date
                 of termination of the Parties' obligation to close under this
                 Agreement, the Vendor covenants to the Purchaser that, except
                 as may be specifically approved in writing by the Purchaser,
                 the Business will be conducted only in the ordinary course and
                 substantially in the same manner as presently conducted, the
                 Vendor will not, with respect to the Business, make or
                 institute any new methods, principles or practices of
                 manufacture, purchase, sale, lease, management, accounting or
                 operation except in the ordinary course of business, and the
                 Vendor will use commercially reasonable efforts with due
                 diligence to (i) maintain the business organization of the
                 Business, and (ii) maintain its relationships with and the
                 goodwill of its suppliers, distributors, licensors, customers
                 and others having business relations with the Business, so as
                 to maintain the goodwill and ongoing business of the Business.
                 By way of illustration and not by way of limitation of the
                 foregoing:

                 9.1.1        the Vendor shall manage its working capital with
                              respect to the Business, including receivables,
                              other current assets, trade payables and other
                              current liabilities, in a fashion consistent with
                              past practice, including by selling inventory and
                              other property in an orderly and prudent manner
                              

<PAGE>   54

                                      -49-

                              and paying outstanding obligations, trade 
                              accounts and other indebtedness as they come due;

                 9.1.2        the Vendor shall maintain the Purchased Assets in
                              good condition and repair, except for normal wear
                              and tear and normal usage;

                 9.1.3        the Vendor shall not, without the prior written
                              approval of the Purchaser, take any of the
                              following actions:

                              (i)    dispose of any of the Purchased Assets, 
                                     other than sales of inventory in the
                                     ordinary course of business;

                              (ii)   subject any of the Purchased Assets to any 
                                     Lien, except Permitted Encumbrances;

                              (iii)  make any payment to, or for the benefit 
                                     of, any of its Employees or Retired 
                                     Employees otherwise than at the regular 
                                     rates payable to them, by way of salary, 
                                     pension, bonus or other remuneration 
                                     consistent with past practices for the 
                                     Business;

                              (iv)   cancel any debts pertaining to the 
                                     Business;

                              (v)    solicit or entertain any offer for, or 
                                     sell or agree to sell, or participate in 
                                     any business combination with respect to, 
                                     any of the Purchased Assets or the 
                                     Business;

                              (vi)   do any act or fail to do any act, when 
                                     such act or failure to act will cause a 
                                     breach of any representation, warranty or 
                                     obligation contained in this Agreement or 
                                     any obligation contained in any Material 
                                     Contract;

                              (vii)  commit to any capital expenditure project 
                                     or make any investment, in either case in 
                                     excess of $1,000,000, not disclosed to the 
                                     Purchaser prior to the date of this 
                                     Agreement; or

                              (viii) enter into any transaction, contract, 
                                     agreement, indenture, instrument or
                                     commitment other than in the ordinary 
                                     course of and in a manner consistent with 
                                     past practices for the Business.

<PAGE>   55

                                      -50-

         9.2     NOTICE OF CESSATION IN ORDINARY COURSE

                 The Vendor shall promptly notify the Purchaser of the
                 occurrence or existence of any event or circumstance on or
                 prior to the Closing Date by reason of which the Business has
                 ceased to be conducted as provided for in Section 9.1 hereof
                 or by reason of which the representations and warranties made
                 by the Vendor herein have ceased to be true and correct in any
                 material respect.

         9.3     ACCESS FOR PURCHASER

                 The Vendor shall permit the Purchaser by its duly appointed
                 employees, officers and consultants at any time and from time
                 to time prior to the Closing Date, during reasonable business
                 hours and without unreasonably affecting the conduct of the
                 Business in the ordinary course, to make such investigation of
                 the Business and Purchased Assets and of their financial and
                 legal condition as the Purchaser may deem necessary or
                 advisable in order to become familiar with the Business and
                 Purchased Assets including, without limitation, full access to
                 all premises at which the Business is conducted and produce or
                 cause to be produced for inspection by the Purchaser, its
                 employees, officers and consultants, all title documents,
                 title deeds, books and records of the Vendor, agreements,
                 contracts, leases, licenses, insurance policies, pension and
                 benefit plans, documents relating to pending lawsuits and all
                 other information which in the reasonable opinion of the
                 Purchaser or its said employees, officers or consultants is
                 required to make an examination of the Business and Purchased
                 Assets and to verify the accuracy of the Vendor's
                 representations and warranties contained herein.

         9.4     MAINTAIN INSURANCE

                 9.4.1    The Vendor shall take all actions necessary to
                          continue to maintain in full force and effect until
                          the Closing Date all policies of insurance with
                          respect to the Business and Purchased Assets in
                          effect on the Financial Statements Date or duly renew
                          the same upon substantially the same terms and
                          conditions.  The Vendor will cooperate fully with the
                          Purchaser and take such actions (including, without
                          limitation, placing insurance carriers on notice of
                          this Agreement and/or providing or seeking necessary
                          consents) as the Purchaser may reasonably request to
                          ensure that from and after the Effective Time, the
                          Purchaser will be entitled to make claims, or receive
                          the proceeds of claims, under all insurance policies
                          (whether in the name of the Vendor or any other
                          Person) which insure or have insured the Business

<PAGE>   56

                                      -51-

                          and Purchased Assets, which are or were in effect at 
                          any time prior to the Effective Time.

                          In furtherance of the foregoing, the Vendor,

                          (i)       will take all reasonable measures to
                                    identify and make copies available to the
                                    Purchaser of all historical policies of
                                    insurance of the Vendor with respect to the
                                    Business and Purchased Assets and, at the
                                    Purchaser's expense, of all predecessor
                                    corporations with respect to the Business;

                          (ii)      agrees to make all reasonable and necessary
                                    attempts to purchase, at the Purchaser's
                                    expense, extended reporting coverages or
                                    the equivalent thereof for five (5) years
                                    from the Closing Date for all current
                                    claims made or modified claims made
                                    coverages of the Business and Purchased
                                    Assets, including without limitation all
                                    casualty, liability and directors and
                                    officers coverages and shall give periodic
                                    status reports to the Purchaser concerning
                                    such attempts; and

                          (iii)     agrees not to release any policies of
                                    insurance which provide or have provided
                                    coverage applicable to the Business and
                                    Purchased Assets without the prior written
                                    consent of the Purchaser.

                 9.4.2    The Vendor and the Purchaser acknowledge that the
                          policies of insurance applicable to the Vendor are
                          not necessarily exclusive to the Business and
                          Purchased Assets and that certain coverages and
                          limits may be impaired by claims arising from other
                          companies or businesses currently or previously owned
                          by the Vendor; however, the Vendor will notify the
                          Purchaser of all such claims and impairment as soon
                          as reasonably practicable.  The Vendor makes no
                          representations or warranties in respect of any
                          policy of insurance and shall not be responsible for
                          any allocations, determinations as to coverage or
                          lack thereof or any decision or interpretation made
                          by insurers or their agents with respect thereto.
                          The Purchaser shall be responsible for all
                          retrospective premiums and associated third party
                          administrator and insurer management and
                          administration costs allocable to the claims
                          experience of the Vendor with respect to the
                          Business.  The Purchaser recognizes and accepts that
                          the Vendor has in the past and may in the future
                          compromise rights and claims in good faith which may
                          have an effect on the consumption of aggregate 

<PAGE>   57

                                      -52-

                          insurance limits and the allocation of retrospective 
                          premiums.

                 9.4.3    As soon as practicable after the Closing Date, but no
                          later than thirty (30) Business Days after the
                          Closing Date, the Vendor and the Purchaser shall
                          enter into an agreement setting forth the procedures
                          for implementation and administration of the
                          entitlements and responsibilities provided for by
                          this Section 9.4.

         9.5     CORPORATE PROCEEDINGS FOR TRANSFER

                 The Vendor shall take all necessary steps and proceedings as
                 may be reasonably considered appropriate by the Purchaser's
                 Counsel in order that the Business and Purchased Assets be
                 duly and regularly transferred to the Purchaser as at the
                 Effective Time.

         9.6     ADJUSTMENT BALANCE SHEET

                 The Vendor shall deliver to the Purchaser the Adjustment
                 Balance Sheet as provided for in Section 2.7.4 hereof.

         9.7     SALE OF ENTERPRISES

                 The Vendor shall not require the Purchaser to comply with the
                 requirements of the Civil Code of Quebec or other Laws
                 relating to the sale of enterprises or bulk sales as may be
                 applicable to the transactions provided for hereunder.

         9.8     RETAIL SALES TAX CERTIFICATES

                 The Vendor shall deliver to the Purchaser on or before the
                 Closing Date a certificate issued by the Minister of Finance
                 (Ontario) pursuant to Section 6 of the Retail Sales Tax Act
                 (Ontario) and certificates issued under any other applicable
                 provincial sales tax legislation which certificates shall
                 indicate that the Vendor has collected, paid and remitted,
                 with respect to the Business, all taxes applicable under such
                 legislation up to the Closing Date or has entered into an
                 arrangement satisfactory to the said Minister or other taxing
                 authority for the payment of such taxes.

         9.9     Tax Returns Assistance

                 After the Closing Date, the Vendor shall furnish or cause to
                 be furnished to the Purchaser, upon request, such information
                 with respect to the Business or the Purchased Assets as is
                 

<PAGE>   58

                                      -53-

                 reasonably necessary for the Purchaser for the preparation and 
                 filing of any tax returns, for the preparation for any tax 
                 audit or for the prosecution or defence of any proceeding or 
                 proposed adjustment with respect to taxes of the Purchaser.

         9.10    OPERATION OF BUSINESS AFTER THE SECOND FIXTURE DATE

                 If the Closing does not occur on or before the Second Fixture
                 Date, the adjustment to the Purchase Price shall be determined
                 on the Second Fixture Date pursuant to Section 2.7 hereof.  In
                 such event, from and after the Second Fixture Date,

                 (i)      the Vendor covenants to the Purchaser that, except as
                          otherwise specifically approved in writing by the
                          Purchaser, the Business will be conducted as provided
                          in Sections 9.1, 9.2, 9.3 and 9.4 hereof;

                 (ii)     all of the earnings and profits of the Vendor with
                          respect to the Business shall be for the account of
                          the Purchaser, and the Vendor shall deposit such
                          earnings and profits in one or more interest-bearing
                          bank accounts as the Purchaser may direct;

                 (iii)    the Vendor may expend funds included in such earnings
                          and profits to permit the Vendor to carry out its
                          obligations with respect to the Business under
                          Sections 9.1.1 and 9.1.2 hereof; and

                 (iv)     in the event that the Vendor determines that it is
                          necessary to make any capital expenditures with
                          respect to the Business (whether above or below the
                          threshold amount specified in Section 9.1.3), it
                          shall promptly give notice of such expenditure to the
                          Purchaser, and if the amount of such expenditure
                          exceeds said threshold amount, shall request the
                          Purchaser's approval of such capital expenditure.

                 In the event that the Closing Date occurs after the Second
                 Fixture Date, then the provisions of Section 11.1.1.3 and all
                 the provisions of Sections 11.1.2 to 11.1.8 and Sections
                 11.2.1 to 11.2.6 shall be satisfied as provided therein, and
                 the Closing shall occur as provided in Article 13 hereof.

         9.11    GUARANTEES, LETTERS OF CREDIT

                 The Vendor will use its reasonable efforts to replace, renew
                 or extend any surety bonds, letters of credit or corporate
                 guarantees previously provided by the Vendor with respect to,
                 and which are required to operate, the Business in the 


<PAGE>   59

                                      -54-

                 ordinary and usual course and to preserve in all
                 material respects the Business intact (the "SUPPORT
                 INSTRUMENTS").  The Vendor shall continue any such
                 arrangements with respect to the Business until the Purchaser
                 obtains such surety and letter of credit arrangements with
                 existing or replacement surety companies or financial
                 institutions or provides substitute guarantees (but in any
                 event such obligation shall not continue for a period
                 exceeding six (6) months from and after the Closing Date).

ARTICLE 10.      COVENANTS OF THE PURCHASER

         The Purchaser covenants and agrees with the Vendor as follows:

         10.1    TAX RETURNS ASSISTANCE

                 After the Closing Date the Purchaser shall furnish or cause to
                 be furnished to the Vendor, upon request, such information
                 with respect to the Business or the Purchased Assets as is
                 reasonably necessary for the Vendor for the preparation and
                 filing of any tax return, for the preparation for any tax
                 audit or for the prosecution or defence of any proceeding or
                 proposed adjustment with respect to taxes of the Vendor.
                 Without limiting the generality of the foregoing provisions of
                 this Section 10.1, the Purchaser shall furnish or cause to be
                 furnished to the Vendor, upon request, tax packages with
                 respect to the Business or the Purchased Assets on schedules
                 to be provided by the Vendor for the periods from January 1,
                 1995 through December 31, 1995 and from January 1, 1996
                 through the Closing Date.  Each such tax package shall be
                 completed and delivered by the Purchaser to the Vendor within
                 sixty (60) days after receipt thereof by the Purchaser.

         10.2    USE OF NAME

                 The Purchaser shall not use nor allow any of its Affiliates or
                 Subsidiaries to use, directly or indirectly, the name "Domtar"
                 or the prefix "Dom" as a trade-mark, service mark or
                 trade-name in connection with any product or service offered
                 by the Business from and after the Closing Date, except as
                 permitted in the Trade-Marks Agreement.

         10.3    KEY EMPLOYEE RETENTION PROGRAM

                 All bonuses, if any, payable pursuant to the Vendor's "Key
                 Employee Retention Program" set out in SCHEDULE 10.3
                 (including any special bonus noted in said Schedule), which
                 shall not be accrued in the Adjustment Balance Sheet, shall be
                 

<PAGE>   60

                                      -55-

                 paid by the Purchaser to said Employees within a period
                 of thirty (30) days from and after the date of their
                 entitlement thereto pursuant to said Program.

         10.4    SALE OF ENTERPRISES

                 The Purchaser shall not require the Vendor to comply with the
                 requirements of the Civil Code of Quebec or other Laws
                 relating to the sale of enterprises or bulk sales as may be
                 applicable to the transactions provided for hereunder.

         10.5    NO INTERFERENCE

                 The Purchaser shall not take any action prior to the Closing
                 Date which would negatively impact the ability of the Vendor
                 to operate the Business or to comply with its obligations
                 under Section 9.1 or other provisions of this Agreement.

         10.6    GUARANTEES, LETTERS OF CREDIT

                 The Purchaser shall (i) reimburse the Vendor for the cost of
                 the Support Instruments continued after the Closing Date, (ii)
                 indemnify and hold harmless the Vendor with respect to all
                 Support Instruments in existence at the Closing Date or
                 thereafter with respect to the Business, and (iii) promptly
                 undertake to have the Vendor released from all such Support
                 Instruments, in each case to the extent they relate to the
                 Business.

ARTICLE 11.      CONDITIONS OF CLOSING

         11.1    PURCHASER'S CONDITIONS

                 The purchase and sale of the Business and Purchased Assets is
                 subject to the following terms and conditions for the
                 exclusive benefit of the Purchaser to be fulfilled and
                 performed on or prior to the Closing Date:

                 11.1.1       REPRESENTATIONS AND WARRANTIES REMAIN CORRECT

                              11.1.1.1     If the Closing Date occurs on or
                                           before the First Fixture Date, each
                                           of the representations and
                                           warranties of the Vendor contained
                                           in this Agreement shall be true and
                                           correct in all material respects on
                                           and as at the Closing Date (except
                                           as such representations and
                                           warranties may have been affected by
                                           the occurrence of events or
                                           circumstances occurring in
                                           contemplation of the consummation of 

<PAGE>   61

                                      -56-

                                           the transactions provided for 
                                           hereunder) with the same force and 
                                           effect as though such
                                           representations and warranties had
                                           been made on and as at such date and
                                           the Purchaser shall have received on
                                           the Closing Date a certificate dated
                                           the Closing Date, in form
                                           satisfactory to the Purchaser's
                                           Counsel, signed by the Senior
                                           Vice-President and Chief Financial
                                           Officer of the Vendor, to the effect
                                           that such representations and
                                           warranties are true and correct in
                                           all material respects on and as at
                                           the Closing Date with the same force
                                           and effect as though made on and as
                                           at such date.

                              11.1.1.2     If the Closing Date occurs after the
                                           First Fixture Date but on or before
                                           the Second Fixture Date, each of the
                                           representations and warranties of
                                           the Vendor contained in this
                                           Agreement shall be true and correct
                                           in all material respects on and as
                                           at the First Fixture Date and each
                                           of the First Core Representations
                                           shall be true and correct in all
                                           material respects on and as at the
                                           Closing Date (in each case except as
                                           such representations and warranties
                                           may have been affected by the
                                           occurrence of events or
                                           circumstances occurring in
                                           contemplation of the consummation of
                                           the transactions provided for
                                           hereunder) with the same force and
                                           effect as though such
                                           representations and warranties had
                                           been made on and as at the First
                                           Fixture Date or the Closing Date, as
                                           the case may be, and the Purchaser
                                           shall have received on the Closing
                                           Date a certificate dated the Closing
                                           Date, in form satisfactory to the
                                           Purchaser's Counsel, signed by the
                                           Senior Vice-President and Chief
                                           Financial Officer of the Vendor, to
                                           the effect that such representations
                                           and warranties are true and correct
                                           in all material respects on and as
                                           at the First Fixture Date or the
                                           Closing Date, as the case may be,
                                           with the same force and effect as
                                           though made on and as at such dates.

                              11.1.1.3     If the Closing Date occurs after the
                                           Second Fixture Date, each of the
                                           representations and warranties of
                                           the Vendor contained in this
                                           Agreement shall be true and correct
                                           in all material respects on and as

<PAGE>   62

                                      -57-

                                           at the First Fixture Date, each of 
                                           the First Core Representations shall 
                                           be true and correct in all material
                                           respects on and as at the Second
                                           Fixture Date, and each of the Second
                                           Core Representations shall be true
                                           and correct in all material respects
                                           on and as at the Closing Date (in
                                           each case except as such
                                           representations and warranties may
                                           have been affected by the occurrence
                                           of events or circumstances occurring
                                           in contemplation of the consummation
                                           of the transactions provided for
                                           hereunder) with the same force and
                                           effect as though such
                                           representations and warranties had
                                           been made on and as at the First
                                           Fixture Date, the Second Fixture
                                           Date or the Closing Date, as the
                                           case may be, and the Purchaser shall
                                           have received on the Closing Date a
                                           certificate dated the Closing Date,
                                           in form satisfactory to the
                                           Purchaser's Counsel, signed by the
                                           Senior Vice-President and Chief
                                           Financial Officer of the Vendor, to
                                           the effect that such representations
                                           and warranties are true and correct
                                           in all material respects on and as
                                           at the First Fixture Date, the
                                           Second Fixture Date or the Closing
                                           Date, as the case may be, with the
                                           same force and effect as though made
                                           on and as at such dates.

                 11.1.2       PERFORMANCE OF OBLIGATIONS

                              The Vendor shall have performed or complied in
                              all material respects with all of its agreements,
                              covenants, obligations and conditions herein
                              agreed to be performed or complied with by the
                              Vendor on or prior to the Closing Date.

                 11.1.3       PERMITS, CONSENTS AND APPROVALS

                              All permits, consents, orders and approvals
                              required by any federal, provincial or local
                              governmental authority, as the case may be,
                              including, without limitation, all consents and
                              approvals required under the applicable federal,
                              provincial or local competition laws including,
                              without limitation, Competition Act (Canada) for
                              the purposes of the consummation of the
                              transactions contemplated hereby shall have been
                              obtained by the Vendor and the Purchaser and all
                              statutory periods in connection with notification
                              procedures required under the said federal,
                              provincial or local competition laws, as the 

<PAGE>   63

                                      -58-

                              case may be, for the purposes of the 
                              consummation of the transactions contemplated 
                              hereby shall have lapsed prior to the Closing 
                              Date.

                 11.1.4       CORPORATE AND OTHER PROCEEDINGS

                              All corporate and other proceedings of the Vendor
                              in connection with the transactions contemplated
                              hereby, and all documents evidencing same or
                              incidental thereto, shall have been duly
                              authorized and executed, shall be in form and
                              substance to the reasonable satisfaction of the
                              Purchaser and the Purchaser's Counsel, and the
                              Purchaser and the Purchaser's Counsel shall have
                              received all such proceedings and documents, or
                              duly certified copies thereof, as may be
                              reasonably requested.

                 11.1.5       TRADE-MARKS AGREEMENT

                              The Parties shall have entered into a trade-marks
                              license pursuant to which the Vendor shall
                              license to the Purchaser the Trade-Marks as
                              defined in, and subject and pursuant to, the
                              Trade-Marks Agreement (the "TRADE-MARKS
                              AGREEMENT") set out in SCHEDULE 11.1.5.

                 11.1.6       DOMTAR GYPSUM INC.

                              The consummation of the purchase and sale of the
                              Business and Purchased Assets pursuant hereto
                              shall take place concurrently with the
                              consummation of the purchase and sale
                              contemplated in the Share Purchase Agreement.

                 11.1.7       OPINION OF VENDOR'S COUNSEL

                              The Purchaser shall have received from the
                              Vendor's Counsel a favourable opinion addressed
                              to the Purchaser, dated the Closing Date in form
                              and substance reasonably satisfactory to the
                              Purchaser, as to the matters contained in
                              Sections 4.1, 4.2 and 4.3.1.1 hereof and such
                              other matters as reasonably requested by the
                              Purchaser, with such qualifications as may be
                              consistent with opinion practices on such issues.
                              The Vendor's Counsel may rely, as to facts
                              material to said opinion which are not
                              independently established by the Vendor's
                              Counsel, on certificates of public officials or
                              of officers of the Vendor and, as to matters of
                              law in other jurisdictions, on opinions of
                              counsel in such jurisdictions.

<PAGE>   64

                                      -59-

                 11.1.8       LITIGATION

                              No suit, action or proceeding shall be pending
                              against the Purchaser or the Vendor before any
                              court or governmental agency which is reasonably
                              likely to result in (i) the restraint or
                              prohibition of the consummation of the
                              transactions contemplated hereby or (ii) an order
                              restricting the Purchaser in the conduct of the
                              Business in such a manner so as to have a
                              Material Adverse Effect.

                 11.1.9       RESCISSION

                              In case any of the foregoing conditions provided
                              for in this Section 11.1 shall not be fulfilled
                              and performed on or prior to the Closing Date to
                              the reasonable satisfaction of the Purchaser and
                              the Purchaser's Counsel, the Purchaser may
                              rescind this Agreement by notice to the Vendor
                              and in such event, the Parties shall be released
                              from all obligations whatsoever to whomsoever
                              including, without limitation, all obligations of
                              the Purchaser to the Vendor, its Affiliates and
                              Subsidiaries and their respective shareholders,
                              directors, officers and employees, pursuant to
                              this Agreement and all other agreements entered
                              into pursuant hereto, other than the obligations
                              of confidentiality of the Purchaser pursuant to
                              the Confidentiality Agreement.

                 11.1.10      WAIVER BY PURCHASER

                              The conditions set out in this Section 11.1 may
                              be waived by the Purchaser in whole or in part by
                              a written document to such effect duly signed
                              thereby.

         11.2    VENDOR'S CONDITIONS

                 The purchase and sale of the Business and Purchased Assets is
                 subject to the following terms and conditions for the
                 exclusive benefit of the Vendor to be fulfilled and performed
                 on or prior to the Closing Date:

                 11.2.1       REPRESENTATIONS AND WARRANTIES REMAIN CORRECT

                              Each of the representations and warranties of the
                              Purchaser contained in this Agreement shall be
                              true and correct in all material respects on and
                              as at the Closing Date (except as such
                              representations and warranties may have been
                              affected by the occurrence of events or
                              circumstances occurring in contemplation of the
                              consummation of the transactions provided for 

<PAGE>   65

                                      -60-

                              hereunder) with the same force and effect as 
                              though such representations and warranties had
                              been made on and as at such date and the Vendor
                              shall have received on the Closing Date a
                              certificate dated the Closing Date, in form
                              satisfactory to the Vendor's Counsel, signed by
                              the President or a Vice-President of the
                              Purchaser, to the effect that such
                              representations and warranties are true and
                              correct in all material respects on and as at the
                              Closing Date with the same force and effect as
                              though made on and as at such date.

                 11.2.2       PERFORMANCE OF OBLIGATIONS

                              The Purchaser shall have performed or complied in
                              all material respects with all of its agreements,
                              covenants, obligations and conditions herein
                              agreed to be performed or complied with by the
                              Purchaser on or prior to the Closing Date.

                 11.2.3       CORPORATE AND OTHER PROCEEDINGS

                              All corporate and other proceedings of the
                              Purchaser in connection with the transactions
                              contemplated hereby, and all documents evidencing
                              same or incidental thereto, shall have been
                              authorized and executed, shall be in form and
                              substance to the reasonable satisfaction of the
                              Vendor and the Vendor's Counsel, and the Vendor
                              and the Vendor's Counsel shall have received all
                              such proceedings and documents or duly certified
                              copies thereof, as may be reasonably requested.

                 11.2.4       GOODS AND SERVICES AND SALES TAXES

                              The Vendor shall have received from the Purchaser
                              the confirmation of the Purchaser's registration
                              for the purposes of Part IX of the Excise Tax Act
                              (Canada) and Chapter VIII of the Quebec Sales Tax
                              Act, and the Purchaser's registration numbers for
                              such purposes.

                 11.2.5       DOMTAR GYPSUM INC.

                              The consummation of the purchase and sale of the
                              Business and Purchased Assets pursuant hereto
                              shall take place concurrently with the
                              consummation of the purchase and sale
                              contemplated in the Share Purchase Agreement.

<PAGE>   66

                                      -61-

                 11.2.6       OPINION OF PURCHASER'S COUNSEL

                              The Vendor shall have received from the
                              Purchaser's Counsel a favourable opinion
                              addressed to the Vendor, dated the Closing Date
                              in form and substance reasonably satisfactory to
                              the Vendor, as to the matters contained in
                              Sections 5.1, 5.2, and 5.3.1 hereof and such
                              other matters as reasonably requested by the
                              Vendor, with such qualifications as may be
                              consistent with opinion practices on such issues.
                              The Purchaser's Counsel may rely, as to facts
                              material to said opinion which are not
                              independently established by the Purchaser's
                              Counsel, on certificates of public officials or
                              of officers of the Purchaser and, as to matters
                              of law in other jurisdictions, on opinions of
                              counsel in such jurisdictions.

                 11.2.7       RESCISSION

                              In case any of the foregoing conditions provided
                              for in this Section 11.2 shall not be fulfilled
                              and performed on or prior to the Closing Date to
                              the reasonable satisfaction of the Vendor and the
                              Vendor's Counsel, the Vendor may rescind this
                              Agreement by notice to the Purchaser and in such
                              event, the Parties shall be released from all
                              obligations whatsoever to whomsoever including,
                              without limitation, all obligations of the Vendor
                              to the Purchaser, its Affiliates and Subsidiaries
                              and their respective shareholders, directors,
                              officers and employees, pursuant to this
                              Agreement and all other agreements entered into
                              pursuant hereto, other than the obligations of
                              confidentiality of the Purchaser pursuant to the
                              Confidentiality Agreement.

                 11.2.8       WAIVER BY VENDOR

                              The conditions set out in this Section 11.2 may
                              be waived by the Vendor in whole or in part by a
                              written document to such effect duly signed
                              thereby.

ARTICLE 12.         SURVIVAL AND RELIANCE ON REPRESENTATIONS AND
                    WARRANTIES AND INDEMNIFICATION

         12.1    SURVIVAL AND RELIANCE

                 The Parties shall be entitled to rely upon the representations
                 and warranties contained herein and the obligations of the
                 Parties with respect thereto shall survive the date 

<PAGE>   67

                                      -62-

                 of this Agreement and shall continue in full force and effect
                 as provided in Section 12.2 hereof.

         12.2    SURVIVAL OF LIABILITY FOR REPRESENTATIONS AND WARRANTIES

                 12.2.1       The Second Core Representations of the Vendor
                              shall survive the Closing Date for a period of
                              one (1) year, the First Core Representations of
                              the Vendor shall survive the Adjustment Date for
                              a period of one (1) year, and all other
                              representations and warranties of the Vendor
                              contained herein shall survive the earlier of the
                              First Fixture Date and the Closing Date for a
                              period of one (1) year, except for

                              12.2.1.1     the representations and warranties
                                           contained in Section 4.8.2 (taxes)
                                           and 4.16 (Employees, Pensions and
                                           Other Benefit Plans) which shall
                                           survive the Closing Date until the
                                           expiry of the limitation or
                                           prescription period under the
                                           relevant Laws, and the Purchaser
                                           covenants that, from and after the
                                           Closing Date, it shall not enter
                                           into, without the prior written
                                           consent of the Vendor, any
                                           agreement, waiver or other
                                           arrangement which provides for an
                                           extension of time with respect to
                                           the filing of any tax return or the
                                           payment or assessment of any taxes
                                           dealt with by any such
                                           representation or warranty, as the
                                           case may be;

                              12.2.1.2     the representations and warranties
                                           contained in Section 4.15 hereof
                                           (Environmental Matters) which shall
                                           survive the earlier of (i) the First
                                           or Second Fixture Date (as
                                           determined by the date on which such
                                           representations and warranties were
                                           last deemed made) and (ii) the
                                           Closing Date for a period of three
                                           (3) years; and

                              12.2.1.3     the representations and warranties
                                           contained in Sections 4.1, 4.2, 4.3
                                           and 4.7.1 hereof which shall survive
                                           without limitation as to time except
                                           as may be limited by law,

                              and except in each case to the extent that during
                              such period the Purchaser shall have given notice
                              to the Vendor of a claim in respect of any such
                              representation or warranty, in which case such
                              representation or warranty with respect to such
                              claim (but not as to other claims) shall continue
                              in full force and effect until the final
                              determination of such claim.

<PAGE>   68

                                      -63-

                              After the end of the applicable survival periods
                              described in this Section 12.2.1, the Vendor
                              shall have no liability with respect to the
                              representations and warranties contained herein
                              except as to claims made prior to the expiry of
                              the relevant period of survival pursuant to this
                              Section 12.2.1.

                 12.2.2       All the representations and warranties of the
                              Purchaser contained herein shall survive the
                              Closing Date for a period of one (1) year, except
                              to the extent that during such period the Vendor
                              shall have given notice to the Purchaser of a
                              claim in respect of any such representation or
                              warranty, in which case such representation or
                              warranty with respect to such claim (but not as
                              to other claims) shall continue in full force and
                              effect until the final determination of such
                              claim.  After the end of such survival period,
                              the Purchaser shall have no liability with
                              respect to any of its representations and
                              warranties contained herein except as to claims
                              made prior to the expiry of the period of
                              survival pursuant to this Section 12.2.2.

         12.3    INDEMNIFICATION BY THE VENDOR

                 12.3.1       The Vendor shall defend, indemnify and hold
                              harmless the Purchaser and each Affiliate thereof
                              and any present or future officer, director,
                              agent or employee of the Purchaser (all of which
                              are herein collectively referred to as "PURCHASER
                              PROTECTED PERSONS") against any and all claims,
                              proceedings, judgments, penalties, fines, claims,
                              damages (other than indirect, incidental or
                              consequential), losses (other than loss of
                              profits), liabilities, fees (including, without
                              limitation, reasonable fees and expense of
                              counsel), costs or expenses (the "CLAIMS")
                              incurred or required to be paid by any Purchaser
                              Protected Person arising out of the breach or
                              non-fulfillment of any representation, warranty,
                              agreement, covenant, condition or any other
                              obligation of the Vendor contained in this
                              Agreement.  All such Claims are referred to
                              herein as "PURCHASER'S INDEMNIFIED CLAIMS".

                 12.3.2       Without limiting the generality of the provisions
                              of Section 12.3.1 hereof and notwithstanding the
                              provisions of Section 12.7 hereof, the Vendor
                              shall defend, indemnify and hold harmless the
                              Purchaser Protected Persons against all Claims
                              with respect to or in any way relating to the
                              matters set out in SCHEDULE 12.3.2 or in Sections
                              6.1.6 and 6.5, and the obligation of the Vendor
                              to indemnify the Purchaser Protected Persons 


<PAGE>   69

                                      -64-

                              pursuant to this Section 12.3.2 with respect to
                              such Claims shall not be subject to the
                              deductible and limiting amounts referred to in
                              Section 12.7 hereof, and the amount for which the
                              Purchaser Protected Persons shall be indemnified
                              for such Claims shall be the entire amount
                              thereof.  Claims for indemnification under this
                              Section 12.3.2 shall not be subject to any
                              limitations on survival of warranties contained
                              in this Article 12, and the Purchaser Protected
                              Persons may seek indemnification hereunder at any
                              time after the Effective Time, except as
                              otherwise expressly provided for in SCHEDULE
                              12.3.2.

                 12.3.3       Notwithstanding any other provision of this
                              Article 12, the Vendor shall have no liability
                              whatsoever to indemnify the Purchaser Protected
                              Persons against any Claims with respect to the
                              ongoing operational environmental matters set out
                              in SCHEDULE 12.3.3.

                 12.3.4       Notwithstanding any other provision of this
                              Article 12, the Vendor shall indemnify and hold
                              harmless the Purchaser Protected Persons against
                              all Claims arising from the failure to comply
                              with the requirements of the Civil Code of Quebec
                              or other Laws relating to the sale of enterprises
                              or bulk sales as may be applicable to the
                              transactions provided for hereunder, and the
                              obligation of the Vendor to indemnify the
                              Purchaser Protected Persons pursuant to this
                              Section 12.3.4 shall not be subject to the
                              deductible and limiting amounts referred to in
                              Section 12.7 hereof, and the amount for which the
                              Purchaser Protected Persons shall be indemnified
                              for such Claims shall be the entire amount
                              thereof.

         12.4    INDEMNIFICATION BY THE PURCHASER

                 The Purchaser shall defend, indemnify and hold harmless the
                 Vendor and each Affiliate thereof and any present, former or
                 future officer, director, agent or employee of the Vendor (all
                 of which are herein collectively referred to as "VENDOR
                 PROTECTED PERSONS") against any and all Claims incurred by the
                 Vendor Protected Persons

                 12.4.1       arising out of the breach or non-fulfillment of
                              any representation, warranty, agreement,
                              covenant, condition or any other obligation of
                              the Purchaser contained in this Agreement; or

<PAGE>   70

                                      -65-

                 12.4.2       with respect to the environmental matters set out
                              in SCHEDULE 12.3.3.

                              All such claims are referred to herein as 
                              "VENDOR'S INDEMNIFIED CLAIMS".

         12.5    INDEMNIFICATION AGAINST THIRD PARTY CLAIMS

                 12.5.1       Promptly upon receipt by either Party (the
                              "INDEMNITEE") of a notice of any Third Party
                              Claim in respect of which the Indemnitee proposes
                              to demand indemnification from the other Party
                              (the "INDEMNITOR"), the Indemnitee shall give
                              notice to that effect to the Indemnitor with
                              reasonable promptness.

                 12.5.2       Without prejudice to the Indemnitee's right to
                              participate in the defence, compromise or
                              settlement of the Third Party Claim, the
                              Indemnitor shall have the right by notice to the
                              Indemnitee not later than ten (10) days after
                              receipt of the notice described in Section 12.5.1
                              hereof to assume (and in the case of asbestos
                              claims, shall assume) the control of the defence,
                              compromise or settlement of the Third Party
                              Claim, provided that such assumption shall, by
                              its terms, be without cost or liability to the
                              Indemnitee and provided that the Indemnitor shall
                              have first delivered to Indemnitee a written
                              acknowledgement by the Indemnitor that the
                              relevant Claim is an Indemnified Claim and that
                              the Indemnitor, in its good faith judgment, will
                              be able to pay any award of money damages against
                              the Indemnitee in connection with such action.
                              If the Indemnitor assumes the defence of an
                              action, (i) the Indemnitee shall be entitled to
                              meaningfully participate therein; (ii) no
                              settlement or compromise thereof may be effected
                              (x) by the Indemnitor without the consent of the
                              Indemnitee (which consent shall not be
                              unreasonably withheld or delayed) unless (A)
                              there is no finding or admission of any violation
                              of law or any violation of the rights of any
                              person by the Indemnitee and no adverse effect on
                              any other claims that may be made against any
                              Indemnitee and (B) all relief provided is paid or
                              satisfied in full by the Indemnitor or (y) by the
                              Indemnitee without the consent of the Indemnitor;
                              and (iii) the Indemnitee may subsequently assume
                              the defence of such action if a court of
                              competent jurisdiction determines the Indemnitor
                              is not vigorously defending such action.

<PAGE>   71

                                      -66-

                 12.5.3       Upon the assumption of control by the Indemnitor
                              pursuant to the provisions of Section 12.5.2
                              hereof, the Indemnitor shall, at its expense,
                              diligently proceed with the defence, compromise
                              or settlement of the Third Party Claim at
                              Indemnitor's sole expense, including employment
                              of counsel reasonably satisfactory to the
                              Indemnitee and, in connection therewith, the
                              Indemnitee shall cooperate fully, but at the
                              expense of the Indemnitor, to make available to
                              the Indemnitor all pertinent information and
                              witnesses under the Indemnitee's control, make
                              such assignments and take such other steps as in
                              the opinion of counsel for the Indemnitor are
                              necessary to enable the Indemnitor to conduct
                              such defence.

                 12.5.4       The final determination of any such Third Party
                              Claim, including all related costs and expenses,
                              shall be binding and conclusive upon the Parties
                              as to the validity or invalidity, as the case may
                              be, of such Third Party Claim against the
                              Indemnitor.

                 12.5.5       Should the Indemnitor fail to defend the
                              Indemnitee as provided in Section 12.5.2 hereof,
                              the Indemnitee shall be entitled to make such
                              settlement of the Third Party Claim as in its
                              sole discretion may appear advisable, and such
                              settlement or any other final determination of
                              the Third Party Claim shall be binding upon the
                              Indemnitor.

         12.6    INDEMNIFICATION AFTER INSURANCE AND OTHER RECOVERIES

                 12.6.1       INSURANCE

                              The amount of the indemnification for any and all
                              Claims which either the Purchaser Protected
                              Persons or the Vendor Protected Persons shall be
                              entitled to receive pursuant to this Article 12
                              shall be determined after giving effect to any
                              and all insurance proceeds received by the
                              Indemnitee from its insurers and any and all
                              recoveries from any other Persons against which
                              there may be indemnity rights pursuant to the
                              Contracts.  The Indemnitee shall use all
                              reasonable efforts to collect such insurance
                              proceeds or, if the Indemnitee is the Purchaser,
                              claims with respect to such indemnity rights
                              against any other Persons under any of the
                              Contracts; provided that nothing in this Section
                              12.6 shall require any Indemnitee to make or
                              prosecute a claim for insurance proceeds if such

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                              a claim would adversely affect the Indemnitee 
                              with respect to matters other than the Claim.

                 12.6.2       COOPERATION

                              If an Indemnitee seeks indemnity from an
                              Indemnitor with respect to any matters relating
                              to environmental or asbestos related matters, the
                              Indemnitee shall cooperate with the Indemnitor,
                              at the Indemnitor's expense, in assisting the
                              Indemnitor to obtain indemnity under agreements
                              with third parties or insurance proceeds under
                              any insurance policies maintained by the
                              Indemnitor covering the claims in question.

         12.7    VENDOR'S MAXIMUM LIABILITY

                 12.7.1       The obligation of the Vendor to indemnify the
                              Purchaser Protected Persons pursuant to this
                              Article 12, excluding the obligation to indemnify
                              for all Claims with respect to the
                              representations and warranties contained in
                              Section 4.15 hereof (Environmental Matters) (the
                              "ENVIRONMENTAL CLAIMS") and further excluding the
                              obligation to provide unlimited indemnification
                              pursuant to Section 12.3.2, shall be limited, in
                              the aggregate, to 10% of the Purchase Price;
                              provided however that the Purchaser shall not
                              exercise its right of indemnification in relation
                              thereto pursuant to this Article 12 unless and
                              until the aggregate amount of the Claims and
                              Section 12.3.2 Claims, asserted against the
                              Vendor, excluding Environmental Claims, is in
                              excess of the aggregate amount of 1% of the
                              Purchase Price, and the amount then claimable
                              shall be only the amount of such Claims which
                              exceeds 1% of the Purchase Price;

                 12.7.2       Subject to the provisions of Sections 12.3.2,
                              12.3.3 and 12.4.2 hereof, the obligation of the
                              Vendor to indemnify the Purchaser pursuant to
                              this Article 12 with respect to Environmental
                              Claims shall be limited, in the aggregate, to the
                              sum obtained by adding to 15% of the Purchase
                              Price an amount equal to the difference between
                              10% of the Purchase Price and the aggregate of
                              the Claims indemnified against or outstanding,
                              pursuant to the provisions of Section 12.7.1
                              hereof, if any; provided however that the
                              Purchaser shall not exercise its right of
                              indemnification in relation thereto pursuant to
                              this Article 12 unless and until the aggregate
                              amount of the Environmental Claims asserted
                              against the Vendor is in excess of the

<PAGE>   73

                                      -68-

                              aggregate amount of 1% of the Purchase Price,
                              and the amount then claimable shall be only the
                              amount of such Environmental Claims which exceeds
                              1% of the Purchase Price; and provided further
                              that the combined amount recoverable under
                              Section 12.7.1 and 12.7.2 shall not exceed in the
                              aggregate 25% of the Purchase Price.

         12.8    DETAILS OF CLAIMS

                 With respect to any Claim pursuant to Section 12.3 or 12.4
                 hereof, no indemnity hereunder shall be sought unless written
                 notice providing reasonable details of the reasons for which
                 the indemnity is sought is provided to the Vendor or the
                 Purchaser, as the case may be.  Such notice shall be given
                 promptly on the occurrence of the circumstances giving rise to
                 the Claim coming to the attention of the Indemnitee hereunder;
                 provided that failure to so notify the Indemnitor shall not
                 relieve the Indemnitor from any liabilities which it may have
                 to the Indemnitee (i) hereunder, except to the extent that is
                 actually prejudiced thereby, or (ii) otherwise than under this
                 Article 12.

         12.9    INDEMNIFICATION SOLE REMEDY

                 The provisions of this Agreement shall constitute the sole
                 indemnification remedy to either Party against the other with
                 respect to any breach or non-fulfillment of any
                 representation, warranty, agreement, covenant, condition or
                 any other obligation contained in this Agreement.

ARTICLE 13.      CLOSING

         The sale and purchase of the Business and Purchased Assets herein
         provided for shall be consummated on the Closing Date at the Closing
         Place.

         13.1    At the Closing, the Vendor shall deliver or cause to be
                 delivered to the Purchaser:

                 13.1.1       instruments of transfer for and documents of
                              title to the Business and Purchased Assets,
                              registered or submitted for registration in the
                              name of the Purchaser or its duly appointed
                              nominee; and

                 13.1.2       all such other agreements, certificates,
                              consents, approvals, opinions and other documents
                              herein required to be delivered by the Vendor at 


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                                      -69-

                              or prior to the Closing Date and not theretofore 
                              received by the Purchaser.

         13.2    The Purchaser shall deliver or cause to be delivered to or to
                 the order of the Vendor:

                 13.2.1       the Purchase Price herein required to be paid by
                              the Purchaser pursuant to Section 2.2 hereof;

                 13.2.2       all such other agreements, certificates,
                              consents, approvals, opinions and other documents
                              herein required to be delivered by the Purchaser
                              at or prior to the Closing Date and not
                              theretofore received by the Vendor.

ARTICLE 14.      TERMINATION

         14.1    ELECTION

                 The Parties shall exercise all reasonable efforts and
                 cooperate, with reasonable diligence, in order for the
                 consummation of the transactions contemplated hereunder to
                 take place at the earliest possible date.  Subject to the
                 provisions of Section 11.1.10 or 11.2.8 hereof, as the case
                 may be, in the event that the sale and purchase of the
                 Business and Purchased Assets herein provided for is not
                 consummated within five (5) months from the date of this
                 Agreement (the "FIVE-MONTH ANNIVERSARY") as a result of the
                 failure of either Party to fulfil any of the conditions
                 provided for in Section 11.1 or 11.2, as the case may be, for
                 the benefit of the other Party on or before the Five-Month
                 Anniversary and the Party who has the benefit of such
                 condition (the "ELECTING PARTY") refuses to waive it, the
                 Electing Party shall have the right, exercisable at any time
                 after the Five-Month Anniversary, to terminate this Agreement
                 by giving at least forty-five (45) days written notice to the
                 other Party (the "NON-ELECTING PARTY").  If the Non-Electing
                 Party does not cure its failure to fulfil the conditions of
                 Section 11.1 or 11.2, as the case may be, by the date for
                 termination (the "TERMINATION DATE") specified in the
                 termination notice given by the Electing Party, then this
                 Agreement shall terminate on the Termination Date, and, except
                 as set forth in Section 14.2 hereof, each Party shall be
                 released from

                 14.1.1       all obligations whatsoever to whomsoever
                              including, without limitation, all obligations to
                              the other Party, its Affiliates and Subsidiaries
                              and their respective shareholders, directors, 

<PAGE>   75

                                      -70-

                              officers and employees, pursuant to this
                              Agreement and all other agreements entered into
                              pursuant hereto; and

                 14.1.2       all Claims arising out of, directly or
                              indirectly, the failure to consummate the sale
                              and purchase of the Business and Purchased Assets
                              as herein provided for.

         14.2    CONTINUING LIABILITY

                 If this Agreement is terminated concurrently with the
                 termination of the Share Purchase Agreement pursuant to
                 Section 13.1 thereof, effective as of a date after the Second
                 Fixture Date, because of the breach by the Purchaser under the
                 Share Purchase Agreement of its obligations under Article 9
                 (Antitrust and Competition Regulatory Approvals) under the
                 Share Purchase Agreement, then the Purchaser under this
                 Agreement shall remain liable to the Vendor for the failure to
                 consummate the sale and purchase of the Business and Purchased
                 Assets as herein provided.

ARTICLE 15.      MISCELLANEOUS

         15.1    NOTICES

                 Any notice or communication provided for under this Agreement
                 shall be in writing and be sufficiently given to the Party to
                 whom it is addressed if it is delivered or sent by prepaid
                 registered or certified mail or transmitted by telecopier to
                 or for such Party at the address or telecopier number of such
                 Party as set out hereinafter or at such other address or
                 telecopier number as such Party shall have hereafter notified
                 to the other Party in the manner provided for in this Section.

                 If to the Vendor:

                 Domtar Inc.
                 395 de Maisonneuve Blvd. West
                 Montreal, Canada
                 H3A 1L6
                 Fax: (514) 848-6850
                 Attention:  Secretary

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                                      -71-

                 If to the Purchaser:

                 c/o Georgia-Pacific Corporation
                 133 Peachtree Street, N.E.
                 Atlanta, GA 30303
                 (30348-05605 for notice by mail)
                 Fax:  (404) 584-1461
                 Attention:  Secretary

                 Any notice or communication addressed and delivered, mailed or
                 telecopied, as the case may be, as aforesaid shall be deemed
                 to have been sufficiently given and received on the date on
                 which it was so delivered or, if such date is not on a
                 Business Day, on the Business Day next following such date, or
                 on the 5th Business Day next following the date of its mailing
                 or on the 1st Business Day next following the date of its
                 transmission by telecopier, as the case may be.

         15.2    PUBLIC ANNOUNCEMENT

                 All public announcements concerning the transactions
                 contemplated hereby shall be jointly planned and coordinated
                 by the Parties and neither Party shall act unilaterally in
                 this regard without the prior approval of the other Party,
                 except where required to do so by the Laws or by the
                 applicable regulations or policies of any stock exchange, in
                 which case, the Party obliged to make public disclosure shall
                 promptly inform thereof the other Party and discuss with the
                 other Party the extent and timing of such disclosure.

         15.3    EXPENSES

                 All costs and expenses (including, without limitation,
                 the fees and disbursement of legal counsel) incurred in
                 connection with the negotiation and the preparation of this
                 Agreement and the consummation of the transactions provided
                 for hereunder shall be paid by the Party incurring such
                 expenses.

         15.4    SUCCESSORS AND ASSIGNS

                 This Agreement shall enure to the benefit of and be binding
                 upon the Parties and their respective successors and assigns,
                 provided that neither this Agreement nor any right or
                 obligation hereunder shall be assigned by either Party without
                 the prior written consent of the other Party, except that the 

<PAGE>   77

                                      -72-

                 Purchaser may assign this Agreement and its rights
                 hereunder to any Affiliate thereof without such consent
                 provided that, notwithstanding any such assignment, the
                 Purchaser shall remain liable to the Vendor, jointly and
                 severally and solidarily with such assignee, for the
                 performance of all the obligations pertaining to the Purchaser
                 pursuant to this Agreement.

         15.5    FURTHER ASSURANCES

                 The Parties shall do with reasonable diligence, all
                 such things and provide all such reasonable assurances as may
                 be required to consummate the transactions provided for
                 hereunder, and each Party shall provide such further documents
                 required by the other Party as may be reasonably necessary or
                 desirable to effect the purpose of this Agreement and carry
                 out its provisions, whether before or after the Closing,
                 including, without limitation, the execution of agreements
                 concerning transitional services as may be mutually agreed by
                 the Parties.

         15.6    DISPUTE RESOLUTION

                 In the event of any and all disputes between the Parties
                 resulting out of or relating to this Agreement or its breach,
                 the Parties shall attempt, in good faith, to settle amicably
                 such disputes (including referral of the dispute to a neutral
                 third-party mediator) prior to submitting same to the court of
                 competent jurisdiction.

         15.7    NO THIRD PARTY BENEFICIARY

                 Nothing contained in this Agreement or any other agreement
                 entered into pursuant hereto is intended, or should be
                 interpreted as having been intended, to create any right or
                 assume any obligation in favour of, or grant any waiver or
                 release from any obligation to, or otherwise constitute a
                 stipulation in favour of any Person, other than the Parties,
                 the Purchaser Protected Persons and the Vendor Protected
                 Persons.

         15.8    COUNTERPARTS

                 This Agreement may be executed by the Parties in several
                 counterparts, each of which when so executed and delivered
                 shall be an original, but all such counterparts shall 

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                                      -73-

                 constitute but one and the same document.

                 IN WITNESS WHEREOF the Parties have executed this Agreement as
of the date first hereinbefore written.


                                              DOMTAR INC.


                                              per: /s/ Stephen C. Larson
                                                   ----------------------------

                                              per: /s/ Pierre Fitzgibbon
                                                   ----------------------------


                                              GEORGIA-PACIFIC CORPORATION


                                              per: /s/ Michael A. Vidan
                                                   ----------------------------