| ITEM 1.01 | ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT |
On October 2, 2018 (the “Effective Date”), Resolute FP US Inc. (the “Seller”), a wholly owned subsidiary of Resolute Forest Products Inc. (the “Company”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) withNew-Indy Containerboard LLC (the “Parent”) andNew-Indy Catawba LLC (the “Purchaser”), to sell the Company’s Catawba, South Carolina paper and pulp mill (the “Business”) to the Purchaser.
The purchase price for the Business consists of $260 million in cash, subject to a customary closing adjustment to reflect normalized working capital for the Business, and the assumption by the Purchaser of approximately $40 million of balance sheet liabilities, largely net pension benefit obligations. The Purchaser also assumes certain other liabilities, including environmental liabilities related to the purchased assets and the Business.
The parties to the Purchase Agreement have each made certain representations and warranties. The Purchase Agreement requires that the Purchaser obtain a representations and warranty insurance policy, which will be the exclusive source of the Seller’s indemnification obligation for any breach of any representation or warranty by the Seller in the Purchase Agreement, other than for fraud.
The Purchase Agreement contains customary closing conditions, including, but not limited to, (i) the expiration or early termination of the waiting period under the Hart-Scott Rodino Act of 1976, as amended, (ii) certain employment continuity requirements, (iii) certain benefit plans and pension plans shall be in full force, (iv) the Seller shall have received a release under certain collective bargaining agreements with respect to employees of the Business, and (v) the receipt of required third-party consents under acquired contracts and assets. Under the terms of the Purchase Agreement, the Purchaser will also offer employment to all employees of the Business effective, upon the closing of the acquisition.
Seller and Purchaser have also agreed to comply with covenants during the interim period between the date of the Purchase Agreement and the closing of the acquisition of the Business, which include covenants regarding thepre-closing operation of the Business, notice of certain events, access to information, cooperation between the parties with respect to certain government filings, publicity, insurance, environmental issues, no solicitation and exclusivity provisions.
The Purchaser and Seller may terminate the Purchase Agreement at any time by mutual consent, or either party may terminate the Purchase Agreement if (i) the acquisition has not been consummated by March 31, 2019, (ii) a governmental entity issues an order or takes an action that permanently restrains or otherwise prohibits the acquisition of the Business, and (iii) the other party (or Parent, in the case of Seller’s right to terminate) breaches in any material respect any of its representations, warranties, covenants or other agreements contained in the Purchase Agreement in a manner that would give rise to the failure of any closing condition, which breach, if curable, has not been cured within thirty (30) days after the receipt by such other party of written notice from the terminating party specifying the breach. The Seller may also terminate the Purchase Agreement if (i) $7 million has not been placed in escrow within two business days after the Effective Date in accordance with the terms of the Purchase Agreement, or (ii) the mutual closing conditions and the Seller’s closing conditions have been satisfied, Seller has served notice to the Purchaser indicating that Seller is ready, willing and able to consummate the transactions contemplated by the Purchase Agreement and the Purchaser fails to consummate the closing of the transactions contemplated by the Purchase Agreement within three business days following the receipt of Seller’s notice. A Reverse Termination Fee of $20 million is payable by Purchaser if the Seller terminates the Purchase Agreement (i) pursuant to the termination provision set forth in clause (ii) of the previous sentence, or (ii) following a willful breach by the Purchaser of the Purchase Agreement that would give rise to the failure of a closing condition of the Purchase Agreement, which has not been cured after notice is provided to the Purchaser.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Statements in this current report on Form8-K that are not reported financial results or other historical information of the Company and its subsidiaries and affiliates are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. They include, for example, statements relating to the expected timetable for closing the sale of the Business and the satisfaction or waiver of closing conditions. Forward-looking statements may be identified by the use of forward-looking terminology such as the words “believes,” “estimates,” “projects,” “anticipates,” “forecast,” “intend,” “project,” “potential,” “target,” “should,” “would,” “could,” “will,” “may,” “expect,” and other terms with similar meaning indicating possible future events or potential impact on our business or the Company’s shareholders.
