<PAGE>   1

                                                         EXHIBIT 2.2




                      DOMTAR U.S. GYPSUM PRODUCTS BUSINESS





                            SHARE PURCHASE AGREEMENT
                                    BETWEEN
                            DOMTAR INDUSTRIES INC.,
                              DOMTAR GYPSUM INC.,
                                  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   . . . . . . . . . . . . .  2
                                                                                                
          1.1    Definitions  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  2
          1.2    Number and Gender  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
          1.3    Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
          1.4    Schedules  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
          1.5    Governing Law  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
          1.6    Submission to Jurisdiction: Appointment of Agent for Service of Process  . .  15
          1.7    Amendment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
          1.8    Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
          1.9    Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
          1.10   Table of Contents and List of Schedules  . . . . . . . . . . . . . . . . . .  16
          1.11   Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
          1.12   Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
          1.13   Delays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17

   ARTICLE 2.        PURCHASED SHARES   . . . . . . . . . . . . . . . . . . . . . . . . . . .  17

   ARTICLE 3.        PURCHASE PRICE   . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
          3.1    Payment of Purchase Price  . . . . . . . . . . . . . . . . . . . . . . . . .  17
          3.2    Adjustment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . .  17

   ARTICLE 4.        REPRESENTATIONS AND WARRANTIES OF THE VENDOR   . . . . . . . . . . . . .  20
          4.1    Incorporation and Authorization  . . . . . . . . . . . . . . . . . . . . . .  20
          4.2    Ownership of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
          4.3    Enforceability of the Agreement  . . . . . . . . . . . . . . . . . . . . . .  21
          4.4    Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22
          4.5    Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22
          4.6    Capital Stock and Records  . . . . . . . . . . . . . . . . . . . . . . . . .  23
          4.7    Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
          4.8    Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
          4.9    Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
          4.10   Inventories and Accounts Receivable  . . . . . . . . . . . . . . . . . . . .  27
          4.11   Absence of Material Changes  . . . . . . . . . . . . . . . . . . . . . . . .  28
          4.12   Contracts  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  29
</TABLE>
<PAGE>   3
                                      -2-

<TABLE>
   <S>           <C>                                                                           <C>
          4.13   Insurance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30
          4.14   Taxes  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30
          4.15   Intellectual Property  . . . . . . . . . . . . . . . . . . . . . . . . . . .  33
          4.16   Environmental Matters  . . . . . . . . . . . . . . . . . . . . . . . . . . .  34
          4.17   Employees, Pension and Other Benefit Plans . . . . . . . . . . . . . . . . .  35
          4.18   Litigation; Compliance with Laws . . . . . . . . . . . . . . . . . . . . . .  39
          4.19   Bank Accounts  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  40
          4.20   Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  40
          4.21   Full Disclosure  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  40
          4.22   Consents and Approvals; Permits  . . . . . . . . . . . . . . . . . . . . . .  40
          4.23   Gypsum Rock Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . .  41

   ARTICLE 5.        REPRESENTATIONS AND WARRANTIES OF THE PURCHASER  . . . . . . . . . . . .  41
          5.1    Incorporation and Authorization  . . . . . . . . . . . . . . . . . . . . . .  41
          5.2    Enforceability of the Agreement  . . . . . . . . . . . . . . . . . . . . . .  41
          5.3    Investment Representation  . . . . . . . . . . . . . . . . . . . . . . . . .  42
          5.4    Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  42

   ARTICLE 6.        NON-COMPETITION  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  42
          6.1    Non-Competition  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  42
          6.2    Permitted Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .  43
          6.3    Limited Exception for Incidental Acquisitions  . . . . . . . . . . . . . . .  43

   ARTICLE 7.        COVENANTS OF THE PARTIES   . . . . . . . . . . . . . . . . . . . . . . .  44
          7.1    Maintenance and Preservation of Business . . . . . . . . . . . . . . . . . .  44
          7.2    Notice of Cessation in Ordinary Course . . . . . . . . . . . . . . . . . . .  46
          7.3    Access for the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . .  46
          7.4    Maintain Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  47
          7.5    Corporate Proceedings for Transfer . . . . . . . . . . . . . . . . . . . . .  48
          7.6    Adjustment Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . .  48
          7.7    Tax Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  48
          7.8    Hazardous Waste  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  49
          7.9    Operation of Business After Second Fixture Date  . . . . . . . . . . . . . .  49

   ARTICLE 8.        ADDITIONAL COVENANTS OF THE PARTIES  . . . . . . . . . . . . . . . . . .  50
          8.1    Tax Returns Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . .  50
          8.2    Use of Name  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  50
          8.3    Employees  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  51
                 8.3.1    Vendor Plans  . . . . . . . . . . . . . . . . . . . . . . . . . . .  51
                 8.3.2    Employees On Medical Leave  . . . . . . . . . . . . . . . . . . . .  51
                 8.3.3    Key Employee Retention Program  . . . . . . . . . . . . . . . . . .  52
</TABLE>
<PAGE>   4

                                      -3-

<TABLE>
   <S>           <C>                                                                           <C>

                 8.3.4    Employee Share Purchase and Executive Stock Option Plans  . . . . .  52
                 8.3.5    U.S. 401(k) Plan  . . . . . . . . . . . . . . . . . . . . . . . . .  52
          8.4    Pension Plans  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  53
          8.5    Affidavits for Title Insurance . . . . . . . . . . . . . . . . . . . . . . .  56
          8.6    No Interference  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  56
          8.7    Guarantees, Letters of Credit, Etc.  . . . . . . . . . . . . . . . . . . . .  57

   ARTICLE 9.        ANTITRUST AND COMPETITION REGULATORY APPROVALS   . . . . . . . . . . . .  57
          9.1    Obtaining Approvals  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  57
          9.2    Dealings With Authority  . . . . . . . . . . . . . . . . . . . . . . . . . .  59

   ARTICLE 10.       CONDITIONS OF CLOSING  . . . . . . . . . . . . . . . . . . . . . . . . .  59
          10.1   Purchaser's Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . .  59
                 10.1.1   Representations and Warranties Remain Correct . . . . . . . . . . .  59
                 10.1.2   Performance of Obligations  . . . . . . . . . . . . . . . . . . . .  61
                 10.1.3   Permits, Consents and Approvals . . . . . . . . . . . . . . . . . .  61
                 10.1.4   Corporate and Other Proceedings . . . . . . . . . . . . . . . . . .  62
                 10.1.5   Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . .  62
                 10.1.6   Real Property Title Insurance . . . . . . . . . . . . . . . . . . .  62
                 10.1.7   Resignation and Releases by Directors and Officers  . . . . . . . .  62
                 10.1.8   Opinion of the Vendor's Counsel . . . . . . . . . . . . . . . . . .  62
                 10.1.9   Litigation  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  63
                 10.1.10  Domtar Canadian Gypsum Products Business  . . . . . . . . . . . . .  63
                 10.1.11  Rescission  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  63
                 10.1.12  Waiver by the Purchaser . . . . . . . . . . . . . . . . . . . . . .  63
          10.2   Vendor's Conditions  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  64
                 10.2.1   Representations and Warranties Remain Correct . . . . . . . . . . .  64
                 10.2.2   Performance of Obligations  . . . . . . . . . . . . . . . . . . . .  64
                 10.2.3   Corporate and Other Proceedings . . . . . . . . . . . . . . . . . .  64
                 10.2.4   Change of Name  . . . . . . . . . . . . . . . . . . . . . . . . . .  65
                 10.2.5   Domtar Canadian Gypsum Products
                              Business  . . . . . . . . . . . . . . . . . . . . . . . . . . .  65
                 10.2.6   Opinion of the Purchaser's Counsel  . . . . . . . . . . . . . . . .  65
                 10.2.7   Rescission  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  65
                 10.2.8   Waiver by the Vendor  . . . . . . . . . . . . . . . . . . . . . . .  66
</TABLE>
<PAGE>   5

                                      -4-

<TABLE>
   <S>           <C>                                                                           <C>
   ARTICLE 11.       SURVIVAL AND RELIANCE ON REPRESENTATIONS AND WARRANTIES AND 
                     INDEMNIFICATION  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  66
          11.1   Survival and Reliance  . . . . . . . . . . . . . . . . . . . . . . . . . . .  66
          11.2   Survival of Liability for Representations and Warranties . . . . . . . . . .  66
          11.3   Indemnification by the Vendor  . . . . . . . . . . . . . . . . . . . . . . .  67
          11.4   Indemnification by the Purchaser . . . . . . . . . . . . . . . . . . . . . .  68
          11.5   Indemnification against Third Party Claims . . . . . . . . . . . . . . . . .  69
          11.6   Indemnification after Insurance and Other Recoveries . . . . . . . . . . . .  70
          11.7   Vendor's Maximum Liability . . . . . . . . . . . . . . . . . . . . . . . . .  71
          11.8   Details of Claims  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  72
          11.9   Indemnification Sole Remedy  . . . . . . . . . . . . . . . . . . . . . . . .  72

   ARTICLE 12.       CLOSING  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  73

   ARTICLE 13.       TERMINATION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  73
          13.1   Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  73
          13.2   Continuing Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . .  74

   ARTICLE 14.       MISCELLANEOUS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  74
          14.1   Notices  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  74
          14.2   Public Announcement  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  75
          14.3   Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  75
          14.4   Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . .  76
          14.5   Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  76
          14.6   Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  76
          14.7   No Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . .  76
          14.8   Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  77
</TABLE>
<PAGE>   6

                            SHARE PURCHASE AGREEMENT

                 THIS AGREEMENT made as of November 8, 1995

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

                                                               (the "PURCHASER")

AND:                         DOMTAR INDUSTRIES INC., a company incorporated
                             under the laws of Delaware

                                                                  (the "VENDOR")

                             DOMTAR GYPSUM INC., a company incorporated under
                             the laws of Delaware, which is a party to this
                             Agreement for the purpose of making the
                             representations set forth in Article 4 and certain
                             covenants set forth in Articles 7 and 8, and

                             DOMTAR INC., a company incorporated under the laws
                             of Canada, which is a party to this Agreement for
                             the purpose of making the covenants set forth in
                             Articles 6 and 11 and certain representations set
                             forth in Article 4.


                 WHEREAS the Vendor is a wholly-owned subsidiary of Domtar;

                 WHEREAS the Corporation is a wholly-owned subsidiary of the
Vendor which owns all the United States of America assets relating to the
Business and, indirectly through its wholly-owned subsidiary KMHC, 49% of all
the issued and outstanding shares of the capital stock of COMSA, which owns all
the Mexican assets (Gypsum rock mine) relating to the Business;

                 WHEREAS the Vendor desires to sell, assign and transfer to the
Purchaser who desires to purchase, the Purchased Shares subject and pursuant to
the provisions hereof;
<PAGE>   7

                                      -2-

                 NOW, THEREFORE, 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)      "ADJUSTMENT ARBITRATOR" means the Person, if any,
                          chosen pursuant to Section 3.2 to make the final
                          determination of the adjustment to the Purchase
                          Price.

                 (B)      "ADJUSTMENT BALANCE SHEET" means the balance sheet of
                          the Corporation as at the Adjustment Date which shall
                          be prepared in accordance with Section 3.2.4 hereof.

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

                 (D)      "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 3.2 hereof and (ii) the Closing
                          Date.

                 (E)      "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.

                 (F)      "AGREEMENT" means this Agreement entitled "SHARE
                          PURCHASE AGREEMENT" and all agreements or documents
                          supplemental hereto or in amendment or confirmation
                          hereof; "HEREIN", "HEREOF", "HERETO", "HEREUNDER"
<PAGE>   8

                                      -3-

                          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.

                 (G)      "ANTITRUST AUTHORITY" has the meaning ascribed
                          thereto in Article 9.

                 (H)      "ANTITRUST LAW" has the meaning ascribed thereto in
                          Article 9.

                 (I)      "ASSET PURCHASE AGREEMENT" means that certain Asset
                          Purchase Agreement dated as of even date herewith
                          between Domtar and the Purchaser, as it may be
                          amended from time to time.

                 (J)      "BUSINESS" means the business presently conducted by
                          the Corporation at and from its facilities, all of
                          which are in the United States of America, as set out
                          in SCHEDULE 1.1(J) and known as Domtar U.S. Gypsum
                          Products Business, excluding any business conducted
                          at the Corporation's Vernon, California facility.

                 (K)      "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.

                 (L)      "CLAIMS" has the meaning ascribed thereto in Section
                          11.3.1 hereof.

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

                 (N)      "CLOSING DATE" means the fifth Business Day after the
                          Purchaser shall have notified the Vendor in writing
                          (or the Vendor shall have notified the Purchaser in
                          writing, if earlier) that the provisions of Section
                          10.1.3 hereof have been met, or such earlier date as
                          the Parties may agree.
<PAGE>   9

                                      -4-

                 (O)      "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.

                 (P)      "CODE" means the Internal Revenue Code of 1986
                          (U.S.A.), as amended, and regulations promulgated
                          thereunder.

                 (Q)      "COMSA" means Compania Occidental Mexicana, S.A. de
                          C.V., a company incorporated under the laws of
                          Mexico.

                 (R)      "CONFIDENTIALITY AGREEMENT" means the confidentiality
                          agreement between the Vendor and the Purchaser dated
                          August 30, 1995.

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

                 (T)      "CORPORATION" means Domtar Gypsum Inc., a company
                          incorporated under the laws of Delaware, to be
                          renamed G-P Gypsum Corporation (or such other name as
                          may be acceptable to the Vendor) prior to or at the
                          Closing.

                 (U)      "DOMTAR" means Domtar Inc., a company incorporated
                          under the laws of Canada.

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

                 (W)      "EMPLOYEE PLANS" means all "employee welfare benefit
                          plans" and "employee pension benefit plans" as
                          respectively defined in Sections 3(1) and 3(2) of
                          ERISA, 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
<PAGE>   10

                                      -5-

                         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 Corporation with respect to any
                         of its Employees or Retired Employees, independent
                         contractors, directors, officers or shareholders or
                         which are established or maintained by any Person
                         which together with the Corporation is or would have
                         been at any date of determination treated as a single
                         employer under Section 414 of the Code (the "RELATED
                         PERSONS") or with respect to which the Corporation or
                         the Related Persons have made or are required to make
                         payments, transfers or contributions.

                 (X)      "EMPLOYEES" means all the employees who, as at the
                          date of determination, are employed by the
                          Corporation whether or not as salaried or unionized
                          employees and whether or not on short or long-term
                          disability, accident or sickness, maternity, lay-off
                          or other authorized leave of absence and including,
                          without limitation, the Retired Employees.

                 (Y)      "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.

                 (Z)      "EMPLOYEES ON SHORT-TERM MEDICAL LEAVE" means
                          Employees on Medical Leave who as at the date of
                          determination, are receiving or are eligible for
                          benefits under the Short Term Disability (STD) Salary
                          Continuation Plan for Non-Union Employees of Domtar
                          Industries Inc. and the corresponding plans or
                          agreements for unionized employees maintained by the
                          Corporation or the Vendor or would be so eligible if
                          their illnesses or injuries were not covered by
                          workers' compensation.

                 (AA)     "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.

                 (BB)     "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.

                 (CC)     "ENVIRONMENTAL AUTHORITIES" means all federal,
                          provincial or state ministries or federal, state,
                          provincial or local governmental bodies
<PAGE>   11

                                      -6-

                          or regulatory agencies, foreign or domestic, charged 
                          with enforcing any of the Environmental Laws.

                 (DD)     "ENVIRONMENTAL CLAIMS" has the meaning ascribed
                          thereto in Section 11.7.1 hereof.

                 (EE)     "ENVIRONMENTAL LAW" means all applicable federal,
                          state, provincial or local codes, laws, statutes,
                          regulations, decrees, orders and by-laws, 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 in force, 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.

                 (FF)     "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.

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

                 (HH)     "ERISA" means the Employee Retirement Income Security
                          Act of 1974 (U.S.A.), as amended, and regulations
                          promulgated thereunder.

                 (II)     "EXCLUDED ASSETS" means the following assets of the
                          Corporation:

                          (i)     all real and personal property located in
                                  Vernon, California or arising out of the sale
                                  of such property;

                          (ii)    the agreements with Public Service Electric &
                                  Gas relating to environmental clean-up at
                                  Camden plant; and
<PAGE>   12

                                      -7-

                          (iii)   any indemnification rights from prior owners
                                  of any of the Corporation's facilities with
                                  respect to the matters set forth on SCHEDULE
                                  11.3.2.

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

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

                 (LL)     "FIRST CORE REPRESENTATIONS" means those (i)
                          representations and warranties of the Vendor, the
                          Corporation and Domtar, as the case may be, contained
                          in Sections 4.1, 4.2, 4.3.1, 4.3.2, 4.4, 4.5, 4.6,
                          4.7.1, 4.7.3, 4.8.1, 4.8.2, 4.20, 4.21 and 4.22 and
                          (ii) all other representations and warranties of the
                          Vendor but with all references to Laws (other than
                          ERISA and the Code) and Environmental Laws being
                          limited to those in effect on or before the First
                          Fixture Date.

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

                 (NN)     "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.

                 (OO)     "HAZARDOUS WASTE"  means a waste which meets the
                          criteria for, or which has been listed or identified
                          as, a hazardous waste by (a) the U.S. Environmental
                          Protection Agency under the U.S. Resource
                          Conservation and Recovery Act, 42 USC Section 6901
                          et seq. and regulations promulgated by the U.S. 
                          Environmental Protection Agency, 40 C.F.R. Part 261 
                          or (b) the California Department of Toxic Substances 
                          under California Health and Safety Code Section 
                          25110 et seq. and regulations promulgated thereunder.
<PAGE>   13

                                      -8-

                 (PP)     "HSR ACT" means the Hart-Scott-Rodino Antitrust
                          Improvement Act of 1976 (U.S.A.), as amended, and
                          regulations promulgated thereunder.

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

                 (RR)     "INDEMNITEE" and "INDEMNITOR" have the respective
                          meanings ascribed thereto in Section 11.5.1 hereof.

                 (SS)     "INITIAL PERIOD" has the meaning ascribed thereto in
                          Section 8.4.9 hereof.

                 (TT)     "INITIAL 30-DAY PERIOD" has the meaning ascribed
                          thereto in Section 3.2.4 hereof.

                 (UU)     "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 Corporation
                          with the exception of the trade-mark "Domcrete".

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

                 (WW)     "KMHC" means KMHC, Incorporated, a company
                          incorporated under the laws of California.

                 (XX)     The "KNOWLEDGE" of the Corporation, the Vendor or
                          Domtar shall mean the knowledge of

                          (i)     the Persons listed in Part 1 of SCHEDULE 
                                  1.1(XX) in the case of the Corporation;

                          (ii)    the Persons listed in Part 2 of the SCHEDULE
                                  1.1(XX) in the case of the Vendor or Domtar.

                 (YY)     "LAW" means all applicable federal, state, provincial
                          or local codes, laws, statutes, regulations, decrees,
                          orders and by-laws in force, otherwise than as a 
<PAGE>   14

                                      -9-

                         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,
                         but excluding Environmental Law.

                 (ZZ)     "LEASED REAL PROPERTIES" means all real and immovable
                          properties leased by the Corporation, as tenant, as
                          set out in SCHEDULE 1.1(ZZ).

                 (AAA)    "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.

                 (BBB)    "MATERIAL ADVERSE EFFECT" means, with respect to any
                          event, act, condition or occurrence of whatever
                          nature (including any adverse determination of 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, the
                          Corporation or Domtar, as the context may require, 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 10.1, the
                          Corporation and its Subsidiaries and the Business (as
                          defined in the Asset Purchase Agreement), taken as a
                          whole, and (b), for all other purposes (including for
                          purposes of the indemnities of Section 11.3), the
                          Corporation and its Subsidiaries, taken as a whole.

                 (CCC)    "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 Corporation
                          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>   15

                                      -10-

                                  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 Corporation, 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
                                  Corporation;

                          (viii)  federal, state 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(CCC), but excluding those being assumed
                          by the Vendor or Domtar in connection with the
                          Excluded Assets.

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

                 (EEE)    "PARTIES" means the Vendor, the Corporation and
                          Domtar (on the one hand) and the Purchaser (on the
                          other hand) collectively and "PARTY" means any one of
                          them.

                 (FFF)    "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
<PAGE>   16

                                      -11-

                                  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 (i)
                          individually would cost less than $50,000 to correct,
                          and (ii) 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.

                 (GGG)    "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.

                 (HHH)    "PROPERTIES" means the Real Properties and all
                          personal and movable properties purportedly owned by
                          the Corporation, other than the Excluded Assets.

                 (III)    "PURCHASE PRICE" has the meaning ascribed thereto in
                          Section 3.1 hereof.

                 (JJJ)    "PURCHASED SHARES" has the meaning ascribed thereto
                          in Article 2 hereof.

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

                 (LLL)    "PURCHASER'S INDEMNIFIED CLAIMS" has the meaning
                          ascribed thereto in Section 11.3.1 hereof.
<PAGE>   17

                                      -12-

                 (MMM)    "PURCHASER'S PENSION PLAN" has the meaning ascribed
                          thereto in Section 8.4.1 hereof.

                 (NNN)    "PURCHASER PROTECTED PERSONS" has the meaning
                          ascribed thereto in Section 11.3.1 hereof.

                 (OOO)    "REAL PROPERTIES" means all real and immovable
                          properties owned by the Corporation, 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(OOO).

                 (PPP)    "RELEASE" means releasing, spilling, leaking,
                          pumping, pouring, emitting, emptying, discharging,
                          injecting, escaping, leaching, disposing or dumping.

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

                 (RRR)    "SECOND CORE REPRESENTATIONS" means those
                          representations and warranties contained in Section
                          4.1, 4.2, 4.3.1, 4.3.2.1(a), 4.3.2.3, 4.3.2.4 (as to
                          the Purchased Shares), 4.4, 4.5, 4.6, and (to the
                          extent necessary for any Employee Plans to be in
                          compliance with ERISA and the Code) 4.17.

                 (SSS)    "SECOND FIXTURE DATE" means September 30, 1996,
                          provided, however, that the Second Fixture Date shall
                          be postponed by the number of days, if any, by which
                          the date described in (ii) below follows the date
                          described in (i) below: (i) the later of the date on
                          which the Purchaser files a complete response to a
                          Second Request or the date which is sixty (60) days
                          after the date of such Second Request and (ii) the
                          date the Vendor, the Corporation or Domtar (as the
                          case may be) files its complete response to such
                          Second Request.

                 (TTT)    "SECOND REQUEST" shall mean a request for additional
                          information and documentary material under the HSR
                          Act relating to the transactions contemplated by this
                          Agreement.

                 (UUU)    "SECURITIES ACT" means the Securities Act of 1933
                          (U.S.A.), as amended.
<PAGE>   18

                                      -13-

                 (VVV)    "SELLING PARTIES" means the Vendor, the Corporation
                          and Domtar, individually and collectively.

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

                 (XXX)    "TAXES" means all taxes, assessments, reassessments,
                          charges, levies and all other imposts, together with
                          all interest, penalties and fines thereon or
                          additions thereto, of whatever kind or nature,
                          including, without limitation, gross or net income,
                          ad valorem, alternative or add-on minimum tax,
                          capital stock, documentary, employment (including,
                          without limitation, social security and
                          unemployment), environmental, excise, franchise,
                          gains, goods and services, gross receipts, import,
                          intangible, license, mining, net worth, occupation,
                          payroll, privilege, production, profits, property,
                          registration, sales, services, severance, stamp,
                          surplus, transfer, use, wage, withholding, workers
                          compensation, value added taxes, charges, fees and
                          customs duties, imposed, levied or assessed by any
                          federal, state, provincial or local government or
                          taxing authority.

                 (YYY)    "TAX RETURNS" means all federal, state or local tax
                          reports, returns, declarations of estimated tax or
                          other information required to be filed with respect
                          to the Corporation, its income, the Properties or the
                          Business.

                 (ZZZ)    "TERMINATION DATE" has the meaning ascribed thereto
                          in Article 13 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 11.3 or 11.4
                          hereof.

               (BBBB)     "TRANSITIONAL PERIOD" has the meaning ascribed
                          thereto in Section 8.4.7.

               (CCCC)     "U.S. GAAP" means generally accepted accounting
                          principles as of December 31, 1994, set forth in the
                          opinions and pronouncements of the Accounting 

                                      -14-

<PAGE>   19

                                      -14-

                          Principles Board and the American Institute of 
                          Certified Public Accountants and statements and 
                          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.

               (DDDD)     "U.S. 401(K) PLAN" means the 401(k) Retirement
                          Savings Plan for Non-Negotiated Employees of the
                          Vendor.

               (EEEE)     "U.S. PLAN" means the Pension Plan for Non-Negotiated
                          Employees of the Vendor.

               (FFFF)     "VENDOR PLANS" has the meaning ascribed thereto in
                          Section 8.3.1.

               (GGGG)     "VENDOR PROTECTED PERSON" has the meaning ascribed
                          thereto in Section 11.4.

               (HHHH)     "VENDOR'S COUNSEL" means Brobeck, Phleger & Harrison.

               (IIII)     "VENDOR'S INDEMNIFIED CLAIMS" has the meaning
                          ascribed thereto in Section 11.4.

         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.

         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.
<PAGE>   20

                                      -15-

         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 deemed to be made in and in all
                 respects shall be interpreted, construed and governed by and
                 in accordance with the laws of the State of Delaware without
                 reference to the choice of law principles thereof.  The
                 Parties irrevocably agree that any legal action or proceeding
                 arising out of or in connection with this Agreement shall be
                 brought in the Chancery or Superior Court of the State of
                 Delaware, or the United States District Court for the State of
                 Delaware.

         1.6     SUBMISSION TO JURISDICTION: APPOINTMENT OF AGENT FOR SERVICE 
                 OF PROCESS

                 Each of the Parties to this Agreement hereby irrevocably and
                 unconditionally agrees (i) to be subject to the jurisdiction
                 of the courts of the State of Delaware and of the federal
                 courts sitting in the State of Delaware, and (ii) to the
                 extent such Party is not otherwise subject to service of
                 process in the State of Delaware, to appoint and maintain an
                 agent in the State of Delaware as such Party's agent for
                 acceptance of legal process, and that service made pursuant to
                 (ii) above shall have the same legal force and effect as if
                 served upon such Party personally within the State of
                 Delaware.  For purposes of implementing the Parties' agreement
                 to appoint and maintain an agent for service of process in the
                 State of Delaware, each such Party that has not as of the date
                 hereof already duly appointed such an agent does hereby
                 appoint RL&F Service Corp., One Rodney Square, 10th Floor,
                 Wilmington, Delaware 19801, as such agent.

         1.7     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.

         1.8     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 of any of the provisions of this
<PAGE>   21

                                      -16-

                 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.

         1.9     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.

         1.10    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.

         1.11    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 the Mellon Bank at 12 noon on the date such
                 payment is due.

         1.12    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.
<PAGE>   22

                                      -17-

         1.13    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.       PURCHASED SHARES

         Upon the terms and subject to the conditions of this Agreement, the
         Vendor covenants and agrees to sell, assign, transfer and deliver to
         the Purchaser and the Purchaser agrees to purchase from the Vendor on
         the Closing Date, as at the Effective Time, all of the issued and
         outstanding shares of the capital stock of the Corporation, being 312
         shares (the "PURCHASED SHARES"), for the Purchase Price and upon the
         terms and conditions herein provided.

ARTICLE 3.       PURCHASE PRICE

         3.1     PAYMENT OF PURCHASE PRICE

                 The price payable by the Purchaser to the Vendor for the
                 Purchased Shares shall be, subject to the adjustments, if any,
                 pursuant to the provisions of Section 3.2 hereof, the amount
                 of Two Hundred Eighty Million Dollars ($280,000,000) (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 3.2.3) calculated from the Second Fixture Date until
                 paid in full) (the "PURCHASE PRICE"), which shall be paid at
                 the Closing Place by wire transfer or certified cheque payable
                 to the Vendor or as directed by the Vendor.

         3.2     ADJUSTMENT OF PURCHASE PRICE

                 3.2.1    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:

                          3.2.1.1     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>   23

                                      -18-

                          3.2.1.2     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.

                 3.2.2    The amount of any adjustment payable in accordance
                          with the provisions of this Section 3.2 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 3.2.4, 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 3.2.  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.

                 3.2.3    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 United States of America
                          in United States of America dollars.

                 3.2.4    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 3.2, 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
<PAGE>   24

                                      -19-

                          resolve 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 the Chicago office of
                                  KPMG Peat Marwick; 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 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 names are
                                  left.  The arbitrators shall be those three
                                  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>   25

                                      -20-

                          Party shall have a right to name the three 
                          arbitrators.

                          Each of the Parties represents and warrants to the
                          other Parties that it has disclosed to the other
                          Parties 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
                          consolidated financial position of the Corporation
                          and its Subsidiaries, and shall be based on the books
                          and records of the Corporation 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
                          Corporation which are required to be reflected or
                          reserved against in the Adjustment Balance Sheet
                          shall be reflected therein.

         3.3     TRANSFER TAXES

                 All stock and other transfer taxes including sales taxes and
                 document recording fees, if any, imposed in connection with
                 the transfer of the Purchased Shares to the Purchaser shall be
                 paid by the Vendor, and all applicable stock transfer tax
                 stamps shall be provided by the Vendor at the Closing.

ARTICLE 4.       REPRESENTATIONS AND WARRANTIES OF THE VENDOR

         The Vendor and the Corporation each represent and warrant to the
         Purchaser as follows and Domtar represents and warrants to the
         Purchaser the matters in Sections 4.1.2 and 4.3:

         4.1     INCORPORATION AND AUTHORIZATION

                 4.1.1    The Vendor is a corporation duly incorporated,
                          organized, validly existing and in good standing
                          under the laws of Delaware and has full capacity,
                          power and authority, corporate and otherwise, to
                          execute, deliver and perform this Agreement and
                          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.
<PAGE>   26

                                      -21-

                 4.1.2    Domtar 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 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     OWNERSHIP OF STOCK

                 The Vendor is the sole and absolute owner of the Purchased
                 Shares with good and marketable record and beneficial title
                 thereto free and clear of all Liens and upon the consummation
                 of the sale of the Purchased Shares to the Purchaser pursuant
                 to this Agreement, the Vendor shall assign, transfer and
                 deliver the Purchased Shares to the Purchaser with good and
                 marketable title, free and clear of all Liens.  The Vendor has
                 the sole and exclusive right, power and authority to vote the
                 Purchased Shares.

         4.3     ENFORCEABILITY OF THE AGREEMENT

                 4.3.1        This Agreement constitutes a legal, valid and
                              binding obligation of each of the Vendor, the
                              Corporation and Domtar, enforceable against them
                              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).

                 4.3.2        Neither the entering into of this Agreement nor
                              the consummation by any of the Vendor, the
                              Corporation and Domtar of any of the transactions
                              contemplated hereby shall:

                              4.3.2.1      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
                                           document of any of the Vendor,
                                           Domtar and the Corporation or of any
                                           written shareholders agreement or
                                           shareholders, stock or voting trust
                                           to which any of the Vendor, Domtar
                                           and the Corporation is a party
<PAGE>   27

                                      -22-

                                           or (b) any Law or any Environmental 
                                           Law to which any of the Vendor, 
                                           Domtar and the Corporation is 
                                           subject;

                              4.3.2.2      subject any of the Vendor and the 
                                           Corporation to any penalty or 
                                           liability;

                              4.3.2.3      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 contract,
                                           agreement or undertaking applicable
                                           to any of the Vendor, Domtar and the
                                           Corporation, except for such
                                           violations, conflicts, breaches,
                                           defaults, or terminations which are
                                           not likely to have a Material
                                           Adverse Effect; or

                              4.3.2.4.     result in the creation or imposition
                                           of any Lien upon the Purchased
                                           Shares or any of the Properties.

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

         4.4     SUBSIDIARIES

                 Except as set out in SCHEDULE 4.4, the Corporation does not
                 have any Subsidiary other than KMHC.

         4.5     CORPORATE STATUS

                 4.5.1        The Corporation

                              4.5.1.1      is duly incorporated, organized,
                                           validly existing and in good
                                           standing under the laws of the State
                                           of Delaware; and

                              4.5.1.2      has the all requisite capacity,
                                           authority and power, corporate and
                                           otherwise, to own, operate and use
                                           the Properties, to lease the Leased
                                           Real Properties and all personal and
                                           movable properties leased thereby
                                           and to conduct the Business, as
                                           presently owned, operated, used,
<PAGE>   28

                                      -23-

                                        leased and conducted, respectively.

                 4.5.2        KMHC is duly incorporated, organized, validly
                              existing and in good standing under the laws of
                              the State of California, and has all requisite
                              capacity, authority and power, corporate and
                              otherwise, to hold the 49% interest in COMSA, as
                              presently held.

         4.6     CAPITAL STOCK AND RECORDS

                 4.6.1        The authorized capital stock of the Corporation
                              consists of 1,000 shares of which only 312
                              shares, being the Purchased Shares, are issued
                              and outstanding and each of such outstanding
                              shares has been duly authorized and issued and is
                              fully paid and non-assessable, and the paid-up
                              capital of the class of such shares has not been
                              changed since December 31, 1994.  The Vendor is
                              the sole registered holder and beneficial owner
                              of each of such outstanding shares.

                 4.6.2        The authorized capital stock of KMHC consists of
                              2,500 shares of which only 50 shares are issued
                              and outstanding and each of such outstanding
                              shares has been duly authorized and issued and is
                              fully paid and non-assessable, and the paid-up
                              capital of the class of such shares shall be as
                              shown in the Adjustment Balance Sheet, and the
                              Corporation is the sole registered holder and
                              beneficial owner of each of such KMHC outstanding
                              shares.

                 4.6.3        No Person has any agreement, option or right
                              capable of becoming an agreement or option

                              4.6.3.1      to acquire any of the Purchased
                                           Shares or any of the issued shares 
                                           of KMHC; or

                              4.6.3.2      to subscribe for or otherwise
                                           acquire any of the unissued shares
                                           of the capital stock of any of the
                                           Corporation or KMHC.

                 4.6.4        The copies of the charter documents and by-laws
                              of the Corporation, KMHC and COMSA that have been
                              previously delivered to the Purchaser are the
                              complete, true and correct charter documents and
                              by-laws of the Corporation, KMHC and COMSA in
                              effect as of the date hereof.  The minutes of
                              directors' and shareholders' meetings and the
                              stock books of each of the Corporation and KMHC
                              that have previously been delivered to the
<PAGE>   29

                                      -24-

                              Purchaser are the complete, true and correct 
                              records of directors' and shareholders' meetings 
                              and capital stock issuances and transfers through
                              and including the date hereof and reflect all 
                              transactions required to be contained in such 
                              records, as well as those matters customarily 
                              contained in records of such type.  The 
                              corporate records of each of the Corporation and 
                              KMHC have been maintained in accordance with 
                              sound corporate and business practices and 
                              present fairly, in all material respects, the 
                              matters referred to therein.

                 4.6.5        Except as set out in SCHEDULE 4.6.5, neither the
                              Corporation nor KMHC exists as a result or
                              incident of any merger or amalgamation between
                              any of the Vendor, the Corporation and KMHC and
                              any other Person or between other Persons
                              pursuant to which the Properties, the 49%
                              interest in COMSA, the Purchased Shares, as the
                              case may be, currently remain subject to the
                              rights of the creditors of the Vendor or such
                              previously existing Person or Persons except as
                              such obligations are reflected in the Interim
                              Balance Sheet.

         4.7     BUSINESS

                 4.7.1        The locations or jurisdictions where the
                              Corporation presently has places of business and
                              where the Corporation had places of business
                              during the preceding three (3) years are set out
                              in SCHEDULE 4.7.1 and, except as therein set out,
                              the Corporation does not have and has not had
                              during such three year period any place of
                              business in any other location or jurisdiction.

                 4.7.2        Except as set out in SCHEDULE 4.7.2, the
                              Corporation 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
                              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.

                 4.7.3        The sole present corporate purpose of KMHC is
                              holding the 49% interest in COMSA and, except as
                              to the holding of said interest, it is not
                              conducting nor has it conducted since April 3,
                              1978 any other business or activity nor does it
                              have any employees or is it party to any 



<PAGE>   30

                                      -25-

                              collective bargaining agreement.

         4.8     FINANCIAL STATEMENTS

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

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

                 4.8.3        The Financial Statements and the Interim Balance
                              Sheet are based on the books and records of the
                              Corporation 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.

                 4.8.4        There are no liabilities, contingent or
                              otherwise, of the Corporation and its
                              Subsidiaries not reflected in the Financial
                              Statements or Interim Balance Sheet or in the
                              notes thereto which are required under U.S. GAAP
                              to be disclosed therein.  Except as and to the
                              extent reflected and adequately reserved against
                              in the Interim Balance Sheet, or as disclosed in
                              SCHEDULE 4.8.4, as of the Financial Statements
                              Date, the Corporation and its Subsidiaries did
                              not have any liability or obligation whatsoever,
                              whether accrued, absolute, contingent or
                              otherwise.

         4.9     ASSETS AND LIABILITIES

                 4.9.1        All the Properties purported to be owned by the
                              Corporation as at the Adjustment Date shall be
                              reflected in the Adjustment Balance Sheet and,
                              except for Permitted Encumbrances and as set out
                              in SCHEDULE 4.9.1, the Corporation owns the
                              Properties reflected in the Interim Balance Sheet
                              and Adjustment Balance Sheet, together with the
                              Intellectual Property, with good and marketable
                              title thereto free and clear of all Liens and
                              also with registered or recorded title to the
                              Real Properties.  Except as set out in SCHEDULE
                              4.9.1, the Properties are in the possession and
                              control of the Corporation, and no other Person
                              is entitled to possession of any such Properties
                              of the Corporation.
<PAGE>   31

                                      -26-

                 4.9.2        The Corporation does not lease any real and
                              immovable property other than the Leased Real
                              Properties.

                 4.9.3        Except as set out in SCHEDULE 4.9.3, the
                              Corporation does not hold any loan or advance due
                              by, or any stock, obligation or securities of, or
                              any other interest in, any other Person.

                 4.9.4        Subject to the Permitted Encumbrances, the Real
                              Properties and the use of the Leased Real
                              Properties do not violate, contravene or breach
                              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
                              4.9.4 or except for Permitted Encumbrances, there
                              does not exist (i) any encroachment by any
                              building or other property not owned by the
                              Corporation on the Real Properties or (ii) any
                              condemnation proceedings or, to the best
                              knowledge of the Vendor and the Corporation, any
                              threat thereof relating to the Real Properties,
                              or (iii) any encroachment by any of the buildings
                              and structures constituting part of or located on
                              the Real Properties and the Leased Properties on
                              any real property not included in the Real
                              Properties or the Leased Real Properties.

                 4.9.5        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 Corporation or
                              such taxes, surtaxes, charges, levies, rates,
                              duties and assessments shall be reflected and
                              reserved against in the Adjustment Balance Sheet.

                 4.9.6        All the Real Properties are legally described in
                              SCHEDULE 4.9.6, and the Vendor has provided the
                              Purchaser with access to true and complete copies
                              of surveys for all the plants forming part of the
                              Real Properties.

                 4.9.7        All the equipment, machinery, rolling stock and
                              communications, computer (other than personal
                              computers) and information systems, and all
                              buildings, plants and structures, whether owned
                              or leased by the Corporation, are in good
                              condition and repair and are adequate for the
<PAGE>   32

                                      -27-

                              conduct of the Business as conducted by the
                              Corporation since December 31, 1994, except for
                              normal wear and tear and normal usage.  Except as
                              set out in SCHEDULE 4.9.7, the buildings, plants
                              and structures and the tangible assets presently
                              owned, leased or licensed by the Corporation
                              include all buildings, plants, structures and
                              other tangible assets necessary to permit the
                              Corporation to conduct the Business in the same
                              manner as such Business has been conducted since
                              December 31, 1994, without any need for
                              replacement, refurbishment or repair otherwise
                              than in the ordinary course and in a manner
                              consistent with the past practices for the
                              Business.

                 4.9.8        The Corporation does not own the real property
                              located in New Hampshire described on SCHEDULE
                              4.9.8.

         4.10    INVENTORIES AND ACCOUNTS RECEIVABLE

                 4.10.1       The inventories of raw materials, work in
                              process, finished goods and supplies of the
                              Corporation 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.

                 4.10.2       The accounts receivable of the Corporation
                              reflected in the Interim Balance Sheet are, and
                              the accounts receivable that will be reflected on
                              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.
<PAGE>   33

                                      -28-

         4.11    ABSENCE OF MATERIAL CHANGES

                 Except as set out in SCHEDULE 4.11, the Business has been
                 conducted 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 4.11 neither the Corporation nor KMHC has:

                 4.11.1       purchased or redeemed directly or indirectly any
                              shares of its capital stock;

                 4.11.2       issued or sold or agreed to issue or sell any
                              shares of its capital stock or any option,
                              warrant, conversion or other right to acquire any
                              such share or any securities convertible into or
                              exchangeable for such shares;

                 4.11.3       been a party to any corporate reorganization,
                              restructuring or merger or amalgamation or
                              amended its articles of incorporation, articles
                              of amendment or certificates in connection
                              therewith or by-laws;

                 4.11.4       declared or paid any dividend or declared or made
                              any other distribution (whether in cash, stock or
                              property) on any of the shares of its capital
                              stock;

                 4.11.5       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 past practices
                              for the Business;

                 4.11.6       entered 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;

                 4.11.7       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;

                 4.11.8       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;
<PAGE>   34

                                      -29-

                 4.11.9       made any change in its accounting principles,
                              policies and practices as utilized in the
                              preparation of the Financial Statements;

                 4.11.10      made any loan or advance, or assumed, guaranteed,
                              endorsed or otherwise become liable with respect
                              to the liabilities or obligations of any other
                              Person, or permitted any of its assets to be
                              subjected to any Lien;

                 4.11.11      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 past practices for
                              the Business;

                 4.11.12      incurred any indebtedness, liability or
                              obligation (absolute, accrued, contingent or
                              otherwise) other than in the ordinary course of
                              and in a manner consistent with past practices
                              for the Business;

                 4.11.13      sold, leased or otherwise disposed of any of the
                              Properties or Intellectual Property or any right,
                              title or interest therein other than in the
                              ordinary course of and in a manner consistent
                              with past practices for the Business;

                 4.11.14      made any payment to, or for the benefit of, any
                              present or former employee, director, officer or
                              shareholder 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;

                 4.11.15      taken any action which has had a Material Adverse
                              Effect;

                 4.11.16      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

                 4.11.17      authorized or agreed to do any of the foregoing
                              matters referred to in this Section 4.11.

         4.12    CONTRACTS

                 4.12.1       Except as set out in SCHEDULE 1.1(CCC) OR 4.12.1,
                              the Material Contracts have been entered into in
                              the ordinary course of the Business and are in
                              full force and effect.  No material default,
                              violation or breach on the part of the
<PAGE>   35

                                      -30-

                              Corporation 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 such 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 Corporation and the Business and Properties
                              are insured with financially sound and reputable
                              insurers against claims, losses and damages from
                              all reasonably foreseeable liabilities, 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 Corporation is
                              in good standing and compliance with respect to
                              each such policy or contract to which it is a
                              party.  Neither the Corporation, the Vendor nor
                              Domtar has 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 with
                              respect to the Corporation against such insurance
                              as to which insurers have asserted a 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
                              Corporation or, where necessary, the Vendor or
                              Domtar.

         4.14    TAXES

                 4.14.1       The goods and services tax and sales tax returns
                              of the Corporation have been filed monthly with
                              federal and state tax authorities, as the case 




<PAGE>   36

                                      -31-

                              may be, for all fiscal periods through the 
                              Financial Statements Date and thereafter through 
                              the Adjustment Date, and all deficiencies, 
                              including interest, penalties and fines thereon 
                              and adjustments thereto as a result of such 
                              filings have been paid or shall be reflected and 
                              reserved against in the Adjustment Balance Sheet.
                              No extensions of the applicable statute of 
                              limitations period for examination of such 
                              returns have been requested or granted.

                 4.14.2       The Corporation has duly and timely filed all Tax
                              Returns required to be filed by it and has paid
                              all Taxes due and payable by it on or prior to
                              the Adjustment Date or such Taxes shall be
                              reflected and reserved against in the Adjustment
                              Balance Sheet; such Tax Returns correctly
                              reflected the facts regarding the income,
                              business, assets, operations, activities, status
                              or other matters of the Corporation or any other
                              information required to be shown thereon. In
                              particular, but without limitation, none of the
                              Tax Returns contains any position which is or
                              would be subject to penalties under Section 6661
                              or Section 6662 of the Code (or any corresponding
                              provision of any state, local or foreign Tax
                              law). Adequate provision shall be made in the
                              Adjustment Balance Sheet for all such Taxes
                              payable for the current year for which Tax
                              Returns are not yet required to be filed.
                              The unpaid Taxes of the Corporation do not
                              exceed the reserve for Tax liability set forth or
                              included in the Financial Statements or the
                              Interim Balance Sheet.  There are no agreements,
                              waivers or other arrangements providing for an
                              extension of time with respect to the filing of
                              any of the Tax Returns or payment of any of the
                              Taxes by the Corporation; except as set out in
                              SCHEDULE 4.14.2 or 4.18, there are no
                              investigations, examinations, reassessments,
                              claims, actions, suits or proceedings threatened
                              or pending against the Corporation in respect of
                              any of the Taxes, nor are there any matters under
                              discussion with any federal, provincial, state or
                              local government or taxing authority, relating to
                              any of the Taxes imposed, levied or assessed by
                              any such government or authority.

                 4.14.3       The Corporation has withheld from each payment
                              made to any of its former or present employees,
                              directors, officers or shareholders all amounts
                              which it is required by the Laws to which it is
                              subject to withhold or deduct and has duly
                              remitted all amounts so withheld or deducted to
                              the proper recipients thereof within the time 





<PAGE>   37

                                      -32-

                              limits and in the manner required by such Laws.

                 4.14.4       All tax-sharing agreements or similar
                              arrangements with respect to or involving the
                              Corporation shall be terminated as of the Closing
                              Date, and after the Closing Date the Corporation
                              shall not be bound thereby or have any liability
                              thereunder for amounts due in respect of periods
                              prior to the Closing Date.

                 4.14.5       Except for the group of which the Corporation is
                              currently a member and except as set out in
                              SCHEDULE 4.14.5, the Corporation has never been a
                              member of an affiliated group of corporations,
                              within the meaning of Section 1504 of the Code,
                              and any Subsidiary of the Corporation has never
                              been a member of any other affiliated group of
                              corporations.

                 4.14.6       All material elections with respect to Taxes
                              affecting the Corporation as of the date hereof
                              are set forth in SCHEDULE 4.14.6.  After the date
                              hereof, no election with respect to Taxes (other
                              than the elections made by the Selling Parties
                              with respect to net operating losses described on
                              SCHEDULE 4.14.6) will be made without the written
                              consent of the Purchaser.

                 4.14.7       Except as set out in SCHEDULE 4.14.7, none of the
                              assets of the Corporation is property which the
                              Corporation is required to treat as being owned
                              by any other person pursuant to the "safe harbor
                              lease" provisions of former Section 168(f)(8) of
                              the Code, or any similar provision of any Tax
                              law.

                 4.14.8       None of the assets of the Corporation directly or
                              indirectly secures any debt, the interest on
                              which is tax-exempt under Section 103(a) of the
                              Code.

                 4.14.9       None of the assets of the Corporation is
                              "tax-exempt use property" within the meaning of
                              Section 168(h) of the Code.

                 4.14.10      The Corporation is not a party to any agreement,
                              contract, arrangement or plan that has resulted
                              or would result in the payment of any "excess
                              parachute payments" within the meaning of Section
                              280G of the Code.

                 4.14.11      The Corporation is not a party to any joint
                              venture, partnership, limited liability company,
                              or other arrangement or contract which could be
<PAGE>   38

                                      -33-

                              treated as a partnership for federal income tax 
                              purposes.

                 4.14.12      The Corporation is authorized to conduct business
                              in every state in which it is conducting
                              business, and is filing all necessary Tax Returns
                              in all states in which it is conducting business
                              except in either case where a failure to be so
                              authorized or to so file would not have a
                              Material Adverse Effect.

                 4.14.13      The Vendor will indemnify the Purchaser against
                              and hold it harmless from any liability of the
                              Corporation or any Subsidiary of the Corporation
                              for Taxes of any person other than the
                              Corporation or any Subsidiary of the Corporation
                              under Treasury Regulation 1.1502-6 (or any
                              similar provision of state, local or foreign
                              law), for any period ending prior to the Closing
                              Date and for any costs, expenses, attorneys' fees
                              or similar costs incurred by the Purchaser or the
                              Corporation as a result of the assertion of such
                              liability by any Taxing Authority.

         4.15    INTELLECTUAL PROPERTY

                 4.15.1       SCHEDULE 4.15 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
                              (including, in each case any registrations or
                              applications therefor) owned or actively used by
                              the Corporation, with the exception of the
                              trade-mark "Domcrete".  With respect to any
                              patent, copyright, trademark, service mark, trade
                              name or industrial design listed on SCHEDULE 4.15
                              which is not owned in its entirety by the
                              Corporation and included within the Intellectual
                              Property to be transferred pursuant hereto, the
                              Vendor has (i) identified on SCHEDULE 4.15 the
                              owner of the subject patent, copyright, trademark
                              service mark, trade name or industrial design and
                              (ii) delivered to the Purchaser true and correct
                              copies of the license or other agreement
                              authorizing the Corporation's use thereof.
                              Except as specifically disclosed on SCHEDULE
                              4.15, no rights under any such licences or
                              agreements will be terminated, limited or
                              otherwise adversely affected as a result of the
                              transactions contemplated hereunder.
<PAGE>   39

                                      -34-

                 4.15.2       Except as set out in SCHEDULE 4.15, 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 on
                              SCHEDULE 4.15 pursuant to Section 4.15.1 hereof,
                              nor does the conduct of the Business by the
                              Corporation breach any registered (or, to the
                              knowledge of the Vendor, unregistered) patent,
                              copyright, trade-mark, service mark, trade-name,
                              industrial design or any other intellectual
                              property right owned by any other Person.

         4.16    ENVIRONMENTAL MATTERS

                 Except as set out in SCHEDULE 4.16:

                 4.16.1       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
                              Corporation is in substantial compliance in all
                              respects thereunder.  The Corporation is in
                              compliance with the Environmental Laws applicable
                              to the conduct of the Business, except to the
                              extent such noncompliance would not constitute a
                              Material Adverse Effect.

                 4.16.2       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 and the Corporation's
                              knowledge, threatened against the Corporation
                              pursuant to any of the Environmental Laws.

                              To the best of the Vendor's and the Corporation'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.

                 4.16.3       The Corporation has not caused the Release of any
                              Hazardous Substances on or from the Real
                              Properties or the Leased Real Properties, 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
<PAGE>   40

                                      -35-

                              Material Adverse Effect.

                 4.16.4       The Corporation has maintained in respect of the
                              Business records substantially in the manner and
                              for the time periods required by the
                              Environmental Laws and Environmental Permits.

                 4.16.5       The Vendor and the Corporation have 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.

                 4.16.6       The Corporation has not received any
                              Environmental Notice pursuant to any of the
                              Environmental Laws and, to the best of the
                              Corporation's and 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 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.

                 4.16.7       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 five
                              (5) year period ending on the date of this
                              Agreement by or for any of the Selling Parties
                              and which are in the possession of any of the
                              Selling Parties.

         4.17    EMPLOYEES, PENSION AND OTHER BENEFIT PLANS

                 4.17.1       SCHEDULE 4.17.1 lists (i) all the Employees
                              together with their respective positions, years
                              of employment and rates of remuneration, as at
                              the date of this Agreement and (ii) all the
                              Employees on Medical Leave who are receiving
                              benefits under the Law or the Employee Plans,
                              together with their respective entitlement under
                              the Employee Plans, as at the date of this
                              Agreement.  All Employees who are Employees on
                              Medical Leave (and Employees on Short-Term
                              Medical Leave) are included (without limitation) 



<PAGE>   41

                                      -36-

                              and specifically so designated on SCHEDULE 4.17.1.

                 4.17.2       Except as set out in SCHEDULE 4.17.2, the
                              Corporation is not 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.

                 4.17.3       The only Employee Plans are those set out in
                              SCHEDULE 4.17.3 and except as set out in SCHEDULE
                              4.17.3 the Corporation is not a party to and it
                              does not operate any other "employee welfare
                              benefit plan" or "employee pension benefit plan"
                              as respectively defined in Sections 3(1) and 3(2)
                              of ERISA or 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
                              which are established or maintained by any
                              Related Person or with respect to which the
                              Corporation has made or is required to make
                              payments, transfers or contributions.  The
                              Employee Plans are duly registered where required
                              by, and are in good standing under, the Laws, and
                              each of the pension plans thereunder is in the
                              funding status as set out in SCHEDULE 4.17.3.

                 4.17.4       The Vendor has delivered to the Purchaser true,
                              complete and up-to-date copies of all documents
                              embodying or summarizing the Employee Plans
                              including, without limitation, all amendments
                              thereto, all funding agreements thereunder, all
                              summaries of such Employee Plans provided by the
                              Corporation 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 each of the Employee
                              Plans for which valuations are required.

                 4.17.5       No promise or commitment has been made by the
                              Corporation (i) to amend any of the Employee
                              Plans or to provide increased benefits thereunder
                              to any of its Employees, Retired Employees,
                              directors, officers or shareholders except 
                              pursuant



<PAGE>   42

                                      -37-

                             to the requirements, if any, of the Employee
                             Plans or collective bargaining agreements, nor
                             (ii) to establish any new "employee welfare
                             benefit plan" or "employee pension benefit plan"
                             as respectively defined in Sections 3(1) and 3(2)
                             of ERISA or 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 4.17.5, no actual amendment to any plan,
                             policy or arrangement referenced in this Section
                             4.17.5 has been adopted by the Vendor since the
                             Financial Statements Date.

                 4.17.6       Each Employee Plan has been maintained, operated
                              and administered in material compliance with its
                              terms and all related documents or agreements and
                              in compliance with the Laws.

                 4.17.7       All required employer contributions, premium
                              payments and source-deducted employee
                              contributions under the 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 any such Employee Plan and
                              the Laws.

                 4.17.8       All insurance premiums required with respect to
                              any Employee Plan, including any premiums payable
                              to U.S. Pension Benefit Guarantee Corporation,
                              have been paid, made, accrued or booked within
                              the time prescribed by any such Employee Plan and
                              the Laws.

                 4.17.9       All benefits, expenses and other amounts due and
                              payable to or under any Employee Plan, and all
                              contributions, transfers or payments required to
                              be made to any Employee Plan, have been paid,
                              made, accrued or booked within the time
                              prescribed by any such Employee Plan and the
                              Laws.

                 4.17.10      Except as set out in SCHEDULE 4.17.10, neither
                              the Vendor nor the Corporation has taken any
                              "contribution holiday" with respect to, or has
                              withdrawn any amount from, the Employee Plans.
<PAGE>   43

                                      -38-

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

                 4.17.12      The only Employee Plans that are subject to Title
                              IV of ERISA are the U.S. Plan and Pension Plan
                              for Unionized Employees of Domtar Gypsum Inc.
                              Except as set out in SCHEDULE 4.17.12, neither
                              the Corporation nor any Related Person would be
                              liable for any material amount pursuant to
                              Section 4062, 4063 or 4064 of ERISA if either of
                              such plans were to terminate as at the Adjustment
                              Date.

                 4.17.13      Neither the Corporation nor any Related Person
                              has incurred any material liability under or
                              pursuant to Title I or IV of ERISA or the
                              penalty, excise tax or joint and several
                              liability provisions of the Code relating to
                              employee benefit plans and, to the best of the
                              Vendor's or the Corporation's knowledge, no event
                              or condition has occurred or exists which could
                              result in any material liability to the
                              Corporation, such Related Person or the Purchaser
                              under or pursuant to Title I or IV of ERISA or
                              such penalty, excise tax or joint and several
                              liability provisions of the Code.

                 4.17.14      Each of the Employee Plans that is subject to the
                              minimum funding standards of ERISA or the Code
                              satisfies such standards under Sections 412 and
                              302 of the Code and ERISA, respectively, and no
                              Employee Plan has incurred an "accumulated
                              funding deficiency" within the meaning of such
                              sections, whether or not waived.

                 4.17.15      Each of the Employee Plans intended to be
                              qualified under Section 401(a) of the Code, and
                              the trust, if any, forming a part thereof, has
                              received a favorable determination letter from
                              the U.S. Internal Revenue Service as to its
                              qualification under the Code and to the effect
                              that each such trust is exempt from taxation
                              under Section 501(a) of the Code, and nothing has
                              occurred since the date of such determination
                              letter that adversely affects such qualification
                              or tax-exempt status.

                 4.17.16      Except as set out in SCHEDULE 4.17.16, neither
                              the Vendor nor the Corporation contributes to,
                              nor do they have any obligation to contribute to,
                              a multiemployer plan as defined in Section
                              4001(a)(3) of ERISA with regard to the Employees
<PAGE>   44

                                      -39-

                              or Retired Employees.  The Vendor shall be
                              responsible for and shall indemnify the Purchaser
                              against all contributions assessed relating to
                              any such multiemployer plan for the period prior
                              to the Closing Date and any assessment of
                              withdrawal liability from any such multiemployer
                              plan based on events occurring during the period
                              prior to and including the Closing Date
                              (including the consummation of the sale of the
                              Purchased Shares).  The Purchaser shall be
                              responsible for and shall indemnify the Vendor
                              against all contributions assessed relating to
                              any such multiemployer plan for the period
                              subsequent to the Closing Date and any assessment
                              of withdrawal liability from any such
                              multiemployer plan based on events occurring at
                              any time subsequent to the Closing Date.  In the
                              event that an assessment of withdrawal liability
                              by a multiemployer plan is based on events
                              occurring both before and subsequent to the
                              Closing Date, such assessment shall be divided
                              between the Parties prorata based on the
                              contribution base units that are lost before and
                              after the Closing Date.  The indemnities in this
                              Section do not apply to payments made or accrued
                              by the Corporation.

                 4.17.17      Except as set out in SCHEDULE 4.17.17, (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 or the Corporation'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 labor 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.

         4.18    LITIGATION; COMPLIANCE WITH LAWS

                 Except as set out in SCHEDULE 4.18:

                 4.18.1       there is not any suit, action, claim or other
                              proceeding or investigation pending or, to the
                              best of the Vendor's and the Corporation's
                              knowledge, threatened against or affecting the
<PAGE>   45

                                      -40-

                              Corporation or to which the Corporation is a
                              party, in or before or by any judicial,
                              quasi-judicial, administrative or
                              quasi-administrative court, tribunal, arbitrator,
                              agency or other governmental body.  Except as
                              described in SCHEDULE 4.18, none of such matters,
                              if adversely determined, is likely have a
                              Material Adverse Effect.

                 4.18.2       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
                              Corporation.

         4.19    BANK ACCOUNTS

                 SCHEDULE 4.19 sets out the name of

                 4.19.1       each bank, trust company or other Person with
                              which the Corporation has an account or
                              safekeeping arrangement or safety deposit box and
                              the names of each Person authorized to operate or
                              who has access to such account, arrangement or
                              box on behalf thereof; and

                 4.19.2       each Person holding a general or special power of
                              attorney from the Corporation with a summary of
                              the terms thereof.

         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 the Corporation or any of
                 their respective properties 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
                 any of the representations or warranties contained herein not
                 misleading.
<PAGE>   46

                                      -41-

         4.22    CONSENTS AND APPROVALS; PERMITS

                 Except as set forth in SCHEDULE 4.22 and except for filings
                 required under the HSR Act, no consent, exemption, approval
                 of, or filing with, any governmental body, agency, authority
                 or court (whether foreign or domestic) or any other Person is
                 required for the execution and delivery of this Agreement, the
                 sale of the Purchased Shares pursuant hereto, or the
                 consummation of the other transactions contemplated hereby.

         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 the Corporation or (ii) owned by Domtar and to be
                 transferred to the Purchaser pursuant to the Asset Purchase
                 Agreement.

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 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

                 5.2.1        This Agreement constitutes a legal, valid and
                              binding obligation of the Purchaser enforceable
                              against it in accordance with its terms, except
                              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).

                 5.2.2        Neither the entering into of this Agreement nor
                              the consummation by the Purchaser of any of the
                              transactions contemplated hereby shall, with
<PAGE>   47

                                      -42-

                              or without the giving of notice or the 
                              lapse of time, or both, result in the violation 
                              of any of the provisions of the articles of 
                              incorporation, articles of amendment, 
                              certificates in respect thereto, or by-laws 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.

                 5.2.3        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
                              Purchased Shares or the consummation of any of
                              the transactions herein provided.

         5.3     INVESTMENT REPRESENTATION

                 The Purchased Shares are purchased by the Purchaser for its
                 own account and not with a view to, or for sale in connection
                 with, any distribution thereof that would require registration
                 under the Securities Act, or any other Laws in respect of
                 securities, nor with any intention of reselling or granting
                 any participation in all or any part of the Purchased Shares
                 to any Person in a transaction that would violate the
                 Securities Act or any other Laws (including, without
                 limitation, those in respect of securities) or this Agreement.

         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 respective
                 properties for any commission, fee or other compensation as
                 broker or finder or for services in any similar capacity.

ARTICLE 6.       NON-COMPETITION

         6.1     NON-COMPETITION

                 From and after the Closing Date, neither Domtar nor the Vendor
                 shall, 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 
<PAGE>   48

                                      -43-

                or be engaged in or have financial interests in any
                gypsum wallboard business in the United States of America or in
                Canada.  The Parties intend that the covenant contained in the
                preceding sentence of this Section 6.1 shall be construed as a
                series of separate covenants, one for each county and Province
                of the United States of America or Canada, as the case may be,
                and except for geographic coverage, each such separate covenant
                shall be deemed identical in terms to the covenant contained in
                the preceding sentence.  In the event that in any judicial
                proceeding, a court should refuse to enforce any of the
                separate covenants deemed included in this Section 6.1, it is
                the intent of the Parties that the breadth of such covenant be
                reduced to the maximum legally allowable parameters rather than
                such covenant being deemed totally unenforceable or invalid. 
                If such a reduction is not feasible, it is the intent of
                the Parties that the unenforceable covenant be deemed
                eliminated from these provisions for the purpose of those
                proceedings only to the extent necessary to permit the
                remaining separate covenants to be enforced.

         6.2     PERMITTED ACTIVITIES

                 Notwithstanding the provisions of Section 6.1 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.

         6.3     LIMITED EXCEPTION FOR INCIDENTAL ACQUISITIONS

                 Notwithstanding the provisions of Section 6.1 hereof, neither
                 the Vendor nor Domtar shall 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 Acquired Gypsum Assets during the last full
                 fiscal year period ("GROSS REVENUES") exceed $35,000,000, the
                 Vendor or Domtar, as the case may be (the "ACQUIROR"), shall
                 offer to sell the Acquired Gypsum Assets to the Purchaser.
                 Such offer to the Purchaser shall be made by the Acquiror
                 promptly upon the execution by the Acquiror of a binding
                 agreement to purchase such assets (but in no event less than
                 30 days prior to closing the acquisition contemplated by such
                 agreement).  If the Purchaser elects to purchase the Acquired
                 Gypsum Assets, the Acquiror and the Purchaser shall negotiate
                 in good faith the price to be paid by the Purchaser to the 
<PAGE>   49

                                      -44-

                 Acquiror for the Acquired Gypsum Assets.  If the
                 Acquiror and the Purchaser cannot agree upon the terms and
                 conditions of such sale, then the Acquiror shall use its
                 commercially reasonable efforts to sell the Acquired Gypsum
                 Assets to a third party within two years after negotiations
                 with the Purchaser cease, but no such sale shall be on terms
                 and conditions in the aggregate more favorable 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
                 Acquiror need not offer the Acquired Gypsum Assets to the
                 Purchaser, but if the Acquiror determines to sell the Acquired
                 Gypsum Assets prior to the fifth anniversary of the Closing,
                 the Acquiror shall first offer the Acquired Gypsum Assets to   
                 the Purchaser following the procedures set out in the
                 preceding sentences of this Section 6.3.

ARTICLE 7.       COVENANTS OF THE PARTIES

         The Parties, as specified in this Article 7, covenant and agree as
         follows:

         7.1     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 and the Corporation covenant to the
                 Purchaser that, except as may be specifically approved in
                 writing by the Purchaser, the Business will be conducted, and
                 the Corporation and KMHC will operate their respective
                 businesses, only in the ordinary course and substantially in
                 the same manner as presently conducted, will not 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 will
                 use their commercially reasonable efforts with due diligence
                 to (i) maintain their business organizations, and (ii)
                 maintain their relationships with and the goodwill of their
                 suppliers, distributors, licensors, customers and others
                 having business relations with them, so as to maintain the
                 goodwill and ongoing business of the Corporation.  By way of
                 illustration and not by way of limitation of the foregoing:

                 (A)          The Corporation shall manage its working capital,
                              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 and paying
                              outstanding obligations, trade accounts and other
                              indebtedness as they come due.
<PAGE>   50

                                      -45-

                 (B)          The Corporation shall maintain its assets in good
                              condition and repair.

                 (C)          The Corporation shall not, without the prior
                              written approval of the Purchaser, take any of
                              the following actions:

                          (I)              dispose of any assets, other than
                                           (x) sales of inventory in the
                                           ordinary course of business and (y)
                                           Excluded Assets;

                          (II)             subject any of its assets to any 
                                           Lien, except Permitted Encumbrances;

                          (III)            make any payments to, or for the
                                           benefit of, any present or former
                                           employee, director, officer or
                                           shareholder 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)             amend its articles of incorporation,
                                           articles of amendment, or
                                           certificates in connection therewith
                                           or by-laws;

                          (V)              incur, assume or guarantee any
                                           obligation or liability for borrowed
                                           money, or exchange, refund or renew
                                           any outstanding indebtedness in such
                                           a manner as to reduce the principal
                                           amount of such indebtedness and
                                           increase the rate or balance
                                           outstanding;

                          (VI)             cancel any debts;

                          (VII)            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 Shares;

                          (VIII)           do any act or fail to do any act,
                                           where such act of 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;

                          (IX)             commit to any capital expenditure
                                           project or make any investment, in
                                           either case in excess of
<PAGE>   51

                                      -46-

                                           $1,000,000 not disclosed to the 
                                           Purchaser prior to the date of this 
                                           Agreement;

                          (X)              organize any Subsidiary, acquire any
                                           capital stock or other equity
                                           securities of any corporation, or
                                           acquire any equity or other
                                           ownership interest in any business;
                                           or

                          (XI)             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.

                 Notwithstanding the foregoing or any other provision of this
                 Agreement, each of the Corporation and KMHC may give to any of
                 the present and former directors and/or officers of itself or
                 any of its predecessor corporations a full release from all
                 its respective claims against them, whether past, present or
                 future, actual, contingent or otherwise.

         7.2     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 7.1 or by
                 reason of which the representations and warranties made by the
                 Vendor, Domtar or the Corporation herein have ceased to be
                 true and correct in any material respect.

         7.3     ACCESS FOR THE PURCHASER

                 The Vendor shall cause the Corporation to, and the Corporation
                 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, Intellectual Properties, Properties and Leased Real
                 Properties and of its financial and legal condition as the
                 Purchaser may deem necessary or advisable in order to become
                 familiar with the Business, Intellectual Properties,
                 Properties and Leased Real Properties 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, share
                 certificate books, share registers, articles of incorporation,
                 articles of amendment and certificates in connection
                 therewith, by-laws, books and records of
<PAGE>   52

                                      -47-

                 the Corporation, 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 Corporation, Business, Intellectual
                 Properties, Properties and Leased Real Properties and to
                 verify the accuracy of Vendor's and the Corporation's
                 representations and warranties contained herein.

         7.4     MAINTAIN INSURANCE

                 7.4.1        The Vendor, Domtar and the Corporation 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
                              Corporation and the Business in effect on the
                              Financial Statements Date or duly renew the same
                              upon substantially the same terms and conditions.
                              The Vendor, Domtar and the Corporation 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
                              Corporation, Domtar or any other Person) which
                              insure or have insured the Corporation, the
                              Business or the Properties and which are in
                              effect or were in effect at any time prior to the
                              Effective Time.

                              In furtherance of the foregoing, the Vendor, 
                              Domtar and the Corporation

                              (a)     will take all reasonable measures to
                                      identify and make copies available to the
                                      Purchaser of all historical policies of
                                      insurance with respect to the Corporation
                                      and Business and, at the Purchaser's
                                      expense, all predecessor corporations and
                                      businesses which were owned by the
                                      Corporation and Business;

                              (b)     agree 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
<PAGE>   53

                                      -48-

                                      Corporation and Business including
                                      without limitation all casualty,
                                      liability and directors and officers
                                      coverages and shall give periodic status
                                      reports to the Purchaser concerning such
                                      attempts; and

                              (c)     agree not to release any insurance
                                      policies which provide or have provided
                                      coverage applicable to the Corporation or
                                      the Business without the prior written
                                      consent of the Purchaser.

                 7.4.2        The Vendor and the Purchaser acknowledge that the
                              policies of insurance applicable to the
                              Corporation are not necessarily exclusive to the
                              Corporation and that certain coverages and limits
                              may be impaired by claims arising from other
                              companies currently or previously owned by
                              Domtar; however, the Vendor will notify the
                              Purchaser of all such claims and impairment as
                              soon as reasonably practicable.  The Vendor and
                              Domtar make 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 and the Corporation shall be
                              responsible for any retrospective premiums and
                              associated third party administrator and insurer
                              management and administration costs allocable to
                              the claims experience of the Corporation.  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 insurance
                              limits and the allocation of retrospective
                              premiums.

                 7.4.3        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 7.4.

         7.5     CORPORATE PROCEEDINGS FOR TRANSFER

                 The Vendor shall cause the Corporation to take all necessary
                 steps and proceedings as may be reasonably considered
                 appropriate by the Purchaser's Counsel in order that the
                 Purchased Shares be duly and regularly transferred to the
                 Purchaser as at the Effective Time.
<PAGE>   54

                                      -49-

         7.6     ADJUSTMENT BALANCE SHEET

                 The Vendor shall deliver to the Purchaser the Adjustment
                 Balance Sheet as provided for in Section 3.2.4.

         7.7     TAX 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 Corporation as is reasonably necessary for
                 the Purchaser 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 Corporation or the
                 Purchaser.

         7.8     HAZARDOUS WASTE

                 Prior to the Closing, the Vendor and the Corporation shall
                 properly remove and dispose of all Hazardous Waste which may
                 be located at the Corporation's facility at Long Beach,
                 California.

         7.9     OPERATION OF BUSINESS AFTER 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 3.2 hereof.  In
                 such event, from and after the Second Fixture Date,

                 (i)      the Vendor and the Corporation covenant to the
                          Purchaser that, except as otherwise specifically
                          approved in writing by the Purchaser, the business
                          will be conducted, and the Corporation and KHMC will
                          operate their respective businesses, as provided in
                          Sections 7.1, 7.2, 7.3 and 7.4;

                 (ii)     the Vendor and the Corporation will hold in trust,
                          for the account of the Purchaser, all of the earnings
                          and profits of the Business, and shall deposit such
                          earnings and profits in one or more interest-bearing
                          bank accounts as the Purchaser may direct;

                 (iii)    the Corporation may expend funds included in such
                          earnings and profits to permit the Corporation and
                          KHMC to carry out their obligations under Sections
                          7.1(a) and (b); and

                 (iv)     in the event that the Corporation determines that is
                          necessary to make any capital expenditures with
                          respect to the Business, (whether above or below 
<PAGE>   55

                                      -50-

                          the threshold amount specified in Section 7.1),
                          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 the Closing Date occurs after the Second Fixture
                 Date, then the provisions of Section 10.1.1.3, and all of the
                 provisions of Sections 10.1.2 - 10.1.10 and Sections 10.2.1 -
                 10.2.6 shall be satisfied as provided therein, and the Closing
                 shall occur as provided in Article 12 hereof.

ARTICLE 8.       ADDITIONAL COVENANTS OF THE PARTIES

         The Parties, as specified in this Article 8, further covenant and 
         agree as follows:

         8.1     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 Corporation 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 8.1,
                 the Purchaser shall furnish or cause to be furnished to the
                 Vendor, upon request, tax packages with respect to the
                 Corporation 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.  The Purchaser shall cooperate with the Selling
                 Parties with regard to the elections to be made by the Selling
                 Parties described on SCHEDULE 4.14.6.

                 The Purchaser's obligations under this Section 8.1 are
                 conditional on the Purchaser's prior receipt of copies of all
                 Tax Returns for periods ending prior to the Closing Date.

         8.2     USE OF NAME

                 The Purchaser shall not use nor allow any of its Affiliates or
                 Subsidiaries including, without limitation, the Corporation to
                 use, directly or indirectly, the name "Domtar" or the prefix
                 "Dom" as a trade-mark, service mark or trade-name in 
<PAGE>   56

                                      -51-

                 connection with any product or service offered by the
                 Business from and after the Closing Date except as permitted
                 by the Trademarks Agreement between Domtar and the Purchaser   
                 executed pursuant to the Asset Purchase Agreement.

                 EMPLOYEES

                 8.3.1        VENDOR PLANS

                              The Parties acknowledge that some of the Employee
                              Plans covering Employees or Retired Employees of
                              the Corporation prior to the Effective Time are
                              maintained by the Vendor for the benefit of its
                              employees as well as those of the Corporation
                              ("VENDOR PLANS") (SCHEDULE 4.17.3 shall designate
                              which Employee Plans are the Vendor Plans).  In
                              general, with respect to benefits provided by
                              such plans (except as may be otherwise
                              specifically provided in this Section 8.3), the
                              Vendor agrees to retain all benefits obligations
                              under the Vendor Plans with respect to the
                              Employees and Retired Employees accruing prior to
                              the Effective Time.  In particular, but without
                              limitation, the Vendor Plans which are employee
                              welfare plans shall be responsible for the
                              following benefits payments, subject to the terms
                              and conditions of particular plan:  (i) claims
                              for health care benefits with respect to expenses
                              incurred by, services performed for or supplies
                              or pharmaceuticals provided to Employees and
                              Retired Employees and their covered dependants
                              prior to 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 prior to Effective
                              Time.  In all cases, the amount and types of
                              benefits payable shall be determined in
                              accordance with the terms of the affected Vendor
                              Plan, and benefits payable for Employees shall be
                              for the account of the Corporation.

                 8.3.2        EMPLOYEES ON MEDICAL LEAVE

                              The Vendor will indemnify and hold the
                              Corporation and the Purchaser harmless against
                              the costs of all benefits payable under Employee
                              Plans (i) to Employees on Long-Term Medical Leave
                              as at the Effective Time and (ii) Employees on
                              Short-Term Medical Leave as at the Effective Date
                              who thereafter go directly to the status of
                              Employees on Long-Term Medical Leave (in each 
<PAGE>   57

                                      -52-

                              case other than benefits payable with Employee
                              Plan assets specifically transferred to the       
                              Purchaser for this purpose).

                 8.3.3        KEY EMPLOYEE RETENTION PROGRAM

                              All bonuses, if any, payable pursuant to the
                              Vendor's "Key Employee Retention Program" set out
                              in SCHEDULE 8.3.3 (including any special bonus
                              noted on that Schedule), which shall not be
                              accrued in the Adjustment Balance Sheet except to
                              the extent that such bonuses required to be paid
                              under such Program in the aggregate exceed the
                              Total Cost set out on SCHEDULE 8.3.3, shall be
                              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.

                 8.3.4        EMPLOYEE SHARE PURCHASE AND EXECUTIVE STOCK 
                              OPTION PLANS

                              The Vendor shall indemnify and hold the
                              Corporation and the Purchaser harmless against
                              any and all claims, obligations and liabilities
                              of Employees and Retired Employees under the
                              Employee Share Purchase and Executive Stock
                              Option Plans covering Employees and Retired
                              Employees prior to the Effective Time and
                              acknowledges that the Purchaser is not
                              responsible for any compensation or benefits
                              under such plan.

                 8.3.5        U.S. 401(K) PLAN

                              Effective as of the Effective Time, the Purchaser
                              shall designate a defined contribution plan or
                              plans (the "PURCHASER'S SAVINGS PLANS") to cover
                              those Employees who participated in the U.S.
                              401(k) Plan as at the Effective Time (other than
                              Employees on Long-Term Medical Leave).  The
                              Purchaser's Savings Plans shall meet the
                              requirements of Sections 401(a) and 401(k) of the
                              Code and shall recognize the service of the
                              affected Employees with the Corporation prior to
                              the Effective Time for all purposes under such
                              plans, to the extent credited under the terms of
                              the U.S. 401(k) Plan (as in effect on the
                              Effective Time).  As soon as practicable after
                              the Effective Time and when all applicable
                              requirements under the Laws have been met (but no
                              later than 150 days thereafter), the Vendor shall
                              transfer, or cause to be transferred, to the
                              Purchaser's Savings Plans an amount (the 
<PAGE>   58

                                      -53-

                              "AGGREGATE ACCOUNT BALANCES"), calculated as of
                              the Effective Time and adjusted as provided below
                              in this Section 8.3.5, in cash (and the notes
                              representing loans to the affected Employees),
                              equal to the total of the individual account
                              balances (the "ACCOUNT BALANCES") of the affected
                              Employees under the U.S. 401(k) Plan, reduced by
                              the amount of any distributions to the affected
                              Employees made in accordance with the terms of
                              the U.S. 401(k) Plan between the Effective Time
                              and the date of the transfer of such Employees'
                              Account Balances.  The Aggregate Account Balances
                              shall be increased or decreased by the amount of
                              any actual earnings or losses on each individual
                              account of the affected Employees included
                              therein from the Effective Time to the date of
                              the transfer of the Aggregate Account Balances,
                              which earnings or losses shall be credited or
                              debited to the appropriate accounts. The affected
                              Employees who have loans outstanding under the
                              U.S. 401(k) Plan at the Effective Time shall have
                              the right to periodically repay such loans in
                              accordance with their terms while such persons
                              are employed by the Purchaser.  Effective upon
                              the transfer of the Aggregate Account Balances to
                              the Purchaser's Savings Plans, the Purchaser and
                              such Purchaser's Savings Plans shall assume all
                              liabilities of the U.S. 401(k) Plan with respect
                              to such Aggregate Account Balances.  Prior to
                              such transfer, the Vendor shall be responsible
                              for the administration of the U.S. 401(k) Plan
                              accounts of participants whose accounts will be
                              transferred to the Purchaser's Savings Plans in
                              accordance with this Section 8.3.5 and shall
                              retain all fiduciary responsibility under ERISA
                              with respect to such funds.  The Purchaser and
                              the Vendor agree to cooperate in developing
                              procedures to facilitate the administration of
                              loans during the period between the Effective
                              Time and the date of the actual transfers and in
                              implementing the transfer of the Aggregate        
                              Account Balances as contemplated in this section.

         8.4     PENSION PLANS

                 8.4.1        Subject to the completion of the transfers
                              contemplated in Section 8.4.2 hereof, the
                              Purchaser shall designate an employee pension
                              benefits plan ("Purchaser's Pension Plan") to
                              assume all responsibility for all pension
                              benefits accrued by the Employees (excluding,
                              however, any Employee on Long-Term Medical Leave
                              at the Effective Time) and Retired Employees
                              under the U.S. Plan.
<PAGE>   59

                                      -54-

                 8.4.2        Subject to the qualification of the Purchaser's
                              Pension Plan and all necessary approvals and
                              further subject to the provisions of this Section
                              8.4, the Vendor shall transfer or cause to be
                              transferred to the Purchaser's Pension Plans from
                              the U.S. Plan, the amounts determined in
                              accordance with this Section 8.4 with respect to
                              all the benefits accrued by the Employees
                              (excluding, however, any Employee on Long-Term
                              Medical Leave) and Retired Employees under the
                              U.S. Plan up to the Effective Time, such transfer
                              to occur no later than ninety (90) Business Days
                              after the actuarial matters have been settled and
                              all regulatory requirements have been met.

                 8.4.3        The Parties confirm that upon the completion of
                              the transfer contemplated in Section 8.4.2
                              hereof, the Vendor and the U.S. Plan shall be
                              completely discharged of all of their respective
                              obligations with respect to the pension benefits
                              accrued by the Employees and Retired Employees
                              with respect to whom transfers are made under the
                              said plans up to the Effective Time.  Prior to
                              the completion of such transfers, the Vendor and
                              U.S. Plan shall remain responsible for the
                              administration of, and liable for all fiduciary
                              and other obligations with respect to, the
                              benefits due to Employees and Retired Employees.

                 8.4.4        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 U.S.
                              Plan in order to allow for the transfer, in
                              compliance with the requirements of the Code, of
                              the amounts contemplated in Section 8.4.2 hereof
                              (the "AMOUNTS").

                 8.4.5        The Vendor shall be responsible for the division
                              of the U.S. Plan in accordance with the Law,
                              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 for
                              review and approval by the Purchaser's actuary
                              prior to their filing with the relevant
                              regulatory authorities.  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
                              8.4.8 and to report its findings to the Purchaser
                              and the Vendor.  No filing with any regulatory
                              body of any kind (including for greater
                              certainty, but without limitation, actuarial 
<PAGE>   60

                                      -55-

                              reports) regarding the division of the Vendor
                              Pension Plans may be made without prior review
                              and approval of the entire filing by the
                              Purchaser.

                 8.4.6        Until the transfer of the Amounts is completed
                              pursuant to Section 8.4.2 hereof, the Vendor
                              shall administer all benefits accrued to the
                              Employees and Retired Employees, and shall make
                              all benefits payments, under the U.S. Plan and
                              the Amounts shall be adjusted accordingly as at
                              the date of the actual transfer.

                 8.4.7        The Vendor shall not make, without the prior
                              written consent of the Purchaser, any
                              modification to the U.S. Plan between the
                              Effective Time and the date of the actual
                              transfer of the Amounts (the "TRANSITIONAL
                              PERIOD"), if such modifications would change in
                              any way the terms and conditions affecting the
                              accrued benefits to be transferred to the
                              Purchaser's Employee Plans (including for greater
                              certainty, but without limitation the benefits of
                              the affected Employees and Retired Employees or
                              the contributions with respect to such benefits)
                              or would otherwise affect the calculation of the
                              Amounts.  Notwithstanding anything in this
                              Section 8.4.7 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.

                 8.4.8        For the purpose of Section 8.4.2 hereof, the
                              Amounts shall equal the projected benefit
                              obligation in respect of the accrued benefits as
                              of the Effective Time of the affected Employees
                              and Retired Employees.  The Amounts shall be
                              determined as at the Effective Time using the
                              same funding actuarial methods and assumptions
                              used in the actuarial valuations of the U.S. Plan
                              as at January 1, 1995.

                              Initial calculations shall be performed by the
                              Vendor's actuary using the actuarial assumptions
                              and the methods referred to in this Section 8.4.8
                              within six (6) months after the Effective Time
                              and shall be submitted for review and approval to
                              the Purchaser's actuary.  The Purchaser's
<PAGE>   61

                                      -56-

                              actuary shall have sixty (60) days to review the
                              calculations and report back to the Parties.  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.

                 8.4.9        During the Transitional Period, the Amounts and
                              all adjustments thereof shall be adjusted as
                              follows:

                          (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 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, at the investment
                                           return rate used in the actuarial
                                           assumptions referred to in Section
                                           8.4.8.

                              The transfer of the Amounts and the adjustments
                              shall be made in kind and in cash as determined
                              in SCHEDULE 8.4.9.  If any portion of the Amounts
                              is transferred in kind, the assets shall be
                              valued for purposes of the transfer at the market
                              value as of the close of business on the market
                              day immediately preceding the transfer.

                 8.4.10       The Vendor shall indemnify and hold the Purchaser
                              and the Purchaser's Employee Plans against any
                              claims, liabilities and expenses (including, for
                              greater certainty and without limitation,
                              attorney's fees) arising from the failure of the
                              U.S. Plan or the U.S. 401(k) Plan to be in
                              compliance with applicable Law (including,
                              without limitation, those pertaining to
                              qualification standards and favorable tax
                              treatment of qualified plans) at the time of the
                              assets transfers contemplated in Sections 8.3.5
                              and 8.4.

         8.5     AFFIDAVITS FOR TITLE INSURANCE

                 The Corporation will cooperate with the Purchaser with respect
                 to obtaining real property title insurance in accordance with
                 Section 10.1.6, including providing owner's affidavits and
                 taking other actions as may reasonably be requested by the
                 Purchaser.
<PAGE>   62

                                      -57-

         8.6     NO INTERFERENCE

                 The Purchaser shall not take any action prior to the Closing
                 which would negatively impact the ability of the Vendor and
                 the Corporation to operate the Business or to comply with
                 their obligations under Section 7.1 or other provisions of
                 this Agreement.  After the Closing, the Parties shall
                 cooperate and not interfere with one another in the efforts of
                 Domtar, the Vendor and Public Service Electric & Gas to
                 clean-up the Camden facility under the Administrative Consent
                 Order issued under the New Jersey Environmental Clean-up
                 Responsibility Act, as amended, and related statutes, with due
                 allowance for the operation of the facility.

         8.7     GUARANTEES, LETTERS OF CREDIT, ETC.

                 (a)      The Vendor and Domtar will use their reasonable
                          efforts to replace, renew or extend any surety bonds,
                          letters of credit or corporate guarantees previously
                          provided by the Vendor or Domtar which are required
                          to operate the Business in the ordinary and usual
                          course and to preserve in all material respects the
                          Business intact (the "SUPPORT INSTRUMENTS").  The
                          Vendor and Domtar 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
                          6 months from Closing).

                 (b)      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 and Domtar released from all such
                          Support Instruments, in each case to the extent they
                          relate to the Business.

ARTICLE 9.       ANTITRUST AND COMPETITION REGULATORY APPROVALS

         9.1     OBTAINING APPROVALS

                 The Purchaser and the Vendor shall prepare and file promptly,
                 with all reasonable diligence, all notifications, forms,
                 reports and other documents, and shall take and complete
                 promptly, with all reasonable diligence, all steps, measures 
<PAGE>   63

                                      -58-

                 and procedures, as may be required by any federal,
                 state, provincial or local governmental authority, as the case
                 may be (the "ANTITRUST AUTHORITY"), for the purpose of
                 obtaining all permits, consents, orders or approvals required
                 under the applicable federal, state, provincial or local
                 antitrust and competition laws (the "ANTITRUST LAWS")
                 including, without limitation, the HSR Act, for the purpose of
                 the consummation of the transaction contemplated hereby;
                 provided that the Vendor shall not be obligated to modify the
                 scope or terms of the transaction or to undertake any
                 obligations with respect to the Corporation or any Subsidiary
                 thereof or the assets of any thereof beyond those already
                 required by other sections of this Agreement.  Without
                 limiting the generality of the foregoing provisions of this
                 Section, the Purchaser shall:

                 9.1.1        take promptly, with all reasonable diligence, any
                              and all of the following actions to the extent
                              reasonably required to eliminate any objections
                              on the part of any Antitrust Authority regarding
                              the legality under any Antitrust Law of the
                              Purchaser's acquisition of the Purchased Shares
                              in accordance with the terms of this Agreement,
                              namely, making proposals, executing and carrying
                              out agreements and submitting to judicial or
                              administrative orders, providing for the sale or
                              other disposition, or the holding separate
                              (though the establishment of a trust or
                              otherwise) of particular assets or categories  of
                              assets or businesses of any of the Purchaser and
                              the Corporation or any Subsidiary thereof, as the
                              case may be, or, pending completing of any of the
                              foregoing actions, the holding separate (through
                              the establishment of a trust or otherwise) of the
                              voting securities of the Corporation or any
                              Subsidiary thereof, as the case may be;

                 9.1.2        use all reasonable efforts to prevent the entry
                              in a judicial or administrative proceeding
                              brought under any Antitrust Law by any Antitrust
                              Authority of any permanent or preliminary
                              injunction or other order that would make the
                              consummation of the acquisition of the Purchased
                              Shares in accordance with the terms of this
                              Agreement unlawful or would prevent or
                              unreasonably delay it, including, without
                              limitation, taking the steps contemplated in
                              Section 9.1.1;

                 9.1.3        take promptly, with all reasonable diligence, in
                              the event that such an injunction or order has
                              been issued in such a proceeding, any and all
                              steps, including, without limitation, appeal
                              thereof, the posting of a bond or the steps
<PAGE>   64

                                      -59-

                              contemplated in Section 9.1.1, necessary to
                              vacate, modify or suspend such injunction or
                              order so as to permit the consummation of the
                              acquisition of the Purchased Shares in accordance
                              with the terms of this Agreement as nearly as
                              possible on the timetable contemplated by this
                              Agreement; and

                 9.1.4        take promptly, with all reasonable diligence, all
                              other actions and do all other things reasonably
                              necessary and proper to avoid or eliminate each
                              and every impediment under any Antitrust Law
                              which may be asserted by any Antitrust Authority,
                              to the consummation of the acquisition of the
                              Purchased Shares in accordance with the terms of
                              this Agreement.

         9.2     DEALINGS WITH AUTHORITY

                 Nothing in this Agreement shall be deemed to limit the ability
                 of the Purchaser to contest, in any appropriate administrative
                 or judicial forum, any effort of any Antitrust Authority to
                 require the divestiture by the Purchaser of particular assets
                 or categories of assets or businesses of any of the Purchaser
                 and the Corporation or any Subsidiary thereof, or the holding
                 separate (through establishment of a trust or otherwise) of
                 the voting securities of the Corporation or any Subsidiary
                 thereof; provided, however, that the Purchaser shall take such
                 steps to hold separate the acquired businesses as may be
                 reasonably necessary (and after the entry of an injunction or
                 other order described in Section 9.1.2, as may be necessary)
                 to permit the completion of the transactions contemplated by
                 this Agreement.

                 The Purchaser shall not agree with the Antitrust Authority to
                 postpone the consummation of the transaction without the prior
                 written consent of the Vendor, which consent shall not be
                 unreasonably withheld.

ARTICLE 10.      CONDITIONS OF CLOSING

         10.1    PURCHASER'S CONDITIONS

                 The purchase and sale of the Purchased Shares 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:

                 10.1.1       REPRESENTATIONS AND WARRANTIES REMAIN CORRECT
<PAGE>   65

                                      -60-

                              10.1.1.1     If the Closing Date occurs on or
                                           before the First Fixture Date, each
                                           of the representations and
                                           warranties of the Selling Parties
                                           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
                                           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 President of
                                           the Vendor, to the effect that such
                                           representations and warranties are
                                           true and correct on and as at the
                                           Closing Date with the same force and
                                           effect as though made on and as at
                                           such date.

                              10.1.1.2     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 Selling Parties 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
                                           President of the Vendor, to the
                                           effect that such representations and
                                           warranties are true and correct on
                                           and as at the First Fixture Date or
                                           the Closing Date, as the case may
                                           be, with the same force and effect 
<PAGE>   66

                                      -61-

                                           as though made on and as at such 
                                           dates.

                              10.1.1.3     If the Closing Date occurs after the
                                           Second Fixture Date, each of the
                                           representations and warranties of
                                           the Selling Parties contained in
                                           this Agreement shall be true and
                                           correct in all material respects on
                                           and as 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 respect 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
                                           President of the Vendor, to the
                                           effect that such representations and
                                           warranties are true and correct 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.

                 10.1.2       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.

                 10.1.3       PERMITS, CONSENTS AND APPROVALS

                              All permits, consents, orders and approvals
                              required by any federal, provincial, state or
                              local governmental authority, as the case may be,
                              including, without limitation, all consents and
                              approvals required under the Antitrust Laws
                              including the HSR Act for the purposes 
<PAGE>   67

                                      -62-

                              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 such Antitrust Laws,
                              for the purposes of the consummation of the
                              transactions contemplated hereby shall have
                              lapsed prior to the Closing Date.

                 10.1.4       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.

                 10.1.5       EXCLUDED ASSETS

                              The transfer of the Excluded Assets by the 
                              Corporation shall have been completed.

                 10.1.6       REAL PROPERTY TITLE INSURANCE

                              The Purchaser shall have obtained at its option
                              and expense a title insurance policy insuring the
                              Purchaser that the Corporation has good and
                              marketable title in fee simple absolute to all
                              the Real Properties free and clear of all title
                              defects or Liens of any nature whatsoever, except
                              as described in such policies and which are
                              reasonably acceptable to the Purchaser, and
                              except for Permitted Encumbrances.
 
                 10.1.7       RESIGNATION AND RELEASES BY DIRECTORS AND OFFICERS

                              Each of the directors and officers of the
                              Corporation and KMHC shall have signed in favour
                              of and delivered to the Corporation and KMHC a
                              resignation as a director and/or officer thereof,
                              as the case may be, and a release from all their
                              respective claims against the Corporation and
                              KMHC as a director and/or officer thereof, as the
                              case may be.

                 10.1.8       OPINION OF THE VENDOR'S COUNSEL
<PAGE>   68

                                      -63-

                              The Purchaser shall have received from the
                              Vendor's Counsel a favorable 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, 4.3 and 4.5, and such other matters
                              as may be reasonably requested by the Purchaser.
                              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.

                 10.1.9       LITIGATION

                              No suit, action or proceeding shall be pending
                              against the Purchaser, the Selling Parties or
                              KMHC before any court or governmental agency
                              which could result in (i) the restraint or
                              prohibition of the consummation of the
                              transactions contemplated hereby or (ii) an order
                              restricting the Corporation or KMHC in conducting
                              their respective businesses in such a manner so
                              as to have a Material Adverse Effect.

                 10.1.10      DOMTAR CANADIAN GYPSUM PRODUCTS BUSINESS

                              The consummation of the purchase and sale of the
                              Purchased Shares pursuant hereto shall take place
                              concurrently with the consummation of the Asset
                              Purchase Agreement.

                 10.1.11      RESCISSION

                              In case any of the foregoing conditions provided
                              for in this Section 10.1 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.
<PAGE>   69

                                      -64-

                 10.1.12      WAIVER BY THE PURCHASER

                              The conditions set out in this Section 10.1 may
                              be waived by the Purchaser in whole or in part by
                              a written document to such effect duly signed
                              thereby.

         10.2    VENDOR'S CONDITIONS

                 The purchase and sale of the Purchased Shares 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:

                 10.2.1       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
                              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.

                 10.2.2       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.

                 10.2.3       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 
<PAGE>   70

                                      -65-

                              and the Vendor's Counsel shall have received
                              all such proceedings and documents or duly
                              certified copies thereof, as may be reasonably
                              requested.

                 10.2.4       CHANGE OF NAME

                              The Corporation shall have changed its name to
                              one which does not include the name "Domtar" or
                              the prefix "Dom".

                 10.2.5       DOMTAR CANADIAN GYPSUM PRODUCTS BUSINESS

                              The consummation of the purchase and sale of the
                              Purchased Shares pursuant hereto shall take place
                              concurrently with the consummation of the Asset
                              Purchase Agreement.

                 10.2.6       OPINION OF THE PURCHASER'S COUNSEL

                              The Vendor shall have received from the
                              Purchaser's Counsel a favorable 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 and 5.2, and such other matters as may be
                              reasonably requested by the Vendor, with such
                              qualifications as may be consistent with opinion
                              practice 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, rely 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.

                 10.2.7       RESCISSION

                              In case any of the foregoing conditions provided
                              for in this Section 10.2 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.
<PAGE>   71

                                      -66-

                 10.2.8       WAIVER BY THE VENDOR

                              The conditions set out in this Section 10.2 may
                              be waived by the Vendor in whole or in part by a
                              written document to such effect duly signed
                              thereby.

ARTICLE 11.      SURVIVAL AND RELIANCE ON REPRESENTATIONS AND WARRANTIES AND 
                 INDEMNIFICATION

         11.1    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 dates and shall
                 continue in full force and effect as provided in Section 11.2
                 hereof.

         11.2    SURVIVAL OF LIABILITY FOR REPRESENTATIONS AND WARRANTIES

                 11.2.1       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 and
                              the Closing Date for a period of one (1) year,
                              and all other representations and warranties of
                              the Vendor and the Corporation contained herein
                              shall survive the earlier of the First Fixture
                              Date and the Closing Date for a period of one (1)
                              year, except for

                              11.2.1.1     the representations and warranties
                                           contained in Sections 4.9.5 and 4.14
                                           hereof (Taxes) and 4.17 (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;

                              11.2.1.2     the representations and warranties
                                           contained in Section 4.16 hereof
                                           (Environmental Matters) which shall
                                           survive the earlier of (i) the First
                                           or Second Fixture Date (as
                                           determined by the date on which
<PAGE>   72

                                      -67-

                                           representations and warranties were
                                           last deemed made) and (ii) the
                                           Closing Date for a period of three
                                           (3) years; and

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

                              except in each case to the extent that during
                              such period the Purchaser shall have given notice
                              to the Vendor or Domtar 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
                              the applicable survival period described above,
                              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 11.2.1.

                 11.2.2       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 11.2.2.

         11.3    INDEMNIFICATION BY THE VENDOR

                 11.3.1       Each of Domtar and the Vendor, jointly and
                              severally, shall defend, indemnify and hold
                              harmless the Purchaser and (after the Effective
                              Time) the Corporation and each Affiliate thereof
                              and any present or future officer, director,
                              agent or employee of 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
<PAGE>   73

                                      -68-

                              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, Domtar or the
                              Corporation  contained in this Agreement.  All
                              such Claims are referred to herein as
                              "PURCHASER'S INDEMNIFIED CLAIMS".

                 11.3.2       Without limiting the generality of the provisions
                              of Section 11.3.1 hereof and notwithstanding the
                              provisions of Section 11.7 hereof, the Vendor
                              and Domtar shall jointly and severally 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 11.3.2 or in Sections 8.3.2, 8.3.4
                              and 8.4.10, and the obligation of the Vendor and
                              Domtar to indemnify the Purchaser Protected
                              Persons pursuant to this Section 11.3.2 with
                              respect to such Claims shall not be subject to
                              the deductible and limiting amounts referred to
                              in Section 11.7 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 11.3.2 shall not be subject to any
                              limitations on survival of warranties contained
                              in this Article 11, and the Purchaser Protected
                              Persons may seek indemnification hereunder at any
                              time after the Effective Time, except as
                              otherwise expressly provided for in SCHEDULE
                              11.3.2.

                 11.3.3       Notwithstanding any other provision of this
                              Article 11, the Vendor and Domtar 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 11.3.3.

         11.4    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
<PAGE>   74

                                      -69-

                 11.4.1       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;
                              provided that any Claim for the breach or
                              nonfulfillment by the Purchaser of its
                              obligations under Article 9 shall not be subject
                              to indemnification under this Section 11.4 but
                              shall be subject to the provisions of Section
                              13.2; or

                 11.4.2       with respect to the environmental matters set out
                              in SCHEDULE 11.3.3.

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

         11.5    INDEMNIFICATION AGAINST THIRD PARTY CLAIMS

                 11.5.1       Promptly upon receipt by either Party (the
                              "INDEMNITEE") of a notice of any Third Party
                              Claim in respect of which 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.

                 11.5.2       Without prejudice to the Indemnitee's right to
                              participate in the defense, 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 11.5.1
                              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 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 defense 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 
<PAGE>   75

                                      -70-

                              person by 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 defense of such action if a court of
                              competent jurisdiction determines the Indemnitor
                              is not vigorously defending such action.

                 11.5.3       Upon the assumption of control by the Indemnitor
                              pursuant to the provisions of Section 11.5.2
                              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.

                 11.5.4       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.

                 11.5.5       Should the Indemnitor fail to defend the
                              Indemnitee as provided in Section 11.5.2 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.

         11.6    INDEMNIFICATION AFTER INSURANCE AND OTHER RECOVERIES

                 11.6.1     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 11 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 
<PAGE>   76

                                      -71-

                            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 11.6 shall require any Indemnitee
                            to make or prosecute a claim for insurance proceeds
                            if such a claim would adversely affect the
                            Indemnitee  with respect to matters other
                            than the Claim.

                 11.6.2     NET OPERATING LOSSES

                            The amount of the indemnification for any Claim by
                            the Purchaser or the Corporation with respect to
                            income taxation matters pertaining to the
                            Corporation shall be determined after having
                            deducted from the amount so claimed pursuant to
                            this Article 11 the amount of the respective
                            federal or specific state net operating losses
                            retained by the Corporation after the Closing Date,
                            as determined as of the Closing Date after the
                            elections made by the Selling Parties under U.S.
                            Treasury Regulation Section 1.1502 and similar
                            state law elections.

                 11.6.3     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.

         11.7    VENDOR'S MAXIMUM LIABILITY

                 11.7.1       The obligation of the Vendor and Domtar to
                              indemnify the Purchaser Protected Persons
                              pursuant to this Article 11, excluding the
                              obligation to indemnify for all Claims with
                              respect to the representations and warranties
                              contained in Section 4.16 hereof (Environmental
                              Matters) (the "ENVIRONMENTAL CLAIMS") and further
                              excluding the obligation to provide unlimited
                              indemnification pursuant to Section 11.3.2 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 11 unless and until the
<PAGE>   77

                                      -72-

                              aggregate amount of the Claims asserted against
                              the Vendor and Domtar, excluding Environmental
                              Claims and Section 11.3.2 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.

                 11.7.2       Subject to the provisions of Sections 11.3.2,
                              11.3.3 and 11.4.2 hereof, the obligation of the
                              Vendor and Domtar to indemnify the Purchaser
                              pursuant to this Article 11 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 11.7.1 hereof, if any; provided however,
                              that the Purchaser shall not exercise its right
                              of indemnification in relation thereto pursuant
                              to this Article 11 unless and until the aggregate
                              amount of the Environmental Claims asserted
                              against the Vendor 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 Environmental Claims which exceeds 1% of the
                              Purchase Price; and provided further that the
                              combined amount recoverable under Section 11.7.1
                              and 11.7.2 shall not exceed in the aggregate 25%
                              of the Purchase Price.

         11.8    DETAILS OF CLAIMS

                 With respect to any Claim pursuant to Section 11.3 or 11.4
                 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 Domtar)
                 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 11.

         11.9    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 
<PAGE>   78

                                      -73-

                 representation, warranty, agreement, covenant,
                 condition or any other obligation contained in
                 this Agreement.

ARTICLE 12.      CLOSING

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

         12.1    At the Closing, the Vendor shall deliver or cause to be
                 delivered to the Purchaser free and clear of all Liens:

                 12.1.1       certificate or certificates for the Purchased
                              Shares, duly endorsed for transfer or with duly
                              executed stock powers for transfer thereof; and

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

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

                 12.2.1       the Purchase Price herein required to be paid by
                              the Purchaser pursuant to Section 3.1 hereof; and

                 12.2.2       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 13.      TERMINATION

         13.1    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 10.1.12 or 10.2.8 hereof, as the case
                 may be, in the event that the sale and purchase of the
                 Purchased Shares 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 fulfill any of the conditions provided for in Section
                 10.1 (other than those contained in Section 10.1.3 to the 
<PAGE>   79

                                      -74-

                 extent covered by Article 9) or 10.2, 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").  For purposes of this
                 Article 13, Domtar and the Corporation shall be deemed the
                 same Party as the Vendor.  If the Non-Electing Party does not
                 cure its failure to fulfil the conditions of Sections 10.1 or
                 10.2, 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
                 13.2,  each Party shall be released from

                 13.1.1       all obligations whatsoever to whomsoever
                              including, without limitation, all obligations to
                              the other Party, its Affiliates and Subsidiaries
                              and their respective shareholders, directors,
                              officers and employees, pursuant to this
                              Agreement and all other agreements entered into
                              pursuant hereto; and

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

         13.2    CONTINUING LIABILITY

                 For purposes of Section 13.1, the responsibility for obtaining
                 any permits, consents, orders or approvals referred to in
                 Article 9 shall be that solely of the Purchaser.  If this
                 Agreement is terminated by Vendor under Section 13.1 effective
                 as of a date after the Second Fixture Date because of the
                 breach by the Purchaser of its obligations under Article 9,
                 then the Purchaser shall remain liable to the Vendor for the
                 failure to consummate the sale and purchase of the Purchased
                 Shares as herein provided.

ARTICLE 14.      MISCELLANEOUS

         14.1    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
                 first-class 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 
<PAGE>   80

                                      -75-

                 number as such Party shall have hereafter notified to
                 the other Party in the manner provided for in this Section.

                 If to the Vendor, the Corporation (before Closing), or Domtar:
                 Domtar Industries Inc., Domtar Gypsum Inc., or Domtar (as
                 applicable)
                 c/o Domtar Inc.
                 395 de Maisonneuve Blvd. West
                 Montreal, Canada 
                 H3A 1L6
                 Fax:   (514) 848-6850
                 Attention:  Secretary


                 If to the Purchaser or the Corporation (after Closing):
                 Georgia-Pacific Corporation or G-P Gypsum Corporation (as
                 applicable)
                 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 7th 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.

         14.2    PUBLIC ANNOUNCEMENT

                 All public announcements concerning the transactions
                 contemplated hereby shall be jointly planned and coordinated
                 by the Parties and no Party shall act unilaterally in this
                 regard without the prior approval of the other, 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 such other Party the
                 extent and timing of such disclosure.

         14.3    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 
<PAGE>   81

                                      -76-

                 provided for hereunder shall be paid by the Party
                 incurring such expenses.

         14.4    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
                 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 with such
                 assignee, for the performance of all the obligations
                 pertaining to the Purchaser pursuant to this Agreement.

         14.5    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.

         14.6    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.

         14.7    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.
<PAGE>   82

                                      -77-

         14.8    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
                 constitute but one and the same document.

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


                                     GEORGIA-PACIFIC CORPORATION


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


                                     DOMTAR INDUSTRIES INC.


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

                                     per: /s/ Gilles Pharand
                                          -------------------------------------


                                     DOMTAR INC.


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


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


                                     DOMTAR GYPSUM INC.


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


                                     per: /s/ Gilles Pharand      
                                          -------------------------------------