**Exhibit 10.2**

 

**AS FILED ON SEDAR**

 

EXECUTION COPY

 

DATED as of the 16th day of November, 2005.

 

BETWEEN

 

CASCADES FINE PAPERS GROUP INC./

CASCADES GROUPE PAPIERS FINS INC.

 

- AND -

 

CASCADES INC.

 

- AND -

 

COAST PAPER LIMITED

 

 

ASSET PURCHASEAGREEMENT

 

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**TABLE OF CONTENTS**

 
| **ARTICLE 1 INTERPRETATION**                                             | **2**                                           |
|-------------------------------------------------------------------------------|-------------------------------------------------|
|                                                                          |                                            |
| 1.1                                                                           | Definitions                                     | 2 |
| 1.2                                                                           | Recitals                                        | 14 |
| 1.3                                                                           | Accounting  Principles                          | 15 |
| 1.4                                                                           | Governing  Law; Attornment                      | 15 |
| 1.5                                                                           | Amendment                                       | 15 |
| 1.6                                                                           | Calculation  of Time                            | 15 |
| 1.7                                                                           | Performance  on Holidays                        | 15 |
| 1.8                                                                           | Waiver  of Rights                               | 15 |
| 1.9                                                                           | Knowledge                                       | 16 |
| 1.10                                                                          | Severability                                    | 16 |
| 1.11                                                                          | Consents  and Approvals                         | 16 |
| 1.12                                                                          | Remedies  Cumulative                            | 16 |
| 1.13                                                                          | Additional  Rules of Interpretation        | 16 |
|                                                                          |                                            |
| **ARTICLE 2 PURCHASE AND SALE OF ASSETS AND ASSUMPTION  OF LIABILITIES** | **18**                                          |
|                                                                          |                                            |   |
| 2.1                                                                           | Purchase  and Sale                              | 18 |
| 2.2                                                                           | Excluded  Assets                                | 19 |
| 2.3                                                                           | Assumption  of Liabilities                      | 19 |
| 2.4                                                                           | Excluded Liabilities                            | 20 |
|                                                                          |                                            |
| **ARTICLE 3 PURCHASE PRICE AND RELATED MATTERS**                         | **20**                                          |
|                                                                          |                                            |
| 3.1                                                                           | Amount  of Purchase Price                       | 20 |
| 3.2                                                                           | Payment  of the Purchase Price                  | 20 |
| 3.3                                                                           | Payment  of the Goodwill Payment                | 21 |
| 3.4                                                                           | Closing                                         | 21 |
| 3.5                                                                           | Allocation  of Purchase Price                   | 21 |
| 3.6                                                                           | Taxes  and Elections                            | 22 |
| 3.6.1                                                                         | Transfer  Taxes                                 | 22 |
| 3.6.2                                                                         | Accounts  Receivable Election              | 22 |
| 3.7                                                                           | Preparation  of Closing Balance Sheet      | 22 |
| 3.7.1                                                                         | Initial  Preparation                       | 22 |
| 3.7.2                                                                         | Dispute  Settlement                        | 23 |
| 3.8                                                                           | Adjustment  Payment                        | 23 |
| 3.9                                                                           | Accounts  Receivable                       | 24 |
| 3.10                                                                          | Aged  Inventory                            | 24 |
| 3.11                                                                          | Pension  Adjustment and Allocated Surplus  | 25 |
| 3.12                                                                          | Pension  Fund Valuation                    | 25 |
| 3.13                                                                          | Interest                                   | 29 |

 

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| **ARTICLE 4 REPRESENTATIONS AND WARRANTIES** | **29**                                                       |
|---------------------------------------------------|--------------------------------------------------------------|
|                                              |                                                         |
| 4.1                                               | Representations  and Warranties of Vendor and Cascades       | 29 |
| 4.1.1                                             | Incorporation  and Status of Vendor and Cascades             | 29 |
| 4.1.2                                             | Due  Authorization by Vendor and Cascades                    | 29 |
| 4.1.3                                             | Title  to Purchased Assets                                   | 30 |
| 4.1.4                                             | Conflicting  Instruments                                     | 30 |
| 4.1.5                                             | Employees                                                    | 30 |
| 4.1.6                                             | Employee  Benefit Plans                                      | 32 |
| 4.1.7                                             | Real  Property                                               | 33 |
| 4.1.8                                             | Status  of Real Property                                     | 33 |
| 4.1.9                                             | Personal  Property                                           | 34 |
| 4.1.10                                            | Contracts                                                    | 34 |
| 4.1.11                                            | No  Breach of Material Contracts                             | 34 |
| 4.1.12                                            | Legal  Proceedings                                           | 35 |
| 4.1.13                                            | Accounts  Receivable                                         | 35 |
| 4.1.14                                            | Annual  Financial Statements                                 | 35 |
| 4.1.15                                            | Condition  and Sufficiency of Tangible Assets                | 35 |
| 4.1.16                                            | Inventories                                                  | 36 |
| 4.1.17                                            | Customers  and Suppliers                                     | 36 |
| 4.1.18                                            | Licences  and Compliance with Laws                           | 36 |
| 4.1.19                                            | Environmental  Matters                                       | 36 |
| 4.1.20                                            | Conduct  of Business in Ordinary Course                      | 37 |
| 4.1.21                                            | Tax  Matters                                                 | 38 |
| 4.1.22                                            | Residence  of Vendor; GST Status                             | 38 |
| 4.1.23                                            | Intellectual  and Industrial Property                        | 38 |
| 4.2                                               | Representations  and Warranties of the Purchaser             | 38 |
| 4.2.1                                             | Incorporation,  Authority and Enforceability                 | 38 |
| 4.3                                               | Commission                                                   | 39 |
| 4.4                                               | Survival  of Representations and Warranties of the Vendor    | 39 |
| 4.5                                               | Survival  of Representations and Warranties of the Purchaser | 39 |
|                                              |                                                         |
| **ARTICLE 5 OTHER COVENANTS OF THE PARTIES** | **40**                                                       |
|                                              |                                                         |
| 5.1                                               | Covenants  of the Vendor                                     | 40 |
| 5.1.1                                             | Consents  and Approvals                                      | 40 |
| 5.1.2                                             | Consent  Not Received by Closing Time                        | 40 |
| 5.1.3                                             | Conduct  of the Business                                     | 41 |
| 5.1.4                                             | Books  and Records of Vendor                                 | 43 |
| 5.1.5                                             | Exclusivity                                                  | 44 |
| 5.1.6                                             | Access  for Confirmatory Due Diligence                       | 44 |
| 5.1.7                                             | Certificat  de Localisation                                  | 44 |
| 5.2                                               | Covenants  of the Purchaser                                  | 44 |
| 5.2.1                                             | Confidentiality  of Vendor’s Information                | 44 |
| 5.2.2                                             | Access  to Books and Records                                 | 45 |
| 5.2.3                                             | Access  to Employees                                         | 46 |
| 5.2.4                                             | Change  and Use of Name                                      | 46 |

 

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| 5.2.5                                    | Equipment  Leases                                               | 47     |
|------------------------------------------|-----------------------------------------------------------------|--------|
| 5.3                                      | Mutual  Covenants                                               | 47     |
| 5.3.1                                    | Cooperation                                                     | 47     |
| 5.3.2                                    | Access  to Sensitive Customer Information                       | 47     |
| 5.3.3                                    | Amounts  Received Post-Closing                                  | 47     |
| 5.3.4                                    | Notice  of Untrue Representation or Warranty                    | 47     |
| 5.3.5                                    | Bulk  Sales Laws                                                | 48     |
|                                     |                                                            |   |
| **ARTICLE 6 CONDITIONS OF CLOSING** | **48**                                                          |
|                                     |                                                            |
| 6.1                                      | Conditions  for the Benefit of the Purchaser               | 48     |
| 6.1.1                                    | Representations,  Warranties and Covenants of the Vendor   | 48     |
| 6.1.2                                    | Deliveries  by Vendor and Cascades                         | 49     |
| 6.1.3                                    | No  Adverse Change                                         | 50     |
| 6.1.4                                    | Consents                                                   | 51     |
| 6.1.5                                    | No  Legal Action                                           | 51     |
| 6.2                                      | Conditions  for the Benefit of the Vendor                       | 51     |
| 6.2.1                                    | Truth  of Representations and Warranties of the Purchaser  | 51     |
| 6.2.2                                    | Delivery  by Purchaser                                     | 52     |
| 6.3                                      | Conditions  for the Benefit of both Parties                | 53     |
| 6.3.1                                    | Competition  Act                                           | 53     |
| 6.3.2                                    | Investment  Canada Act                                     | 53     |
| 6.3.3                                    | Regulatory  Approvals                                      | 53     |
| 6.4                                      | Waiver                                                     | 53     |
| 6.5                                      | Failure  to Satisfy Conditions                             | 53     |
| 6.6                                      | Damage  or Expropriation                                   | 54     |
|                                     |                                                            |
| **ARTICLE 7 TERMINATION**           | **55**                                                          |
|                                     |                                                            |
| 7.1                                      | Termination                                                     | 55     |
| 7.2                                      | Effect  of Termination                                          | 55     |
|                                     |                                                            |
| **ARTICLE 8 INDEMNIFICATION**       | **55**                                                          |
|                                     |                                                            |
| 8.1                                      | Indemnification  by Vendor                                      | 55     |
| 8.2                                      | Indemnification  by the Purchaser                               | 56     |
| 8.3                                      | Agency  for Representatives                                     | 57     |
| 8.4                                      | Notice  of Third Party Claims                                   | 57     |
| 8.5                                      | Defence  of Third Party Claims                                  | 57     |
| 8.6                                      | Assistance  for Third Party Claims                              | 58     |
| 8.7                                      | Settlement  of Third Party Claims                               | 58     |
| 8.8                                      | Direct  Claims                                                  | 58     |
| 8.9                                      | Failure  to Give Timely Notice                                  | 59     |
| 8.10                                     | Reductions  and Subrogation                                     | 59     |
| 8.11                                     | Payment  and Interest                                           | 59     |
| 8.12                                     | Limitations                                                     | 59     |
| 8.13                                     | Additional Rules and Procedures                       | 60     |

 

iii

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| **ARTICLE 9 EMPLOYEES**      | **61**                                                                                 |
|-----------------------------------|----------------------------------------------------------------------------------------|
|                              |                                                                                   |
| 9.1                               | Employees                                                                              | 61 |
| 9.2                               | Employee  Liability of the Purchaser                                                   | 61 |
| 9.3                               | Employee  Liability of the Vendor                                                      | 61 |
| 9.4                               | Short  Term Disabled Employees                                                         | 62 |
| 9.5                               | Pension  and Savings Plans                                                             | 62 |
| 9.6                               | Vendor  Liability                                                                      | 62 |
| 9.7                               | Notice  by Vendor                                                                      | 63 |
|                              |                                                                                   |
| **ARTICLE 10 MISCELLANEOUS** | **63**                                                                                 |
|                              |                                                                                   |
| 10.1                              | Further  Assurances                                                               | 63 |
| 10.2                              | Public  Announcements                                                             | 63 |
| 10.3                              | Notices                                                                           | 63 |
| 10.4                              | Time  of the Essence                                                              | 65 |
| 10.5                              | Costs  and Expenses                                                               | 65 |
| 10.6                              | Effect  of Closing                                                                | 65 |
| 10.7                              | Counterparts                                                                      | 65 |
| 10.8                              | Assignment                                                                        | 65 |
| 10.9                              | Parties  in Interest                                                              | 66 |
| 10.10                             | Third  Parties                                                                    | 66 |
| 10.11                             | Liability  of Cascades                                                            | 66 |
| 10.12                             | [              ] | 66 |

 

iv

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THIS AGREEMENT dated as of the 16th day ofNovember, 2005.

 
| **B E T W E E N:** |                                                                                                                            |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------|
|               |                                                                                                                            |
|               | **CASCADES  FINE PAPERS GROUP INC./  CASCADES GROUPE PAPIERS FINS INC.**,  a  corporation incorporated under the laws of Canada |
|               | ** **                                                                                                                      |
|               | (the **“Vendor”**)                                                                                                    |
|               |                                                                                                                            |
| **A N D:**         |                                                                                                                            |
|               |                                                                                                                            |
|               | **CASCADES  INC.**, a company amalgamated  pursuant to the laws of Quebec                                                       |
|               |                                                                                                                            |
|               | (**“Cascades”**)                                                                                                      |
|               |                                                                                                                            |
| **A N D:**         |                                                                                                                            |
|               |                                                                                                                            |
|               | **COAST  PAPER LIMITED**, a corporation  amalgamated under the laws of Canada                                                   |
|               |                                                                                                                            |
|               | (the **“Purchaser”**)                                                                                                 |

 

**RECITALS**:

 

1.             The Vendor,through its division, Cascades Resources, carries on the business of marketingand distribution of printing paper, business imaging, graphic arts supplies andequipment, sanitation and maintenance supplies in Canada (the **“Business”**);

 

2.             ThePurchaser wishes to purchase from the Vendor and the Vendor wishes to sell,transfer, assign and convey to the Purchaser, the undertaking and all of theVendor’s right, title and interest in, under and to the property and assetsused by the Vendor in carrying on the Business (except for certain assetsspecifically identified herein) upon the terms and conditions hereinafter setforth;

 

3.             The Vendoris a wholly-owned subsidiary of Cascades and Cascades will derive a substantialbenefit from the completion of the transactions contemplated hereunder;

 

**NOWTHEREFORE** inconsideration of the premises and mutual agreements hereinafter set out and ofother consideration (the receipt and sufficiency of which are acknowledged byeach Party), the Parties agree as follows:

 

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**ARTICLE 1INTERPRETATION**

 

**1.1****                           ****Definitions**

 

In this Agreement, unless the context otherwise requires, the followingcapitalized words and expressions will have the respective meanings ascribed tothem below:

 

**“****Accounts Receivable****”** means all trade accounts receivable, notesreceivable, book debts and other debts due or accruing due to the Vendor inrespect of the Business (including any interest payable thereon) and the fullbenefit of all security therefore and all interest thereon payable to theVendor other than the Excluded Receivables. As described in Exhibit Bof the Disclosure Letter, the net book value of the Accounts Receivable recordedon the Closing Balance Sheet shall be reduced by an amount equal to theExcluded Receivables Adjustment for the purposes of calculating the AdjustedNet Asset Value. For the purpose of the calculations set forth in Exhibit Bof the Disclosure Letter, the net book value of the Accounts Receivable shallbe deemed to include the net book value of the Excluded Receivables;

 

**“****Accounting Records****”** means all of the Vendor’s books of account,accounting records and other financial data and information relating to theBusiness, and includes all records, data and information stored electronically,digitally or on computer related media;

 

**“****Act****”** means the *CompetitionAct* (Canada) and the regulations made thereunder;

 

**“****Adjusted Closing Value of thePurchased Assets****”** meansthe value of the Purchased Assets of the Vendor as recorded on the ClosingBalance Sheet and as adjusted in accordance with Exhibit B of theDisclosure Letter;

 

**“****Adjusted Net Asset Value****”** means the difference between the Adjusted ClosingValue of the Purchased Assets and the Closing Value of the Assumed Liabilitiesas adjusted in accordance with Exhibit B of the Disclosure Letter;

 

**“****Adjustment Date****”** means the seventh Business Day after the Adjusted NetAsset Value is finally determined in accordance with Section 3.7;

 

**“****Adjustment Payment****”** has the meaning ascribed to that term in Section 3.8;

 

**“****AS Assets****”** has the meaning ascribed to that term in Section 2.2(i);

 

**“****Affiliate****”** means, with respect to any person, any other personthat directly or indirectly controls, is controlled by, or is under commoncontrol with that other person. For purposes of this definition, a person “controls”another person if that person directly or indirectly possesses the power todirect or cause the direction of the management and policies of that otherperson, whether through ownership or voting of securities, by contract orotherwise and “controlled by” and “under common control with” have similarmeanings;

 

**“Aged Inventory”** means the portion of the Inventorieswhich is at least twelve (12) months old as at the Closing Date. The AgedInventory and its book value prior to the Aged 

 

2

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InventoryAdjustment are identified in Exhibit B of the Disclosure Letter ona warehouse basis, save and except for the book value of equipment Inventoryfor sale which is identified in Exhibit B of the Disclosure Letteron a consolidated basis. The manufacturer warranties on the equipment for saleshall be excluded from the Aged Inventory. The identification of the AgedInventory and the determination of its book value prior to the Aged InventoryAdjustment in Exhibit B of the Disclosure Letter have been made inaccordance with past practices;

 

**“****Aged Inventory Adjustment****”** means the Aged Inventory Write-Down less theprovision for clearance and the provision for physical inventory count used inthe preparation of the draft Closing Balance Sheet. The Aged InventoryAdjustment shall be used in the calculation of the Adjusted Net Asset Value asdescribed in Exhibit B of the Disclosure Letter;

 

**“****Aged Inventory Amount****”** has the meaning ascribed to that term in Section 3.10;

 

**“****Aged Inventory Net Book Value****”** means the value of the Aged Inventory after itswrite-down for the purpose of calculating the Adjusted Net Asset Value asdescribed in Exhibit B of the Disclosure Letter. The Aged InventoryNet Book Value shall be used in the determination of the Aged Inventory Amountcontemplated in Section 3.10;

 

**“****Aged Inventory Write-Down****”** means the amount by which the book value of the AgedInventory will be written down as at the Closing Date as described in Exhibit Bof the Disclosure Letter. The book value of the paper Inventory between twelve(12) and twenty-four (24) months old as of the Closing Date shall be writtendown by 60% whereas all other Inventory over twelve (12) months old as of theClosing Date shall be written down by 100%;

 

**“****Agreement****”** means this asset purchase agreement;

 

**“****Allocated Surplus****”** has the meaning ascribed to that term in Section 3.12(c);

 

**“****Ancillary Agreements****”** means each of the Deed of Transfer, theNon-Competition Agreement, the Employee Non-Competition Agreements, theTransitional Services Agreement and the Paper Supply Agreement;

 

**“****Annual Financial Statements****”** means the financial statements of the Vendor relatingto the Business as at December 31st, 2004, 2003, and 2002,respectively, consisting in each case of the balance sheet of the Business andthe accompanying statements of profit and loss, retained earnings and cashflows for the 12 month period then ended, a copy of which is attached to Schedule 1.1Bof the Disclosure Letter;

 

**“****AR Shortfall****”** has the meaning ascribed thereto in Section 3.9;

 

**“****Articles****”** means, with respect to any body corporate, theoriginal or restated articles of incorporation, articles of amendment, articlesof amalgamation, articles of arrangement, articles of reorganization, articlesof revival, letters patent, memorandum of agreement, special Act or statute andany other instrument or constating document by or pursuant to which the bodycorporate is incorporated or comes into existence;

 

3

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**“****Assumed Liabilities****”** has the meaning ascribed to that term in Section 2.3;

 

**“****Basket****”** has the meaning ascribed to that term in Section 8.12(a);

 

**“****Books and Records****”** means the Accounting Records and all books, records,sales and purchase records, lists of suppliers and customers, price lists andcatalogues, advertising material, sales literature, cost and pricinginformation, credit information, personnel and payroll records, production,Inventories and Accounts Receivable data, formulae, business, engineering andconsulting reports and research and development information and plans andprojections of or relating to the Business and all other documents, files,records, maps, site plans, surveys, soil and substratum studies, as–builtdrawings, appraisals, electrical and mechanical plans and studies,correspondence, and other data and information, financial or otherwise, whichrelate to the Business, including all data and information storedelectronically, digitally or on computer related media to the extent theforegoing are maintained with respect to the Business and except as any of theforegoing relate primarily to the Excluded Assets;

 

**“****Bureau Investigation****”** means the ongoing inquiry by the Commissionerconcerning alleged activities by certain persons, including the Vendor, inrelation to carbonless paper and other fine paper products, contrary tosections 45 and 61 of the *Competition Act*(Canada);

 

**“****Business****”** has the meaning ascribed to that term in therecitals;

 

**“****Business Day****”** means a day other than a Saturday, Sunday or anyother day on which the principal chartered banks located in the City ofMontreal, Quebec are not open for the transaction of domestic business duringnormal banking hours;

 

**“****Cash Portion****”** has the meaning ascribed to that term in Section 3.1;

 

**“****CICA Standards****”** has the meaning ascribed to that term in Section 3.12(a);

 

**“****Claim****”** means any act, omission or state of facts, and anyLegal Proceeding, assessment, judgment, settlement or compromise relatingthereto, which gives rise to or may give rise to a Loss;

 

**“****Closing****”** means the completion of the sale to and purchase bythe Purchaser of the Purchased Assets and the completion of all othertransactions contemplated by this Agreement that are to occur contemporaneouslytherewith;

 

**“****Closing Balance Sheet****”** means the unaudited balance sheet of the Business asat the close of business on the Closing Date, as prepared and finallydetermined in accordance with the provisions of Section 3.7;

 

**“****Closing Date****”** means December 31, 2005 or such earlier or laterdate as may be agreed upon in writing by the Parties which date in allcases shall be the last day of a calendar month;

 

**“****Closing Date Amount****”** has the meaning ascribed to that term in Section 3.12(c);

 

4

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**“****Closing Date Rate****”** has the meaning ascribed to that term in Section 3.12(c);

 

**“****Closing Documents****”** means the Ancillary Agreements and any other documentor instrument delivered at or subsequent to the Closing as provided in orpursuant to this Agreement and **“ClosingDocument”** means any one of them;

 

**“****Closing Time****”** means 7:00 p.m. Montreal time on the ClosingDate or such other time on the Closing Date as the Parties agree in writingthat the Closing shall take place;

 

**“****Closing Value of the AssumedLiabilities****”** meansthe value of the Assumed Liabilities of the Vendor as recorded on the ClosingBalance Sheet;

 

**“****Collective Agreement****”** means any collective agreement, letter ofunderstanding, letter of intent or other written agreement with any labourunion or employee association that governs the terms and conditions ofemployment of any Employees;

 

**“****Commissioner****”** means the Commissioner of Competition appointed underthe *Competition Act* (Canada);

 

**“****Competition Act Approval****”** means either:

 

(a)                                  theapplicable waiting period under Section 123 of the *Competition Act*(Canada) shall haveexpired and the Purchaser shall have been advised in writing by theCommissioner in terms satisfactory to the Purchaser in its sole discretion,that she has determined not to make an application for an Order under the Actin respect of the transactions contemplated by this Agreement;

 

(b)                                 theCommissioner shall have issued a waiver under Subsection 113(c) ofthe Act and the Purchaser shall have been advised in writing by theCommissioner in terms satisfactory to the Purchaser in its sole discretion,that she has determined not to make an application for an Order under the Actin respect of the transactions contemplated by this Agreement; or

 

(c)                                  an advanceruling certificate shall have been issued under Section 102 of such Act inrespect of the transactions contemplated by this Agreement;

 

**“****Confidentiality Agreement****”** means the confidentiality agreement between Vendorand PaperlinX Limited dated February 11, 2005 and March 2, 2005;

 

**“****Consent****”** means any consent, approval, permit, waiver, ruling,exemption, or acknowledgement that may be required from any person (otherthan the Vendor) under the terms of any Contract (including any Lease orEquipment Lease) issued to or for the benefit of the Vendor which is providedfor or required pursuant to the terms of such Contract (including any Lease orEquipment Lease) in connection with the sale of the Purchased Assets to thePurchaser and the completion of the other transactions contemplated herein orwhich is otherwise necessary to permit the Parties to perform theirobligations or is otherwise required to permit the consummation of thetransactions as contemplated herein and the operation of the Business by 

 

5

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Purchasersubstantially in the same manner as such Business was conducted by Vendor priorto the Closing;

 

**“****Contracts****”** means all contracts, agreements, instruments andother legally binding commitments or arrangements, written or oral, enteredinto by the Vendor in respect of the Business, including those listed oridentified in Section 4.1.10 of Schedule 1.1A of the DisclosureLetter;

 

**“****Deed of Transfer****”** has the meaning ascribed to that term in Section 6.1.2(c);

 

**“****Deficit Reduction****”** has the meaning ascribed to that term in Section 3.12(d)(i);

 

**“****Direct Claim****”** means any Claim asserted against an Indemnitor by anIndemnitee which does not result from a Third Party Claim;

 

**“****Disclosure Documents****”** has the meaning ascribed to that term in Section 4.1.14;

 

**“****Disclosure Letter****”** means the confidential disclosure letter dated as ofthe date hereof delivered by the Vendor to the Purchaser on or prior to thedate hereof;

 

**“****Disclosure Schedule****”** means Schedule 1.1A of the DisclosureLetter;

 

**“****Employee****”** means an individual who is employed by the Vendorexclusively in the Business immediately prior to the Closing Date, whether on afull-time or part-time basis, other than the Inactive Employees;

 

**“****Employee Benefit Plans****”** means all compensation, bonus, deferred compensation,incentive compensation, share purchase, share appreciation, share option,severance or termination pay, vacation pay, hospitalization or other medical,health and welfare benefits, life or other insurance, dental, eye care,disability, salary continuation, supplemental unemployment benefits,profit-sharing, mortgage assistance, employee loan, employee discount, employeeassistance, counselling, pension, retirement or supplemental retirement benefitplan, arrangement or agreement, including any defined benefit or definedcontribution pension plan and any group registered retirement savings plan, andany other similar employee benefit plan, arrangement or agreement, whether oralor written, funded or unfunded, including policies with respect to holidays,sick leave, long-term disability, vacations, expense reimbursements andautomobile allowances and rights to company-provided automobiles, that aresponsored or maintained or contributed to or required to be contributed to, bythe Vendor for the benefit of any of the Employees, former employees orbeneficiaries of any of them, whether or not insured and whether or not subjectto any Law, except that the term **“EmployeeBenefit Plans****”** shall notinclude any statutory plans with which the Vendor is required to comply,including the Canada/Quebec Pension Plan or plans administered pursuant toapplicable provincial health tax, workers’ compensation, workers’ safety andinsurance and employment insurance legislation;

 

[              ]

 

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**“****Encumbrance****”** means any option or any other right of third partiesof any nature, mortgage, charge, hypothec, *BankAct* (Canada) security, easement, encroachment, lien, adverse claim,restrictive covenant, assignment by way of security, security interest of anynature, servitude, pledge, hypothecation, security agreement, leasing, titleretention agreement, right of occupation, option or privilege or any agreementto create any of the foregoing;

 

**“****Environment****”** means all components of the earth, including air (andall layers of the atmosphere), land (and all surface and subsurface soil,underground spaces and cavities and all land submerged under water) and water(and all surface and underground water), organic and inorganic matter andliving organisms. For greater certainty, the interacting natural systems thatinclude components referred to above are included in the definition of **“Environment****”**;

 

**“****Environmental Laws****”** means all Laws relating to the Subject Propertiesand/or the Business and relating, in whole or in part, to public health andsafety, pollution or the protection of the Environment, including the existenceor Release of or dealings with those substances which are defined or otherwiseregulated as Hazardous Substances, wastes or threats to the public health andsafety or the environment or the transportation of dangerous goods, includingthe *Politique de protection des sols et deréhabilitation des terrains contaminés*published in 1998 by theministère du Développement durable, de l’Environnement et des Parcs (Quebec),as amended to this date;

 

**“****Environmental Liabilities****”** means any cost, damage, expense, liability,obligation, Claim or Loss or other responsibility arising from or underEnvironmental Laws and consisting of or relating to: (i) any environmentalconditions (including on-site or off-site contamination, and regulation ofchemical substances or products); or (ii) financial responsibility underEnvironmental Laws for cleanup costs or corrective action, including anyinvestigation, cleanup, removal, containment, monitoring or other remediationor response actions required by applicable Environmental Laws (provided thatsuch has been required by any Governmental Authority or any other person) andfor any natural resource damages;

 

**“****Equipment Leases****”** means all leases of personal or movable property usedin the Business to which the Vendor is a party or under which it has rights;

 

**“****Estimated Adjusted Net Asset Value****”** shall be the amount equal to the difference betweenthe estimated Adjusted Closing Value of the Purchased Assets and the estimatedClosing Value of the Assumed Liabilities as adjusted in accordance with Exhibit Bof the Disclosure Letter. This amount shall be agreed upon by Vendor andPurchaser at least 10 days prior to Closing;

 

**“****Estimated Amount****”** has the meaning ascribed to that term in Section 3.2(a);

 

**“****Excluded Assets****”** has the meaning ascribed to that term in Section 2.2;

 

**“****Excluded Liabilities****”** has the meaning ascribed to that term in Section 2.4;

 

**“****Excluded Receivables****”** has the meaning ascribed to that term in Section 2.2;

 

7

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**“****Excluded Receivables Adjustment****”** means the amount by which the Accounts Receivablerecorded on the Closing Balance Sheet will be reduced on such Closing BalanceSheet to take into account the Excluded Receivables as described in Exhibit Bof the Disclosure Letter. The Excluded Receivables Adjustment shall be equal tothe net book value of the Excluded Receivables (their book value less thecorresponding provision for doubtful accounts);

 

**“****GAAP****”** means, at any time, generally accepted accountingprinciples in Canada including those set out in the Handbook of the CanadianInstitute of Chartered Accountants in force at such time;

 

**“****Goodwill Amount****”** has the meaning ascribed to that term in Section 3.1;

 

**“****Goodwill Payment Date****”** has the meaning ascribed to that term in Section 3.3;

 

**“****Governmental Authority****”** means any domestic or foreign government, whetherfederal, provincial, state, territorial or municipal; and any governmentalagency, ministry, department, Tribunal, commission, bureau, board or otherinstrumentality exercising or purporting to exercise legislative, enforcement,judicial, regulatory or administrative functions of, or pertaining to,government;

 

**“****GST****”** means taxes, interest, penalties and fines imposedunder Part IX of the *Excise Tax Act*(Canada)and the regulations made thereunder; and **“GSTLegislation****”** means suchact and regulations collectively;

 

**“****Hazardous Substances****”** means any waste or other substance, including solid,liquid, gas, odour, heat, sound, vibration or radiation, that is listed,defined, designated or classified as, or otherwise determined to be, dangerous,hazardous, radioactive, explosive or toxic or a pollutant or a contaminantunder any Environmental Laws, including any mixture or solution thereof, andspecifically including petroleum and all derivatives thereof or syntheticsubstitutes therefor and asbestos or asbestos-containing materials;

 

**“****ICA Approval****”** means that the Purchaser shall have made anapplication for review under the *InvestmentCanada Act* in connection with the transactions contemplated herebyand shall have received evidence satisfactory to the Purchaser, acting in itssole discretion, that the Minister designated under that Act has been satisfiedor has been deemed to have been satisfied that the acquisition by the Purchaserof the Business is likely to be of net benefit to Canada;

 

**“****Inactive Employees****”** means Employees who, on the Closing Date, have beenabsent from work for a period of at least 17 weeks but does not include thoseEmployees who are Short Term Disabled Employees. A separate listing of all theInactive Employees and all the Short Term Disabled Employees are set forth intwo parts on Schedule 1.1F of the Disclosure Letter;

 

**“****Income Tax Act****”** means, collectively, the *Income Tax Act*, R.S.C. 1985, 5th Supplement, the Income TaxApplication Rules, R.S.C. 1985, 5th Supplement, and the Income Tax regulations,in each case as amended to the date hereof;

 

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**“****Indemnitee****”** means any Party and its Representatives entitled toindemnification under this Agreement;

 

**“****Indemnitor****”** means any Party obligated to provide indemnificationunder this Agreement;

 

**“****Indemnity Payment****”** means any amount of a Loss required to be paidpursuant to Sections 8.1 or 8.2;

 

**“****Independent Accountant****”** has the meaning ascribed to that term in Subsection 3.7.2;

 

**“****Information****”** has the meaning ascribed to that term in Section 5.2.1(a);

 

**“****Insurance Recovery****”** has the meaning ascribed to that term in Section 8.10;

 

**“****Interested Person****”** means any present or former officer, director,shareholder or employee, of the Vendor or any other person with which theVendor or any of the foregoing does not deal at arm’s length within the meaningof the Income Tax Act;

 

**“****Interim Period****”** means the period from and including the time ofexecution of this Agreement to and including the earlier of the date thisAgreement is terminated in accordance with Section 7.1 and the ClosingTime;

 

**“****Inventories****”** means all inventories of every kind and nature andwheresoever situated used in or produced by the Business, including allfinished goods, work in process, raw materials, goods in transit, new andunused production and shipping supplies, new and unused major maintenance itemsand all other materials and supplies on hand;

 

**“****June 30 Amount****”** has the meaning ascribed to that term in Section 3.12(d);

 

**“****June 30 Rate****”** has the meaning ascribed to that term in Section 3.12(d);

 

**“****June Purchaser Reduction****”** has the meaning ascribed to that term in Section 3.12(d)(ii);

 

**“****June Vendor Reduction****”** has the meaning ascribed to that term in Section 3.12(d)(ii);

 

**“****Law****”** means, in respect of any person, property,transaction or event, any domestic or foreign statute, ordinance, rule,regulation, treaty, restriction, regulatory policy, practice, guideline,standard, code, by-law (zoning or otherwise) or Order that applies in whole orin part to such person, property, transaction or event, to the extent ithas the force of law and includes Environmental Laws;

 

**“****Leased Property****”** means all the right, title and interest of the Vendorin, to and under the subject matter (whether real or immovable or personal ormovable) of the Leases and the Equipment Leases;

 

9

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**“****Leases****”** means the real or immovable property leases (includingemphyteutic leases) and other rights of occupancy relating to real propertyused in the Business (including any rights to leasehold improvements) to whichthe Vendor is a party or under which it has rights, whether as lessor orlessee;

 

**“****Legal Proceeding****”** means any litigation, action, suit, investigation,hearing, claim, complaint, grievance, arbitration proceeding or otherproceeding and includes any appeal or review and any application for same,whether or not involving a Third Party Claim;

 

**“****Licence****”** means any licence, permit, approval, authorization,certificate, directive, Order, variance, registration, right, privilege,concession or franchise issued, granted, conferred or otherwise created by anyGovernmental Authority, or any agreement with any Governmental Authority;

 

**“****Loss****”** means any loss, liability, damage, cost, expense,charge, fine, penalty or assessment, whether or not involving a Third PartyClaim, including the costs and expenses of any Legal Proceeding, assessment,judgment, settlement or compromise relating thereto and all interest, fines andpenalties and reasonable legal fees and expenses incurred in connectiontherewith;

 

**“****Machinery and Equipment****”** means all machinery, equipment (including trucks,automobiles, and other vehicles), spare parts, tools, jigs, dies, officeequipment (including computers and computer accessories), furniture, fixtures,furnishings and accessories and supplies of all kinds used in the Business,whether located on premises of the Vendor relating to the Business orelsewhere, including the items set forth and described on Schedule 1.1Cof the Disclosure Letter, together with any additions thereto arising in theordinary course during the Interim Period;

 

**“****Material****”** means, unless explicitly stated otherwise or in relationto the expression “Material Contracts”, any issue, change or effect that wouldbe considered material to a reasonable person in similar circumstances;

 

**“****Material Contracts****”** means (i) the agreements and arrangementsdescribed in Section 4.1.5 of the Disclosure Letter, and (ii) theLeases, the Equipment Leases, the supplier and customer contracts relating tothe Business and the Contracts listed or identified in Section 4.1.10 ofthe Disclosure Letter;

 

**“****Net Receivables****”** means the amount of the Accounts Receivables less theExcluded Receivables and less the Reserve as reflected on the Closing BalanceSheet;

 

**“****Net Sales****”** means, with respect to the sale of Aged Inventory,gross sales before sales Taxes less commissions, rebates and like charges;

 

**“****Non-Competition Agreement****”** has the meaning ascribed to that term in Subsection 6.1.2(f);

 

**“****Non Paper Inventory****”** means Inventories other than paper Inventories,including graphic art supplies, industrial and equipment Inventories;

 

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**“****Notice Period****”** has the meaning ascribed to that term in Section 8.5;

 

**“Order”**means any order, directive, judgment, decree, award or writ of any Tribunal;

 

[              ]

 

**“****Parties****”** means the Vendor, Cascades, the Purchaser and any otherperson who may become a party to this Agreement and **“Party”** means any one of them;

 

**“****Pension Adjustment****”** means the amount calculated in accordance with Section 3.12(d)(iii);

 

**“****Pension Adjustment Payment Date****”** has the meaning ascribed to that term in Section 3.11;

 

**“****Pension Adjustment Reduction****”** has the meaning ascribed to that term in Section 3.12(d)(ii);

 

**“****Pension Plan****”** has the meaning ascribed to that term in Section 9.5;

 

**“****Permitted Encumbrances****”** with respect to the Purchased Assets means:

 

(a)                                  inchoate orstatutory liens for Taxes not at the time overdue but only if the amountthereof at the Closing Date is taken into account as a current liability incalculating the Closing Value of the Assumed Liabilities;

 

(b)                                 statutoryliens incurred or deposits made in the ordinary course of the Business inconnection with worker’s compensation, employment insurance employer healthtax, Canada/Quebec Pension Plan and similar legislation;

 

(c)                                  thoseEncumbrances listed on Schedule 1.1D of the Disclosure Letter;

 

(d)                                 easementsand any registered restrictions or covenants that run with the land providedthey have been complied with and provided that they do not affect the abilityof the Vendor to carry on the Business as it has been carried on in the past;

 

(e)                                  rights ofway for, or reservations in favour of public utilities relating to sewers,water lines, gas lines, pipelines, electric lines, telegraph and telephonelines, cable lines and other similar products or services, provided that theydo not affect the ability of the Vendor to carry on the Business as it has beencarried on in the past; and

 

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(f)            zoningby-laws, ordinances and other restrictions as to the use of real property, andagreements with other persons registered against title to the lands (with theexception of any Encumbrances) and provided that they do not affect the abilityof the Vendor to carry on the Business as it has been carried on in the past;

 

**“****Preliminary Pension Adjustment****”** has the meaning ascribed to that term in Section 3.12(c);

 

**“****Preliminary Purchaser Allocation****”** has the meaning ascribed to that term in Section 3.12(c);

 

**“****Prepaid Expenses****”** means all prepaid expenses and deposits relating tothe Business, other than (i) those relating to Excluded Assets; and (ii) thoseprepaid expenses the benefit of which cannot be transferred to the Purchaserall of which are set forth on Schedule 1.1G of the DisclosureLetter**;**

 

**“****Prime Rate****”** for any day means the rate of interest expressed as arate per annum that National Bank of Canada establishes at its principal officein Montréal, Québec as the reference rate of interest that it will charge onthat day for Canadian dollar demand loans to its customers in Canada and whichit at present refers to as its prime rate;

 

**“****Prohibited Logos****”** has the meaning ascribed to that term in Subsection 5.2.4(a);

 

**“****Prohibited Name****”** has the meaning ascribed to that term in Subsection 5.2.4(a);

 

**“****Purchased Assets****”** has the meaning ascribed to that term in Section 2.1;

 

**“****Purchase Price****”** means the price payable by the Purchaser to theVendor for the Purchased Assets provided for in Section 3.1;

 

**“****Purchaser’s Advisors****”** means the directors, officers, employees, agents,legal counsels, accountants and professional advisors of the Purchaser and anyother person authorized in writing by the Purchaser to represent the Purchaser;

 

**“****Purchaser’s Closing Certificate****”** has the meaning ascribed to that term in Section 6.2.1;

 

**“****Purchaser’s Core Representations****”** has the meaning ascribed to that term in Subsection 6.2.1(a);

 

**“****Rate Increase****”** has the meaning ascribed to that term in Section 3.12(b);

 

**“****Real Property****”** means all owned real and immovable property used inor relating to the Business, including the real property described in Section 4.1.7of the Disclosure Letter, and includes all plant, buildings, structures,erections, improvements, appurtenances and fixtures situated thereon or formingpart thereof;

 

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**“****Reference Date****”** has the meaning ascribed to that term in Section 3.12(b);

 

**“****Reference Date Amount****”** has the meaning ascribed to that term in Section 3.12(b);

 

**“****Reference Date Rate****”** has the meaning ascribed to that term in Section 3.12(b);

 

**“****Regulatory Approval****”** means any approval, consent, ruling, authorization,notice, permit, waiver, exemption or acknowledgement, other than theCompetition Act Approval and the ICA Approval, that may be required fromany person by Law, the terms of any Licence or the conditions of any Order orotherwise which is required in connection with the sale of the Purchased Assetsto the Purchaser and the completion of the other transactions contemplatedherein or which is otherwise necessary to permit the Parties to perform theirobligations or is otherwise required to permit the consummation of thetransactions as contemplated herein and the operation of the Business byPurchaser substantially in the same manner as such Business was conducted byVendor prior to Closing;

 

**“****Release****”** means any discharge, spill, release, emission,leaking, pumping, pouring, dumping, emptying, injection, deposit, disposal,dispersal, leaching or migration of Hazardous Substances not permitted byapplicable Environmental Laws, in, on or into the Environment;

 

**“****Replacement Plans****”** has the meaning ascribed to that term in Section 9.1;

 

**“****Representative****”** means, in respect of an Indemnitee, each director,officer, employee, agent, legal counsel, accountant, professional advisor andother representative of that Indemnitee;

 

**“****Reserve****”** means the provision for doubtful Accounts Receivablereflected in the Closing Balance Sheet excluding the provision for doubtfulaccounts for Excluded Receivables;

 

**“****September 30 Amount****”** has the meaning ascribed to that term in Section 3.12(a);

 

**“****September 30 Rate****”** has the meaning ascribed to that term in Section 3.12(a);

 

**“****Short Term Disabled Employees****”** means those Employees who as of the Closing Date arenot working and who are expected to return to work within a period of six (6) monthsfollowing the Closing Date.

 

**“****Subject Properties****”** means the Real Property and all of the real andimmovable property used in or relating to the Business which constitutes LeasedProperty and includes all plants, buildings, structures, erections,improvements, appurtenances and fixtures situated thereon or forming part thereof;

 

**“****Tax” or “Taxes****”** means all taxes, assessments, charges, dues, duties,rates, fees, imposts, levies and similar charges of any kind lawfully levied,assessed or imposed by any Governmental Authority under any applicable TaxLegislation, or other income, capital, goods 

 

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andservices, sales, use, consumption, excise, value-added, business, real orimmovable property, personal or movable property, transfer, franchise,withholding, payroll, or employer health taxes, customs, import, anti-dumpingor countervailing duties, Canada/Quebec Pension Plan contributions, employmentinsurance premiums, and provincial workers’ compensation payments, includingany interest, penalties and fines associated therewith;

 

**“****Tax Legislation****”** means, collectively, the Income Tax Act and allfederal, state, provincial, territorial, municipal, foreign, or other statutesimposing a Tax, including all treaties, conventions, rules, regulations,Orders, and decrees of any jurisdiction;

 

**“****Tax Returns****”** means all reports, elections, returns, and otherdocuments required to be filed under the provisions of any Tax Legislation andany tax forms required to be filed, whether in connection with a Tax Return ornot, under any provisions of any applicable Tax Legislation;

 

**“****Third Party Actuaries****”** has the meaning ascribed thereto at Section 3.12(e);

 

**“****Third Party Claim****”** means any Claim asserted against an Indemnitee thatis paid or payable to, or claimed by, any person who is not a Party;

 

**“****Transitional Services Agreement****”** has the meaning ascribed thereto at Section 6.1.2(g);

 

**“****Tribunal****”** means any court (including a court of equity),arbitrator or arbitration panel and any other Governmental Authority, stockexchange, or association or other body exercising adjudicative, judicial,regulatory or quasi-judicial powers;

 

**“****Vendor’s Actuaries****”** means Morneau Sobeco;

 

**“****Vendor’s Closing Certificate****”** has the meaning ascribed to that term in Section 6.1.1;

 

**“****Vendor’s Core Representations****”** has the meaning ascribed to that term in Subsection 6.1.1(a);

 

**“****Vendor’s Intellectual and Industrial Property****”** means theintellectual and industrial property rights used in whole or in part in,or required by the Vendor for the carrying on by the Vendor of, the Business,both domestic and foreign and whether or not registered anywhere in the world(but specifically excluding intellectual and industrial property rights listedas Excluded Assets) all of which is listed in Section 4.1.23 of Schedule 1.1Aof the Disclosure Letter.

 

**1.2****                           ****Recitals**

 

The Partiesacknowledge and declare that the recitals in this Agreement are true andcorrect, are incorporated by reference herein, and deemed to be an integral part ofthis Agreement.

 

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**1.3****                           ****Accounting Principles**

 

Wherever in this Agreement reference is made to GAAP, such referenceshall, unless otherwise specified herein, be deemed to be to the GAAP from timeto time approved by the Canadian Institute of Chartered Accountants applicableas at the date on which such principles are to be applied or on which anycalculation or determination is required to be made in accordance with GAAP.

 

**1.4****                           ****Governing Law;Attornment**

 

This Agreement shall be construed, interpreted and enforced inaccordance with, and the rights of the Parties shall be governed by, the lawsof the Province of Quebec and the federal laws of Canada applicable therein(excluding any conflict of law rule or principle of such laws that mightrefer such interpretation or enforcement to the laws of another jurisdiction).Each Party irrevocably submits to the exclusive jurisdiction of the courts ofQuebec with respect to any matter arising hereunder or relating hereto.

 

**1.5****                           ****Amendment**

 

This Agreement may not be amended, supplemented or otherwisemodified in any respect except by written instrument executed by the Parties.

 

**1.6****                           ****Calculation of Time**

 

In this Agreement, a period of days shall be deemed to begin on thefirst day after the event which began the period and to end at 5:00 p.m.(Montreal time) on the last day of the period. If any period of time is toexpire hereunder on any day that is not a Business Day, the period shall bedeemed to expire at 5:00 p.m. (Montreal time) on the next succeedingBusiness Day.

 

**1.7****                           ****Performance on Holidays**

 

If any act (including the giving of notice) is otherwise required bythe terms hereof to be performed on a day which is not a Business Day, such actshall be valid if performed on the next succeeding Business Day.

 

**1.8****                           ****Waiver of Rights**

 

Any waiver of, or consent to depart from, the requirements of anyprovision of this Agreement shall be effective only if it is in writing andsigned by the Party giving it, and only in the specific instance and for thespecific purpose for which it has been given. No failure on the part ofany Party to exercise, and no delay in exercising, any right under thisAgreement shall operate as a waiver of such right. No single or partialexercise of any such right shall preclude any other or further exercise of suchright or the exercise of any other right.

 

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**1.9****                           ****Knowledge**

 

Where any representation, warranty or other statement in this Agreementis expressed to be made by the Vendor or Cascades, as applicable, to itsknowledge or is otherwise expressed to be limited in scope to matters known tothe Vendor or Cascades, as applicable, or of which the Vendor or Cascades, asapplicable, is aware, it shall mean such knowledge as is actually known to theofficers or employees of the Vendor or Cascades, as applicable, who haveoverall responsibility for or knowledge of the matters relevant to suchstatement and shall be deemed to include knowledge that such persons wouldacquire after making appropriate inquiries to other officers or employees ofVendor or of Cascades who, having regard to their position andresponsibilities, should reasonably be expected to have knowledge relevant tothe representation, warranty or other statement in question.

 

**1.10****                        ****Severability**

 

Any provision in this Agreement which is prohibited or unenforceable inany jurisdiction shall, as to such jurisdiction, be ineffective to the extentof such prohibition or unenforceability without invalidating the remainingprovisions hereof or affecting the validity or enforceability of such provisionin any other jurisdiction.

 

**1.11****                        ****Consents and Approvals**

 

Unless otherwise specified, where the consent or approval of a Party iscontemplated or required by the terms of this Agreement, that Party shall notunreasonably delay or withhold the giving of such consent or approval after arequest therefore has been made by the other Party.

 

**1.12****                        ****Remedies Cumulative**

 

The rights, remedies, powers and privileges herein provided to a Partyare cumulative and in addition to and not exclusive of or in substitution forany rights, remedies, powers and privileges otherwise available to that Party.

 

**1.13****                        ****Additional Rules ofInterpretation**

 

(a)                                  In thisAgreement, unless the context requires otherwise, words in one gender includeall genders and words in the singular include the plural and vice versa.

 

(b)                                 The divisionof this Agreement into Articles, Sections, Subsections and other subdivisions,the inclusion of headings and the provision of a table of contents are forconvenience of reference only and shall not affect the construction orinterpretation of this Agreement. The headings in the Agreement are notintended to be full or precise descriptions of the text to which they refer.

 

(c)                                  Unlesssomething in the subject matter or context is inconsistent therewith,references herein to an Article, Section, Subsection, paragraph or clause areto the applicable article, section, Subsection, paragraph or clause of thisAgreement.

 

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(d)                                 Wherever thewords “include”, “includes” or “including” are used in this Agreement or in anyClosing Document, they shall be deemed to be followed by the words “withoutlimitation” and the words following “include”, “includes” or “including” shallnot be considered to set forth an exhaustive list.

 

(e)                                  The words “hereof”,“herein”, “hereto”, “hereunder”, “hereby” and similar expressions shall beconstrued as referring to this Agreement in its entirety and not to anyparticular Section or portion of it.

 

(f)                                    Unlessotherwise specified, all dollar amounts in this Agreement, including the symbol“$”, refer to Canadian currency.

 

(g)                                 Unlessotherwise indicated, all references in this Agreement to any statute includethe regulations thereunder and all applicable guidelines, bulletins or policiesmade in connection therewith and which are legally binding, in each case asamended, re-enacted, consolidated or replaced from time to time and in the caseof any such amendment, re-enactment, consolidation or replacement, referenceherein to a particular provision shall be read as referring to such amended,re-enacted, consolidated or replaced provision as at the appropriate time.

 

(h)                                 Allreferences herein to any agreement (including this Agreement), document orinstrument mean such agreement, document or instrument as amended,supplemented, modified, varied, restated or replaced from time to time inaccordance with the terms thereof and, unless otherwise specified therein,includes all schedules and exhibits attached thereto.

 

(i)                                     Unless thecontext otherwise requires, references in this Agreement to a “person” are to be broadly interpretedand shall include an individual (whether acting as an executor, administrator,legal representative or otherwise), body corporate, unlimited liabilitycompany, partnership, limited liability partnership, joint venture, trust,unincorporated association, unincorporated syndicate, any GovernmentalAuthority and any other legal or business entity.

 

(j)                                     The term “ordinarycourse”, when used in relation to the conduct by the Vendor of the Business, orthe conduct of business by any other person, means any transaction whichconstitutes an ordinary day-to-day business activity, conducted in acommercially reasonable and businesslike manner, having no unusual or specialfeatures, and, in the case of the Business, consistent with past practice and,in the case of any other person (other than an individual), being such as aperson of similar nature and size and engaged in a similar business mightreasonably be expected to carry out from time to time.

 

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(k)                                  Unlessotherwise defined herein, words or abbreviations which have well-known trademeanings are used herein with those meanings.

 

**ARTICLE 2 PURCHASE AND SALE OF ASSETS AND ASSUMPTION OF LIABILITIES**

 

**2.1****                           ****Purchase and Sale**

 

Subject to the terms and conditions of this Agreement, the Vendoragrees to sell, transfer, assign and convey to the Purchaser and the Purchaseragrees to purchase from the Vendor, as a going concern, the undertaking and allof the Vendor’s right, title and interest in, under and to the property andassets (other than the Excluded Assets) used in carrying on the Business(collectively, the **“Purchased Assets”**). The PurchasedAssets shall include all of the Vendor’s right, title and interest in, underand to:

 

(a)           the RealProperty;

 

(b)           theMachinery and Equipment;

 

(c)           theContracts

 

(d)           the AccountsReceivable;

 

(e)           theInventories;

 

(f)            the Leases;

 

(g)           theEquipment Leases;

 

(h)           the fullbenefit of all Licenses, to the extent that they are transferable;

 

(i)            the Vendor’sIntellectual and Industrial Property including without limitation the nameGraphic Resources and any trade name used by the Business;

 

(j)            the PrepaidExpenses;

 

(k)           the Booksand Records; and

 

(l)            the goodwillof the Business together with the exclusive right of the Purchaser to representitself as carrying on the Business in continuation of, and as successor to, theVendor.

 

exceptto the extent that any such assets constitute Excluded Assets.

 

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**2.2****                           ****Excluded Assets**

 

Notwithstanding anything to the contrary in Section 2.1 orelsewhere in this Agreement, the Purchased Assets shall not include thefollowing (the **“Excluded Assets”**), which are not part of the purchase andsale contemplated hereunder and shall remain the property of the Vendor afterClosing:

 

(a)           term or timedeposits, cash on hand or on deposit with banks, other financial institutionsor other depositaries;

 

(b)           guaranteedinvestment certificates, treasury bills and other similar cash items andmarketable securities;

 

(c)           the interestof the Vendor in any insurance policies, including the cash surrender valuethereof and any claims under such policies;

 

(d)           refundableTaxes previously paid by the Vendor and any claim or right of the Vendor to anyrefund of, or credit with respect to, Taxes, in each case in respect of anyperiod prior to the Closing Date, together with any interest thereon;

 

(e)           thecorporate and Tax records of the Vendor;

 

(f)            Licences ofthe Vendor relating to the Business which are not transferable;

 

(g)           subject tothe other provisions of this Agreement, the right to use the name “Cascades” orthe Cascades logo or any variation thereof;

 

(h)           Books andRecords relating exclusively to the foregoing;

 

(i)            assetslocated in the City of St-Jérôme, Province of Quebec, relating to the mainframe(AS 400) (the **“AS Assets”**);

 

(j)            the accountsreceivables payable over several years that are listed in Section 2.2(j)of the Disclosure Letter which had an aggregate net book value of approximately$248,000 as at September 30, 2005 (the **“ExcludedReceivables****”**); and

 

(k)           any otherassets of the Vendor which are not used in the Business.

 

**2.3****                           ****Assumption ofLiabilities**

 

The Purchaser shall assume and shall pay, satisfy, fulfill anddischarge and perform, as the case may be unless specifically excludedelsewhere in this Agreement:

 

(a)           all obligations to be performed by theVendor on and after the Closing Date under the Contracts (including Leases andEquipment Leases) which by the terms and conditions thereof are to be paid,discharged or performed at any time after the Closing excluding any obligationsrelating to or arising out of such Contracts (including Leases and Equipment 

 

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Leases) as a result ofany breach of such Contracts (including Leases and Equipment Leases) or anyviolation of Law, breach of warranty, tort, delict or infringement occurring onor prior to the Closing;

 

(b)           all otherliabilities of the Vendor incurred in connection with the Business up to theClosing Date to the extent only that they are reflected as current liabilitieson the Closing Balance Sheet prepared in accordance with this Agreement;

 

(c)           allobligations and liabilities relating to warranty and product liability claimsand returned goods relating to the Business;

 

(d)           theobligations and liabilities relating to the Employees to be assumed by Purchaseras set out in Section 9.1 and Section 9.2 hereto;

 

(e)           theobligations and liabilities relating to the Pension Plan assumed by Purchaseras set out in Section 9.5 hereto; and

 

(f)            those liabilitieslisted in Schedule 2.3 of the Disclosure Letter, (collectively, the**“AssumedLiabilities”**).

 

**2.4****                           ****Excluded Liabilities**

 

Notwithstanding anything to the contrary contained in this Agreementand regardless of whether such liability or obligation is disclosed herein (orin the Disclosure Letter (other than the liabilities listed in Schedule 2.3of the Disclosure Letter) or in the exhibits to the Disclosure Letter), thePurchaser does not hereby assume and will not assume or be liable for anyliabilities or obligations of the Vendor or any liabilities or obligations ofCascades except for the Assumed Liabilities (collectively, the **“Excluded Liabilities”**).

 

**ARTICLE 3 PURCHASE PRICE AND RELATED MATTERS**

 

**3.1****                           ****Amount of Purchase Price**

 

Subject to the adjustments provided herein, the aggregate price payableby the Purchaser to the Vendor for the Purchased Assets (the **“Purchase Price”**)is the sum of the Adjusted Net Asset Value (the **“Cash Portion”**) plus one millionsix hundred thousand dollars ($1,600,000) (the **“Goodwill Amount”**) and theassumption of all of the Assumed Liabilities decreased, as the case may be,by the amount of the Pension Adjustment or increased, as the case may be,by the Allocated Surplus.

 

**3.2****                           ****Payment of the PurchasePrice**

 

The Purchase Price shallbe paid and satisfied by the Purchaser as follows: 

 

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(a)           by payingthe Vendor 95% of the Estimated Adjusted Net Asset Value (the **“Estimated Amount”**)by wire transfer of immediately available funds on the Closing Date to anaccount designated in writing by the Vendor;

 

(b)           by payingthe Vendor the remaining portion of the Cash Portion in accordance with andsubject to the terms and conditions of Section 3.8 by certified cheque,bank draft or wire transfer of immediately available funds to an accountdesignated in writing by the Vendor;

 

(c)           by payingthe Vendor the Goodwill Amount in accordance with and subject to the terms andconditions of Section 3.3 by certified cheque, bank draft or wire transferof immediately available funds to an account designated in writing by theVendor;

 

(d)           by payingthe Vendor, if applicable, the amount of the Allocated Surplus in accordancewith and subject to the terms and conditions of Section 3.11 by certifiedcheque, bank draft or wire transfer of immediately available funds to anaccount designated in writing by the Vendor; and

 

(e)           by theassumption of all of the Assumed Liabilities.

 

**3.3****                           ****Payment of the GoodwillPayment**

 

On or prior to a date (the **“Goodwill Payment Date”**) which isfifteen (15) Business Days from the date on which the draft Closing DateBalance Sheet is delivered by the Purchaser to Vendor, Purchaser shall pay toVendor by bank draft, certified cheque or wire transfer of immediatelyavailable funds to the account designated in writing by Vendor the amount of theGoodwill Payment. No interest shall be payable on the Goodwill Amount if suchpayment is made on or prior to the Goodwill Payment Date.

 

**3.4****                           ****Closing**

 

The Closing shall take place at the Closing Time at the offices ofFraser Milner Casgrain LLP, 1 Place Ville-Marie, Suite 3900, Montreal,Quebec, or at such other place as may be agreed upon in writing by Vendorand the Purchaser.

 

**3.5****                           ****Allocation of PurchasePrice**

 

The Vendor and thePurchaser agree to allocate the Purchase Price among the Purchased Assets inaccordance with Exhibit A of the Disclosure Letter. The Vendor andthe Purchaser agree that the values so attributed to the Purchased Assets arethe respective fair market values thereof, and each Party shall report the saleand purchase of the Purchased Assets for all Tax purposes in mutually agreeableform and in a manner consistent with such allocation. Each Party shallindemnify and save harmless the other Party in respect of any additional Tax,legal and/or accounting costs paid or incurred by the other Party as a resultof the failure of the indemnifying Party to file as aforesaid.

 

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**3.6****                           ****Taxes and Elections**

 

**3.6.1****                       ****Transfer Taxes**

 

ThePurchaser shall be liable for and shall pay, either to the Vendor at theClosing Time or directly to the appropriate Governmental Authority, asrequired, all land transfer taxes, sales taxes (whether imposed by Canada, aprovince or local taxing authority therein) and all other Taxes or other likecharges properly payable upon and in connection with the transfer of thePurchased Assets to the Purchaser, including, but not limited to GST andprovincial sales taxes but excluding any income taxes payable by the Vendor asa result of the completion of the transactions herein contemplated. The Vendorand Purchaser shall make a joint election pursuant to the provisions of Subsection 167(1) ofthe GST Legislation, and any similar Tax Legislation, in prescribed form andincluding the prescribed information, with respect to the purchase and sale ofthe Purchased Assets pursuant to the provisions of this Agreement. ThePurchaser shall file the joint election not later than the day on or beforewhich the return is required to be filed by the Purchaser under the GSTLegislation and any similar Tax Legislation for the Purchaser’s reportingperiod in which the sale was made, in compliance with the requirements of theGST Legislation and any similar Tax Legislation.

 

**3.6.2****                       ****Accounts ReceivableElection**

 

Purchaser and Vendor shall jointly elect pursuant to Section 22 ofthe Income Tax Act and the corresponding provisions of any other TaxLegislation, in prescribed form containing the prescribed information andwithin the time period specified for the purposes of the prescribed form, withrespect to the purchase and sale of all Accounts Receivable included in thePurchased Assets and Vendor and Purchaser shall prepare and execute theprescribed form and deliver it at or before the Closing Time for executionby Purchaser and Vendor, and Purchaser shall file such form within theprescribed time period. 

 

**3.7**                            **Preparation of ClosingBalance Sheet**

 

**3.7.1**                        **Initial Preparation**

 

Promptly after the Closing Time, thePurchaser shall prepare, at its expense and in accordance with GAAP,consistently applied, a balance sheet of the Business on the Closing Date and acalculation of the Adjusted Net Asset Value which shall be calculated inaccordance with Exhibit B of the Disclosure Letter hereof. Anybonus, retention bonus, severance or similar benefit payable to Employees shallbe accrued as a liability on the Closing Balance Sheet. A draft of the ClosingBalance Sheet and a draft calculation of the Adjusted Net Asset Value shall bedelivered to the Vendor no later than 30 Business Days following the Closing Date.The Closing Balance Sheet shall be prepared in the English language inaccordance with GAAP, consistently applied with the Annual Financial Statementsfor the fiscal year ended on December 31, 2004, except as specificallyprovided for in Exhibit B of the Disclosure Letter. The Purchasershall permit representatives of the Vendor to be present at the inventory countused in the preparation of the draft Closing Balance Sheet and if requestedshall provide such representatives promptly with copies of all working paperscreated in connection with such inventory count. If the Vendor does not give anotice of disagreement in accordance with Subsection 3.7.2, the 

 

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Vendorshall be deemed to have accepted the draft Closing Balance Sheet and draftcalculation of the Adjusted Net Asset Value prepared by the Purchaser whichshall be final and binding on the Parties and the draft calculation of theAdjusted Net Asset Value shall constitute the Adjusted Net Asset Value forpurposes of this Agreement immediately following the expiry date for the givingof such notice of disagreement.

 

**3.7.2****                       ****Dispute Settlement**

 

If the Vendor disagrees with any item in the draft Closing BalanceSheet or the draft calculation of the Adjusted Net Asset Value preparedpursuant to Section 3.7.1, it shall give notice to the Purchaser of suchdisagreement no later than 10 Business Days after delivery of the draft ClosingBalance Sheet. Any notice of disagreement given by the Vendor shall set forthin detail the particulars of such disagreement. The Parties shall then usereasonable commercial efforts to resolve such disagreement for a period of 15Business Days following the giving of such notice. If the disagreement is notresolved in its entirety by the end of such 15 Business day period, then suchdisagreement, or that part of the disagreement that remains unresolved,shall be submitted by the Parties to an accounting firm of recognized nationalstanding in Canada, which is independent of the Parties or, in the absence ofagreement, to Deloitte & Touche LLP, Chartered Accountants (the **“Independent Accountant”**).The Independent Accountant shall, as promptly as practicable (but in any eventwithin 20 Business Days following its appointment), make a determination withrespect to the disagreements identified by the Vendor that have not beenresolved by the Parties in accordance with this Section 3.7.2 and basedsolely on written submissions submitted by the Parties to the IndependentAccountant. Immediately following the decision of the Independent Accountant asto such unresolved disagreements, the draft Closing Balance Sheet and thecalculation of the draft Adjusted Net Asset Value shall be deemed to reflect, (i) ifapplicable, the matters resolved by the Parties, and (ii) the decision ofthe Independent Accountant, and shall respectively become the final and bindingClosing Balance Sheet and Adjusted Net Asset Value for the purpose of thisAgreement. For greater certainty, the Independent Accountant’s decision shallbe final and binding upon the Parties and shall not be subject to appeal. ThePurchaser and the Vendor shall each pay one-half of the fees and expenses ofthe Independent Accountant with respect to the resolution of the dispute.

 

**3.8****                           ****Adjustment Payment**

 

On the Adjustment Date (a) the Purchaser shall pay to the Vendorthe amount, if any, by which the Adjusted Net Asset Value exceeds the EstimatedAmount or (b) the Vendor shall pay to the Purchaser the amount, if any, bywhich the Estimated Amount exceeds the Adjusted Net Asset Value (in each case,the **“AdjustmentPayment”**), in either case by certified cheque, bank draft or wiretransfer of immediately available funds to an account designated in writing bythe Purchaser or the Vendor, as the case may be. Notwithstanding anythingcontained in this Agreement, the Parties hereby agree that the matterssubmitted to the Independent Accountants in accordance with Section 3.7.2shall be limited to the items in dispute, and that the portion of the AdjustmentPayment which is not affected by the outcome of the final determinationcontemplated by Section 3.7.2 shall be paid within 15 Business Daysfollowing the delivery of the draft Closing Balance Sheet by the Purchaser tothe Vendor.

 

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**3.9****                           ****Accounts Receivable**

 

Purchaser shall after the Closing Date use its reasonable commercialefforts to collect all Accounts Receivable existing as at the Closing Date andreflected on the Closing Balance Sheet. Any amounts collected by the Purchaserfrom any debtor of Accounts Receivable shall be imputed firstly to the invoicesor amounts identified by the debtor when making the payment, and secondly,where amounts paid do not identify the invoices being paid, to the oldestAccounts Receivable from such debtor; provided that if a payment of any of theAccounts Receivable is contested, in whole or in part, by the debtor thereof,then any amounts collected by the Purchaser from such debtor shall be imputedto the next oldest uncontested Accounts Receivable from such debtor. Purchasershall have no obligation to retain a collection agency or institute suit tocollect any Accounts Receivable. Purchaser shall have no further duty to useits reasonable commercial efforts to collect any Accounts Receivable thatremain uncollected on the 180th day after the Closing Date. If, on the 180thday after the Closing Date, the amount of Accounts Receivable collected byPurchaser is less than the Net Receivables (the **“AR Shortfall”**), Vendor shallimmediately pay to Purchaser an amount equal to the sum of (a) for any ARShortfall up to $500,000, Vendor shall pay 50% of that portion of theshortfall; (b) for any AR Shortfall in excess of $500,000 and up to$1,000,000, Vendor shall pay 75% of that portion of the shortfall; and (c) forany AR Shortfall in excess of $1,000,000, Vendor shall pay 100% of that portionof the shortfall.

 

**3.10****                        ****Aged Inventory**

 

On the Closing Date or on the day following the Closing Date, theVendor shall provide the Purchaser with a list of the Aged Inventory existingas at the Closing Date. With respect to any Aged Inventory sold by Purchaser inthe twelve (12) months following the Closing Date, Purchaser undertakes to useits reasonable commercial efforts to sell and maximize the price of the AgedInventory and shall pay (the **“Aged Inventory Amount”**) to Vendoran amount equal to the sum of (a) for the amount of Net Sales from AgedInventory up to $1,000,000, an amount equal to 80% of such Net Sales minus thenet book value of such inventory; (b) for the amount of Net Sales fromAged Inventory in excess of $1,000,000 up to $2,000,000, an amount equal to 75%of such Net Sales minus the net book value of such inventory; and (c) forthe amount of Net Sales from Aged Inventory in excess of $2,000,000, an amountequal to 70% of such Net Sales minus the net book value of such inventory. Forthe purposes of the foregoing calculation, the net book value of such inventoryshall be calculated in accordance with the definition of Aged Inventory NetBook Value. The Aged Inventory Amount shall be calculated in respect of each ofthe four quarters following the Closing Date and be paid by Purchaser to Vendorwithin 45 Business Days of the end of the relevant quarter and shall be accompaniedby a statement setting forth the amount of the Aged Inventory sold during suchquarter and the calculation of the Aged Inventory Amount. During such twelve(12) month period following the Closing Date, the Purchaser shall permit theVendor and the Vendor’s advisors, without undue interference to the ordinaryconduct of the Business and upon reasonable notice, to inspect the AgedInventory and shall furnish to the Vendor and the Vendor’s advisors suchreports and financial and operating data and other information with respect tothe Aged Inventory as the Vendor shall from time to time reasonably request. Uponexpiration of the twelve (12) month period following the Closing Date, thePurchaser agrees that the Vendor shall have the right at its cost and expense(including without limitation promptly reimbursing the Purchaser for any andall picking costs incurred by the Purchaser) to pick up from the Purchaser anyremaining unsold Aged Inventory; provided, however, that the Vendor shall notbe permitted 

 

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tosell any of such remaining Aged Inventory in North America, other than throughnormal marketing channels, without first obtaining Purchaser’s prior writtenconsent which consent shall not be unreasonably withheld.

 

**3.11****                        ****Pension Adjustment andAllocated Surplus**

 

Within seven (7) Business Days from the date on which thedetermination of the amount of the Pension Adjustment or, as the case may be,the Allocated Surplus, becomes final and binding upon the Parties (the **“Pension AdjustmentPayment Date”**), (a) the Vendor shall pay to Purchaser theamount of the Pension Adjustment, and the Purchase Price shall be deemed tohave been reduced by such an amount, or (b) the Purchaser shall pay to theVendor the amount of the Allocated Surplus, and the Purchase Price shall bedeemed to have been increased by such amount, in either case by bank draft,certified cheque or wire transfer of immediately available funds to an accountdesignated in writing by the Purchaser, or, as the case may be, by theVendor. No interest shall be payable on the amount of the Pension Adjustment orof the Allocated Surplus if such payment is made on or prior to the PensionAdjustment Payment Date.

 

**3.12****                        ****Pension Fund Valuation**

 

(a)           Forthwith afterthe execution of this Agreement, Vendor shall retain the Vendor’s Actuaries forthe purpose of determining the amount (the **“September 30 Amount”**) of thesurplus or deficit of the Pension Plan for accounting purposes calculated inaccordance with Chapter 3461 of the Handbook of the Canadian Institute ofChartered Accountants (the **“CICA Standards”**) as of September 30,2005. The discount rate used to determine the September 30 Amount shall bethe discount rate that represents the upper limit of the discount rate rangedetermined by the Vendor’s Actuaries as of September 30, 2005 (the **“September 30 Rate”**).The Vendor’s Actuaries shall be instructed to conduct an actuarial valuationfor the purpose of determining the September 30 Amount which shall consistof a valuation of the Pension Plan’s assets and liabilities as of September 30,2005. Such actuarial valuation shall use and rely upon the same methods asthose found in the Vendor’s pension cost and disclosure information for thePension Plan that was prepared for the Vendor’s most recent annual auditedfinancial statements.

 

(b)           No laterthan on a date agreed to in writing by Vendor and Purchaser which shall be atleast thirty (30) days prior to the Closing Date, or as otherwise agreed to inwriting by Vendor and Purchaser (the **“Reference Date”**), Vendor shallretain the Vendor’s Actuaries for the purpose of determining the amount (the **“Reference Date Amount”**)of the surplus or deficit of the Pension Plan for accounting purposescalculated in accordance with the CICA Standards as of the Reference Date. Thediscount rate used to determine the Reference Date Amount shall be the discountrate that represents the upper limit of the discount rate range determined bythe Vendor’s Actuaries as of the Reference Date except that if such discountrate is 5.25% or lower, then such rate shall be increased

 

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by 0.25% (the **“Rate Increase”**)(such discount rate, as it may be increased by the Rate Increase, shall bereferred to as the **“Reference Date Rate”**). The Vendor’sActuaries shall be instructed to conduct an actuarial update for the purpose ofdetermining the Reference Date Amount using and relying upon all of theassumptions, methods and data that were used and relied upon for determiningthe September 30 Amount and use the same valuations except that (x) theReference Date Rate will be used instead of the September 30 Rate, and (y)the value of the Pension Plan’s assets and liabilities (as described in thesummary of the rollover methodology set forth on Exhibit J of theDisclosure Letter) established as of September 30, 2005 will be rolledforward to the Reference Date. If the Reference Date Amount is a deficit, thenthe Parties will notionally allocate the Reference Date Amount betweenPurchaser and Vendor by applying the following formula: (a) the first$1,100,000 of the Reference Date Amount will be allocated to Vendor, (b) theamount of the Reference Date Amount in excess of $1,100,000 will be allocated50%-50% between Vendor and Purchaser, except that the maximum amount allocableto the Purchaser shall be $1.5 million and Vendor’s allocation shall beunlimited. If the portion of the Reference Date Amount allocated to Vendorpursuant to the foregoing calculation is in excess of $3.8 million, then Vendorwill have, in its discretion, five (5) days (and no more) from the date onwhich the Reference Date Amount has been finally determined to notify Purchaserin writing that it wishes to terminate this Agreement in accordance with theterms of Article 7 hereof.

 

(c)           Forthwith after the Closing Date,Purchaser shall retain the Vendor’s Actuaries for the purpose of determiningthe amount (the **“Closing Date Amount”**) of the surplus or deficit of the PensionPlan for accounting purposes calculated in accordance with the CICA Standardsas of the Closing Date. The discount rate used to determine the Closing DateAmount shall be the discount rate that represents the upper limit of thediscount rate range determined by the Vendor’s Actuaries as of the Closing Dateexcept that if such discount rate is 5.25% or lower, then such rate shall beincreased by the Rate Increase (such discount rate, as it may be increasedby the Rate Increase, shall be referred to as the **“Closing Date Rate”**). The Vendor’sActuaries shall be instructed to conduct an actuarial update for the purpose ofdetermining the Closing Date Amount using and relying upon all of theassumptions, methods and data that were used and relied upon for determiningthe September 30 Amount and use the same valuations except that (x) theClosing Date Rate will be used instead of the September 30 Rate, and (y)the value of the Pension Plan’s assets and liabilities (as described in thesummary of the rollover methodology as set forth in Exhibit J ofthe Disclosure Letter) established as of September 30, 2005 will be rolledforward as of the Closing Date. If the Closing Date Amount is a deficit, thenthe Parties will notionally allocate the Closing Date Amount between Purchaserand Vendor by applying the following formula: (a) the first $1,100,000 ofthe Closing 

 

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Date Amount will beallocated to Vendor, (b) the amount of the Closing Date Amount in excessof $1,100,000 will be allocated 50%-50% between Vendor and Purchaser, exceptthat the maximum amount allocable to the Purchaser shall be $1.5 million andVendor’s allocation shall be unlimited. The amount notionally allocated toVendor in accordance with the foregoing shall be referred to as the **“Preliminary PensionAdjustment”**. The amount notionally allocated to Purchaser inaccordance with the foregoing shall be referred to as the **“Preliminary Purchaser Allocation”**.For greater certainty, the Parties acknowledge that the Preliminary PurchaserAllocation includes the amount attributable to the Rate Increase, ifapplicable. If the Closing Date Amount as calculated without the Rate Increase,if any, is a surplus, then such surplus (i.e. the surplus calculated withoutthe Rate Increase) will be allocated 50%-50% between Vendor and Purchaser,except that the maximum amount allocable to the Purchaser shall be $1.5 millionand Vendor’s allocation shall be unlimited. The Purchase Price shall beincreased by the surplus amount allocated to the Vendor (the **“Allocated Surplus”**)calculated in accordance with the foregoing.

 

(d)           Ifthe Closing Date Amount is a deficit, forthwith after June 30, 2006,Purchaser shall retain the Vendor’s Actuaries for the purpose of (i) determining the applicable discount ratethat would be used to determine the amount (the **“June 30 Amount”**) of thesurplus or deficit of the Pension Plan for accounting purposes if such surplusor deficit had to be calculated as of June 30, 2006, and (ii) ifapplicable, determining the amount of the June 30 Amount. The discountrate (the **“June 30Rate”**) that would be used to determine the June 30 Amount wouldbe the discount rate that represents the upper limit of the discount rate rangedetermined by the Vendor’s Actuaries as of June 30, 2006.

 

If the June 30 Rateis equal to or less than the Closing Date Rate, then the Pension Adjustmentshall be deemed to be equal to the Preliminary Pension Adjustment and theVendor’s Actuaries shall not calculate the June 30 Amount. For greatercertainty, the June 30 Rate shall not be increased by the Rate Increase.

 

If the June 30 Rateis higher than the Closing Date Rate, then the Pension Adjustment shall bedetermined in accordance with the provisions that follow:

 

(i)            the Vendor’s Actuaries shall be instructedto determine the June 30 Amount using and relying upon all of theassumptions, methods and data that were used and relied upon for determiningthe Closing Date Amount so that the sole difference between the determinationof the June 30 Amount and the Closing Date Amount shall be the use of adifferent discount rate. For greater certainty, it is acknowledged by the Partiesthat the valuation of the 

 

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Pension Plan’s assets andliabilities will not be rolled forward to June 30, 2006. The differencebetween the Closing Date Amount and the June 30 Amount shall be referredto as the **“DeficitReduction”**;

 

(ii)           the amount of the Deficit Reduction, upto an amount equal to two times the Preliminary Purchaser Allocation, shall benotionally allocated 50% to the Vendor (the **“June Vendor Reduction”**) and50% to the Purchaser (the **“June Purchaser Reduction”**).Any amount of the Deficit Reduction in excess of the sum of the June VendorReduction and the June Purchaser Reduction shall be allocated 100% to theVendor, subject to an aggregate maximum allocation to Vendor equal to thePreliminary Pension Adjustment. The aggregate amount allocated to Vendor inaccordance with the foregoing shall be referred to as the **“Pension Adjustment Reduction”**; and

 

(iii)          the amount of the Pension Adjustmentshall be equal to the difference between the Preliminary Pension Adjustmentand, if any, the Pension Adjustment Reduction. Notwithstanding any otherprovision of this Agreement, the calculation of the Pension Adjustment shallnever result in an increase of the Purchase Price, and the amount of thePension Adjustment cannot exceed the Preliminary Pension Adjustment.

 

(e)           Vendor and Purchaser shall cause theVendor’s Actuaries to use their best efforts to deliver their written reportswith respect to the determinations for which they are retained pursuant to thisSection 3.12 to the Parties as soon as possible. The fees and expenses ofthe Vendor’s Actuaries shall be borne (i) by the Vendor with respect tothe work that such actuaries perform pursuant to Sections 3.12(a), 3.12(b) and3.12(d), and (ii) by the Purchaser with respect to the work that suchactuaries perform pursuant toSection 3.12(c). If Purchaser disagrees with any of the determinationsmade by the Vendor’s Actuaries (including any assumptions, methods or data usedor relied upon by the Vendor’s Actuaries for the purpose of calculating thesurplus or deficit of the Pension Fund), then Purchaser shall send a writtennotice to Vendor indicating with reasonable details the reason(s) for thedisagreement within five (5) days of the date on which the applicableVendor’s Actuaries written report was delivered to Purchaser, failing whichsuch determination shall be final and binding on the Parties upon theexpiration of such date. If the matter cannot be resolved by Purchaser andVendor within five (5) days of the date on which the aforesaid notice wassent by Purchaser, then either Purchaser or Vendor shall be entitled to referthe matter(s) in dispute to Watson Wyatt (provided that there is no conflict)(the **“ThirdParty Actuaries”**) who shall make a determination as soon asreasonably practicable in respect of such dispute and, where applicable, revisethe amount of the surplus or 

 

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deficit of the PensionPlan. The Third Party Actuaries’ determination shall be final and binding onthe Parties. The fees and expenses of the Third Party Actuaries incurred inconnection with the foregoing shall be borne equally between Purchaser andVendor.

 

**3.13****                        ****Interest**

 

In the event that a Party fails to make a payment pursuant to Article 3by the due date of such payment, then the unpaid balance of such payment shallbear interest at a rate per annum equal to the Prime Rate plus 3%, calculatedand payable monthly, both before and after judgment, with interest on overdueinterest at the same rate, from said due date until the unpaid balance and theaccrued interest thereon is paid in full.

 

**ARTICLE 4 REPRESENTATIONS AND WARRANTIES**

 

**4.1****                           ****Representations andWarranties of Vendor and Cascades**

 

The Vendor and where applicable, Cascades does not give or assume anyguarantees, warranties, representations or undertakings other than thoseexpressly contained in this Agreement or in any of the applicable AncillaryAgreements. For the avoidance of doubt, other guarantees, representations,warranties or undertakings of the Vendor are hereby explicitly excluded.Subject to any limitations contained in this Agreement, or in any of theAncillary Agreements, the Vendor and where applicable, Cascades herebyrepresents and warrants to the Purchaser that the Vendor’s and whereapplicable, Cascades’ representations and warranties set forth below are trueand correct, unless expressly specified otherwise. The Vendor’s and whereapplicable, Cascades representations and warranties set forth below are subjectto any and all modifications, exceptions and/or qualifications set forth in theDisclosure Letter and/or elsewhere in this Agreement, or in any of theAncillary Agreements.

 

**4.1.1****                       ****Incorporation and Statusof Vendor and Cascades**

 

Each of the Vendor and Cascades is a corporation duly incorporated,organized and subsisting under the laws of Canada and has the corporate power, authorityand capacity to execute and deliver this Agreement, to sell, assign andtransfer the Purchased Assets to the Purchaser as herein contemplated and toperform its other obligations hereunder and will have the corporate power,authority and capacity to execute and deliver the applicable AncillaryAgreements. No proceedings have been taken or authorized by the Vendor orCascades or by any other person with respect to the bankruptcy, insolvency,liquidation, dissolution or winding up of the Vendor or Cascades or withrespect to any amalgamation, merger, consolidation, arrangement orreorganization of, or relating to, the Vendor or Cascades nor, to the knowledgeof the Vendor or Cascades, have any such proceedings been threatened by anyother person.

 

**4.1.2                     DueAuthorization by Vendor and Cascades**

 

The execution and delivery of this Agreement and each of the AncillaryAgreements to which each of the Vendor and Cascades is a Party when executedand delivered 

 

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andthe completion of the transactions herein and therein contemplated have beenduly and validly authorized by all necessary corporate action on behalf of theVendor and Cascades, as applicable, and this Agreement has been duly andvalidly executed and delivered by the Vendor and Cascades and is a valid andbinding obligation of the Vendor and Cascades enforceable against the Vendorand Cascades in accordance with its terms and each of the Ancillary Agreementsto which they are a Party will be duly and validly executed and delivered bythe Vendor and Cascades, as applicable, and will be valid and bindingobligations of the Vendor and Cascades, as applicable, enforceable against theVendor and Cascades, as applicable, in accordance with their terms. There is noLegal Proceeding in progress, pending or, to the knowledge of the Vendor,threatened, against or affecting the Vendor or affecting the title of theVendor to any of the Purchased Assets before any Tribunal which affectsadversely or might reasonably be expected to affect adversely the ability ofthe Vendor and Cascades to enter into this Agreement or the AncillaryAgreements or to perform its obligations hereunder or thereunder otherthan as set out in the Disclosure Letter.

 

**4.1.3****                       ****Title to PurchasedAssets**

 

Except as disclosed in Section 4.1.3 of the Disclosure Letter, theVendor is the legal and beneficial owner of all of the Purchased Assets withgood and marketable title thereto, free and clear of all Encumbrances otherthan Permitted Encumbrances and has the exclusive right to possess and disposeof the Purchased Assets. No person has, or has any right capable of becoming,any agreement, option, understanding or commitment for the purchase or otheracquisition from the Vendor of the Business or any of the Purchased Assets,other than pursuant to purchase orders accepted by the Vendor in the ordinarycourse of the Business. No other person owns any property and assets which arebeing used in the Business except for the Leases and the Equipment Leases.

 

**4.1.4****                       ****Conflicting Instruments**

 

Except as disclosed in Section 4.1.4 of the Disclosure Letter,none of the entering into of this Agreement by the Parties, nor the enteringinto of any agreement or other instrument contemplated hereby nor the completionof the transactions herein contemplated nor the performance by the Vendor ofits obligations hereunder will:  (a) materiallyconflict with, or result in the breach or violation of or default under, orcause the acceleration of any obligations of the Vendor under, any of the termsand provisions of (i) to the knowledge of Vendor, any Law, (ii) theArticles of the Vendor or its by-laws or any resolution of the directors orshareholders of the Vendor; or (iii) any Material Contract, or of anyLicence or Order held by the Vendor in respect of the Business or otherwiseaffecting the Business, (b) relieve any other party to any MaterialContract of that party’s obligations thereunder or enable it to terminate itsobligations thereunder, (c) cause the Vendor or the Purchaser to lose anyMaterial rights under any Contract or any right to a government grant or taxcredit or refund or (d) result in the creation of any Encumbrance on anyof the Purchased Assets.

 

**4.1.5****                       ****Employees**

 

(a)           [              ]

 

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[              ]

 

(b)           Except as disclosedin Section 4.1.5 of the Disclosure Letter**,**the Vendor is not a party to or bound by or subject to any Collective Agreementrelating to the Employees, has not made any commitment to, or conducted anynegotiation or discussion with, any labour union or employee association withrespect to any future agreement or arrangement, is not required to recognizeany labour union or employee association representing its employees or any agenthaving bargaining rights for its employees and, to the knowledge of the Vendor,there is no current attempt to organize, certify or establish any labour unionor employee association with respect to Employees nor has there been anyattempt to do so during the period of one year preceding the date hereof.

 

(c)           Except as set forthin Section 4.1.5 of the Disclosure Letter, there has not been, for aperiod of twelve (12) consecutive months preceding the date hereof, nor isthere existent or, to the knowledge of the Vendor, threatened any strike,slowdown, picketing or work stoppage with respect to the Employees of theBusiness. Except as set forth in Section 4.1.5 of the Disclosure Letter,Vendor has not engaged in any unfair labour practice with respect to theBusiness;

 

(d)           Except as set forthin Section 4.1.5 of the Disclosure Letter, to the knowledge of the Vendor,no managerial Employee and no group of Employees of the Business has or haveany plans to terminate his, her or its employment.

 

(e)           No employees otherthan the Employees are employed by the Vendor in connection with the Business.

 

(f)            Except as set forthin Section 4.1.5 of the Disclosure Letter, no Employee or former employeeof the Business will become entitled to any bonus, retirement, severance, jobsecurity or similar benefit or any enhanced benefit solely as a result of theconsummation of the transactions contemplated herein.

 

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(g)           All amounts due and owing or accrued duebut not yet owing for all salary, wages, bonuses, commissions, vacation withpay, pension benefits or other employee benefits in connection with theEmployees have been paid or if accrued are reflected in the Books and Records.

 

**4.1.6****                        ****Employee Benefit Plans**

 

(i)            Schedule 4.1.6 of the Disclosure Letter includes copiesof all Employee Benefit Plans, together with all related documentationincluding, without limitation, funding and investment management agreements,summary plan descriptions, the most recent actuarial reports, financialstatements and asset statements, all Material opinions and memoranda (whetherexternally or internally prepared) and all Material correspondence with allregulatory authorities or other relevant persons. No changes, except forchanges resulting from the administration of, or as a result of the applicationof, the Employee Benefit Plans or as a result of the application of a Law, haveoccurred or are expected to occur which would materially affect the informationcontained in the actuarial reports, financial statements or asset statementsrequired to be provided to the Purchaser pursuant to this provision.

 

(ii)           All of the Employee Benefit Plans are andhave been established, registered, qualified, invested and administered, in allrespects, in accordance with their terms and all Laws, including all Tax Lawswhere same is required for preferential tax treatment. To the knowledge ofVendor, no fact or circumstance exists that could adversely affect thepreferential tax treatment ordinarily accorded to any such Employee BenefitPlan.

 

(iii)          All obligations regarding the EmployeeBenefit Plans have been satisfied, there are no outstanding defaults orviolations by any party to any Employee Benefit Plan and no Taxes, penalties,or fees are owing or exigible under or in respect of any of the EmployeeBenefit Plans.

 

(iv)          All contributions or premiums required tobe paid by Vendor under the terms of each Employee Benefit Plan or by Laws havebeen made in a timely fashion in accordance with Laws and the terms of theEmployee Benefit Plans. Vendor has no liability (other than liabilitiesaccruing after the Closing Date) with respect to any of the Employee BenefitPlans. Contributions or premiums for the period up to the Closing Date havebeen paid by Vendor even though not otherwise required to be paid until a laterdate.

 

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(v)           Since December 31, 2004, no commitments toimprove or otherwise amend any Employee Benefit Plan have been made except asrequired by Laws.

 

(vi)          Except as set forth in Schedule 4.1.6 ofthe Disclosure Letter, there are no funded plans.

 

(vii)         No insurance policy or any other agreement affectingany Employee Benefit Plan requires or permits a retroactive increase incontributions, premiums or other payments due thereunder. The level ofinsurance reserves under each insured Employee Benefit Plan is reasonable andsufficient to provide for all incurred but unreported claims.

 

(viii)        Except as disclosed in Section 4.1.6 of theDisclosure Letter, none of the Employee Benefit Plans provide post-employmentbenefits or benefits to retired employees or to the beneficiaries or dependantsof retired employees.

 

(ix)          No Employee Benefit Plan exists thatcould result in (i) the payment to any person of any money, benefits orother property, (ii) accelerated or increased funding requirements for anyEmployee Benefit Plan or (iii) the acceleration or provision of any otherincreased rights or benefits to any person as a result of the transactionscontemplated by this Agreement.

 

**4.1.7****                        ****Real Property**

 

Other than the Leases and except as disclosed in Section 4.1.7 ofthe Disclosure Letter, the Vendor does not own or have any interest in, nor is theVendor a party to or bound by or subject to any agreement, contract, commitmentor option, respecting any real or immoveable property relating to the Business.Section 4.1.7 of the Disclosure Letter specifies the following withrespect to each separate parcel of Real Property: the municipal address, abrief legal description, the public highway on which it fronts, its approximatedimensions and size, a brief description of buildings and structures thereon, abrief description of any easements or restrictive covenants benefiting orburdening the parcel. The “certificat de localisation” to be prepared by aQuébec land surveyor on the Real Property shall not disclose any Encumbrance,defect, irregularity or problem, save for Permitted Encumbrances, any minordiscrepancy between the title deeds, the cadastre and/or the measurements andany other defect, irregularity or problem (whether or not registered) whichdoes not materially interfere with the occupation, use or enjoyment of the RealProperty. The Vendor is the owner of the Real Property with good and marketabletitle thereto and the Real Property is free of any Encumbrance except PermittedEncumbrances. No part of the Real Property is in an agricultural zonepursuant to Quebec Law.

 

**4.1.8****                       ****Status of Real Property**

 

Except as disclosed in Section 4.1.8 of the Disclosure Letter,there are no agreements, options, contracts or commitments to sell, transfer ordispose of the Real Property or

 

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anyinterest therein or which would restrict the ability of the Vendor to transferthe Real Property, and no person has any right to occupy or use the RealProperty or any part thereof other than the Vendor. To the Vendor’sknowledge, the Vendor has received no notice from any Governmental Authority tothe effect that the Real Property does not comply with applicable Laws.

 

**4.1.9****                       ****Personal Property**

 

Except as disclosed in Section 4.1.9 of the Disclosure Letter andproperty subject to an Equipment Lease, the Vendor is the owner of all personaland movable property used in the Business with good and marketable titlethereto free of any Encumbrance other than Permitted Encumbrances.

 

**4.1.10****                     ****Contracts**

 

The Vendor is not a party to or bound by or subject to any Contract,written or oral, of any nature or kind relating to the Business except for:

 

(a)           the Leases,all of which are listed in Section 4.1.10 of the Disclosure Letter;

 

(b)           theEquipment Leases, all of which are listed in Section 4.1.10 of theDisclosure Letter;

 

(c)           servicecontracts;

 

(d)           agreementsand arrangements with respect to Employees, Employee Benefit Plans and personsreceiving compensation for work or services provided to the Vendor set forthand described in Section 4.1.5 of the Disclosure Letter;

 

(e)           supplier andcustomer contracts;

 

(f)            PermittedEncumbrances set forth and described in Schedule 1.1D of theDisclosure Letter; and

 

(g)           the otherContracts listed or identified in Section 4.1.10 of the Disclosure Letter.

 

**4.1.11****                     ****No Breach of Material Contracts**

 

The Vendor has performed all Material obligations required to beperformed by it and is entitled to all benefits under, and is not alleged to bein default of, any Material Contract to which it is a party. Each of theMaterial Contracts is in full force and effect and there exists no actual oralleged default or event of default or event, occurrence, condition or act(including the purchase of the Purchased Assets and the other transactionscontemplated herein) which, with the giving of notice, the lapse of time, orboth, or the happening of any other event or condition,

 

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wouldbecome a Material default or event of default under any Material Contract.True, correct and complete copies of all Material Contracts have been deliveredto Purchaser.

 

**4.1.12****                      ****Legal Proceedings**

 

Except as set forth and described in Section 4.1.12 of theDisclosure Letter, there is no Legal Proceeding (whether or not purportedly onbehalf of the Vendor) in progress, pending or, to the Vendor’s knowledge,threatened against or affecting the Business or the Purchased Assets before anyTribunal.

 

**4.1.13****                     ****Accounts Receivable**

 

Except as disclosed in Section 4.1.13 of the Disclosure Letter orin Exhibit B of the Disclosure Letter**,**the Accounts Receivable, less the Reserve, have beencalculated in accordance with GAAP, consistently applied.

 

**4.1.14****                     ****Annual Financial Statements**

 

The Annual Financial Statements have been prepared in accordance withGAAP applied on a basis consistent with those of previous fiscal years and eachfairly, accurately and completely discloses in all Material respects (i) theassets, liabilities and obligations (whether accrued, contingent, absolute orotherwise), income, losses, retained earnings, reserves and financial positionof the Business, (ii) the results of operations of the Business and (iii) thechanges in the financial position of the Business, all as at the dates and forthe periods therein specified**.**Noneof the Purchased Assets have been revalued upward at any time since December 31,2004.

 

True, correct and complete copies of the Annual Financial Statementsare attached as Schedule 1.1B to the Disclosure Letter.

 

The confidential information memorandum, including any supplement ormodification thereto, prepared in connection with the sale of the Business, thedocuments made available in the data room set up by Vendor in connectionwith the sale of the Business and the documents remitted to Purchaser’srepresentatives in connection with Vendor’s management presentations regardingthe sale of the Business (collectively, the **“Disclosure Documents”**), are trueand accurate in all material respects, and do not omit to state any factnecessary in order to make the statements, financial information and otherinformation therein not misleading. The Parties agree that the representationand warranty contained in this paragraph: (i) shall not extend to anyforward-looking statements contained in the Disclosure Documents, (ii) doesnot extend to any verbal information provided to the Purchaser or itsrepresentatives by the Vendor or its representatives, and (iii) withrespect to any Disclosure Document, the representation and warranty is made asof the date that such Disclosure Document was delivered to the Purchaser or itsrepresentative.

 

**4.1.15****                     ****Condition and Sufficiency of TangibleAssets**

 

The tangible assets owned or leased by the Vendor are adequate andsuitable for the uses to which they are being put. The tangible assets owned orleased by the Vendor (other

 

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thanthe AS Assets) constitute all of the tangible assets used or held for use inconnection with the Business as currently conducted and constitute all of thetangible assets necessary to conduct such Business.

 

**4.1.16****                     ****Inventories**

 

Except as disclosed in Section 4.1.16 of the Disclosure Letter orin Exhibit B of the Disclosure Letter, the inventories of theBusiness (other than inventories which have been written down in the AnnualFinancial Statements as at December 31, 2004) have been valued in theAnnual Financial Statements as at December 31, 2004 at the lower ofaverage cost or net realizable value in accordance with GAAP, consistentlyapplied.

 

**4.1.17****                     ****Customers and Suppliers**

 

Section 4.1.17 of the Disclosure Letter contains a list of the top100 customers of the Business (determined on the basis of revenues) for each ofthe last two fiscal years of the Vendor and the top 20 suppliers of theBusiness (determined on the basis of sales less gross profit) for each of thelast two fiscal years of the Vendor. Since December 31, 2004, except asdisclosed in Section 4.1.17 of the Disclosure Letter, none of suchcustomers or suppliers has ceased to do business with the Business other thanas a result of ordinary course of business. To Vendor’s knowledge, no customeror supplier is in financial distress or threatened with bankruptcy orinsolvency. To Vendor’s knowledge, none of the Vendor’s suppliers or top 50customers have advised the Vendor of their intention to terminate theirbusiness relationship with the Vendor.

 

**4.1.18****                     ****Licences and Compliance with Laws**

 

The Vendor possesses all Material Licences necessary to carry on theBusiness, all of which are listed in Section 4.1.18 of the DisclosureLetter and has conducted and, except for the Bureau Investigation, isconducting the Business in Material compliance with all applicable Laws and, tothe Vendor’s knowledge, is not in Material breach of any provision ofapplicable Laws.

 

**4.1.19****                     ****Environmental Matters**

 

Except as set forth in the reports and documents contained in Section 4.1.19of the Disclosure Letter therein

 

(a)           the Vendoroperates the Business and each one of the Subject Properties are, and, to theVendor’s knowledge, at all times have been, in Material compliance with allEnvironmental Laws and, to the knowledge of the Vendor, there are no facts thatcould reasonably be expected to give rise to a notice of Materialnon-compliance by the Vendor with any Environmental Law;

 

(b)           to theknowledge of Vendor, there are no Hazardous Materials located in, on, at orunder any of the Subject Properties contrary to Environmental Laws;

 

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(c)           the Vendorhas not been required by any Governmental Entity to (A) alter any of theSubject Properties in a Material way in order to be in compliance withEnvironmental Laws, (B) file any notice with any Governmental Authorityrelating to any potential or actual contaminated Subject Property or (C) perform anyenvironmental closure, decommissioning, rehabilitation, restoration orpost-remedial investigation on, about or in connection with any SubjectProperty, nor, to the knowledge of Vendor, is there any fact or circumstancewhich could give rise to such a request by a Governmental Authority;

 

(d)           there are nopending or, to the knowledge of Vendors, threatened Claims or restrictions ofany nature arising resulting from any Environmental Liabilities or under orpursuant to any Environmental Laws with respect to or affecting the Business orany of the Subject Properties;

 

(e)           to theknowledge of Vendor, none of the Subject Properties currently owned, leased orused by the Vendor or over which it has or had charge, management or controlhas ever had asbestos, asbestos-containing materials, PCBs, lead, radioactivesubstances or aboveground or underground storage systems, active or abandoned,located on, at or under them; and

 

(f)            the Vendorhas not received or does not have any basis to expect receipt of (and, to theknowledge of Vendor, no person for whose conduct the Vendor is or may beheld responsible has received or has a basis to expect receipt of) any writtendirective, inquiry, notice, order, warning or other communication from anyGovernmental Authority or other persons that relates to any HazardousSubstances or any alleged actual or potential violation or failure to complywith any Environmental Laws, or of any alleged actual or potential obligationto undertake or bear the cost of any Environmental Liabilities.

 

Section 4.1.19 of the Disclosure Letter lists all reports anddocuments relating to the environmental matters affecting the Business or anySubject Property which are in the possession or under the control of theVendor. Copies of all such reports and documents have been provided toPurchaser. To the knowledge of Vendor, there are no other reports or documentsrelating to environmental matters affecting the Business or any SubjectProperty which have not been made available to Purchaser whether by reason ofconfidentiality restrictions or otherwise.

 

**4.1.20****                     ****Conduct of Business in OrdinaryCourse**

 

Except as disclosed in Section 4.1.20of the Disclosure Letter, since December 31, 2004, the Vendor has carriedon the Business in the ordinary course and, without limiting the generality ofthe foregoing, the Vendor has taken the actions described in Section 5.1.3(a) andhas not taken any of the actions described in paragraphs (iii), (vi), (vii),(viii), (x), (xii), (xiv) and (xv) of Subsection 5.1.3(b) or agreedor became bound to do any of such actions.

 

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**4.1.21****                     ****Tax Matters**

 

There are no outstanding liabilities for Taxes payable, collectible orremittable or that may become payable or due by the Vendor, whetherassessed or not, which may result in an Encumbrance on or other claimagainst or seizure or sale of all or any part of the Purchased Assets orwould otherwise adversely affect the Business or would result in the Purchaserbecoming liable or responsible therefor. There are no actions, assessments,reassessments, suits, proceedings, investigations or Claims pending orthreatened against the Vendor in respect of Taxes which may result in anEncumbrance on or other Claim against or seizure or sale of any of thePurchased Assets or liability or responsibility on the part of thePurchaser for Taxes payable, collectible or remittable by the Vendor. TheVendor has withheld from each payment (including taxable benefits) made by itto any person all Taxes and other deductions required to be withheld therefromand has remitted the same to the proper Tax or other receiving authority withinthe time required under the applicable Laws.

 

**4.1.22****                     ****Residence of Vendor; GST Status**

 

The Vendor is not a “non-resident” of Canada within the meaning of theIncome Tax Act. The Vendor is registered for the purposes of the GSTLegislation and the *Act Respecting theQuebec Sales Tax*and its registration numbers are 104607387RT and1000055901, respectively. This Agreement provides for the sale to the Purchaserof all or part of a business that was established or carried on by theVendor.

 

**4.1.23****                     ****Intellectual and Industrial Property**

 

Section 4.1.23 of the Disclosure Letter sets forth and describesall of the Vendor’s Intellectual and Industrial Property forming part ofthe Purchased Assets and specifies, for each item, whether the Vendor’sIntellectual and Industrial Property (including all Intellectual PropertyRights pertaining thereto) is owned by the Vendor or whether the Vendor’sIntellectual and Industrial Property is used by the Vendor under a licenceagreement or arrangement from another person. To the knowledge of the Vendor,none of the Vendor’s Intellectual or Industrial Property is being infringed bythird parties.

 

**4.2****                           ****Representations andWarranties of the Purchaser**

 

The Purchaser represents and warrants to the Vendor as set out in this Section 4.2and acknowledges that the Vendor is relying on such representations andwarranties in connection with the transactions contemplated in this Agreementand the applicable Ancillary Agreements.

 

**4.2.1****                       ****Incorporation, Authority andEnforceability**

 

The Purchaser is a corporation duly amalgamated and subsisting underthe laws of Canada and has the corporate power and capacity to enter into thisAgreement, to and will have the corporate power and capacity to enter into theapplicable Ancillary Agreements, purchase the Purchased Assets from the Vendoras herein contemplated and to perform its other obligations hereunder andunder the applicable Ancillary Agreements. The execution and delivery of thisAgreement and the Ancillary Agreements and the completion of the transactionsherein and

 

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thereincontemplated have been duly and validly authorized by all necessary corporate actionon behalf of the Purchaser and this Agreement has been duly and validlyexecuted and delivered by the Purchaser and is a valid and binding obligationof the Purchaser enforceable against the Purchaser in accordance with its termsand the applicable Ancillary Agreements will be duly and validly executed anddelivered by the Purchaser and will be valid and binding obligations of thePurchaser enforceable against the Purchaser in accordance with their terms.

 

**4.3****                           ****Commission**

 

Each Party represents and warrants to the other Party that such otherParty will not be liable for any brokerage commission, finder’s fee or othersimilar payment in connection with the transactions contemplated hereby becauseof any action taken by, or agreement or understanding reached by, that Party. TheVendor will be responsible for payment of any fees charged by CIBC WorldMarkets Inc.

 

**4.4****                           ****Survival ofRepresentations and Warranties of the Vendor**

 

The representations and warranties of the Vendor contained in thisAgreement and in any Closing Document and in any agreement, certificate,affidavit, statutory declaration or other document delivered or given pursuantto this Agreement or any Closing Document shall survive the Closing and,notwithstanding the Closing or any investigation made by or on behalf of thePurchaser with respect thereto, shall continue in full force and effect for thebenefit of the Purchaser; provided, however, that no claim in respect thereofshall be valid unless it is made within the following time periods:

 

(a)           in the caseof a claim in respect of the Vendor’s Core Representations and Warranties (andthe corresponding representations and warranties set out in the Vendor’sClosing Certificate) and in the case of a claim in respect of a representationor warranty based on fraud, [              ];and

 

(b)           in the caseof a claim in respect of any other representation or warranty (and thecorresponding representations and warranties set out in the Vendor’s ClosingCertificate) within a period of [              ]from the Closing Date;

 

and any such claim asaforesaid shall be made in accordance with the provisions set forth in Article 8and, upon the expiry of the relevant limitation period referred to inSubsections (a) and (b) of this Section 4.4, the Vendor shallhave no further liability to the Purchaser with respect to the representationsor warranties referred to in such clauses, respectively, except in respect ofclaims which have theretofore been made in accordance with the provisions setforth above.

 

**4.5****                           ****Survival ofRepresentations and Warranties of the Purchaser**

 

The representations and warranties of the Purchaser contained in thisAgreement and in any Closing Document and in any agreement, certificate,affidavit, statutory declaration or other document delivered or given pursuantto this Agreement or any Closing Document shall survive the Closing and,notwithstanding the Closing or any investigation made by or on behalf

 

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of theVendor with respect thereto, shall continue in full force and effect for thebenefit of the Vendor provided, however, that no claim in respect thereof shallbe valid unless it is made within the following time periods: 

 

(a)           in the caseof a claim in respect of the Purchaser’s Core Representations and Warranties(and the corresponding representations and warranties set out in the Purchaser’sClosing Certificate), [              ];  

 

(b)           in the caseof a claim in respect of any other representation and warranty (and thecorresponding representations and warranties set out in the Purchaser’s ClosingCertificate), within a period of [              ]from the Closing Date; 

 

andany such claim shall be made in accordance with the provisions set forth in Article 8and, upon the expiry of the relevant limitation period referred to inSubsections (a) and (b) of this Section 4.5, the Purchaser shallhave no further liability to the Vendor with respect to any of suchrepresentations or warranties, except with respect to claims which have beenproperly made in accordance with the provisions set forth above.

 

**ARTICLE 5**

**OTHER COVENANTS OF THE PARTIES**

 

**5.1****                           ****Covenants of the Vendor**

 

The Vendor hereby covenants and agrees with the Purchaser as set out inthis Section 5.1.

 

**5.1.1****                        ****Consents and Approvals**

 

Commencing forthwith after the date hereof, the Vendor shall use allreasonable commercial efforts to obtain, at or prior to the Closing Time, allConsents and Regulatory Approvals, as well as the Competition Act Approval,provided that the foregoing shall not include, for greater certainty, theobligation to negotiate any remedy with the Commissioner.

 

**5.1.2****                       ****Consent Not Received by Closing Time**

 

If a consent orapproval of a third party required to permit the transfer or assignment to thePurchaser of the Vendor’s interest in any of the Contracts or the Licenses isnot received on or before the Closing Time, and if, notwithstanding suchnon-receipt, the Vendor and the Purchaser proceed to complete the sale and thepurchase of the Business and the Purchased Assets contemplated by thisAgreement, the transfer or assignment of those Contracts and Licenses inrespect of which the required consent has not been received on or before theClosing Time will not be effective in each case until the applicable consent orapproval has been received and such Contract or Licenses will be held by theVendor following the Closing Time in trust for the benefit and exclusive use ofthe Purchaser and the Vendor shall, to the extent permitted by Law, carry outand comply with the terms and provisions thereof for the

 

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Purchaser’sexclusive benefit. The Vendor shall continue to use all reasonable commercialefforts to obtain the required consents and approvals and shall only make useof such Contracts and Licenses in accordance with the directions of thePurchaser that do not conflict with the terms of such Contracts or Licenses.

 

Following Closing, the Purchaser shall indemnify the Vendor against anyClaim or Loss suffered by, imposed upon or asserted against the Vendor as aresult of any action taken by the Purchaser pursuant to Contracts or Licensesthat have not been assigned or transferred from the Vendor to the Purchaser.

 

**5.1.3****                       ****Conduct of the Business**

 

(a)           During theInterim Period, the Vendor shall:

 

(i)            carry on theBusiness in the ordinary course (except as may be otherwise required orcontemplated by the provisions of this Agreement) and in compliance withapplicable Laws and perform its obligations under all Contracts (includingLeases and Equipment Leases) including the payment of all Taxes due andpayable;

 

(ii)           usereasonable commercial efforts to preserve the Business and the goodwill ofsuppliers, customers and others having business relations with the Vendor inconnection with the Business and maintain in full force and effect all of theVendor’s Intellectual and Industrial Property and all licence agreements orarrangements with respect thereto;

 

(iii)          usereasonable commercial efforts to retain the services of the present executives,Employees, consultants and advisors of or to the Business (except as may beotherwise required or contemplated by the provisions of this Agreement); and

 

(iv)          continue infull force and effect the insurance coverage on the Business and the PurchasedAssets, take out such additional insurance as may be required in theordinary course of the Business and give all notices and present all claimsunder all insurance policies in a due and timely fashion and promptly advisethe Purchaser in writing of any such claims.

 

(b)           During theInterim Period, the Vendor shall not (except as may be otherwise requiredor contemplated by the provisions of this Agreement), without the prior writtenconsent of the Purchaser:

 

(i)            become aparty to or bound by or subject to any new agreement, contract or commitmentwith any Interested Person relating to the Business or amend or concur in theamendment of any such existing agreement, contract or commitment or make orauthorize

 

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anypayment to or for the benefit of any Interested Person other than such as isrequired or contemplated by an existing policy or practice as to periodicreview of Employee Benefit Plans, or as otherwise required by applicable Laws;

 

(ii)           make anybudgeted capital expenditure as of the date hereof relating to the Business inexcess of $50,000 and which are in the ordinary course of Business or authorizeany new capital expenditures relating to the Business in excess of $100,000 inthe aggregate; 

 

(iii)          become aparty to or bound by or subject to any new agreement or arrangement withrespect to Employee benefits (other than an employment or personal servicesagreement or arrangement which is terminable by the Vendor without liability onno more than 30 days’ notice) or amend or concur in the amendment of orincrease any payment or obligation under any existing agreement or arrangementwith respect to Employee Benefit Plans other than such as is required orcontemplated by an existing policy or practice as to periodic review ofEmployee Benefit Plans, or as otherwise required by applicable Laws;

 

(iv)          terminatethe employment of any manager of the Business or grant any severance ortermination pay to any manager of the Business;

 

(v)           pay a bonusto an employee other than as specified in written employment agreements, copiesof which having been provided to Purchaser;

 

(vi)          make anychange in the rate or form of compensation or remuneration payable or tobecome payable to any manager or other employee which is outside the ordinarycourse;

 

(vii)         take anystep to dissolve, wind-up or otherwise affect its continuing corporateexistence or amalgamate or merge with any person or amend the Vendor’s Articlesor by-laws;

 

(viii)        sell orlease any of the Purchased Assets other than in the ordinary course ofbusiness;

 

(ix)          cancel, waive orvary the terms of any debt owing to or any claim or right of the Vendorrelating to the Business;

 

(x)            incur anyobligation or liability relating to the Business except in the ordinary courseof business or make, authorize or accept any early payment of any such existingobligation or liability;

 

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(xi)          create or permitthe creation of any new Encumbrance on any of the Purchased Assets (except forany Permitted Encumbrance) or amend or concur in the amendment of any suchexisting Encumbrance;

 

(xii)         terminate, enter into, amend or otherwise modify inany Material respect any Material Contracts, other than with respect to theentering into of any customer contract;

 

(xiii)        terminate, transfer, assign, modify or change, orgrant any rights under, any of the Vendor’s Intellectual and IndustrialProperty other than in the ordinary course of business;

 

(xiv)        revalue upward any of the Purchased Assets set forthon the balance sheet that is part of the Annual Financial Statements orany Purchased Assets acquired after the date of the Annual FinancialStatements; or

 

(xv)         take or refrain from taking any other action thatwould cause any of the representations and warranties of the Vendor under thisAgreement or any Closing Document to be inaccurate, false or misleading;

 

oragree or become bound to do any of the foregoing.

 

**5.1.4****                        ****Books and Records of Vendor**

 

(a)           The Vendorshall, from and after the Closing Date, retain all books and records of Vendor(other than the Books and Records) that relate to the Business or the PurchasedAssets relating to any period ending on or prior to the Closing Date for aperiod of seven years following the Closing Date. So long as such books andrecords and other documents, information and files are retained by the Vendorpursuant to the provisions hereof, the Purchaser shall have the right, toinspect and make copies of the same at the expense of the Vendor during normalbusiness hours and upon reasonable notice.

 

(b)           AfterClosing, the Vendor agrees to cooperate in a reasonable manner with thePurchaser and the Purchaser’s Representatives for the purposes of thepreparation of the Purchaser’s accounts and Tax Returns and in providing allinformation required for legal, filing and regulatory purposes. Withoutlimiting the generality of the foregoing, the Vendor shall, upon reasonablenotice, provide the Purchaser and its Representatives reasonable access duringnormal business hours to all books and records of the Vendor (other than theBooks and Records) that relate to the Business or the Purchased Assetsnecessary for the preparation of such accounts and tax returns and forgathering the required information for legal, filing and

 

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regulatory purposestogether with the assistance of those employees of the Vendor that thePurchaser may reasonably request.

 

**5.1.5****                        ****Exclusivity**

 

During the Interim Period, Cascades and/or Vendor shall not, directlyor indirectly, solicit, initiate or encourage any inquiries or proposals from,discuss or negotiate with, provide any non-public information to, or considerthe merits of any inquiries or proposals from, any person (other than Purchaserand its Affiliates) relating to any transaction involving the disposition ofall or substantially all of the Business or any Material part of thePurchased Assets.

 

**5.1.6****                        ****Access for Confirmatory Due Diligence**

 

Vendor shall (a) permitPurchaser and Purchaser’s Advisors for a period of 30 days after the datehereof, without undue interference to the ordinary conduct of the Business, tohave reasonable access upon reasonable notice (i) to the premises of theBusiness for the purpose of site visits, (ii) to the Contracts notpreviously reviewed in the due diligence data room and the Contractsprovided in the due diligence data room that were redacted or that wereotherwise incomplete, (iii) to the senior personnel of the Business forthe purpose of conducting interviews, (iv) to any relevant informationnecessary for reviewing all matters included in the Disclosure Letter that werenot previously disclosed, and (v) to any relevant information in respectof any matters arising out of the foregoing, and (b) furnish to Purchaseror Purchaser’s Advisors such financial and operating data and other informationwith respect to the Purchased Assets and the Business as Purchaser shall fromtime to time reasonably request.

 

No investigations made by or on behalf of Purchaser or informationreceived by Purchaser in the course of its due diligence investigations,whether under this Section 5.1.6 or any other provision of this Agreementor of the Disclosure Letter, shall have the effect of waiving, diminishing thescope of, or otherwise affecting any representation or warranty made by Vendorin this Agreement.

 

**5.1.7****                        ****Certificat de Localisation**

 

The Vendor hereby covenants and agrees that it shall use itscommercially reasonable efforts to deliver a “certificat de localisation” tothe Purchaser that is prepared by a Québec land surveyor that is satisfactoryto the Purchaser acting reasonably on or before the Closing Date.

 

**5.2****                           ****Covenants of thePurchaser**

 

The Purchaser hereby covenants and agrees with the Vendor as set out inthis Section 5.2:

 

**5.2.1****                       ****Confidentiality of Vendor’sInformation**

 

In addition to itsobligations under the Confidentiality Agreement:

 

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(a)           During theInterim Period, the Purchaser shall keep confidential any trade secrets,know-how or confidential, personal or proprietary information and any financialor Business documents or information (collectively in this Section 5.2.1the **“Information”**)received by it from the Vendor concerning the Business and shall not discloseany Information to any third party, provided that any Information may bedisclosed to the Purchaser’s Advisors who need to know such Information inconnection with the transactions herein contemplated. The Purchaser shall use allreasonable commercial efforts to ensure that the Purchaser’s Advisors keepconfidential any Information disclosed to them.

 

(b)           From andafter the Closing Date, the Purchaser shall not disclose any information ordocumentation, nor shall it allow any of its employees (including, withoutlimitation, the Employees) to disclose any information or documentation, to anythird party, other than any Governmental Authority, in the event that suchdisclosure may result in a liability or obligation of the Vendor except ifsuch disclosure is (i) required under any applicable Law, or (ii) madefor the purpose of enforcing Purchaser’s rights under this Agreement or anyAncillary Agreement.

 

(c)           If thisAgreement is terminated in accordance with the provisions hereof, the Purchasershall:

 

(i)            ensure thatall Information and all copies thereof are either destroyed or returned to theVendor if it so requests and certify the destruction of all Information and allcopies thereof in writing to the Vendor so that, so far as possible, anyInformation obtained during and as a result of any investigation by thePurchaser’s Advisors is not disseminated beyond those persons concerned withsuch investigations; and

 

(ii)           not,directly or indirectly, use for its own purposes, any Information discovered oracquired by the Purchaser’s Advisors as a result of the Vendor making availableto them any documents and materials relating to the Business.

 

**5.2.2****                       ****Access to Books and Records**

 

(a)           The Purchaser shall, from and after theClosing Date, retain all Books and Records relating to any period ending on orprior to the Closing Date for a period of seven years following the ClosingDate. So long as such Books and Records and other documents, information andfiles are retained by the Purchaser pursuant to the provisions hereof, theVendor shall have the right, for the purpose of filing any Tax Returns asrequired under this Agreement and for the purpose of contesting any assessmentor reassessment for Tax in accordance with the provisions of Article 8 to

 

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inspect and make copiesof the same at the expense of the Vendor during normal business hours and uponreasonable notice.

 

(b)           After Closing, the Purchaser agrees tocooperate in a reasonable manner with the Vendor and the Vendor’s agents,representatives and auditors for the purposes of the preparation of the Vendor’saccounts and Tax Returns and in providing all information required for legal,filing and regulatory purposes. Without limiting the generality of theforegoing, the Purchaser shall, upon reasonable notice, provide the Vendor, itsagents, representatives and auditors reasonable access during normal businesshours to all Books and Records necessary for the preparation of such accountsand tax returns and for gathering the required information for legal, filingand regulatory purposes together with the assistance of those employees of thePurchaser that the Vendor may reasonably request.

 

**5.2.3****                        ****Access to Employees**

 

The Purchaser shall, from and after the Closing Date, make theEmployees available to the Vendor upon any reasonable request to that effect byVendor, but at Vendor’s cost and expense, for the purposes of the BureauInvestigation during normal business hours and upon reasonable notice.

 

**5.2.4****                        ****Change and Use of Name**

 

(a)           As soon asreasonably practicable, but in any event within one hundred and twenty (120)days after the Closing Date, the Purchaser shall ensure and procure that theBusiness shall have ceased using the words “Cascades” whether used alone or as part orin combination with other words or any other word that is similar or reasonablylikely to be confused with it (the **“Prohibited Name”**), any of thelogos or symbols set out in Section 5.2.4(a) of the Disclosure Letter(the **“ProhibitedLogos”**) and shall have removed them from all stationery, marketingdocumentation and all other external written communications of the Businessthat contain the Prohibited Name or the Prohibited Logos.

 

(b)           As soon asreasonably practicable, but in any event within two hundred and forty (240)days after the Closing Date, the Purchaser shall ensure and procure that theBusiness shall have ceased using the Prohibited Name and Prohibited Logos andshall have removed them from all machinery, vehicles, products and packaging.

 

(c)           As soon asreasonably practicable, but in any event within three hundred and sixty (360)days after the Closing Date, the Purchaser shall ensure and procure that theBusiness shall have ceased using the Prohibited Name and Prohibited Logos andshall have removed them from and shall have removed them from all elements ofits business including, but not limited to, its buildings and plants.

 

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**5.2.5****                        ****Equipment Leases**

 

The Purchaser shall use reasonable commercial efforts to cause anylender or lessor party to an Equipment Lease to unconditionally releaseCascades from any guarantee it provided as a condition to the execution of suchEquipment Lease. Following Closing, the Purchaser shall indemnify Cascadesagainst any post Closing derived or based Claim or Loss suffered by, imposedupon or asserted against Cascades as a result of any such lender or lessorenforcing such guarantee post Closing. 

 

**5.3****                           ****Mutual Covenants**

 

Each Party hereby covenants and agrees with the other Partyas follows:

 

**5.3.1****                        ****Cooperation**

 

The Parties shall cooperate fully in good faith with eachother and their respective Representatives in connection with any steps required to be taken as part oftheir respective obligations under this Agreement.

 

**5.3.2****                        ****Access to Sensitive CustomerInformation**

 

Notwithstanding any other term of this Agreement, any competitivelysensitive information concerning customer pricing, competitive strategy orbidding activities of the Business to be disclosed in connection with thisAgreement shall be identified by the Vendor as such. Any such information may bedisclosed to the Purchaser’s external advisors, Governmental Authorities and toemployees of the Purchaser who have acknowledged in writing that they are boundby the Confidentiality Agreement and who shall not be sales or marketingrepresentatives and who shall keep such information confidential from all otheremployees of the Purchaser and not use it for any operational purpose of thePurchaser until after Closing of this Agreement.

 

**5.3.3****                        ****Amounts Received Post-Closing**

 

All amounts collected on or after the Closing Date (i) fromAccounts Receivable or otherwise relating to the Purchased Assets or theBusiness, or (ii) from accounts receivable or otherwise relating to thebusiness conducted by Purchaser on or after the Closing Date, shall belong to,and if received by Vendor shall be received for the benefit and the account of,Purchaser, and Vendor shall, on a daily basis in the first two weeks afterClosing and on a weekly basis thereafter, transfer and remit to Purchaser allsuch amounts received by or paid to Vendor on or after the Closing Date. Notwithstandingthe foregoing, any amount relating to the Excluded Assets collected on or afterthe Closing Date shall belong to, and if received by Purchaser shall bereceived for the benefit and the account of, Vendor, and Purchaser shall, on adaily basis in the first two weeks after Closing and on a weekly basisthereafter, transfer and remit to Vendor all such amounts received by or paidto Purchaser on or after the Closing Date.

 

**5.3.4****                        ****Notice of Untrue Representation orWarranty**

 

Vendor shall promptly notify Purchaser, and Purchaser shall promptlynotify Vendor, upon any representation or warranty made by such Party containedin this Agreement

 

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becominguntrue or incorrect during the Interim Period. Any such notification shall setout particulars of the untrue or incorrect representation or warranty anddetails of any actions being taken by the Vendor or Purchaser, as the case may be,to rectify that state of affairs.

 

**5.3.5****                        ****Bulk Sales Laws**

 

The Parties hereby waive compliance with the *Bulk Sales Act* (Ontario) and any other applicable bulk salesLaws.

 

**ARTICLE 6**

**CONDITIONS OF CLOSING**

 

**6.1****                           ****Conditions for theBenefit of the Purchaser**

 

The transactions herein contemplated, including the sale and purchaseof the Purchased Assets in accordance with the terms of this Agreement, aresubject to the conditions precedent set out in this Section 6.1, each ofwhich is hereby declared to be for the exclusive benefit of the Purchaser. Eachof such conditions is to be satisfied in full at or prior to the Closing Time. TheVendor covenants and agrees to use its reasonable commercial efforts to causeeach of such conditions to be fulfilled at or prior to the Closing Time.

 

**6.1.1****                       ****Representations, Warranties andCovenants of the Vendor**

 

Each of:

 

(a)           therepresentations and warranties of Vendor (A) in Sections 4.1.1(Incorporation and Status of Vendor), 4.1.2 (Due Authorization by Vendor),4.1.3 (Title to Purchased Assets), 4.1.4 (Conflicting Instruments)(subparagraph (a) only), 4.1.22 (Residence of Vendor) and 4.3 (Commission)(**“Vendor’sCore Representations”**) and (B) made pursuant to this Agreementthat are qualified by a reference to materiality or GAAP shall, in each case,have been true and correct in all respects on the date hereof and shall be trueand correct in all respects on the Closing Date with the same force and effectas if made at and as of the Closing Date and as though Closing Date wassubstituted for the date hereof or similar terms throughout suchrepresentations and warranties;

 

(b)           the otherrepresentations and warranties of Vendor or Cascades, as applicable madepursuant to this Agreement shall have been true and correct in all Materialrespects on the date hereof and shall be true and correct in all Materialrespects on the Closing Date with the same force and effect as if made at andas of the Closing Date and as though Closing Date was substituted for the datehereof or similar terms throughout such representations and warranties; and

 

(c)           thecovenants contained in this Agreement to be performed by Vendor on or prior tothe Closing Date shall have been performed in all Material

 

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respects and the Vendorshall not be in Material breach of any agreement on its part contained inthis Agreement,

 

and Purchaser shall havereceived a certificate confirming the foregoing, signed for and on behalf ofVendor by senior officers or directors of Vendor, in each case in form andsubstance reasonably satisfactory to Purchaser and Purchaser’s counsel (the **“Vendor’s ClosingCertificate”**). The receipt of the Vendor’s Closing Certificate andthe consummation of Closing shall not constitute a waiver by Purchaser or anamendment of any of the representations and warranties or covenants of Vendorwhich are contained in this Agreement. The materiality qualifications permittedto be in the Vendor’s Closing Certificate pursuant to paragraphs (b) and (c) aboveare solely for purposes of determining whether this condition has beensatisfied, and shall not be deemed to have so qualified the representations, warrantiesor covenants referred to therein. Upon delivery of the Vendor’s ClosingCertificate, the representations and warranties of Vendor shall be deemed tohave also been made on and as of the Closing Date and as though Closing Datewas substituted for the date hereof or similar terms throughout suchrepresentations and warranties, except as may be qualified in the Vendor’sClosing Certificate.

 

**6.1.2****                        ****Deliveries by Vendor and Cascades**

 

Vendor or Cascades, as applicable, shall deliver or cause to be deliveredto Purchaser the following in form and substance satisfactory toPurchaser, acting reasonably:

 

(a)           certifiedcopies of (A) the constating documents and by-laws of Vendor and ofCascades, (B) all resolutions of the board of directors of Vendor and of Cascadesapproving the entering into and completion of the transactions contemplated bythis Agreement and each of the Ancillary Agreements to which Vendor orCascades, as applicable, is a party;

 

(b)           a recentcertificate of status, compliance, good standing or similar certificate withrespect to Vendor issued by the appropriate government officials of itsjurisdiction of incorporation;

 

(c)           [              ]

 

(d)           a deed oftransfer (the **“Deed of Transfer”**) in respect of the Real Propertysubstantially in the form of the deed of transfer attached hereto as Exhibit Eto the Disclosure Letter;

 

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(e)           [              ]

 

(f)            Each ofCascades and Vendor shall have delivered to Purchaser an executed copy of anon-competition and non-solicitation agreement (the **“Non-Competition Agreement”**)substantially as set forth in the form of the non-competition andnon-solicitation agreement attached as Exhibit F to the DisclosureLetter;

 

(g)           Vendor shallhave delivered to Purchaser an executed copy of a transitional servicesagreement (the **“Transitional Services Agreement”**) substantially as set forthin the form of agreement attached as Exhibit G to theDisclosure Letter.

 

(h)           necessaryreleases, discharges, deeds, conveyances, assurances, transfers, assignments orany other instruments necessary or reasonably required to transfer thePurchased Assets to Purchaser with a good title, free and clear of allEncumbrances other than Permitted Encumbrances, in form and substancesatisfactory to Vendor and Purchaser acting reasonably;

 

(i)            theelections referred to in Section 3.6;

 

(j)            the Vendor’sClosing Certificate;

 

(k)           an opinionof counsel to Vendor, substantially in the form attached as Exhibit Hto the Disclosure Letter;

 

(l)            all suchother agreements, certificates, affidavits, statutory declarations, instrumentsof transfer and other documentation reasonably required by Purchaser toimplement the transactions herein contemplated, all of which shall besatisfactory in form and substance to counsel to Purchaser, actingreasonably; and

 

(m)          Vendor shalldeliver to Purchaser on the Closing Date the names of all Employees andInactive Employees contemplated by Section 4.1.5 of the Disclosure Letter.

 

**6.1.3****                       ****No Adverse Change**

 

During the InterimPeriod, there shall have been no change in the operations, results ofoperation, affairs, prospects or condition (financial or otherwise) of theBusiness which, would have a Material adverse effect on the Business, thePurchased Assets or the Assumed Liabilities, except that there shall not betaken into account any effect or losses arising out of (i) changes in lawsor their interpretation, (ii) deteriorations in paper prices or in thespecialty paper products industry in general other than deteriorationsattributable in whole or in part to the Vendor and/or its Affiliates, or (iii) [              ]

 

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[              ]

 

**6.1.4****                        ****Consents**

 

All Consents necessary to allow the Vendor to assign the MaterialContracts to the Purchaser, which Consents shall include an acknowledgement bythe other party that the Material Contracts so assigned remain in full forceand effect and that the Purchaser may continue to enjoy all rights andbenefits thereunder, shall have been granted, obtained and received.

 

**6.1.5****                        ****No Legal Action**

 

No action or proceeding shall be pending or threatened by any person(other than the Parties) in any jurisdiction, to enjoin, restrict or prohibitany of the transactions contemplated by this Agreement or the right of thePurchaser to conduct the Business after Closing on substantially the same basisas previously operated.

 

**6.2****                           ****Conditions for theBenefit of the Vendor**

 

The transactions herein contemplated, including the sale and purchaseof the Purchased Assets in accordance with the terms of this Agreement, aresubject to the conditions precedent set out in this Section 6.2, each ofwhich is hereby declared to be for the exclusive benefit of the Vendor. Each ofsuch conditions is to be satisfied in full at or prior to the Closing Time. ThePurchaser covenants and agrees to use its reasonable commercial efforts tocause each of such conditions to be fulfilled at or prior to the Closing Time.

 

**6.2.1****                       ****Truth of Representations andWarranties of the Purchaser**

 

Each of:

 

(a)           therepresentations and warranties of Purchaser (A) in Section 4.2.1(Incorporation, Authority and Enforceability) (**“Purchaser’s Core Representations”**)and (B) made pursuant to this Agreement that are qualified by a referenceto materiality or GAAP shall, in each case, have been true and correct in allrespects on the date hereof and shall be true and correct in all respects onthe Closing Date with the same force and effect as if made at and as of theClosing Date and as though Closing Date was substituted for the date hereof orsimilar terms throughout such representations and warranties;

 

(b)           the otherrepresentations and warranties of Purchaser made pursuant to this Agreementshall have been true and correct in all Material respects on the date hereofand shall be true and correct in all Material respects on the

 

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Closing Date with thesame force and effect as if made at and as of the Closing Date and as thoughClosing Date was substituted for the date hereof or similar terms throughoutsuch representations and warranties; and

 

(c)           the covenants contained in this Agreementto be performed by Purchaser on or prior to the Closing Date shall have beenperformed in all Material respects and Purchaser shall not be in Materialbreach of any agreement on its part contained in this Agreement,

 

and Vendor shall havereceived a certificate confirming the foregoing, signed for and on behalf ofPurchaser by senior officers or directors of Purchaser, in each case in form andsubstance reasonably satisfactory to Vendor and Vendor’s counsel (the **“Purchaser’s ClosingCertificate”**). The receipt of the Purchaser’s Closing Certificateand the consummation of Closing shall not constitute a waiver by Vendor or anamendment of any of the representations and warranties or covenants ofPurchaser which are contained in this Agreement. The materiality qualificationspermitted to be in the Purchaser’s Closing Certificate pursuant to paragraphs (b) and(c) above are solely for purposes of determining whether this conditionhas been satisfied, and shall not be deemed to have so qualified therepresentations, warranties or covenants referred to therein. Upon delivery ofthe Purchaser’s Closing Certificate, the representations and warranties ofPurchaser shall be deemed to have also been made on and as of the Closing Dateand as though Closing Date was substituted for the date hereof or similar termsthroughout such representations and warranties, except as may be qualifiedin the Purchaser’s Closing Certificate.

 

**6.2.2****                        ****Delivery by Purchaser**

 

Purchaser shall deliver or cause to be delivered to Vendor thefollowing in form and substance satisfactory to Vendor, acting reasonably:

 

(a)           certifiedcopies of (A) the constating documents and by-laws of Purchaser, (B) allresolutions of the board of directors of Purchaser approving the entering intoand completion of the transactions contemplated by this Agreement and each ofthe Ancillary Agreements to which Purchaser is a party;

 

(b)           a recentcertificate of status, compliance, good standing or similar certificate withrespect to Purchaser issued by the appropriate government officials of itsjurisdiction of incorporation;

 

(c)           theelections referred to in Section 3.6;

 

(d)           thePurchaser’s Closing Certificate;

 

(e)           Purchasershall have delivered to Vendor an executed copy of the [              ].

 

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(f)            an opinionof counsel to Purchaser, substantially in the form attached as Exhibit Ito the Disclosure Letter; and

 

(g)           all suchother agreements, certificates, affidavits, statutory declarations, instrumentsof transfer and other documentation reasonably required by Vendor to implementthe transactions herein contemplated, all of which shall be satisfactory in form andsubstance to counsel to Vendor, acting reasonably.

 

**6.3****                           ****Conditions for theBenefit of both Parties**

 

The transactions herein contemplated, including the sale and purchaseof the Purchased Assets in accordance with the terms of this Agreement, aresubject to the conditions precedent set out in this Section 6.3, each ofwhich is hereby declared to be for the benefit of both of the Parties hereto.Each of such conditions is to be satisfied in full at or prior to the ClosingTime. Each of the Parties covenants and agrees to use its reasonable commercialefforts to cause each of such conditions to be fulfilled prior to the ClosingTime, provided that the foregoing shall not include, for greater certainty, theobligation to negotiate any remedy with the Commissioner.

 

**6.3.1****                        ****Competition Act**

 

The Competition ActApproval shall have been obtained.

 

**6.3.2****                        ****Investment Canada Act**

 

The ICA Approval shallhave been obtained, if applicable.

 

**6.3.3****                        ****Regulatory Approvals**

 

All Regulatory Approvals required in connection with the sale of thePurchased Assets to the Purchaser and the completion of the other transactionscontemplated herein shall have been granted, obtained and received. All suchRegulatory Approvals shall have no Material conditions or be on termssatisfactory to the Parties, acting reasonably.

 

**6.4****                           ****Waiver**

 

Either Party may waive, by notice to the other Party, anycondition set forth in this Article 6 which is for its benefit. No waiverby a Party of any condition, in whole or in part, shall operate as a waiver ofany other condition.

 

**6.5****                           ****Failure to SatisfyConditions**

 

(a)           If any condition set forth in Sections6.1 or 6.2 is not satisfied or waived by the applicable beneficiary of suchcondition at the Closing Time, or if it becomes apparent that any suchcondition can not be satisfied at the Closing Time, the Party entitled to thebenefit of such condition (the

 

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**“****First Party****”**) may terminate this Agreement by notice inwriting to the other Party and in such event:

 

(i)            unless theother Party can show that the condition or conditions which have not beensatisfied and for which the First Party has terminated this Agreement arereasonably capable of being performed or caused to be performed by the FirstParty or have not been satisfied by reason of a default by the First Partyhereunder, the First Party shall be released from all obligations hereunder;and

 

(ii)           unless theFirst Party can show that the condition or conditions which have not beensatisfied and for which the First Party has terminated this Agreement arereasonably capable of being performed or caused to be performed by the otherParty or have not been satisfied by reason of a default by the other Partyhereunder, then the other Party shall also be released from all obligationshereunder.

 

**6.6****                           ****Damage or Expropriation**

 

If, prior to the Closing Time, all or any substantial portion of thePurchased Assets are destroyed or substantially damaged by fire or other hazardor shall be expropriated or seized by any Governmental Authority or any otherperson in accordance with applicable Laws, or if notice of any suchexpropriation or seizure shall have been given in accordance with applicableLaws, the Purchaser shall have the option, exercisable by written notice to theVendor given prior to the Closing Time:

 

(a)           to terminatethis Agreement and not complete the transactions herein contemplated, in whichcase the Purchaser shall be released from all obligations hereunder except thoseset forth in Sections 4.3, 5.2.1, 10.2 and 10.5 or 10.11 as of and from thegiving of such notice; or

 

(b)           to completethe transactions herein contemplated with a reduction of the Purchase Price bythe net amount equal to the cost of repair, or, if expropriated or seized or ifdestroyed or damaged beyond repair, by the net amount equal to the replacementcost of the property or assets so expropriated, seized, damaged or destroyed,after taking into account all proceeds of any insurance or compensation forsuch destruction, damage, expropriation or seizure received by the Vendor andassigned to and received by the Purchaser. For greater certainty, the amountcontemplated pursuant to this Subsection (b) shall in no event beless than zero.

 

If any loss, damage orclaim for which insurance is carried by the Vendor in respect of the PurchasedAssets arises during the Interim Period, or if any of the Purchased Assets areexpropriated or seized, the Purchaser, as a condition of Closing, shall beentitled to be satisfied that the insurers or the expropriating authorityrecognize all claims of the Vendor for payment in accordance with the terms ofthe relevant insurance policies or rules of the relevant expropriating

 

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authorityand that all such claims and proceeds thereof are assignable, and are assigned,to the Purchaser.

 

**ARTICLE 7**

**TERMINATION**

 

**7.1****                           ****Termination**

 

This Agreement and thetransactions contemplated hereby may be terminated:

 

(a)           at any timeby mutual written consent of the Vendor and the Purchaser;

 

(b)           in the eventthat the Reference Date Amount is in excess of $3.8M, at the discretion of theVendor provided that it notifies Purchaser in writing within 5 days of the dateon which the final determination of the Reference Date Amount is made;

 

(c)           by theVendor or the Purchaser at any time, if (i) the Closing has not occurredon or before [              ](the **“DropDead Date”**) or (ii) it becomes evident that the Competition ActApproval will not be obtained prior to the Drop Dead Date, unless the failureof the Closing to occur by such date shall be due to the failure of the Partyseeking to terminate this Agreement to perform or observe the covenantsand agreements of such Party set forth herein.

 

**7.2****                           ****Effect of Termination**

 

In the event of termination of this Agreement by either the Vendor orthe Purchaser in accordance with Section 6.5 or as provided in Section 7.1hereof, this Agreement shall, subject to the terms of Section 6.5 becomevoid and have no effect except that (i) this Section 7.2 shallsurvive any termination of this Agreement, (ii) no Party shall be relievedor released from any liabilities or damages arising out of such Party’s wilfulbreach of any provision of this Agreement, and (iii) no Party shall bereleased of any obligations under Section 4.3, Subsection 5.2.1, Section 10.2,Section 10.5 or Section 10.11.

 

**ARTICLE 8**

**INDEMNIFICATION**

 

**8.1****                           ****Indemnification byVendor**

 

The Vendor shallindemnify, defend and save harmless the Purchaser and each of Purchaser’sRepresentatives from and against any Claim or Loss suffered by, imposed upon orasserted against them, as a direct or indirect result of, or arising inconnection with or related in any manner whatsoever to:

 

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(a)           subject to Section 4.4and the limitations set forth in Section 8.12(a), any misrepresentation orbreach of warranty made or given by the Vendor in this Agreement, in anyClosing Document or in any other document delivered pursuant to this Agreementor any Closing Document;

 

(b)           any failureby the Vendor to observe or perform any covenant or obligation containedin this Agreement, any Closing Document or in any document delivered pursuantto this Agreement or any Closing Document;

 

(c)           anyliabilities or obligations for Taxes attributable to the Vendor or the Businessprior to or arising from the Closing including any Taxes payable by the Vendorin connection with any transaction contemplated under this Agreement except ifsuch Taxes are accrued on the Closing Balance Sheet and only to the extent ofthe amount so accrued;

 

(d)           any Claim orLoss, including any fine or other liabilities (whether civil or criminal)against the Purchased Assets, the Business, the Purchaser, its Affiliates orthe Employees by or on behalf of any Governmental Authority or any other partydirectly or indirectly arising in connection with, or related in any mannerwhatsoever to the Bureau Investigation or any civil proceeding related theretoor to facts that are the subject of the Bureau Investigation;

 

(e)           anyliabilities or obligations of the Vendor of any nature whatsoever (including,without limitation, the Excluded Liabilities) existing on or after Closingother than the Assumed Liabilities;

 

(f)            the non-complianceby the Parties with respect to any applicable bulk sales Laws in connectionwith the transactions contemplated by this Agreement except to the extent thatany applicable Damages are attributable to the Purchaser’s failure to pay,discharge or perform its obligations pursuant to the Assumed Liabilities;and

 

(g)           the ExcludedAssets.

 

For greater certainty, the right to indemnification under Sections 8.1(b) to8.1(g) exists notwithstanding Section 4.4 and notwithstanding anyrepresentation or warranty in Section 4.1 and such right toindemnification is a right that is separate and independent from any otherright or remedy under this Agreement and is not subject to any of thelimitations set out in Section 8.12(a), provided that Vendor shall nothereby be obligated to indemnify Purchaser twice for the same Damages.

 

**8.2****                           ****Indemnification by thePurchaser**

 

The Purchasershall indemnify, defend and save harmless the Vendor and each of the Vendor’sRepresentatives from and against any Claim or Loss suffered by, imposed upon orasserted against them, as a direct or indirect result of, or arising inconnection with or related in any manner whatsoever to:

 

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(a)           subject to Section 4.5and the limitations set forth in Section 8.12(b), any misrepresentation orbreach of any warranty made or given by the Purchaser in this Agreement, in anyClosing Document or in any document delivered pursuant to this Agreement or anyClosing Document; or

 

(b)           theoperations of the Business after the Closing Time including, withoutlimitation, any failure by the Purchaser to pay, satisfy, discharge, perform orfulfill any of the Assumed Liabilities as they become due;

 

(c)           the mattersset forth in Section 9.2; or

 

(d)           any failureby the Purchaser to observe or perform any covenant or obligationcontained in this Agreement, in any Closing Document or in any documentdelivered pursuant to this Agreement or any Closing Document.

 

**8.3****                           ****Agency forRepresentatives**

 

Each Party agrees that it accepts each indemnity in favour of any ofits Representatives as agent and trustee of that Representative. Each Partyagrees that the other Party may enforce an indemnity in favour of any ofthat Party’s Representatives on behalf of that Representative.

 

**8.4****                           ****Notice of Third PartyClaims**

 

If an Indemnitee receives notice of the commencement or assertion ofany Third Party Claim, the Indemnitee shall give the Indemnitor reasonablyprompt notice thereof, but in any event no later than 30 Business Days afterreceipt of such notice of such Third Party Claim. Such notice to the Indemnitorshall describe the Third Party Claim in reasonable detail and shall indicate,if reasonably practicable, the nature and estimated amount of the Loss or Claimthat has been or may be sustained by the Indemnitee.

 

**8.5****                           ****Defence of Third PartyClaims**

 

Subject to Section 8.13(a),the Indemnitor may participate in or assume the defence of any Third PartyClaim (provided that (i) the Third Party Claim seeks only monetary damagesand does not seek any injunctive or other relief against the Indemnified Party,and (ii) legal counsel chosen by the Indemnifying Party is satisfactory tothe Indemnified Party, acting reasonably) by giving notice to that effect tothe Indemnitee not later than 20 Business Days after receiving notice of thatThird Party Claim (the **“Notice Period”**). The Indemnitor’sright to do so shall be subject to the rights of any insurer or other party whohas potential liability in respect of that Third Party Claim. The Indemnitorshall pay all of its own expenses of participating in or assuming such defence.The Indemnitee shall co-operate in good faith in the defence of each ThirdParty Claim, even if the defence has been assumed by the Indemnitor and may participatein such defence assisted by counsel of its own choice at its own expense. Ifthe Indemnitee has not received notice within the Notice Period that theIndemnitor has elected to assume the defence of such Third Party Claim, theIndemnitee may, at its option, elect to settle or

 

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compromisethe Third Party Claim or assume such defence, assisted by counsel of its ownchoosing and the Indemnitor shall be liable for all reasonable costs andexpenses paid or incurred in connection therewith and any Claim or Losssuffered or incurred by the Indemnitee with respect to such Third Party Claim.If the Indemnitor elects to assume the defence of a Third Party Claim underthis Section 8.5, the Indemnitor shall not have the right thereafter tocontest its liability for such claim.

 

**8.6****                           ****Assistance for ThirdParty Claims**

 

The Indemnitor and the Indemnitee will use all reasonable commercialefforts to make available to the Party which is undertaking and controlling thedefence of any Third Party Claim (the **“Defending Party”**) and at suchParty’s cost and expense,

 

(a)           thoseemployees and other persons whose assistance, testimony or presence isnecessary to assist the Defending Party in evaluating and in defending anyThird Party Claim; and

 

(b)           alldocuments, records and other materials in the possession of such Partyreasonably required by the Defending Party for its use in defending any ThirdParty Claim,

 

andshall otherwise cooperate with the Defending Party.

 

**8.7****                           ****Settlement of ThirdParty Claims**

 

If an Indemnitor elects to assume the defence of any Third Party Claimas provided in Section 8.5, then the Indemnitor shall not be liable forany legal expenses incurred by the Indemnitee in connection with the defence ofsuch Third Party Claim following the receipt by the Indemnitee of notice ofsuch assumption. Notwithstanding the foregoing, if the Indemnitor fails to takereasonable steps necessary to defend diligently such Third Party Claim within20 Business Days after receiving notice from the Indemnitee, or that theIndemnitee believes on reasonable grounds that the Indemnitor has failed totake such steps, then the Indemnitee may, at its option, elect to assume thedefence of and to negotiate, settle or compromise the Third Party Claimassisted by counsel of its own choosing and the Indemnitor shall also be liablefor all reasonable costs and expenses paid or incurred in connection therewith.The Indemnitor shall not, without the prior written consent of the Indemnitee,enter into any compromise or settlement of a Third Party Claim, which wouldlead to liability or create any other obligation, financial or otherwise, onthe Indemnitee.

 

**8.8****                           ****Direct Claims**

 

Any Direct Claimshall be asserted by giving the Indemnitor reasonably prompt written noticethereof, but in any event not later than 40 Business Days after the Indemniteebecomes aware of the basis of such Direct Claim. The Indemnitor shall then havea period of 20 Business Days within which to respond in writing to such DirectClaim. If the Indemnitor does not so respond within such 20 Business Daysperiod, the Indemnitor shall be deemed to have rejected such Claim, and in suchevent the Indemnitee shall be free to pursue such remedies as may beavailable to the Indemnitee.

 

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**8.9****                           ****Failure to Give TimelyNotice**

 

A failure to give timely notice as provided in this Article 8shall not affect the rights or obligations of any Party except and only to theextent that, as a result of such failure, any Party which was entitled toreceive such notice was deprived of its right to recover any payment under itsapplicable insurance coverage or was otherwise directly and materially damagedas a result of such failure.

 

**8.10****                         ****Reductions and Subrogation**

 

If the amount of any Loss at any time subsequent to the making of anIndemnity Payment in respect of that Loss is reduced by any recovery,settlement or otherwise under or pursuant to any insurance coverage (the **“Insurance Recovery”**),and provided that any such Insurance Recovery is actually received by theIndemnitee, the amount of such reduction (less any costs or expenses (includingTaxes) or premiums incurred in connection therewith), shall promptly be repaidby the Indemnitee to the Indemnitor. Upon making a full Indemnity Payment, theIndemnitor shall, to the extent of such Indemnity Payment, be subrogated to allrights of the Indemnitee against any third party that is not an Affiliate ofthe Indemnitee in respect of the Loss to which the Indemnity Payment relates. Untilthe Indemnitee recovers full payment of its Loss, any and all claims of theIndemnitor against any such third party on account of such Indemnity Paymentshall be postponed and subordinated in right of payment to the Indemnitee’s rightsagainst such third party. Without limiting the generality or effect of anyother provision hereof, the Indemnitee and Indemnitor shall duly execute uponrequest all instruments reasonably necessary to evidence and perfect suchpostponement and subordination.

 

**8.11****                         ****Payment and Interest**

 

All Losses shall bear interest at a rate per annum equal to the PrimeRate plus 3%, calculated and payable monthly, both before and after judgment,with interest on overdue interest at the same rate, from the date that theIndemnitee disbursed funds, suffered damages or losses or incurred a loss,liability or expense in respect of a Loss, to the date of payment by theIndemnitor to the Indemnitee.

 

**8.12****                         ****Limitations**

 

(a)           No Claims and/or Losses may beasserted by the Purchaser or the Purchaser’s Representatives under Section 8.1(a) unlessand until the aggregate amount of the Claims and/or Losses of the Purchaser andits Representatives collectively, in respect of such Claims and/or Lossesexceeds [              ]%of the Adjusted Net Asset Value in the aggregate (the **“Basket”**), with a maximum aggregateliability equal to [              ]%of the Adjusted Net Asset Value, other than (i) in respect of the Vendor’sCore Representations and Warranties (and the corresponding representations andwarranties in the Vendor’s Closing Certificate), and (ii) in respect ofClaims and/or Losses based on fraud, which, in each case, shall not be subjectto such limitations and for whom the Vendor’s indemnification obligationshereunder shall be for an unlimited amount and shall be from

 

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the first dollar of theClaims and/or Losses suffered or incurred by the Purchaser or the Purchaser’sRepresentatives.

 

(b)           No Claimand/or Losses may be asserted by the Vendor or the Vendor’sRepresentatives under Section 8.2(a) unless and until the aggregateamount of the Claims and/or Losses of the Vendor and its Representativescollectively, in respect of such Claims and/or Losses exceeds [     ]%of the Adjusted Net Asset Value in the aggregate, up to a maximum aggregateliability equal to [     ]% of the Adjusted Net AssetValue, other than (i) in respect of the Purchaser’s Core Representationsand Warranties (and the corresponding representations and warranties in thePurchaser’s Closing Certificate), and (ii) in respect of Claims and/orLosses based on fraud, which, in each case, shall not be subject to suchlimitations and for whom the Purchaser’s indemnification obligations hereundershall be for an unlimited amount and shall be from the first dollar of theClaims and/or Losses suffered or incurred by the Vendor or the Vendor’sRepresentatives.

 

(c)           The partiesagree that all obligations and liabilities of Purchaser relating to warrantyand product liability claims and returned goods relating to the Businessassumed by Purchaser hereunder shall be deemed to constitute Claims or Lossesfor the purpose of determining whether the threshold in Subsection 8.12(a) abovehas been met or exceeded.

 

**8.13****                         ****Additional Rules and Procedures**

 

(a)           If any ThirdParty Claim is of a nature such that the Indemnitee is required by Law to makea payment to any person (a **“Third Party”**) with respect to suchThird Party Claim before the completion of settlement negotiations or relatedlegal proceedings, the Indemnitor’s rights under Section 8.5 shall onlyapply after payment of such Third Party Claim to the Third Party or theprovision of sufficient security by the Indemnitor. If the amount of anyliability under the Third Party Claim in respect of which such a payment wasmade, as finally determined, is less than the amount which was paid by theIndemnitor, the Indemnitee shall, forthwith after receipt of the differencefrom the Third Party, pay such difference to the Indemnitor;

 

(b)           TheIndemnitee and the Indemnitor shall co-operate with each other, actingreasonably, with respect to Third Party Claims, shall keep each other advisedwith respect thereto (including supplying copies of all relevant documentationpromptly as it becomes available) and shall each designate a senior officer whowill keep himself informed about and be prepared to discuss the Third PartyClaim with his counterpart and with counsel at all reasonable times.

 

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**ARTICLE 9**

**EMPLOYEES**

 

**9.1****                           ****Employees**

 

Effective as of the Closing Date, the Purchaser shall assume all labourand employment obligations of the Vendor relating to the Business and establishor provide replacement employee benefit plans (other than the Pension Plan) tothe Employees that provide equivalent or similar benefits to the Employees(other than with respect to Employees covered by a collective agreement) inorder to meet its obligations hereunder (such replacement employee benefitplans are hereinafter collectively referred to as the **“Replacement Plans”**). For greatercertainty, the Purchaser shall recognize, to the extent previously recognizedby the Vendor, the service of the Employees for all purposes including, withoutlimitation, eligibility and vesting under the Replacement Plans. The Purchasershall also cause the Replacement Plans to waive any pre-existing conditionlimitations, accept any pre-approvals, and honour any deductibles andout-of-pocket expenses incurred by the Employees (and their dependents andsurvivors) due to their participation in the applicable Employee Benefit Plansprovided by the Vendor immediately prior to the Closing Date.

 

**9.2****                           ****Employee Liability ofthe Purchaser**

 

Without limiting the Purchaser’s obligations in respect of theEmployees on and after the Closing Date the Purchaser shall be responsible for:

 

(a)           Allliabilities for salary, wages, bonuses, retention bonuses, commissions, pensioncontributions, vacation pay, and other compensation relating to employment of theEmployees on and after the Closing Date, and all liabilities under or inrespect of the Replacement Plans;

 

(b)           Allseverance payments, damages for wrongful dismissal and all related costs inrespect of the termination by the Purchaser of the employment of any Employee;and

 

(c)           Allemployment-related claims, penalties and assessments in respect of the Businessarising out of matters which occur on or subsequent to the Closing Date.

 

**9.3****                           ****Employee Liability ofthe Vendor**

 

Without limiting the Vendor’s obligations in respect of Employeesemployed in the Business prior to the Closing Date, the Vendor shall beresponsible for (i) all liabilities for salary, wages, bonuses,commissions and other compensation relating to employment of all Employees inthe Business, in each case, prior to or as at the Closing Date, except to theextent that they are accrued on the Closing Balance Sheet, (ii) anytermination pay and severance payment resulting from the termination ofemployment of all Employees with the Vendor on or prior to the Closing Date, (iii) alltermination pay, all severance payments, damages for wrongful dismissal and allrelated costs in respect of the termination by the Vendor of the employment ofany Employee who does not accept to continue his employment with the Purchaser,(iv) all

 

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liabilitiesfor claims for injury, disability, death or workers’ compensation arising fromor related to employment in the Business prior to the Closing Date, (v) allemployment related claims, penalties and assessments in respect of the Businessarising out of matters which occurred prior to the Closing Date, and (vi) allliabilities related to the Employee Benefit Plans existing prior to or as atthe Closing Date, except to the extent that they are accrued on the ClosingBalance Sheet.

 

**9.4****                           ****Short Term DisabledEmployees**

 

Notwithstanding anything contained herein to the contrary, the Vendoragrees that it shall be responsible for any and all liabilities arising at anytime before or after the Closing Date that relate to the Short Term DisabledEmployees and which result from their absence from work during the short termdisability period without regard to whether the Vendor’s applicable insurancecovers such liabilities during such period.

 

**9.5****                           ****Pension and SavingsPlans**

 

As of and effective on the Closing Date, Vendor shall transfer toPurchaser all its rights and obligations under the *Pension Plan for the employees of Cascades Resources, a division ofCascades Fine Papers Group Inc.* (the **“Pension Plan”**) and Purchaser shallbecome the sponsor of the Pension Plan and, subject to the other provisions ofthis Agreement, assume all the rights and obligations of Vendor thereunder. Activemembers of the Pension Plan who are not Employees shall have their rights underthe Pension Plan dealt with in accordance with its rules and relevantapplicable pension Law.

 

**9.6****                           ****Vendor Liability**

 

Vendor shall retain responsibility for, and satisfy all obligations andliabilities with respect to, all payments and benefits of the Employees (andall former employees, agents and representatives involved in the Business)under the Employee Benefit Plans (other than the Pension Plan), as the case may be,accrued up to the Closing Date or which relate to the events prior to theClosing Date in accordance with the terms thereof and Laws (other than theobligations and liabilities that are accrued on the Closing Balance Sheet), andthe Vendor agrees to indemnify and hold the Purchaser harmless from and againstany and all damages which the Purchaser may suffer or incur in connectionwith such obligations and liabilities.

 

For the avoidance of doubt, Vendor shall be responsible for thefollowing claims or benefit payments of all Employees and former employees involvedin the Business regardless of whether such claims are filed before or after theClosing Date:

 

(a)           with respectto death or dismemberment claims, those in respect of which the event occurredprior to the Closing Date;

 

(b)           with respectto health claims, those in respect of which the services were provided or thesupplies were purchased prior to the Closing Date;

 

(c)           with respectto short term and/or long term disability claims and workers’ compensationclaims, for those claims resulting from events that occurred prior to theClosing Date, including, to the extent covered under the

 

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Employee Benefit Plans,for recurring illnesses which first originated with events occurring prior tothe Closing Date, whether or not such claims continue after the Closing Date.

 

**9.7****                           ****Notice by Vendor**

 

Vendor shall prior to the Closing Date send a written notice to theEmployees advising them of the delay and the time limit within which a claimmust be filed under Vendor’s Employee Benefit Plans for claims in respect ofwhich the event occurred, the services were provided or the supplies werepurchased prior to the Closing Date.

 

**ARTICLE 10**

**MISCELLANEOUS**

 

**10.1****                         ****Further Assurances**

 

Each Party shall from time to time execute and deliver or cause to beexecuted and delivered all such further documents and instruments and do orcause to be done all further acts and things as the other Party may, before orafter the Closing Time, reasonably require as being necessary or desirable inorder to effectively carry out or better evidence or perfect the full intentand meaning of this Agreement or any provision hereof.

 

**10.2****                         ****Public Announcements**

 

Each Party agrees that no disclosure or public announcement regardingthis Agreement or the transactions contemplated hereby shall be made by eitherParty without the prior written consent of the other Party, which consent shallnot be unreasonably withheld or delayed. If a public announcement or disclosureis required by either of the Parties pursuant to Law, the Parties shallcooperate in the preparation and release of a public announcement or disclosureregarding this Agreement or the transactions contemplated hereby

 

**10.3****                         ****Notices**

 

(a)           Any notice, direction or othercommunication (in this Section, a **“notice”**) required or permitted tobe given to a Party shall be in writing and shall be sufficiently given ifdelivered personally, mailed or transmitted by facsimile as follows:

 

(i)            in the case of the Vendor or Cascades,at:

 

**CASCADES FINE PAPERS GROUP INC.**

2 Rolland Avenue

Saint-Jérôme QC  J7Z 5V6

 

Attention:              President

 

Fax No.:                  450 569-3933

 

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with a copy to:

 

**FRASERMILNER CASGRAIN LLP**

1 Place Ville Marie, Suite 3900

Montréal QC H3B 4M7

 

Attention:              Charles R. Spector

 

Fax No.:                  514 866-2241

 

(ii)           in the case of the Purchaser, at:

 

**C/OSPICERS PAPER, INC.**

12310 E. SlausonAvenue

Santa Fe Springs,CA 90670

USA

 

Attention:              Anthony J. Kennedy

 

Fax No.:                  562 693-0868

 

and to:

 

**PAPERLINXLIMITED**

307 Ferntree GullyRoad

Mt. Waverley, VIC3149

Australia

 

Attention:              Chief Financial Officer

 

Fax No.:                  61 3 8540 2255

 

with a copy to:

 

**STIKEMANELLIOTT LLP**

1155 René-Lévesque Blvd, Suite 4000

Montreal, Québec H3B 3V2

 

Attention:              John W. Leopold and Michel Gélinas

 

Fax No.:                  514 397-3222

 

(b)           Any notice delivered personally, shall bedeemed to have been given and received on the day on which it was delivered, ifdelivered prior to 5:00 p.m. (recipient’s time) on a Business Day;otherwise on the first Business Day thereafter. Any notice mailed shall bedeemed to have been given and received on the third Business Day after it wasmailed, provided that if the Party giving the notice knows or ought reasonablyto know of

 

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disruptions in the postalsystem that might affect the delivery of mail, such notice shall not be mailedbut shall be given by personal delivery or facsimile transmission. Any noticetransmitted by facsimile shall be deemed to have been given and received on theday of its transmission if the machine from which it was sent receives theanswerback code of the Party to whom it was sent prior to 5:00 p.m.(recipient’s time) on such day; otherwise on the first Business Day thereafter.

 

(c)           Either Party may change its addressfor service from time to time by notice given to each of the other Party inaccordance with the foregoing provisions.

 

**10.4****                         ****Time of the Essence**

 

Time shall be of theessence of this Agreement.

 

**10.5****                         ****Costs and Expenses**

 

Each Party shall be responsible for all costs and expenses (includingthe fees and disbursements of legal counsel, bankers, investment bankers,accountants, brokers and other advisors) incurred by it in connection with thisAgreement and the transactions contemplated herein.

 

**10.6****                         ****Effect of Closing**

 

All provisions of this Agreement shall remain in full force and effectnotwithstanding the Closing, subject only to the limitations specified inSections 4.4 and 4.5 and Article 8.

 

**10.7****                         ****Counterparts**

 

This Agreement may be executed in counterparts, each of whichshall be deemed to be an original and both of which together shall constituteone and the same instrument. To evidence its execution of an original counterpart ofthis Agreement, a Party may send a copy of its original signature on theexecution page hereof to the other Party by facsimile transmission andsuch transmission shall constitute delivery of an executed copy of thisAgreement to the receiving Party.

 

**10.8****                         ****Assignment**

 

This Agreement may not be assigned by any Party without the priorwritten consent of the other Parties. Purchaser may assign and transferthis Agreement and any agreement ancillary to this Agreement and any of itsrights and obligations hereunder and thereunder to one or more of itsAffiliates provided that Purchaser shall remain solidarily liable with suchAffiliate(s) for its obligations hereunder and thereunder.

 

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**10.9****                         ****Parties in Interest**

 

This Agreement shall enure to the benefit of and be binding upon theParties and their respective successors, including any successor by reason ofthe amalgamation or merger of a Party, and permitted assigns.

 

**10.10****                       ****Third Parties**

 

Except as specifically set forth or referred to herein, nothing hereinis intended or shall be construed to confer upon or give to any person, otherthan the Parties and their respective successors, including any successor byreason of the amalgamation or merger of a Party, and permitted assigns, anyrights or remedies under or by reason of this Agreement.

 

**10.11****                       ****Liability of Cascades**

 

Cascades hereby acknowledges that by executing this Agreement, it issolidarily (within the meaning of the *CivilCode of Quebec*) liable with the Vendor for the timely performanceand fulfilment by Vendor of all of Vendor’s obligations and covenants underthis Agreement and the Ancillary Agreements.

 

Cascades acknowledges that Purchaser is relying on this covenant inconnection with the purchase of the Purchased Assets under this Agreement andthat Purchaser would not have entered into the Agreement without the benefit ofsuch covenant by Cascades.

 

**10.12****                       ****[              ]**

 

[              ]

 

**[Rest of page intentionally left blank]**

 

**[Signature page follows]**

 

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**IN WITNESS WHEREOF** this Agreement has been executed by theParties hereto.

 
|   | **CASCADES INC.**                                                       |
|--------|-------------------------------------------------------------------------|
|   |                                                                    |
|   | By:                                                                     | */s/ Alain Lemaire* |   |
|   |                                                                    |   |   |
|   |                                                                    |   |   |
|   |                                                                    |
|   |                                                                    |
|   | **CASCADES FINE PAPERS GROUP INC./  CASCADES GROUPE PAPIERS FINS INC.** |
|   |                                                                    |
|   | By:                                                                     | */s/ Alain Lemaire* |   |
|   |                                                                    |   |   |
|   |                                                                    |   |   |
|   |                                                                    |
|   |                                                                    |
|   | **COAST PAPER LIMITED**                                                 |
|   |                                                                    |
|   | By:                                                                     | */s/ Darryl Abotomey* |   |
|   |                                                                    |   |   |
|   |                                                                    |   |   |

 

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