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(Mark One)
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2020
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 001-33776
RESOLUTE FOREST PRODUCTS INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
98-0526415
(I.R.S. employer identification number)
111 Robert-Bourassa Boulevard
Suite 5000
Montreal
Quebec
Canada
H3C 2M1
(Address of principal executive offices) (Zip Code)
(514) 875-2160
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $0.001 per share
(Title of class)
RFP
(Trading Symbol)
New York Stock Exchange
Toronto Stock Exchange
(Name of exchange on which registered)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ☐
Accelerated Filer
☒
Non-accelerated Filer
☐
Smaller Reporting Company
☐
Emerging Growth Company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by a check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter
(June 30, 2020) was $118 million.
As of January 29, 2021, there were 80,813,619 shares of Resolute Forest Products Inc. common stock, $0.001 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement to be filed within 120 days of December 31, 2020, are incorporated by reference in this Annual Report on Form 10-K in response to Part III,
Items 10, 11, 12, 13 and 14.
Table of Contents
Part I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV
Item 15.
Item 16.
Signatures
TABLE OF CONTENTS
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
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CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION AND USE OF
THIRD-PARTY DATA
Statements in this Annual Report on Form 10-K (or, “Form 10-K”) that are not reported financial results or other historical information of Resolute Forest
Products Inc. (with its subsidiaries, either individually or collectively, unless otherwise indicated, referred to as “Resolute Forest Products,” “Resolute,”
“we,” “our,” “us,” or the “Company”) are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. They
include, for example, statements relating to the impact of the novel coronavirus (or, “COVID-19”) pandemic and resulting economic conditions on our
business, results of operations and market price of our securities, and to our: efforts and initiatives to reduce costs and increase revenues and profitability;
business and operating outlook; future pension obligations; assessment of market conditions; growth strategies and prospects, and the growth potential of
the Company and the industry in which we operate; liquidity; future cash flows, including as a result of the changes to our pension funding obligations;
estimated capital expenditures; and strategies for achieving our goals generally, including the strategies described in Part II, Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations – Overview – Our Business,” of this Form 10-K. Forward-looking statements
may be identified by the use of forward-looking terminology such as the words “should,” “would,” “could,” “will,” “may,” “expect,” “believe,”
“anticipate,” “attempt,” “project,” “estimate,” “guide,” “strive,” “continue,” “create,” “plan,” “see,” “seek,” “improve,” “move,” “position,” “build,”
“grow,” “pursue,” and other terms with similar meaning indicating possible future events or potential impact on our business or Resolute Forest Products’
shareholders.
The reader is cautioned not to place undue reliance on these forward-looking statements, which are not guarantees of future performance. These statements
are based on management’s current assumptions, beliefs, and expectations, all of which involve a number of business risks and uncertainties that could
cause actual results to differ materially. The potential risks and uncertainties that could cause our actual future financial condition, results of operations, and
performance to differ materially from those expressed or implied in this Form 10-K include, but are not limited to, the impact of: the COVID-19 pandemic
on our business and resulting economic conditions, developments in non-print media, including changes in consumer habits, and the effectiveness of our
responses to these developments; intense competition in the forest products industry; any inability to offer products certified to globally recognized forestry
management and chain of custody standards; any inability to successfully implement our strategies to increase our earnings power; the possible failure to
successfully integrate acquired businesses with ours or to realize the anticipated benefits of acquisitions, such as our entry into wood manufacturing in the
U.S., and tissue production and sales, or divestitures or other strategic transactions or projects; uncertainty or changes in political or economic conditions in
the U.S., Canada or other countries in which we sell our products; global economic conditions; the highly cyclical nature of the forest products industry;
any difficulties in obtaining timber or wood fiber at favorable prices, or at all; changes in the cost of purchased energy and other raw materials; physical,
financial and regulatory risks associated with global, regional, and local weather conditions, and climate change; any disruption in operations or increased
labor costs due to labor disputes; difficulties in our employee relations, attraction or retention; disruptions to our supply chain, operations, or the delivery of
our products; disruptions to our information technology systems including cybersecurity and privacy incidents; risks related to the operation and transition
of legacy system applications; negative publicity, even if unjustified; currency fluctuations; any increase in the level of required contributions to our
pension plans, including as a result of any increase in the amount by which they are underfunded; our ability to maintain adequate capital resources to
provide for all of our substantial capital requirements; the terms of our outstanding indebtedness, which could restrict our current and future operations; the
replacement of the London Interbank Offered Rate (or, the “LIBOR”) with an alternative interest rate; losses that are not covered by insurance; any
additional closure costs and long-lived asset or goodwill impairment or accelerated depreciation charges; any need to record additional valuation
allowances against our recorded deferred income tax assets; our exports from one country to another country becoming or remaining subject to duties, cash
deposit requirements, border taxes, quotas, or other trade remedies or restrictions; countervailing and anti-dumping duties on imports to the U.S. of the vast
majority of our softwood lumber products produced at our Canadian sawmills; any failure to comply with laws or regulations generally; any additional
environmental or health and safety liabilities; any violation of trade laws, export controls, or other laws relating to our international sales and operations;
adverse outcomes of legal proceedings, claims and governmental inquiries, investigations, and other disputes in which we are involved; the actions of
holders of a significant percentage of our common stock; and the potential risks and uncertainties described in Part I, Item 1A, “Risk Factors,” which have
been heightened by the COVID-19 pandemic, including related governmental responses and economic impacts, market disruptions and resulting changes in
consumer habits.
All forward-looking statements in this Form 10-K are expressly qualified by the cautionary statements contained or referred to in this section and in our
other filings with the U.S. Securities and Exchange Commission (or, the “SEC”) and the Canadian securities regulatory authorities. We disclaim any
obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as
required by law.
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Market and Industry Data
The information on industry and general economic conditions in this Form 10-K was derived from third-party sources and trade publications we believe to
be widely accepted and accurate. We have not independently verified the information and cannot assure you of its accuracy.
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ITEM 1. BUSINESS
PART I
We are a global leader in the forest products industry with a diverse range of products, including market pulp, tissue, wood products, and paper. We own or
operate some 40 facilities, as well as power generation assets in the U.S. and Canada. Marketing our products in over 50 countries, we have third-party
certified 100% of our managed woodlands to at least one internationally recognized forest management standard.
Resolute Forest Products Inc., a Delaware corporation, was formed on January 25, 2007, from the merger of Abitibi-Consolidated Inc. and Bowater
Incorporated. Our common stock trades under the stock symbol “RFP” on both the New York Stock Exchange (or, the “NYSE”) and the Toronto Stock
Exchange (or, the “TSX”).
Information About our Executive Officers
The following is information about our executive officers as of March 1, 2021:
Name
Remi G. Lalonde
Lori Kilgour
John Lafave
Patrice Minguez
Daniel Ouellet
Hugues Simon
Richard Tremblay
Jacques P. Vachon
Sylvain A. Girard
Position
Age
44 President and Chief Executive Officer, and Chief Financial Officer
50 Senior Vice President, Process Improvement and Chief Information Officer
56 Senior Vice President, Pulp and Paper Sales and Marketing
57 President, Tissue Group
50 Senior Vice President, Human Resources
50 President, Wood Products
57 Senior Vice President, Pulp and Paper Operations
61 Senior Vice President, Corporate Affairs and Chief Legal Officer
50 Senior Vice President and Chief Financial Officer (as of March 2, 2021)
Officer
Since
2018
2019
2018
2017
2018
2021
2014
2007
2021
Mr. Lalonde became president and chief executive officer as of March 1, 2021, after Yves Laflamme stepped down and retired. Mr. Lalonde will cease to
be chief financial officer upon the appointment of Sylvain Girard to this role as of March 2, 2021. Mr. Lalonde previously served as senior vice president
and chief financial officer from November 2018 to March 1, 2021, and was vice president, strategy and corporate development from May 2018 to
November 2018. He was general manager of Resolute’s pulp and paper mill in Thunder Bay (Ontario), from February 2016 to May 2018. Before taking a
leadership role in operations, Mr. Lalonde was treasurer and vice president, investor relations, from November 2014 to February 2016, and vice president,
investor relations, from September 2011 to November 2014. He initially joined Resolute in 2009 as senior legal counsel, securities, following six years at a
Wall Street law firm.
Ms. Kilgour previously served as vice president, information technology, from July 2017 to May 2019, as vice president and program director from July
2015 to July 2017, and as vice president, operational excellence, engineering and energy, from January 2013 to July 2015. Prior to joining Resolute in
2013, she worked at Tembec, Verso Corporation/International Paper and Catalyst.
Mr. Lafave previously served as vice president, sales, national accounts – paper sales, vice-president, sales, national accounts – newsprint, vice president,
sales, national accounts – commercial printers, and executive sales representative from 2003 to 2009. Prior to joining Resolute, he held progressive
positions in sales with UPM-Kymmene and Repap Enterprises.
Mr. Minguez previously served as special advisor to the former president and chief executive officer in July 2017. Prior to joining Resolute in August 2017,
he was founder and former president of Cellynne Holdings, Inc., a tissue business, from January 1989 to August 2012. From February 1987 to January
1989, Mr. Minguez headed Société Antillaise de Service SARL, a distribution company he founded, specializing in janitorial supplies and proprietary
systems.
Mr. Ouellet previously served as vice president, human resources, for Resolute’s Canadian and U.S. operations, from January 2016 to May 2018, and as
vice president, human resources, for its Canadian operations, from November 2013 to January 2016. He held a range of other human resources positions
since joining Resolute in September 2000, and also acquired operational experience leading the Company’s sawmill operations in the Saguenay – Lac-
Saint-Jean region of Quebec. Prior to joining Resolute, Mr. Ouellet worked with Alliance Forest Products, Alcan, and a regional trade union.
Mr. Simon previously served as a special advisor to the senior vice president and chief financial officer from January 4, 2021 to March 1, 2021. Prior to
joining Resolute in 2021, he was president of BarretteWood Inc., from July 2016 to November 2020,
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and served as vice president, sales and procurement for BarretteWood Inc. from August 2012 to July 2016. He also served as vice president sales and
marketing and value added operations of Resolute wood products and a range of other positions with Resolute and its predecessor companies, from 1999 to
2012.
Mr. Tremblay previously served as senior vice president, pulp and paper group, from June 2015 to February 2018, and as senior vice president, pulp and
paper operations, from February 2014 to May 2015. He served as interim senior vice president, pulp and paper operations, from November 2013 to January
2014, and as vice president, pulp and paper operations from June 2011 to October 2013. Prior to joining Resolute in June 2011, he served as general
manager of several mills at Smurfit Stone Container Corporation between 2002 and 2011.
Mr. Vachon previously served as senior vice president and chief legal officer from January 2011 to February 2012, as senior vice president, corporate
affairs and chief legal officer from October 2007 to January 2011, and as senior vice president, corporate affairs and secretary, from 1997 to October 2007.
The Company announced the appointment of Sylvain A. Girard as the Company’s next senior vice president and chief financial officer, effective March 2,
2021. Mr. Girard joined Resolute as special advisor to Remi G. Lalonde, on February 15, 2021. Mr. Girard most recently served as executive vice president
and chief financial officer of SNC-Lavalin Group Inc. from 2016 to 2020. Previously, he held senior executive positions in finance with SNC-Lavalin,
following 22 years with General Electric Company (or, “GE”). He held a number of positions at GE, including 14 years as chief financial officer in the
financial and healthcare sectors of GE in Europe.
Products
We manage our business based on the products we manufacture. Our reportable segments correspond to our principal product lines: market pulp, tissue,
wood products, and paper. As of the second quarter of 2020, the results from our newsprint and specialty papers operations have been combined to form the
paper reportable segment. This better reflects management’s internal analysis, given the diminishing percentage newsprint and specialty papers represent in
our product portfolio.
Market pulp
We produce market pulp at five facilities in North America, with total capacity of 1.3 million metric tons, or 8% of total North American capacity. Our
market pulp includes virgin pulp and recycled bleached kraft (or, “RBK”) pulp, for which we are a leading global producer. Approximately 80% of our
virgin pulp capacity is softwood-based: northern bleached softwood kraft (or, “NBSK”) pulp, southern bleached softwood kraft (or, “SBSK”) pulp, and fluff
pulp. The remainder of our virgin pulp capacity consists of northern bleached hardwood kraft (or, “NBHK”) pulp and southern bleached hardwood kraft (or,
“SBHK”) pulp. Pulp not converted into paper or tissue is sold as market pulp, which is used to make a range of consumer products including tissue,
packaging, specialty paper products, diapers, and other absorbent products. 23% of our 2020 market pulp shipments were exported outside of North
America, including significant exports to Europe, Asia, and Latin America.
Tissue
We produce tissue products at three facilities in North America. With total capacity of 128,000 short tons (116,000 metric tons), we are a fully integrated
manufacturer operating four tissue machines and 13 converting lines, including the converting facility in Hagerstown, Maryland, that we acquired in
December 2020. We manufacture a range of tissue products for the away-from-home and retail markets, including recycled and virgin paper products,
covering premium, value, and economy grades. We also sell parent rolls not converted into tissue products.
Wood products
We own 14 sawmills in Canada that produce construction-grade lumber sold in North America. On February 1, 2020, we completed the acquisition of three
sawmills in the U.S. South, bringing our number of sawmills to 17. The three sawmills have a combined production capacity of 550 million board feet once
ramped-up. For more information, see Note 3, “Business Acquisition,” to our consolidated financial statements and related notes (or, “Consolidated
Financial Statements”) appearing in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Form 10-K.
Our Canadian sawmills produce dimension spruce-pine-fir lumber and provide wood chips to our pulp and paper mills in Canada. Our sawmills also supply
wood residue to our other segments, to be used as fuel to produce electricity and steam based on renewable sources. Our U.S. sawmills produce dimension
lumber and decking from southern yellow pine. In 2020, we shipped 1.9 billion board feet of construction-grade lumber and decking. We also operate two
remanufactured wood products facilities that manufacture bed frame components, finger joints, and furring strips, two engineered wood products facilities
that manufacture I-joists for the construction industry, and one wood pellet facility, all of which are located in Quebec and Ontario.
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Paper
We produce a wide range of papers at 10 mills strategically located to serve major markets, with total capacity of 2.1 million metric tons. We are a leading
global producer of newsprint and the largest producer of uncoated mechanical papers in North America.
We own six newsprint facilities in North America, with total capacity of 1.4 million metric tons, which represents 9% of total worldwide capacity and 44%
of total North American capacity. We sell newsprint to newspaper publishers worldwide and also to commercial printers in North America for uses such as
inserts and flyers. In 2020, North American deliveries represented 65% of our total newsprint shipments.
We produce specialty papers at four facilities in North America. With total capacity of 0.7 million metric tons, our specialty papers comprise uncoated
mechanical papers, including supercalendered paper and white paper, as well as uncoated freesheet papers. With 26% of total North American capacity, we
are the largest producer of uncoated mechanical papers in North America, and the fourth largest in the world. Our specialty papers are used in books, retail
inserts, direct mail, coupons, magazines, catalogs, bags and other commercial printing applications. We sell specialty papers to major commercial printers,
direct mailers, publishers, catalogers and retailers, mostly in North America.
For information on our corporate strategy, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations –
Overview – Our Business” of this Form 10-K.
Pulp, tissue, and paper manufacturing facilities
The following table lists the pulp, tissue, and paper manufacturing facilities and the number of machines we owned as of December 31, 2020. The table
presents our total 2020 production by product line (which represents all of our reportable segments except wood products), reflecting the impact of any
downtime taken in 2020, and our 2021 capacity. Total capacity is based on an operating schedule of approximately 360 days. In certain cases, production
can exceed capacity, due to changes in the manufacturing properties of the product.
(In thousands of metric tons)
Canada
Alma (Quebec)
Amos (Quebec)
Baie-Comeau (Quebec)
Clermont (Quebec)
Dolbeau (Quebec)
Gatineau (Quebec)
Kénogami (Quebec)
Saint-Félicien (Quebec)
Thunder Bay (Ontario)
U.S.
Calhoun (Tennessee)
Coosa Pines (Alabama)
Grenada (Mississippi)
Hialeah (Florida)
Menominee (Michigan)
Sanford (Florida)
Wood products facilities
Number of
Machines
2021
Total
Capacity
2020
2020 Production By Product Line
Total
Production
Market
Pulp
Tissue
Paper
3
1
2
1
1
1
1
1
2
3
1
1
2
1
1
22
341
194
336
221
137
197
132
369
530
356
264
229
31
170
25
3,532
253
59
58
219
112
190
121
365
495
307
256
204
22
112
24
2,797
—
—
—
—
—
—
—
365
306
128
256
—
—
112
—
1,167
—
—
—
—
—
—
—
—
—
49
—
—
22
—
24
95
253
59
58
219
112
190
121
—
189
130
—
204
—
—
—
1,535
The following table lists the sawmills we owned or operated as of December 31, 2020. The table presents our total 2020 production, reflecting the impact
of any downtime taken in 2020, and our 2021 mechanical capacity. We do not have access to
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enough timber to operate all of the sawmills at their total mechanical capacity. Total capacity is based on an operating schedule of approximately 355 days.
(In million board feet)
Canada
2021
Total Capacity
2020
Total Production
(1)
Atikokan (Ontario)
Comtois (Quebec)
Girardville (Quebec)
Ignace (Ontario)
La Doré (Quebec)
La Tuque (Quebec)
Maniwaki (Quebec)
Mistassini (Quebec)
Obedjiwan (Quebec)
Pointe-aux-Outardes (Quebec)
Saint-Félicien (Quebec)
Saint-Thomas (Quebec)
Senneterre (Quebec)
Thunder Bay (Ontario)
(2)
U.S.
(3)
Cross city (Florida)
El Dorado (Arkansas)
Glenwood (Arkansas)
(4)
145
145
220
115
198
186
204
209
65
184
174
93
167
330
185
180
185
2,985
139
47
214
—
225
101
96
203
47
109
105
35
139
277
128
3
98
1,966
(1)
(2)
(3)
(4)
Forest Products Mauricie L.P. is located in La Tuque and is a consolidated subsidiary in which we have a 93.2% interest. The amounts in the
above table represent the sawmill’s total capacity and production.
Sociéte en Commandite Scierie Opitciwan is located in Obedjiwan and is an unconsolidated entity in which we have a 45% interest. The amounts
in the above table represent the sawmill’s total capacity and production.
On February 1, 2020, we acquired from Conifex Timber Inc. all of the equity securities and membership interests in certain of its subsidiaries, the
business of which consists mainly in the operation of three sawmills and related assets in Cross City and in Glenwood and El Dorado, with
combined production capacity of 550 million board feet. When operating to capacity, almost 25% of our lumber production will be in the U.S.
South. For more information, see Note 3, “Business Acquisition,” to our Consolidated Financial Statements.
The El Dorado mill, which was already idled at the time of the acquisition, was restarted in the fourth quarter of 2020.
The following table lists the remanufactured wood, engineered wood, and wood pellet products facilities we owned or operated as of December 31, 2020,
and their respective 2021 capacity and 2020 production. Total capacity is based on an operating schedule of approximately 355 days.
(In million board feet, except where otherwise stated)
Remanufactured Wood Products Facilities
Château-Richer (Quebec)
La Doré (Quebec)
Total Remanufactured Wood Products Facilities
Engineered Wood Products Facilities
Larouche and Saint-Prime (Quebec) (in million linear feet)
(1)
Wood Pellet Products Facility
Thunder Bay (Ontario) (in thousands of metric tons)
2021
Total Capacity
2020
Total Production
66
16
82
145
45
40
14
54
134
41
(1)
Resolute-LP Engineered Wood Larouche Inc. and Resolute-LP Engineered Wood St-Prime Limited Partnership are located in Larouche and Saint-
Prime, respectively, and are unconsolidated entities in which we have a 50% interest in
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each entity. We operate the facilities and our joint venture partner sells the products. The amounts in the above table represent the mills’ total
capacity and production.
Other products
We sell green power produced from renewable sources and wood-related products to customers located in Canada and the U.S. Sales of these other
products are considered a recovery of the cost of manufacturing our primary products.
We also have a 49% interest in Serres Toundra Inc., a joint venture that produces vegetables from 19 hectares of greenhouses adjacent to our Saint-Félicien
pulp mill. The greenhouses source a portion of their heat from our Saint-Félicien pulp mill and are also expected to source a portion of their CO
2
requirements from such mill by the end of 2021.
Raw Materials
In the manufacture of our paper, tissue, pulp, and wood products, our operations consume substantial amounts of raw materials such as wood and
chemicals, as well as energy. We purchase raw materials and energy sources (to complement internal generation) primarily on the open market. These raw
materials are market-priced commodities and as such, are subject to fluctuations in market prices. For additional information about commodity price risk,
see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk – Commodity Price Risk” of this Form 10‑K.
Wood
Our sources of wood include purchases from local producers, including sawmills that supply residual wood chips, wood harvested from government-owned
land on which we hold timber supply guarantees or harvesting rights, and property we own or lease. In Quebec, under the Sustainable Forest Development
Act, volumes are allocated through timber supply guarantees, which are five years in length and renewable, subject to certain conditions. As of
December 31, 2020, we were allocated 4.5 million cubic meters of supply through the timber supply guarantees. In Ontario, we had long-term harvesting
rights for 11.5 million acres of government-owned land, as of December 31, 2020. The harvesting rights licenses in Ontario are 20 years in length and
automatically renew every five years, contingent upon our continued compliance with environmental performance and reforestation requirements.
We depend heavily on harvesting rights and timber supply guarantees over government-owned land in Ontario and Quebec, respectively. The volume of
harvest permitted under these licenses is subject to limits, which are generally referred to as the annual allowable cut (or, the “AAC”). The AAC is reviewed
regularly, typically every five years in Quebec and every 10 years in Ontario. The next AAC revision in Quebec is scheduled to take place in 2023 while
Ontario is completing AAC revisions in 2021 for the forests in which we operate. About 25% of the total allowable harvesting rights in Quebec are
allocated through an open auction system. The prices generated by the auction system are used to set pricing for the remainder of the AAC. The timber
requirements for our U.S. sawmills are met mostly by purchasing timber from timberland owners.
In addition to the forest management regulations that we must abide with, we have sought out independent certification for 100% of the forests that we
manage or on which we hold significant harvesting rights in order to demonstrate our strong belief that it is possible to operate successfully with
sustainable harvesting practices while maintaining biodiversity and protecting the forest, values important to a range of stakeholders. The woodlands that
we manage are all independently certified to at least one internationally recognized forest management standard: Sustainable Forestry Initiative (or,
“SFI ”) and Forest Stewardship Council (or, “FSC ”). In 2020, we successfully maintained SFI forest management certifications for all of our managed
woodlands in Quebec and Ontario. We also continued to maintain the FSC forest management certificates that we held in Quebec and Ontario. In addition,
we continue to be one of the largest holders of SFI and FSC forest management certificates in North America.
®
®
®
®
We have also instituted fiber-tracking systems at all of our North American facilities to ensure that our wood fiber supply comes from acceptable sources
such as certified forests and legal harvesting operations, with the exception of our three recently acquired sawmills in the U.S. South, which are expected to
have their fiber-tracking systems certified in 2021. These systems are third-party certified according to one or more of three internationally recognized
chain of custody standards, namely SFI, FSC, and Programme for the Endorsement of Forest Certification (or, “PEFC”). 100% of our wood and fiber
sources are procured through the FSC Controlled Wood standard, the FSC chain of custody certification, the PEFC due diligence requirements, or the SFI
fiber sourcing requirements, and in some cases a combination of these standards.
We strive to improve our forest management and wood fiber procurement practices and we encourage our wood and fiber suppliers to demonstrate
continual improvement in forest resource management, wood and fiber procurement, and third-party certification.
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Chemicals
We use various chemicals in our pulp, tissue, and paper manufacturing operations including caustic soda, sodium chlorate, hydrogen peroxide, liquid
sodium hydrosulfite, and sulfuric acid.
Energy
Steam and electrical power constitute the primary forms of energy used in pulp, tissue, and paper production. Process steam is produced in boilers using a
variety of fuel sources, as well as heat recovery units in mechanical pulp facilities. All of our pulp, paper and tissue operating sites generate 100% of their
own steam requirements. In 2020, the Alma, Calhoun, Coosa Pines, Dolbeau, Gatineau, Kénogami, Saint-Félicien and Thunder Bay operations collectively
consumed 61% of their electrical requirements from internal sources, notably on-site cogeneration and hydroelectric dams. We purchased the balance of
our electrical energy needs from third parties. We have six sites that operate cogeneration facilities and all of these sites generate primarily green energy
from renewable biomass.
We also have one hydroelectric generation and transmission network (Hydro-Saguenay in the Saguenay – Lac-Saint-Jean region of Quebec), which consists
of seven generating stations with 170 MW of capacity. The water rights agreements required to operate some of these facilities typically range from 10 to
50 years and, subject to certain conditions, some are renewable for additional terms. In some cases, the agreements are contingent on the continued
operation of the related paper mills and a minimum level of capital spending in the region. For the other facilities, the right to generate hydroelectricity
stems from our ownership of the riverbed on which these facilities are located.
Competition
In general, our products, other than tissue, are globally-traded commodities. The markets in which we compete are highly competitive and, aside from
quality specifications to meet customer needs, including designations to globally recognized forest management and chain of custody standards, the
production of our products does not depend upon a proprietary process or formula. Pricing and the level of shipments of our products are influenced by the
balance between supply and demand as affected by global economic conditions, changes in consumption and capacity, the level of customer and producer
inventories, and fluctuations in currency exchange rates. Prices for our products have been and are likely to continue to be highly volatile.
We produce six major grades of market pulp (NBSK, SBSK, NBHK, SBHK, RBK, and fluff), for which we compete with a number of major market pulp
producers, primarily with operations in North America. Market pulp being a globally-traded commodity, we also compete with other producers from South
America (eucalyptus hardwood and radiata pine softwood), Europe (northern hardwood and softwood), and Asia (mixed tropical hardwood). Price, quality,
service, and fiber sources are considered the main competitive determinants.
We are an integrated manufacturer of tissue products and compete with several major competitors in the North American tissue market. The key
competitive attributes in this market include price, product quality, service, and customer relationships. Competition is also significantly affected by
geographic location, as freight costs represent a material portion of the costs. We compete with branded and private-label products within North America.
We compete in North America with both large North American and numerous smaller local lumber producers in a highly competitive market. We also
compete with European producers in the North American market during periods of favorable currencies and prices. Because there are few distinctions
between lumber from different producers, competition is primarily based on price. Competition is also affected by cost and availability of wood, freight
cost, and labor. We have been required to pay cash deposits for estimated countervailing duties and anti-dumping duties on the vast majority of our U.S.
imports of softwood lumber products produced at our Canadian sawmills, since April 28, 2017, and June 30, 2017, respectively. As of December 31, 2020,
the rates for such estimated countervailing and anti-dumping duties were 19.10% and 1.15%, respectively. During any period in which our U.S. imports of
softwood lumber products from our Canadian sawmills are subject to countervailing duty or anti-dumping cash deposit requirements or duty requirements,
our competitive position could be materially affected. For additional information, see Item 1A, “Risk Factors – Legal and Compliance Risks – We are
subject to countervailing and anti-dumping duty orders on the vast majority of our U.S. imports of softwood lumber products produced at our Canadian
sawmills, which could materially affect our operations and cash flows,” of this Form 10‑K.
In 2020, the five largest North American newsprint producers represented 88% of North American capacity, and the five largest global producers
represented 32% of global newsprint capacity. We face competition from both large global producers and numerous smaller regional producers. Price,
quality, and customer relationships are important competitive determinants.
Our uncoated mechanical and uncoated freesheet papers compete on the basis of price, quality, service, and range of product line. We compete with
numerous uncoated mechanical paper producers, with the five largest North American producers
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representing 89% of the North American uncoated mechanical papers capacity, and the five largest global producers representing 54% of global uncoated
mechanical papers capacity in 2020. In addition, imports from overseas accounted for 9% of North American uncoated mechanical paper demand in 2020.
There are also numerous worldwide suppliers of other grades of paper such as coated mechanical papers and coated freesheet.
As with other global commodities, the competitive position of our products is significantly affected by fluctuations in foreign currency exchange rates. For
additional information, see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk – Foreign Currency Exchange Risk,” of this
Form 10-K.
Trends in non-print media are expected to continue to adversely affect demand for traditional print media. For additional information, see Item 1A, “Risk
Factors – Strategic Risks – Developments in non-print media and changes in consumer habits regarding the use of paper are expected to continue to
adversely affect the demand for some of our key products,” of this Form 10-K.
Based on market interest, we offer a number of our products with specific designations to one or more globally recognized forest management and chain of
custody standards. Our ability to conform to new or existing guidelines for certification depends on a number of factors, many of which are beyond our
control, such as: changes to the standards or the interpretation or the application of the standards; the adequacy of government-implemented conservation
measures; and the existence of territorial disputes between Indigenous peoples and governments. If we are unable to offer certified products, or to meet
commitments to supply certified product, it could adversely affect the marketability of our products and our ability to compete with other producers.
Human Capital
As of December 31, 2020, we employed approximately 7,100 people, of whom approximately 3,700 were represented by various unions, primarily Unifor,
and the Confederation of National Trade Unions (or, the “CNTU”) in Canada, and predominantly by the United Steelworkers International (or, the “USW”)
in the U.S. In the past year, we renewed or entered into a number of agreements with unions, covering approximately 500 employees in Canada. Collective
agreements covering approximately 300 employees in Canada have expired, involving certain Canadian sawmills.
While we intend to renew collective agreements, there can be no assurance that we will be able to renew agreements on satisfactory terms, or that we will
maintain continuously satisfactory agreements with all of our unionized employees. Should we be unable to do so, it could result in strikes, work stoppages,
or disturbances by affected employees, which could cause us to experience a disruption of operations and affect our business, financial condition, or results
of operations.
Our long-term competitiveness is tied to the ability to recruit, develop and retain top-quality employees with the right skills. We are building a strong
corporate culture that attracts results-driven and action-oriented employees and allows natural leaders to grow. We hired 970 new permanent and temporary
employees, raising our employer profile through targeted recruitment practices. We assessed 100% of salaried employees’ effectiveness through the
Demonstrated Effectiveness Appraisal process, which is focused on enhancing organizational capability through managerial accountability and people
development. We continue to train every employee on Resolute’s Code of Business Conduct and have in place a Diversity Policy designed to ensure equal
consideration and opportunities to all employees. We are equally committed to ensuring that our employees are consistently motivated and engaged by
promoting individual professional development goals, support sharing of knowledge and resources across the Company, and create opportunities for growth
and learning wherever possible.
The health and safety of our employees is a core Company value. We are committed to providing our employees with safe working environments, in
addition to complying with applicable legal requirements at all our sites. Since 2015, our Occupational Safety and Health Administration (OSHA) incident
rate world-class performance has been below 0.80, and we achieved an OSHA incident rate of 0.62 in 2020, which is one of the lowest rates within the
North American forestry products industry.
Since the beginning of the COVID-19 pandemic, a vigilance committee has been set up to collect and analyze continuous relevant information through the
appropriate public health authorities where we operate, and more than 30 pandemic crisis management protocols have been implemented to ensure the
safety and health of employees and contractors working at all our sites, helping to mitigate disruptions of operations.
In addition, the board adopted a board-level diversity policy striving to maintain a minimum of 25% representation each of men and women on our board
of directors, as well as an executive leadership-level diversity policy acknowledging diversity as a key factor in the Company’s talent management strategy.
Currently there are two women on the board representing 29% of its membership.
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Trademarks
We have registrations or pending applications for our key trademarks “RESOLUTE” and “resolute Forest Products & Design” in the countries of our
principal markets, as well as “RESOLUTE FOREST PRODUCTS”, “R Design”, and “RESOLUTE TISSUE” in Canada and the U.S., and “RÉSOLU” and
“Produits forestiers résolu & Design” in Canada. The current registrations of these trademarks are effective for various periods of time and may be renewed
periodically, provided that we, as the registered owner, comply with all applicable renewal requirements.
Environmental and Other Regulated Matters
We are subject to a number of federal or national, state, provincial, and local laws and regulations in various jurisdictions relating to the environment,
health and safety, and some of our infrastructure, including dams and bridges. We believe our operations are in material compliance with current applicable
environmental, health and safety, as well as applicable infrastructure laws and regulations. While it is impossible to predict future laws and regulations that
may be adopted, we believe that we will not be at a significant competitive disadvantage with regard to meeting future Canadian or U.S. standards. For
additional information, see Note 18, “Commitments and Contingencies – Environmental matters,” to our Consolidated Financial Statements.
Internet Availability of Information
We make our Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K, and any amendments to these reports, available free
of charge on our website (www.resolutefp.com) as soon as reasonably practicable after we file or furnish such materials to the SEC. The SEC also
maintains a website (www.sec.gov) that contains our reports and other information filed with the SEC. Our reports are also available on the System for
Electronic Document Analysis and Retrieval website (www.sedar.com).
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ITEM 1A. RISK FACTORS
In addition to the other information set forth in this Form 10-K and in other documents we file with the SEC, you should carefully consider the following
factors, among others, which could materially affect our business, financial condition, future results, reputation as well as the market price of our securities.
In particular, the risks described below could cause actual events to differ materially from those contemplated in the forward-looking statements in this
Form 10-K.
Risks related to the COVID-19 pandemic
The outbreak of the pandemic caused by COVID-19 has had, and could continue to have a negative impact on financial markets, economic conditions and
portions of our business. While we are unable to predict the extent, nature and duration of these impacts at this time, the global COVID-19 pandemic could
negatively affect our business and results of operations, as well as the market price of our securities, in a number of ways, including the following:
• While we expect to continue to operate in all of our business segments in Canada and the U.S., we have reduced our operational footprint to levels
consistent with essential or reduced needs, including the temporary idling of certain machines or facilities and implementing temporary or
permanent layoffs. Further adjustments to our operational footprint, temporary or permanent, could be made as the COVID-19 pandemic situation
develops.
•
The COVID-19 pandemic has already accelerated the secular demand decline for paper products like those we manufacture as widespread
confinement alters consumer habits, which has had, and could continue to have an impact on pulp demand. The decline in demand and altered
habits could have a permanent effect.
• Any construction slowdown in North America may result in a decline in demand for wood products. If the demand for wood products falls and we
reduce harvesting and sawmill activity as a result, we could have greater difficulty obtaining the supply of timber and wood fiber required for our
operations at favorable prices, or at all.
•
•
There is lower demand for our away-from-home tissue products usually found in hotels, restaurants, schools, office buildings and other businesses
or premises, and our ability to convert our tissue for the retail market may be limited.
There is increased risk that we may not obtain raw materials, chemicals and other required supplies or services in a timely fashion and at favorable
prices due to the impact of the reduced economic activity as a result of the COVID-19 pandemic on our suppliers, which could affect our
production output and profitability.
• Additional trade restrictions or barriers could also negatively affect our supply chain as well as the sales or distribution of our products.
•
The impact of the reduced economic activity as a result of the COVID-19 pandemic on our customers has increased our risk of credit exposure and
that risk could continue to increase.
• Although the forest products industry has generally been recognized as critical or essential in locations where we operate, the current health
restrictions, including social distancing measures, impact how our employees fulfill their duties, and limits the number of employees we can have
at our operations, which in turn could impact our production output and costs.
•
•
•
It could be difficult or costly to restart certain of our temporarily idled operations, and we could face personnel shortages if employees are no
longer available or amenable to return to work.
Should certain employees become ill from COVID-19 or unable to work, the attention of our management team could be diverted and our
operations could be affected.
The reduced operations and staffing at our facilities, remote working conditions and increased risk of obtaining supplies or services could increase
the risk of non-compliance and incidents.
If necessary, to preserve liquidity, we could suspend or defer capital projects, as well as other strategic initiatives. Strategies to increase earnings power or
generate additional cash flow, including acquisitions, divestitures and other transactions could be delayed or not materialize given the current economic
uncertainty. In response to the COVID-19 pandemic, we could decide to permanently shut down machines or facilities and be required to record significant
closure costs, remediation costs, long-lived asset impairment or accelerated depreciation charges.
The economic uncertainty resulting from the COVID-19 pandemic and the ensuing decline in financial market returns and low-interest rate environment
could continue to result in an increase in the amount by which our pension plans are underfunded by the next measurement date at year-end. This could
result in a significant increase in the amount of our required future pension contributions, which could have an adverse effect on our financial condition.
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If we do not generate enough cash to fund our short-term or long-term obligations, we may have to draw further on our credit facilities to meet our
obligations or seek additional sources of liquidity. The economic uncertainty resulting from the COVID-19 pandemic and any downgrade of our credit
ratings could lead to greater difficulty in obtaining additional financing on favorable terms.
The COVID-19 pandemic, including related governmental responses and economic impacts, market disruptions and changes in consumer habits, has
heightened the risks and uncertainties described in the risk factors below, and should be read in conjunction therewith.
Strategic Risks
Strategic risks relate to our future business plans and strategies, including the risks associated with the global macro-environment in which we operate,
trends in our industry, demand for our products, competitive threats, product innovation, public policy developments, changes to consumption habits,
resource allocation, and strategic initiatives, including mergers and acquisitions, dispositions, and restructuring activity.
Developments in non-print media and changes in consumer habits regarding the use of paper are expected to continue to adversely affect the demand
for some of our key products.
Trends in non-print media are expected to continue to adversely affect demand for traditional print media, including our papers, and our customers’
products. Neither the timing nor the extent of these trends can be predicted with certainty. Our newspaper, magazine, book and catalog publishing
customers could increase their use of, and compete with, non-print media, including multimedia technologies, electronic storage and communication
platforms such as websites and social media, which could further reduce their consumption of newsprint, commercial printing papers or other products we
manufacture, including market pulp. The demand for our paper products has weakened significantly over the past decade. This situation has accelerated
since the COVID-19 pandemic as confinement and work from home has altered consumer habits, which could become permanent and also impact the
demand for pulp. For example, over the 10 years ended December 31, 2020, according to industry statistics, North American newsprint demand fell by
69%, and fell by 26% in 2020.
We face intense competition in the forest products industry.
We compete with numerous forest products companies, some of which have greater financial resources. The trend toward consolidation in the forest
products industry has led to the formation of sizable global producers that have greater flexibility in pricing and financial resources for marketing,
investment, research and development, innovation, and expansion. Because the markets for our products are highly competitive, actions by competitors can
affect our ability to compete and the volatility of prices at which our products are sold.
The forest products industry is capital intensive, and we require significant investment to remain competitive. Some of our competitors may be lower-cost
producers in some of the businesses in which we operate. For example, the sizable low-cost hardwood and softwood grade pulp capacity in South America,
which continues to grow as a result of ongoing investment and whose costs are thought to be very competitive, and the actions those mills take to gain
market share, could continue to adversely affect our competitive position in similar grades. This in turn could impact our sales and cash flows, and push us
to consider significant capital investments to remain competitive. Failure to compete effectively could have a material adverse effect on our business,
financial condition or results of operations.
If we are unable to offer products certified to globally recognized forestry management and chain of custody standards or meet customers’ product
specifications, it could adversely affect our ability to compete.
Based on market interest, we offer a number of our products, including pulp and paper, wood and tissue, with specific designations to one or more globally
recognized forest management and chain of custody standards as well as product specifications to meet customers’ requirements. Our ability to conform to
new or existing guidelines for certification depends on a number of factors, many of which are beyond our control, such as: changes to the standards or the
interpretation or the application of the standards; the collaboration of our suppliers in timely sharing product information; the adequacy of government-
implemented conservation measures; and the existence of territorial disputes between Indigenous peoples and governments. If we are unable to offer
certified products, or to meet commitments to supply certified product or meet the product specifications of our customers, it could adversely affect the
marketability of our products and our ability to compete with other producers.
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We may not be successful in implementing our strategies to increase earnings power.
Our corporate strategy is focused on continuing to transform the Company away from mature product markets and products in structurally declining
demand toward a more profitable and sustainable organization over the long run. This includes maximizing value generation from structurally declining
paper, growing in pulp and wood products, integrating our pulp into value-added quality tissue, and investing in product innovation, while maintaining a
disciplined approach to capital allocation.
The implementation of our corporate strategy is subject to uncertainty and could require significant capital investments. In addition, strategic initiatives
could have unintended consequences, including, for example, a loss of certain pulp customers if our tissue segment becomes competitive with tissue
products sold by those customers.
As part of our corporate strategy, we pursue acquisitions, divestitures, and other strategic transactions and projects to complement, expand or optimize our
business, such as our entry into wood manufacturing in the U.S., and tissue production and sales. In connection with any acquisition, divestiture, strategic
transaction or project, we may not successfully integrate an acquired business, assets, technologies, processes, controls, policies, and operations with ours
or realize some or all of the anticipated benefits and synergies of the acquisition, divestiture, strategic transaction or project. In connection with such
transactions, we may face challenges associated with entering into a new market, production location, product category, or meeting customers’ demands.
We may also face issues with the separation of processes and loss of synergies following the divestiture of businesses. In addition, we may not be able to
successfully negotiate potential acquisitions, divestitures, strategic transactions or projects that we identify, or may not be able to obtain financing that may
be needed. Future acquisitions could result in potentially dilutive issuances of equity securities and the incurrence of debt and contingent liabilities, and
substantial goodwill. The negotiation of any transaction and its completion may be complex, costly, and time consuming. To the extent we are unsuccessful
in implementing our corporate strategy or our efforts do not achieve the anticipated outcomes, our results of operations and cash flows may be adversely
affected.
Changes in the political or economic conditions in the U.S., Canada or other countries in which we sell our products could adversely affect our results
of operations.
We manufacture products in the U.S. and Canada, and we sell products throughout the world. The economic and political policies of each country and
region have a significant impact on our costs and the prices of, and demand for, our products. Changes in regional economies and economic policies can
affect demand for our products, manufacturing and distribution costs, pricing, sales volume, and the availability or cost of insurance. These changes, in
turn, can affect our results of operations. Changes to regional economies and economic policies that can bring about such effects include, among others,
changes in the terms of, or countries that are parties to, bilateral and multi-lateral trade agreements and arrangements, limitations on the ability of potential
customers to import products or obtain foreign currency for payment of imported products, and political and economic instability, including pandemics,
significant civil unrest, acts of war or terrorist activities, or unstable or unpredictable governments in countries in which we operate or trade.
Our business is subject to global economic conditions and is highly cyclical; soft conditions could cause a number of the risks we face to increase in
likelihood, magnitude and duration.
Our operations and performance depend significantly on worldwide economic conditions. During periods of weak or weakening global economic
conditions, we would expect any increase in unemployment or lower gross domestic product growth rates to adversely affect demand for our products as
our customers delay or reduce their expenditures. For example, during an economic downturn, end consumers may reduce newspaper and magazine
subscriptions as a direct result of their financial circumstances, contributing to lower demand for our products by our customers. Advertising demand in
printed magazines and newspapers may also decline. Lower demand for print advertisements leads to fewer or smaller pages in, and may lead to less
frequent publication of, printed newspapers, magazines and other advertisement circulars and periodicals, decreasing the demand for our products. In
addition, demand for our market pulp products is generally associated with the production rates of paper producers, as well as consumption trends for
products such as tissue, toweling and absorbent products.
An economic downturn in the U.S. or Canada could also negatively affect the U.S. or Canadian housing industry, which is a significant driver of demand
for our lumber and other wood-based products. For example, a decline in housing starts or in the repair and remodeling segment could create a low level of
primary demand for our lumber and other wood-based products, which we would expect to result in our wood products business operating at a lower level
until there is a meaningful recovery in new residential construction demand or in the repair and remodeling sector. In addition, with less lumber demand,
sawmills could generate fewer wood chips that we use in our pulp and paper mills, which could lead those mills to increase their supply from the open
market, where prices can fluctuate with market conditions. We could also have less wood residue to use internally, which would increase our fossil fuel
consumption and, as a result, our costs and environmental impact.
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The forest products industry is also highly cyclical. The overall levels of demand for the products we manufacture, and consequently, our sales and
profitability, reflect fluctuations in levels of end user demand. As described above, end user demand depends at least in part on general economic
conditions in North America and the world, and the effect can be significant. In addition to end user demand, we have experienced cyclical changes in
prices, sales volume and margins for our commodity products as a result of changing market trends and the effect of capacity fluctuations on supply and
demand as well as the relative competitiveness of producers. Because our commodity products have few distinguishing qualities from producer to producer,
competition is based mainly on price, which is determined by supply relative to demand, which is in turn affected by the factors described above.
Operational Risks
Operational risks arise from external events, processes, people and systems that affect the operation of our businesses. These include risks affecting, among
other things, marketing and sales, woodlands management, production, supply chains, information management, data protection and security, including
cybersecurity, human resources, and reputation.
Our manufacturing businesses may have difficulty obtaining timber or wood fiber at favorable prices, or at all.
Wood fiber is the principal raw material we use in our business. We primarily use wood chips and logs for our pulp, tissue, and paper mills. Our wood
products business is also dependent on our timber supply.
We depend heavily on harvesting rights and timber supply guarantees over government-owned land in Ontario and Quebec, respectively. The volume of
harvest permitted under these licenses is subject to limits, which are generally referred to as the annual allowable cut (or, “AAC”). The AAC is reviewed
regularly, typically every five years in Quebec and every 10 years in Ontario. The next AAC revision in Quebec is scheduled to take place in 2023 while
Ontario is completing AAC revisions in 2021 for the forests in which we operate. About 25% of the total allowable harvesting rights in Quebec are
allocated through an open auction system. The prices generated by the auction system are used to set pricing for the remainder of the AAC.
In addition, regulatory developments, activist campaigns and litigation advanced by Indigenous groups or other stakeholders have caused, and may cause in
the future, significant reductions in the amount of timber available for commercial harvest in Canada, or that meet standards required for third-party
certifications. Future regulation, particularly by Ontario, Quebec, or the federal Canadian government, as well as litigation, changes in forest management
certification standards, and actions taken by activists to influence the availability of timber for commercial harvest could focus on any one or more of the
use of timberlands, forest management practices, forest management and chain of custody certification standards, consultation with Indigenous groups,
protection of habitats and endangered or other species, including the woodland caribou, promotion of forest biodiversity, and the response to, and
prevention of, catastrophic wildfires.
Increased pressures on the Canadian provincial and federal governments to increase the protection of the woodland caribou, its habitat, and the boreal
forest, could impact timber supply. For example, regulations relating to habitats, and endangered or other species could significantly reduce timber supply
to our mills. Our access to timber may also be affected by factors such as fire and fire prevention, insect infestation, disease, ice storms, wind storms,
drought, flooding, and other natural and man-made causes, which could potentially reduce supply and increase prices.
Though timber is our primary source of fiber, wood fiber is a commodity and we also buy a significant portion of our fiber requirements on the open
market. Prices for wood fiber are cyclical and subject to market influences, which could be concentrated in one or more regions due to market shifts. The
timber requirements for our U.S. sawmills are met mostly by purchasing timber from timberland owners.
If we are unable to obtain adequate supplies of timber or wood fiber at favorable prices for any of the reasons described above, our business operation
could be materially and adversely affected.
A sustained increase in the cost of purchased energy and other raw materials would lead to higher manufacturing costs, which could reduce our
margins.
Our operations consume large amounts of energy, such as electricity, natural gas, fuel oil, and wood residue, a substantial proportion of which we buy on
the open market. The main raw materials we require in our manufacturing processes are wood fiber and chemicals. The prices for raw materials and energy
are volatile and may change rapidly, which impacts our manufacturing costs, directly affects our results of operations and may contribute to earnings
volatility.
For our commodity products, the relationship between industry supply and demand, rather than changes in the cost of raw materials, determines our ability
to increase prices. Consequently, we may be unable to pass along increases in our operating costs to our customers. Any sustained increase in energy,
chemical, or raw material prices without any corresponding increase
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in product pricing would reduce our operating margins and potentially require us to limit or cease operations of one or more of our facilities.
We also generate electricity at our hydroelectric facilities. There can be no certainty that we will be able to maintain the water rights necessary for our
hydroelectric power generating facilities, or to renew them on favorable conditions. The closure of certain machines or facilities located in Quebec could
trigger the exercise of termination rights by the Quebec government under hydro water rights agreements. The amount of electricity we can generate is also
subject to the volume of rain or snowfall and is therefore variable from one year to the next.
We are subject to physical, financial and regulatory risks associated with global, regional, and local weather conditions, and climate change.
Our operations and the operations of our suppliers are subject to climate variations, which impact the productivity of forests, the frequency and severity of
wildfires, the availability of water, the distribution and abundance of species, and the spread of disease or insect epidemics, which in turn may adversely or
positively affect timber production and availability. Over the past several years, changing weather patterns and climatic conditions due to natural and man-
made causes have added to the unpredictability and frequency of natural disasters such as hurricanes, earthquakes, hailstorms, wildfires, drought, flooding,
snow, ice storms, the spread of disease, and insect infestations. Any of these natural disasters could also affect woodlands or cause variations in the cost of
raw materials, such as virgin fiber. Changes in precipitation could make wildfires more frequent or more severe, and could adversely affect timber
harvesting or our hydroelectric production. The effects of global, regional, and local weather conditions, and climate change, including the costs of
complying with evolving climate change regulations and transition costs relating to a low carbon economy could also adversely impact our results of
operations.
We could experience disruptions in operations or increased labor costs due to labor disputes or occupational health and safety issues.
As of December 31, 2020, we employed approximately 7,100 people, of whom approximately 3,700 were represented by various unions, primarily Unifor,
and the Confederation of National Trade Unions (or, the “CNTU”) in Canada, and predominantly by the United Steelworkers International (or, the “USW”)
in the U.S. In the past year, we renewed or entered into a number of agreements with unions, covering approximately 500 employees in Canada. Collective
agreements covering approximately 300 employees in Canada have expired, involving certain Canadian sawmills.
While we intend to renew collective agreements, there can be no assurance that we will be able to renew agreements on satisfactory terms, or that we will
maintain continuously satisfactory agreements with all of our unionized employees. Should we be unable to do so, it could result in strikes, work stoppages,
or disturbances by affected employees, which could cause us to experience a disruption of operations and affect our business, financial condition, or results
of operations.
Occupational health and safety issues, including relating to the COVID-19 pandemic, could also cause disruptions in operations or otherwise affect labor-
related costs.
Difficulties in our employee relations or difficulties identifying, attracting, and retaining employees for work, particularly in remote locations and
certain positions with specialized skills, could lead to operational disruptions or increase our costs.
Our ability to achieve our future goals and objectives is dependent, in part, on maintaining good relations with our employees and minimizing employee
turnover at our corporate offices, mills, and woodlands operations. Work stoppages, excessive employee turnover, or difficulty in attracting and retaining
employees, particularly for work in remote locations and certain positions with specialized skill sets, could lead to operational disruptions or increased
costs.
Disruptions to our supply chain, operations, or the delivery of our products, could adversely affect our financial condition or results of operations.
The success of our businesses is largely contingent on the availability of, and direct access to, raw materials, as well as our ability to ship products on a
timely and cost-efficient basis. As a result, any event that disrupts or limits transportation or delivery services or the operations of our suppliers could
materially and adversely affect our business. In addition, our operating results depend on the continued operation of our various production facilities and
our ability to complete construction and maintenance projects on schedule. Interruptions of operations at our facilities, including interruptions caused by
the events described below, could materially reduce the productivity and profitability of a particular manufacturing facility, or our business as a whole,
during and after the period of such operational difficulties.
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Our operations, supply chain, and transportation and delivery services are subject to potential hazards, including explosions, fires, accidental release of
toxic materials, severe weather and natural disasters, mechanical and power failures, structural failures at any of our dams or hydroelectric facilities,
supplier disruptions, labor shortages or other difficulties, public health measures to prevent or eradicate epidemics or pandemics, transportation
interruptions, remediation complications, environmental and workplace risks, and terrorist or other violent acts.
Some of these hazards can cause personal injury and loss of life, severe damage to or destruction of property, equipment, or the environment, and can result
in, among other things: the suspension of operations; the shutdown of affected facilities; reputational damage; the imposition of civil or criminal penalties;
workers’ compensation; and claims against us with respect to workplace exposure, exposure of contractors on our premises, as well as other persons
located nearby.
We are subject to disruptions to the information technology systems used to manage our operations and other business processes, including
cybersecurity and privacy incidents that could involve sensitive company, employee, customer, vendor, and shareholder information.
We use information technology to securely manage operations and various business functions. We rely on various technologies to process, store, and report
on our business and interact with employees, customers, vendors, and shareholders. The secure and reliable processing, maintenance, and transmission of
this information is critical to our operations and business strategy. Despite our security design and controls, and those of our third-party providers, our
information technology and infrastructure may be vulnerable to interruptions, breakdowns, cyberattacks or breaches due to employee error, malfeasance,
hackers, computer viruses, ransomware, natural disasters, power or telecommunications failures, as well as other disruptions. A cybersecurity breach could
result in operational disruptions or the misappropriation of sensitive data or personal information and could subject us to civil and criminal penalties,
litigation, or have a negative impact on our reputation. We may be required to expend capital and other resources to protect against such security breaches
or cyberattacks, or to remediate problems caused by such breaches, attacks, or other disruptions. We have been the subject of cyberattacks from time to
time, none of which have had a material impact on our business information systems or operations. There can be no assurance that such disruptions or
misappropriations and the resulting repercussions will not negatively impact our cash flows and materially affect our results of operations or financial
condition. Recent developments in cybersecurity and privacy legislation in different jurisdictions are imposing additional obligations on us and could
expand our potential liability in the event of a cybersecurity or privacy incident.
We are currently transitioning from certain legacy system applications, and during the transition, such legacy systems may be more vulnerable to attack
or failure and implementation of the transition may cause disruptions to our business information systems.
We are currently in the process of replacing certain legacy system applications with an integrated business management software platform. Prior to the
completion of this upgrading process, we may not have supplier or third-party support for legacy systems in the event of failure or required updates, and
such legacy systems may be more vulnerable to breakdown, malicious intrusion, and random attack. Prior to the completion of this upgrading process, we
may also experience difficulties maintaining or replacing the hardware infrastructure required to operate these legacy systems. Such legacy systems, if not
properly functioning prior to their replacement, could adversely affect our business.
During the process of replacing legacy systems, we could experience disruptions to our business information systems and normal operating processes
because of the projects’ complexity. The potential adverse consequences could include delays, loss of information, decreased management reporting
capabilities, damage to our ability to process transactions, harm to our control environment, diminished employee productivity, business interruptions, and
unanticipated increases in costs. Further, our ability to achieve anticipated operational benefits from new platforms is not assured.
Negative publicity, even if unjustified, could have a negative impact on our brand and the marketability of our products.
We believe that we have established a reputation for transparent communications, social and corporate governance, responsible forestry practices, and
overall sustainability leadership. We also believe that our commitment to sustainable and responsible forestry practices extends well beyond strict
compliance with applicable forestry regulations, which in Quebec and Ontario are already among the most, if not the most, rigorous in the world. Negative
publicity, whether or not justified, relating to our operations and our business could tarnish our reputation or reduce the value of our brand and market
demand for our products. In addition, the actions of activists, whether or not justified, could impede or delay our ability to access raw materials or obtain
third-party certifications with respect to forest management and chain of custody standards that we seek in order to supply certified products to our
customers. In these cases, we may have to incur significant expenses and dedicate additional resources to defend ourselves against activist campaigns,
rebuild our reputation, and restore the value of our brand.
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Financial Risks
Financial risks relate to our ability to meet financial obligations and mitigate exposure to broad market risks, including: volatility in foreign currency
exchange rates, interest rates and commodity prices, capital structure, as well as credit and liquidity risk, including risk related to cash management,
extension of credit, collections, credit ratings, and availability and cost of funding.
Currency fluctuations can adversely affect our competitive position, selling prices, manufacturing costs, and net monetary items.
We compete with producers from around the world, particularly North America, Europe, and South America, in most of our product lines, with the
exception of wood products and tissue, where we compete primarily with other North American producers. We sell our products mainly in transactions
denominated in U.S. dollars, but we also sell in certain local currencies, including the Canadian dollar, the euro, and the pound sterling. Changes in the
relative strength or weakness of these currencies, particularly the U.S. dollar, could affect international trade flows of these products. A stronger U.S. dollar
might attract imports, thereby increasing product supply and possibly creating downward pressure on prices. On the other hand, a weaker U.S. dollar might
encourage U.S. exports but also increase manufacturing costs in Canadian dollars.
We are particularly sensitive to changes in the value of the Canadian dollar versus the U.S. dollar. The actual impact of these changes depends primarily on
the proportion of our production and sales that occur in Canada, the proportion of our financial assets and liabilities denominated in Canadian dollars, and
the magnitude, direction and duration of changes in the exchange rate. We expect exchange rate fluctuations to continue to impact costs and revenues, but
we cannot predict the magnitude or direction of this effect for any period, and there can be no assurance of any future effects. In 2019 and 2020, the
Canadian dollar fluctuated between a low of US$1.27 in December of 2020 and a high of US$1.45 in March of 2020. Based on operating projections for
2021, if the Canadian dollar strengthens by one cent against the U.S. dollar, we expect that it will decrease our annual operating income by approximately
$16 million, and vice versa.
Furthermore, certain monetary assets and liabilities, including a substantial portion of our net pension and other postretirement benefit obligations and our
net deferred income tax assets, and certain of our indebtedness, including the Quebec secured term loan facility (or, the “Loan Facility”) are denominated
in Canadian dollars. As a result, our earnings and the amounts borrowable under our Loan Facility can be subject to the potentially significant effect of
foreign exchange gains or losses in respect of these Canadian dollar net monetary items. A fluctuation of the Canadian dollar against the U.S. dollar in any
given period would generally cause a foreign exchange gain or loss or change in the effective availability of the Loan Facility.
The amount by which our pension plans are underfunded could increase the level of required contributions, which could have an adverse impact on
our financial condition.
As of December 31, 2020, we had net pension obligations of $1,440 million, of which approximately 78% relates to our registered pension plans in the
provinces of Quebec and Ontario, and approximately 22% of which relates to our U.S. qualified pension plan. See Note 16, “Pension and Other
Postretirement Benefit Plans,” to our Consolidated Financial Statements, for a description of our pension plan funding obligations, including our unfunded
pension obligations.
The amount by which our pension plans are funded or underfunded varies depending upon the return on pension fund investments, the level of interest rates
used to determine minimum funding levels, the payments of benefits, and other actuarial assumptions and experience. Variations from our assumptions
would cause the actual amount of our required contributions to vary from our current estimates. Any additional contributions to our pension plans to fund
potential deficit increases would be required to be paid over a period of time ranging from seven to 11 years depending upon the laws applicable to the
funding of the specific pension plan. Any change to laws and regulations applicable to the funding of our pension plans could also increase or decrease our
future funding obligations. Similarly, because we make our Quebec and Ontario pension plan contributions in Canadian dollars, the amount of our
contributions as stated in U.S. dollars can be subject to the potentially significant effect of foreign currency exchange rate variations. Any such variations
could materially affect our cash flows and financial condition, in each case either positively or negatively depending on the direction and magnitude of the
variation. In addition, an increase in our net pension obligations could make it more difficult to obtain financing on favorable terms.
It is also possible that regulators, including Canadian provincial pension regulators, could attempt to compel additional funding of certain of our pension
plans, including our Canadian registered pension plans, in respect of plan members associated with sites we formerly operated. On June 12, 2012, we filed
a motion for directives with the Quebec Superior Court, the court with jurisdiction in the creditor protection proceedings under the Companies’ Creditors
Arrangement Act (Canada) (or, the “CCAA Creditor Protection Proceedings”), seeking an order to prevent pension regulators in each of Quebec, New
Brunswick, and Newfoundland and Labrador from declaring partial wind-ups of pension plans relating to employees of former operations in
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New Brunswick, and Newfoundland and Labrador, or a declaration that any claim for accelerated reimbursements of deficits arising from a partial wind-up
is a barred claim under the CCAA Creditor Protection Proceedings. A partial wind-up would likely shorten the period in which any deficit within those
plans, which could reach up to C$150 million ($118 million), would have to be funded if we do not obtain the relief sought. At this time, we cannot
estimate the additional contributions, if any, that may be required in future years, but they could be material.
Our operations require substantial capital and we may be unable to maintain adequate capital resources to provide for all of our capital requirements.
Our businesses are capital intensive and require regular capital expenditures in order to maintain our equipment, increase our operating efficiency, comply
with environmental laws, and innovate to remain competitive. If our available cash resources and cash generated from operations are not sufficient to fund
our operating needs, make pension contributions, and finance our working capital, capital expenditures, and duty cash deposits, we would either need to
borrow or reduce or delay capital expenditures. If we cannot maintain or upgrade our equipment as required, we may become unable to manufacture
products that compete effectively. An inability to make required capital expenditures in a timely fashion could also have a material adverse effect on our
growth, business, financial condition, or results of operations.
The terms of our ABL Credit Facility, our Senior Secured Credit Facility, the indenture governing our 2026 Notes and our Loan Facility could restrict
our current and future operations, and changes relating to LIBOR could impact our borrowings under some of these facilities.
The credit agreements governing our senior secured asset-based revolving credit facility (or, the “ABL Credit Facility”), our senior secured credit facility
(or, the “Senior Secured Credit Facility”), the indenture governing our 4.875% senior notes due 2026 (or, the “2026 Notes”), and our Loan Facility contain
certain restrictive covenants that impose operating, borrowing, and financial restrictions on us and could limit our ability to engage in activities that might
be in our long-term best interests. For a description of our ABL Credit Facility, Senior Secured Credit Facility, the indenture governing the 2026 Notes and
the Loan Facility, including the covenants and restrictions they contain, see Note 15, “Long-Term Debt,” to our Consolidated Financial Statements.
A breach of the covenants under the ABL Credit Facility, the Senior Secured Credit Facility, the 2026 Notes or the Loan Facility could result in an event of
default, which could allow holders and lenders, as the case may be, to accelerate the repayment of their debt and could result in the acceleration of the
repayment of any other debt to which a cross-acceleration or cross-default provision applies. An event of default under the ABL Credit Facility, the Senior
Secured Credit Facility or the Loan Facility would also allow the lenders to terminate all commitments to extend further credit to us under those facilities.
If we were unable to repay amounts due and payable under the ABL Credit Facility, the Senior Secured Credit Facility or the Loan Facility, the lenders
would have the right to proceed against the collateral securing the indebtedness. In any of these events, we may seek to refinance our indebtedness, but be
unable to do so on commercially reasonable terms. As a result, we could be: limited in how we conduct our business; unable to raise additional debt or
equity financing to operate during general economic or business downturns; unable to compete effectively or to take advantage of new business
opportunities; or forced to sell assets.
In addition, our borrowings under the ABL Credit Facility and the Senior Secured Credit Facility bear interest at variable rates, primarily based on LIBOR
as the reference. LIBOR is subject to national and international proposals for reform that may cause LIBOR to cease to exist after 2021 or to perform
differently than in the past. While we expect that reasonable alternatives to LIBOR will be available, we cannot predict the consequences and timing of the
development of alternative reference rates, and the transition to an alternative reference rate could result in an increase in our interest expense.
We may be subject to losses that might not be covered in whole or in part by our insurance coverage.
We maintain property, business interruption, credit, general liability, casualty, and other types of insurance, including environmental liability, that we
believe are in accordance with customary industry practices, but we are not fully insured against all potential hazards inherent in our business, including
losses resulting from human error, cybersecurity issues, natural disasters, war risks, or terrorist acts. As is typical in the industry, we also do not maintain
insurance for any loss to our access to standing timber from natural disasters, regulatory changes, or other causes. Changes in insurance market conditions
have caused, and may in the future cause, premiums and deductibles for certain insurance policies to increase substantially and in some instances, for
certain insurance to become unavailable or available only for reduced amounts of coverage. If we were to incur a significant liability for which we were not
fully insured, we might not be able to finance the amount of the uninsured liability on terms acceptable to us or at all, and might be obligated to divert a
significant portion, or all, of our cash flow from normal business operations.
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We could be required to curtail production, shut down machines or facilities, restructure operations, or sell non-core assets, which could result in
recording significant additional closure costs and long-lived asset impairment or accelerated depreciation charges.
As part of our transformation strategy, and in response to changing market dynamics and structurally declining demand for some of our products, it may be
necessary to further curtail production, permanently shut down machines and facilities, restructure operations, or sell non-core assets. In addition to the
potential loss of production, curtailments and shutdowns could result in asset or goodwill impairments, accelerated depreciation, and closure costs for the
affected facilities, including restructuring charges, exit or disposal costs, and remediation and other environmental costs, which could negatively impact our
cash flows and materially affect our results of operations and financial condition. The closure of machines or facilities could also trigger the payment of
severance, additional pension contributions, or wind-up deficiencies.
Losses related to the impairment of long-lived assets to be held and used are recognized when circumstances, such as continuing losses or demand declines
in certain businesses, indicate the carrying value of an asset group may not be recoverable. When indicators that the carrying value of an asset group may
not be recoverable are triggered, we evaluate the carrying value of the asset group in relation to its expected undiscounted future cash flows. If the carrying
value of an asset group is greater than the expected undiscounted future cash flows to be generated by the asset group, an impairment charge is recognized
based on the excess of the asset group’s carrying value over its fair value. If it is determined that the carrying value of an asset group is recoverable, we
review and adjust, as necessary, the estimated useful lives of the assets in the group. If there were to be a triggering event, it is possible that we could record
significant non-cash long-lived asset impairment or accelerated depreciation charges in future periods, which would be recorded as operating expenses and
would negatively impact our results of operations.
We also may be disposing of assets or businesses and be required to recognize additional impairment charges based on the excess of the asset group’s
carrying value over the expected net proceeds from the sale, which could materially affect our results of operations and financial condition.
We could be required to record goodwill impairment charges on all or a significant amount of the goodwill on our Consolidated Balance Sheets.
We have goodwill of $31 million recorded in our Consolidated Balance Sheet as of December 31, 2020, all of which arose from our acquisition of the U.S.
Sawmill Business. Goodwill represents the excess of the purchase price of an acquisition over the estimated fair values of identifiable tangible and
intangible assets of the acquired business. Future acquisitions that we make may also result in significant amounts of additional goodwill. The
determination of goodwill involves significant judgment and assumptions including the assessment of the results of the most recent fair value calculations,
the identification of macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, specific events affecting us
and the business, and making the assessment on whether each relevant factor will impact the impairment test positively or negatively, and the magnitude of
any such impact. The carrying value of goodwill is not amortized, and is tested for impairment at the reporting unit’s level annually, or more frequently if
events or changes in circumstances indicate a potential impairment loss. In the event that the net carrying amount of the reporting unit exceeds its fair
value, an impairment charge is recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying
amount of goodwill in that reporting unit.
We could be required to record additional valuation allowances against our recorded deferred income tax assets.
We recorded significant deferred income tax assets relating to our Canadian operations in our Consolidated Balance Sheet as of December 31, 2020. If, in
the future, we determine that we are unable to recognize these deferred income tax assets as a result of sustained cumulative losses in our Canadian
operations, we could be required to record additional valuation allowances for the portion of the deferred income tax assets that is not more likely than not
to be realized. Such valuation allowances, if taken, would be recorded as a charge to income tax provision and would adversely impact our results of
operations.
Legal and Compliance Risks
Legal and compliance risks arise from governmental and regulatory action, operations and business conduct, and contractual and other legal liabilities,
including risks associated with: international trade regulation; legal proceedings; our shareholder relationships; commitments to customers, suppliers or
other stakeholders; and compliance with securities, governance and other laws and regulations, policies and procedures, such as those relating to financial
reporting and disclosure obligations, the environment, forest management, health and safety, marketing, product safety and liability, and privacy and
antitrust. Governmental and regulatory risk includes the risk that government or regulator actions will impose additional costs on us or cause us to have to
change our operations and business models or practices.
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Products we produce in one country and export to another may become subject to duties or other international trade remedies or restrictions.
We produce products in the U.S. and Canada, and we sell products worldwide. Under international agreements and the domestic trade laws of many
countries, trade remedies are available to domestic industries where imports are alleged to be “dumped” or “subsidized” and such imports are alleged to
cause material injury, or an imminent threat of injury, to a domestic industry. Under such laws, dumping generally involves selling for export a product at a
price lower than that at which the same or similar product is sold in the home market of the exporter, or where the export prices are lower than a value that
typically must be at or above the full cost of production (including sales and marketing costs) and a reasonable amount for profit. International trade laws
also generally provide that subsidies from governments may be subject to trade remedies under certain circumstances. A trade remedy investigation or
proceeding may involve allegations of either dumping, subsidization, or both. Where injurious dumping is found, the trade remedy is typically an anti-
dumping duty order. Where injurious subsidization is found, the trade remedy is typically a countervailing duty order. In principle, a duty equal to the
amount of dumping or subsidization, as applicable, should be imposed on the importer of the product. However, whether or not consistent with treaty
obligations or other applicable law, authorities have imposed assumed or estimated rates on products that may not be related to actual dumping by a
particular producer or may not be based on subsidies actually received by the producer. Anti-dumping and countervailing duty orders do not prevent the
export or import of the product, but rather require the importer of the product to pay to the government an anti-dumping duty or countervailing duty, or a
deposit on estimated anti-dumping duties or countervailing duties, as applicable. The imposition of additional anti-dumping duties, countervailing duties,
deposit requirements in respect of estimated duties, or any other trade remedy on one or more of our products could materially affect our cash flow, and the
competitive position of our operations relating to the affected product.
In addition to risks related to the trade remedies discussed above, a country could impose taxes or tariffs on some or all imported products, whether or not
consistent with existing trade treaties or agreements, and trade treaties, agreements and arrangements may be renegotiated or terminated, or one or more
countries that are parties may withdraw. Such actions with respect to trade treaties, agreements, or arrangements taken by any country where we sell our
products internationally, could materially affect our cash flow, and the competitive position of our operations relating to the affected products.
We are subject to countervailing and anti-dumping duty orders on the vast majority of our U.S. imports of softwood lumber products produced at our
Canadian sawmills, which could materially affect our operations and cash flows.
The vast majority of our U.S. imports of softwood lumber products produced at our Canadian sawmills are subject to orders requiring us to pay cash
deposits to the U.S. for estimated countervailing and anti-dumping duties. These cash deposit requirements are the result of petitions filed by U.S. softwood
lumber products producers and forest landowners with the U.S. Department of Commerce (or, “Commerce”) and the U.S. International Trade Commission.
No such deposits paid to the U.S. will be converted into actual countervailing duties or anti-dumping duties unless and until all appeals of final
determinations and orders have been exhausted. We requested and participated in the first and second administrative reviews and could remain subject to
annual administrative reviews for five or more years following the initial Commerce orders.
We have been required to pay cash deposits for estimated countervailing duties and anti-dumping duties on the vast majority of our U.S. imports of
softwood lumber products produced at our Canadian sawmills, since April 28, 2017, and June 30, 2017, respectively. As of December 31, 2018, the rates
for such estimated countervailing and anti-dumping duties were 14.70% and 3.20%, respectively. Commerce issued its final results in the countervailing
duties first administrative review on December 1, 2020 and its final results in the anti-dumping first administrative review on November 30, 2020 and
established our new rates at 19.10% for countervailing duties and 1.15% for anti-dumping duties. These rates will apply until Commerce sets new duty
rates in subsequent administrative reviews, or new rates may be set through a remand determination by a United States-Mexico-Canada Agreement
binational panel (or, “Panel”) on appeal. Through December 31, 2020, our aggregate cash deposits paid to the U.S. for all affected products totaled $243
million.
We cannot provide any assurance regarding the estimated or final duty rates that may be determined by Commerce in its future administrative reviews.
During any period in which our U.S. imports of softwood lumber products from our Canadian sawmills are subject to countervailing or anti-dumping cash
deposit requirements or duty requirements, our cash flows and the competitive position of those products and our related Canadian operations could be
materially affected.
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Any failure to comply with laws and regulations could require us to incur or record additional liabilities and adversely affect our results of operations.
We are subject to a variety of foreign, federal or national, state, provincial, and local laws and regulations dealing with financial reporting and disclosure
obligations, corporate governance, antitrust, customs and trade, employees, contractors, transportation, taxes, timber and water rights, pensions, benefit
plans, workplace health and safety, the manufacture and sale of consumer products, including product safety and liability, the environment, and Indigenous
peoples, among others. Many of these laws and regulations are complex and subject to differing interpretation, and the requirements of laws and
regulations of different countries and jurisdictions in which we operate, have sales or otherwise do business, or in which our securities trade or in which our
security holders reside, may differ or be inconsistent with one another. Compliance with these laws and regulations, including changes to them or their
interpretations or enforcement, or introduction of new laws and regulations, has required in the past, and could require in the future, substantial
expenditures by us and adversely affect our results of operations. In addition, noncompliance with laws and regulations, especially those related to the
environment and Indigenous peoples, could significantly damage, and require us to spend substantial amounts of money to rebuild our reputation.
In addition, our ability to comply with these laws and regulations often depends, at least in part, on compliance by independent third parties, such as
contractors and agents we retain to provide services. For example, our compliance with customs requirements for international shipments depends in part
on compliance by our customs brokers, sureties, transportation companies, and external advisors, in addition to our own employees and consultants, and we
could be liable for noncompliance by any of them, even if inadvertent. Failure to comply with laws and regulations can also be the result of unintended
consequences, such as unforeseen consequences of information technology modifications, upgrades, or replacements. Although we strive to comply with
laws and regulations applicable to us, no company, including ours, can assure that it will successfully prevent, detect, or remediate all potential instances of
non-compliance, and any failure to do so could be material, require substantial expenditures, and adversely affect our results of operations.
As an owner of real estate and industrial facilities, we could be required to incur or record additional environmental and related health and safety
liabilities.
As an owner and operator of real estate and industrial facilities, we are subject to a wide range of general and industry-specific laws and regulations relating
to pollution and the protection of the environment, as well as several requirements stipulated in our facilities’ permits, including those governing air
emissions, water usage, wastewater discharges, the storage, management and disposal of regulated substances and waste, the investigation and clean-up of
contaminated sites, landfill and wastewater treatment system operation and closure, forest management and operations, endangered species and their
habitat, health and safety, carbon pricing and climate change. Changes to our operations and costs to comply with these laws and regulations may increase
as the requirements of these laws and regulations evolve. Noncompliance with these regulations or permit conditions can result in significant civil,
administrative or criminal fines or penalties, or regulatory or judicial orders enjoining or curtailing operations. This may include liability under
environmental laws for cleanup, improvement or change of pollution control equipment, and other costs and damages, including investigation costs, tort
liability and damages to natural resources, resulting from past or present spills, releases or threats of releases of regulated substances and waste on or from
our current or former properties or operations. We may also be liable under health and safety laws for related exposure of employees, contractors and other
persons to substances and waste on or from our current or former properties or injuries. We may incur liability under these laws without regard to whether
we knew of, were responsible for, or owned the property at the time of, any exposure, spill, release or threats of releases of any regulated substances or
waste on or from any current or former property, or at properties where we arranged for the disposal of regulated materials or waste. Claims or liability may
also arise out of currently unknown environmental conditions, obligations arising as a result of new or revised rules or regulations (e.g. regulation of
perfluoroalkyl or polyfluoroalkyl substances, or “PFAS”) or aggressive enforcement efforts by government regulators, public interest groups or private
parties. As a result, we may be required to incur or record additional environmental or related health and safety liabilities.
Our international sales and operations are subject to applicable laws relating to trade, export controls, and foreign corrupt practices, the violation of
which could adversely affect our operations.
As a result of our international sales and operations, we are required to comply with trade and economic sanctions and other restrictions imposed by the
U.S., Canada, and other governments or organizations. We are also subject to the U.S. Foreign Corrupt Practices Act, the Corruption of Foreign Public
Officials Act (Canada), the United Kingdom Bribery Act 2010 and other anti-bribery laws that generally bar bribes or unreasonable gifts to foreign
governments or officials and, in some jurisdictions, to other commercial parties. Changes in trade sanctions laws could restrict our business practices,
including cessation of business activities in sanctioned countries or with sanctioned entities, and may result in modifications to compliance programs.
Violations of these laws or regulations could result in sanctions, including fines, loss of authorizations
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needed to conduct our international business, and other penalties, as well as result in a default under certain of our financing agreements, each of which
could adversely impact our business, operating results, and financial condition.
We are and may become a party to a number of legal proceedings, claims, governmental inquiries, investigations, and other disputes, and adverse
judgments could have a material adverse effect on our financial condition.
We become involved in various legal proceedings, claims, governmental inquiries, investigations, and other disputes in the normal course of business.
These could include, for example, matters related to contracts, transactions, commercial and trade disputes, taxes, environmental issues, activist damages,
employment and workers’ compensation claims, grievances, human rights complaints, pension and benefit plans and obligations, health and safety, product
safety and liability, asbestos exposure, intellectual property, financial reporting and disclosure obligations, corporate governance, Indigenous peoples’
claims, antitrust, governmental regulations, and other matters. In addition to claims against us and our consolidated subsidiaries, these matters may involve
claims asserted by others against unconsolidated partnerships and joint ventures in which we have an interest. Although the final outcome of these matters
is subject to many variables and cannot be predicted with any degree of certainty, we regularly assess the status of the matters and establish provisions
(including legal costs expected to be incurred) when we believe an adverse outcome is probable, and the amount can be reasonably estimated. Legal
proceedings that we believe could have a material adverse effect if not resolved in our favor, or that we believe to be significant, are discussed in Item 3 of
this Form 10-K and in Note 18, “Commitments and Contingencies – Legal matters” to our Consolidated Financial Statements. However, our reports do not
disclose or discuss all matters of which we are aware. If our assessment of the probable outcome or materiality of a matter is not correct, we may not have
made adequate provision for such loss and our financial condition, cash flows, or results of operations could be adversely impacted.
In addition, if a loss resulting from an adverse outcome in connection with a matter were to affect the solvency of certain of our subsidiaries or remain
unpaid for certain periods, it could result in a default under the ABL Credit Facility, the Senior Secured Credit Facility, or the indenture governing the 2026
Notes and the Loan Facility. For additional information, see “Financial Risks – The terms of our ABL Credit Facility, our Senior Secured Credit Facility,
the indenture governing our 2026 Notes and our Loan Facility could restrict our current and future operations, and changes relating to LIBOR could impact
our borrowings under some of these facilities” above.
Some matters that we may be involved in from time to time result from claims brought by us against third parties, including customers, suppliers,
shareholders, governments or governmental agencies, activists and others. Even if such a matter does not involve a claim for damages or other penalty or
remedial action against us, such a matter could nevertheless adversely affect our relationships with those and other third parties.
There is a shareholder who owns a substantial percentage of our common stock, and its interests could differ from those of other stockholders, and its
actions could affect the price of our common stock.
There is a shareholder who owns a substantial percentage of the outstanding shares of our common stock, and could increase its percentage ownership even
further. This shareholder could be in a position to influence the outcome of actions requiring shareholder approval, including, among other things, the
election of board members. The concentration of ownership could also facilitate or hinder a negotiated change of control and consequently, impact the
value of our common stock. In addition, the possibility that this shareholder may sell all or a large portion of our common stock in a short period of time
may adversely affect the trading price of our common stock.
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ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Information regarding our owned properties is included in Item 1, “Business.”
In addition to the properties that we own, we also lease under long-term leases office and manufacturing premises, machinery, chemical equipment, office
equipment, and rail cars, have water rights on certain government-owned waters, and have harvesting rights or timber supply guarantees with respect to
certain government-owned land. For additional information, see Note 12, “Operating Leases” and Note 18, “Commitments and Contingencies –
Commitments,” to our Consolidated Financial Statements.
We hold the properties that we own or lease, and the rights and supply guarantees described above, through various operating subsidiaries, including our
principal U.S. operating subsidiary, Resolute FP US Inc., and our principal Canadian operating subsidiary, Resolute FP Canada Inc. For a list of our
subsidiaries as of December 31, 2020, see Exhibit 21.1, “Subsidiaries of the registrant,” of this Form 10-K.
The obligations under the Senior Secured Credit Facility are secured by a first priority mortgage on the real property of our Calhoun facility and a first
priority security interest on the fixtures and equipment located therein. On November 13, 2019, a legal hypothec in the amount of C$30 million ($24
million) was registered on our Saint-Félicien immovable and movable property, for more information see Note 18, “Commitments and Contingencies –
Legal matters – Fibrek acquisition,” to our Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
See the description of our material pending legal proceedings in Note 18, “Commitments and Contingencies – Legal matters,” to our Consolidated
Financial Statements, which is incorporated in this “Item 3 – Legal Proceedings” by reference.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
Our common stock trades under the stock symbol “RFP” on both the NYSE and the TSX. As of January 29, 2021, there were 2,377 holders of record of
our common stock.
We did not declare or pay any dividends on our common stock in 2020 or 2019. Any future determination to pay dividends will be at the discretion of the
board of directors and will be dependent on then-existing conditions, including our financial condition, results of operations, capital requirements,
contractual and legal restrictions, business prospects and other factors that the board of directors considers relevant. Our debt agreements contain
restrictions on our ability to pay dividends and repurchase shares, as further described in Note 15, “Long-Term Debt,” to our Consolidated Financial
Statements.
On March 2, 2020, our board of directors authorized a share repurchase program of up to 15% of our common stock, for an aggregate consideration of up
to $100 million. In 2020, we repurchased 6.9 million shares at a cost of $30 million under this program. In 2019, we repurchased 4.8 million shares at a
cost of $24 million, completing our $150 million share repurchase program launched in 2012.
The following table sets forth information about our stock repurchases for the three months ended December 31, 2020:
o October 31
1 to November 30
1 to December 31
Total Number of Shares Purchased
Average Price Paid per Share
$
$
$
$
4.71
4.92
5.69
4.88
1,066,988
877,799
191,029
2,135,816
Total Number of Shares Purchased
Approximate Dollar Value of Shares
as Part of Publicly
Announced Plans or
Programs
1,066,988
877,799
191,029
2,135,816
That May Yet Be
Purchased Under the
(1)
Plans or Programs
$
$
$
$
75,866,143
71,546,792
70,460,359
70,460,359
(1)
$100 million share repurchase program launched in 2020.
See Part III, Item 12 of this Form 10-K, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” for
information regarding our equity compensation plan.
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Table of Contents
The following graph compares the cumulative total return attained by shareholders of our common stock versus the cumulative total returns of the Standard
& Poor’s 500 (or, the “S&P 500”) index and the Peer Group (as defined below), since December 31, 2015. The graph tracks the performance of a $100
investment in our common stock, in the S&P 500 index, and in the Peer Group on December 31, 2015 (with the reinvestment of all dividends) to
December 31, 2020. The stock price performance included in the graph is not necessarily indicative of future stock price performance.
(1)
(2)
The information contained in this stock performance graph shall not be deemed to be “soliciting material” or “filed” or incorporated by reference
in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended (or, the “Exchange
Act”), except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act of 1933, as amended, or
the Exchange Act.
The group of individual peer companies comprising the peer group (or, the “Peer Group”) are: Clearwater Paper Corporation, Domtar
Corporation, Verso Corporation, Mercer International Incorporated, Rayonier Advanced Materials, Canfor Corporation, Interfor Corporation,
Western Forest Products Inc and West Fraser Timber Company Limited. Conifex Timber Incorporated is no longer considered in the Peer Group.
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ITEM 6. SELECTED FINANCIAL DATA
The following table presents a summary of historical consolidated financial information for each of the last five years and should be read in conjunction
with Items 7 and 8 of this Form 10-K. The selected financial information for the years ended December 31, 2020, 2019 and 2018, and as of December 31,
2020 and 2019, under the captions “Statement of Operations Data,” “Segment Sales Information,” “Statement of Cash Flows Data” and “Financial
Position” shown below has been derived from our audited Consolidated Financial Statements.
(In millions, except per share amounts)
Statement of Operations Data
Sales
Operating income (loss)
Net income (loss) including noncontrolling interests
Net income (loss) attributable to Resolute Forest Products Inc.
Basic net income (loss) per share attributable to Resolute Forest Products
Inc. common shareholders
Diluted net income (loss) per share attributable to Resolute Forest
Products Inc. common shareholders
Dividend declared per common share
Segment Sales Information
Market pulp
Tissue
Wood products
Paper
Statement of Cash Flows Data
Net cash provided by operating activities
Cash invested in fixed assets
Disposition of assets
(In millions, except otherwise indicated)
Financial Position
Fixed assets, net
Total assets
Total debt
Additional Information
Number of employees
$
$
$
$
$
$
$
$
$
$
$
$
2020
2,800
99
10
10
0.12
0.12
—
668
173
1,025
934
2,800
334
78
14
2020
$
$
$
1,441
3,730
561
Years Ended December 31,
2019
2018
2017
2,923
17
(47)
(47)
(0.51)
(0.51)
—
797
165
616
1,345
2,923
85
113
3
$
$
$
$
$
$
$
$
$
$
$
$
3,756
379
235
235
2.57
2.52
1.50
1,085
130
823
1,718
3,756
435
155
336
As of December 31,
2019
2018
1,459
3,626
449
$
$
$
1,515
3,935
645
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
3,513
42
(78)
(84)
(0.93)
(0.93)
—
911
81
797
1,724
3,513
158
164
21
2017
1,716
4,147
789
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2016
3,545
(18)
(76)
(81)
(0.90)
(0.90)
—
836
89
596
2,024
3,545
81
249
5
2016
1,842
4,227
762
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
7,100
6,700
7,400
7,700
8,300
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management’s discussion and analysis is intended to help the reader understand Resolute Forest Products, our results of operations, cash
flows and financial condition. The discussion is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements
and the accompanying notes (or, the “Consolidated Financial Statements”) contained in Item 8, “Financial Statements and Supplementary Data” of this
Annual Report on Form 10-K (or, “Form 10-K”).
When we refer to “Resolute Forest Products,” “Resolute,” “we,” “our,” “us,” or the “Company,” we mean Resolute Forest Products Inc. with its
subsidiaries, either individually or collectively, unless otherwise indicated.
OVERVIEW
Resolute Forest Products is a global leader in the forest products industry with a diverse range of products, including market pulp, tissue, wood products,
and paper, which are marketed in over 50 countries. The Company owns or operates some 40 facilities, as well as power generation assets, in the U.S. and
Canada. We produce lumber in the U.S. and Canada, and we are the largest producer of wood products east of the Canadian Rockies, the largest producer
of uncoated mechanical papers in North America, and a competitive pulp producer in North America. We are also a leading global producer of newsprint
and an emerging tissue producer. Resolute has third-party certified 100% of its managed woodlands to internationally recognized sustainable forest
management standards.
We report our activities in four business segments: market pulp, tissue, wood products, and paper. We believe an integrated approach across these segments
maximizes value creation for our Company and stakeholders.
We are guided by our vision and values, focusing on safety, sustainability, profitability, accountability, and teamwork. We believe we can be distinguished
by the following competitive strengths:
•
Competitive cost structure combined with diversified and integrated asset base
–
–
–
–
–
large-scale and cost-effective operations, including significant internal energy production from cogeneration and hydroelectric facilities,
which support our value proposition;
control over fiber transformation chain from standing timber to end-product for the majority of our offering;
nearly 100% of our products sourced from high-quality virgin fiber;
harvesting rights for the majority of fiber needs in Canada; and
sophisticated logistics capabilities to meet demanding customer expectations.
•
Solid balance sheet
–
–
–
favorable pricing and flexibility under borrowing agreements together with our liquidity levels support ability to weather challenging
market cycles and to execute our transformation strategy;
significant tax assets to defer cash income taxes and provide synergies to execute this strategy; and
customers benefit from a financially stable and reliable business partner in a challenging industry.
•
Seasoned management team
–
–
–
deep industry expertise, with influential leaders in forestry, operations, environmental risk management and public policy;
culture of accountability, encouraging transparency and straightforwardness; and
core identity tied to renewable resources we harvest in a truly sustainable manner.
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Our Business
Products
For information on our products, see Part I, Item 1, “Business – Products” of this Form 10-K.
Strategy and highlights
Our corporate strategy is focused on continuing to transform the Company away from mature product markets and products in structurally declining
markets toward a more profitable and sustainable organization over the long run, founded on a competitive portfolio of manufacturing assets and a solid
presence in long-term growth markets. Our strategy is to drive value creation by growing in pulp and wood products, integrating our pulp into value-added
quality tissue, investing in product innovation, and maximizing cash generation from our paper assets, while maintaining a disciplined approach to capital
allocation.
Growing in pulp and wood products
Market pulp and wood products are core segments for the Company, and we believe in their long-term, sustained growth potential. We are confident in our
ability to generate attractive returns for shareholders as operators of these assets. Our strategy is to take an opportunistic approach to these strategic
initiatives, such as:
•
•
•
spending to improve productivity and/or lower costs;
investing selectively in organic expansions; and
pursuing opportunistic strategic acquisitions.
For example, in 2020, we acquired three sawmills in the U.S. South, with combined production capacity of 550 million board feet once ramped-up, giving
us immediate scale in an attractive region and providing an opportunity to create value by maintaining appropriate working capital and by deploying our
operational expertise in sawmilling, with a focus on reliability, productivity and safety.
Integrating our pulp into value-added quality tissue
We entered the tissue market in 2015 with the construction of a greenfield tissue facility at our Calhoun (Tennessee) site and the acquisition of two tissue
mills and a recovered paper facility in Florida. The purpose of our diversification into tissue is to add value with the integration of our market pulp,
particularly as printing and writing demand for pulp continues to decline. We also believe that the tissue business will provide a more stable source of
revenue and profitability.
Our tissue operations are almost entirely supplied from our pulp mills, creating synergies and minimizing risks associated with cyclical market pulp
pricing. For our Calhoun tissue facility, pulp is transferred directly as slush pulp into the tissue operation, reducing process, energy, handling and logistics
costs. Equipped with three modern converting lines sized specifically for the tissue machine, our Calhoun tissue facility mostly sells converted products
that target the fast growing premium private-label markets in the U.S.
In December 2020, we completed the acquisition of a tissue converting facility located in Hagerstown, Maryland, with three bath tissue and towel
converting lines. The Hagerstown assets will improve converting capacity, extend the Company's product offering and expand its territory in the attractive
Northeast market.
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Investing in product innovation
Fiber from trees is renewable, reusable and fossil-free, and we believe that it can serve as a core pillar in the ongoing shift away from fossil-based materials
toward renewable alternatives. With our large-scale access to high-quality fiber, our expertise in managing its value-transformation chain and our
strategically-located manufacturing facilities, we believe in investing in our business to build a competitive forest products company for the future.
For example, today we manufacture wood pellets used in renewable energy production from sawmill byproducts and, in partnership with a leading industry
research organization, we recently launched an innovative pilot bio-refinery plant to produce lignin and cellulosic sugars for uses such as wood adhesives,
animal feed and composites. In early 2020, we also announced the construction of a commercial plant to produce cellulose filaments, a new sustainable
biomaterial derived from wood fiber that can be integrated into commercial and consumer products for many industries, including transportation,
construction and energy, increasing the resistance and durability of those products. The cellulose filaments will be marketed with the help of Performance
BioFilaments Inc., a joint venture established in 2014 by Resolute and Mercer International Inc., dedicated to the development of non-traditional
applications for cellulose filaments.
We see certain megatrends around evolving customer preferences toward more renewable alternatives, urbanization and demographic changes that could
open opportunities for our Company in value-added engineered wood products to capitalize on the growing role of wood in multi-family residential and
commercial construction, as well as innovative fiber-derived products.
Maximizing cash generation from paper assets
Our high quality paper assets position us to compete effectively in the industry. This segment remains an important part of our business, generating cash to
help finance our transformation strategy. In order to remain competitive in mature and declining markets that our paper operations face, we strive to
consistently:
• maintain a stringent focus on controlling costs and optimizing our performance;
• manage production and inventory levels; and
•
focus production at our most profitable and lower-cost facilities and machines.
Disciplined approach to capital allocation
As we operate in a capital-intensive and cyclical industry, we believe that the proper allocation of capital is a top priority, and that it should be done in a
disciplined manner, with a view to maximize free cash flow through the business cycle and to generate attractive returns for our shareholders. Accordingly,
we:
•
•
•
•
•
spend our capital in a disciplined, strategic and focused manner, concentrating on our most competitive sites and the highest-return projects;
explore value-creating opportunities for incremental organic growth projects, segment extensions, bolt-on acquisitions, position-repurposing
activities, divestitures, investments, join ventures, capital market transactions and other similar transactions in order to calibrate and maximize the
efficiency of our allocation of capital and other resources and optimize the value of our business;
seek to maintain solid financial liquidity that over time is sufficient to support the evolution of our transformation strategy;
based on market conditions, seek to retire, repay or refinance our outstanding indebtedness with a view to reducing costs and enhancing our
financial flexibility; and
return excess capital over time to our shareholders through dividends and share repurchases.
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Here is a summary of some of our key strategic initiatives since 2014:
(1)
(2)
(3)
(4)
With the acquisition of Atlas Paper Holdings, Inc. and its subsidiaries (or, “Atlas”), we gained an immediate position in the North American
consumer tissue market and access to a customer base to accelerate the sale and distribution of our Calhoun tissue production.
Incremental pulp capacity from the pulp digester serves in part to supply slush pulp to our Calhoun tissue machine.
The acquisition of three sawmills in the U.S. South from Conifex Timber Inc., with combined production capacity of 550 million board feet, gives
us immediate scale in an attractive region, with quality assets in a rich fiber basket, close to growing end-markets. The facilities produce
construction-grade dimensional lumber and decking products from locally sourced southern yellow pine for distribution within the U.S.
Subsequent to year-end 2020, we issued $300 million unsecured senior notes due in 2026 with a 4.875% coupon, the proceeds of which, together
with cash on hand, were used to redeem the $375 million aggregate principal amount of our 5.875% senior notes due in 2023.
Sustainable development and performance
Our sustainability strategy is based on a balanced approach to environmental, social and economic performance, designed to enhance our competitive
position. It is supported by public commitments in a number of key performance areas, focusing primarily on:
•
improving resource efficiency, which helps control wood fiber, chemical, and energy costs, three significant input costs in our industry;
• moving beyond regulatory compliance and environmental incident management to differentiate ourselves as an environmental supplier of choice;
•
•
positioning Resolute as a competitive employer; and
building solid relations in our operating communities.
The overall responsibility for our sustainability performance resides with our president and chief executive officer, while we rely on our corporate
sustainability committee to support the delivery of our key commitments and to implement related plans.
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As an industry leader, we are committed to maintaining effective sustainability oversight and management practices, and have moved beyond already
rigorous regulatory compliance and environmental incident management to commit to transparency and annual sustainability reporting. The environmental,
health and safety committee of the board of directors of the Company periodically reviews the Company’s strategies, activities, policies and
communications regarding sustainability and other related matters, and makes recommendations to the board.
Our recent key sustainability achievements include:
• Achieving world-class safety performance, close to the targets we set at the beginning of the year, even with the integration of our three new U.S.
sawmills. The Company’s Occupational Safety and Health Administration (OSHA) incident rate was 0.62 for the year, with a severity rate of 16.8.
Safety is our first priority, and we strive for zero injuries.
• Achieving an 83.4% reduction in absolute greenhouse gas (or, “GHG”) emissions (scope 1 and 2) compared to 2000 levels, and setting a new
target to reduce absolute GHG emissions by 30% against 2015 levels by 2025.
•
Sourcing three quarters of our energy from renewable sources, and producing one third of the energy we consume internally.
• Announcing the construction of a $20 million commercial cellulose filament plant, slated for completion in 2022, at our Kénogami (Quebec) paper
mill. Cellulose filaments, a sustainable biomaterial derived from wood fiber, are manufactured entirely from renewable sources, resulting in a low
carbon footprint.
•
•
Continuing implementation of a $45 million strategic investment plan at our Saint-Félicien pulp mill to improve the operation, increase average
daily production capacity, and reduce GHG emissions from the use of fossil fuels by 20%, or approximately 35,000 metric tons of CO equivalents
per year.
2
Increasing the energy efficiency of our facilities and lowering GHG emissions, including an initiative at our Dolbeau paper mill to decrease the
use of the auxiliary boiler fueled with bunker C oil, equivalent to a reduction of 1,600 metric tons of CO equivalents per year.
2
• Deploying a carbon capture unit and ancillary equipment at our Saint-Félicien pulp mill to improve growth rates at Toundra Greenhouse, a state-
of-the-art vegetable-growing complex in which we hold a 49% interest, and announcing its third expansion since opening in 2016: a $39 million
investment that will create 55 new jobs, in addition to consolidating Toundra Greenhouse’s position as a major player in the province’s greenhouse
industry.
• Maintaining certification of 100% of Resolute-owned or managed woodlands to at least one internationally recognized forest management
standard (Sustainable Forestry Initiative , or “SFI ”, and Forest Stewardship Council , or “FSC ”). As a result, our commitments extend well
beyond strict compliance with applicable forestry regulations, which in Quebec and Ontario are already among the most – if not the most –
rigorous in the world.
®
®
®
®
• Maintaining internationally recognized chain of custody certifications at 100% of our certified manufacturing facilities (SFI, FSC, and Programme
for the Endorsement of Forest Certification, or “PEFC™”), and completing multisite chain of custody certification for all of our tissue mills,
including our Calhoun tissue operation.
• Deploying our Regional Supplier Registry web portal to support the development of local, regional and Indigenous business in our Quebec
operating communities as part of our commitment to further integrate sustainability practices into our procurement process.
•
•
Continuing to report climate change, water security and forests disclosures to CDP, as we have done since 2006. We received an “A-” for our
forests disclosures – the highest score achieved in this category by any North American forest products company – placing us at the leadership
level and reflecting environmental best practices. We maintained management level scores for our climate change (“B-”) and water security (“B”)
disclosures, reflecting the actions we have taken to evaluate and manage our risks in these categories. Full disclosures and scores are available on
CDP’s website (www.cdp.net), though this information is not incorporated by reference into this Form 10-K and should not be considered part of
this or any other report that we file with or furnish to the U.S. Securities and Exchange Commission (or, the “SEC”).
Continuing to implement our proactive approach to environmental management by beating our class 1 and 2 environmental incident target,
recording 13 incidents in 2020, and maintaining ISO 14001:2015 environmental management system certification at 100% of our certified
operations.
• Making new environmental commitments to include our wood products facilities in the Company’s GHG emissions inventory by 2022, develop
scope 3 GHG emission commitments by working with suppliers and other stakeholders, and record fiber losses of no more than 40 kg per metric
ton of production.
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•
Completing a consultative process of our internal and external stakeholders in order to assess, review and update our shared priorities, which
inform our sustainability strategy and public commitments.
• Adopting a board-level diversity policy striving to maintain a minimum of 25% representation each of men and women, as well as an executive
leadership-level diversity policy acknowledging diversity as a key factor in the Company’s talent management strategy. Currently there are two
women on the board representing 29% of its membership.
• Updating our Information Technology Security Policy, adopting a three-year continuous improvement strategy for managing data security and
privacy, and making a commitment to review the strategy annually.
•
•
Training 100% of all new employees on the Company's Code of Business Conduct, and committing to review it, as well as our Ethics Reporting
Policy, on an annual basis.
Ensuring 100% of our operations reported their community outreach activities, including active engagement of union officials, employees, mayors
and other community leaders, Indigenous partners, small community business owners, customers, and representatives of governments at various
levels.
• Maintaining long-term consultative and business relationships with close to 40 Indigenous communities and organizations.
• Achieving our annual commitment to making community and charitable contributions of more than $1 million by contributing $1.1 million toward
various community organizations, as well as more than $420,000 toward scholarships and research grants.
•
In addition to maintaining information resources such as BorealForestFacts.com and The Resolute Blog, we maintained a social media presence
with platforms such as Forum boréal and Boreal Forum. The information contained on or connected to BorealForestFacts.com , The Resolute Blog
and the Forum boréal and Boreal Forum social media platforms is not incorporated by reference into this Form 10-K and should not be considered
part of this or any other report that we file with or furnish to the SEC.
• Other sustainability performance indicators and disclosures prepared in accordance with the Global Reporting Initiative’s GRI Standards are
available on our website (www.resolutefp.com/sustainability). We have reported publicly in accordance with GRI since 2010. Such sustainability
disclosures on our website are not incorporated by reference into this Form 10-K and should not be considered part of this or any other report that
we file with or furnish to the SEC.
Our sustainability achievements have been recognized by independent organizations. In 2020, we received extensive regional, North American and global
recognition for excellence and leadership in corporate social responsibility and sustainable development. Some of the more noteworthy awards include:
•
•
•
•
The Environment + Energy Leader top project of the year award for our Thunder Bay thermomechanical pulp biorefinery (July 21, 2020);
The Business Intelligence Group’s BIG Award for Business for green company of the year in the enterprise/manufacturing category (November
10, 2020);
The American Forest & Paper Association’s leadership in sustainability award in the energy efficiency/greenhouse gas reduction (large company)
category for the second consecutive year (November 13, 2020); and
In partnership with FPInnovations and Performance BioFilaments, a partnership award at the ADRIQ (Association pour le développement de la
recherche et de l'innovation du Québec) Innovation Awards for our commercial plant specializing in the production of cellulose filaments at the
Kénogami paper mill (November 19, 2020).
For a complete list of Resolute’s public sustainability commitments, visit our corporate website at www.resolutefp.com/sustainability. The commitments on
our website are not incorporated by reference into this Form 10-K and should not be considered part of this or any other report that we file with or furnish
to the SEC.
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Power generation
We produce electricity at six cogeneration facilities and seven hydroelectric dams. The output is consumed internally or sold under contract to third parties.
This allows us to reduce our costs by generating energy internally at a lower cost compared to open market purchases, and by producing revenue from
external sales.
This table provides a breakdown of the output capacity (based on installed capacity and operating expectations in 2021) available for internal consumption
at our existing production facilities:
INTERNAL CONSUMPTION
Calhoun (Tennessee)
Coosa Pines (Alabama)
Hydro Saguenay (Quebec) (7 dams)
Thunder Bay (Ontario)
Type
Cogeneration
Cogeneration
Hydroelectric
Cogeneration
Capacity
(MW)
64
25
170
25
Energy
Consumption
(MWh/Year)
337,000
155,000
1,174,000
192,000
We estimate that the approximate annualized cost savings to our operations attributable to internal consumption from our cogeneration assets and
hydroelectric facilities is between $40 million and $45 million.
The table below shows the facilities where we currently produce electricity to sell externally as green power produced from renewable sources at favorable
rates, almost all of which we buy back at lower rates for use in our operations:
EXTERNAL SALES
Dolbeau (Quebec)
Gatineau (Quebec)
Saint-Félicien (Quebec)
Thunder Bay (Quebec)
Type
Cogeneration
Cogeneration
Cogeneration
Cogeneration
Energy
Capacity
(MW)
28
15
43
65
Annualized Sales
(MWh/Year)
193,000
106,000
290,000
431,000
External sales generated from our cogeneration assets reduced cost of sales, excluding depreciation, amortization and distribution costs (or, “COS”), by $38
million, $36 million and $37 million for the years ended December 31, 2020, 2019 and 2018, respectively.
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2020 Overview
Impact of the COVID-19 pandemic
We have sustained operations across all of our business segments through the COVID-19 pandemic, but we had to take certain measures in the face of the
dramatic reduction in economic activity, particularly for marketing-dependent products like newspapers, inserts, flyers and commercial paper. We continue
to focus on key short-term priorities, including: operating under rigorous protocols around the health and safety of our employees, contractors and
suppliers; reducing our paper production consistent with the dramatic decrease in economic activity affecting demand; maintaining disciplined liquidity
management; monitoring customer credit risk; and controlling spending around selling, general and administrative (or, “SG&A”) expenses and capital
expenditures. Specifically, as of December 31, 2020, we have reduced our operational footprint by temporarily idling paper machines representing in
aggregate 28% of our run-rate capacity (equivalent to 48,000 metric tons per month). This decision led to workforce reductions and spending limitations or
deferrals. We continue to monitor the market to adjust our capacity to market conditions.
Temporary idling of Amos and Baie-Comeau facilities
Due to the overall decrease in demand for newsprint, accelerated by the economic context surrounding the COVID-19 pandemic, the Amos (Quebec) and
Baie-Comeau (Quebec) paper mills have been temporarily idled since April 2020. As a result, we reassessed the remaining useful lives of the fixed assets
and recognized an accelerated depreciation charge of $38 million and recognized additional provisions of $17 million. These charges are recorded in
“Closure costs, impairment and other related charges” in our Consolidated Statement of Operations for the year ended December 31, 2020. We also
recognized inventory write-downs of $25 million recorded in “Cost of sales, excluding depreciation, amortization and distribution costs” in our
Consolidated Statement of Operations for the year ended December 31, 2020.
Business acquisition
On February 1, 2020, we acquired from Conifex Timber Inc. all of the equity securities and membership interests in certain of its subsidiaries, the business
of which consists mainly in the operation of three sawmills and related assets in Cross City (Florida) and in Glenwood and El Dorado (Arkansas) (or, the
“U.S. Sawmill Business”). The U.S. Sawmill Business acquired produces construction-grade dimensional lumber and decking products from locally-
sourced southern yellow pine for distribution within the U.S. This acquisition diversified our lumber production, and increased our operating capacity in
the U.S. South. The fair value of the consideration, paid in cash, for the acquired U.S. Sawmill Business was $173 million. For more information, see Note
3, “Business Acquisition,” to our Consolidated Financial Statements.
Liquidity and capital resources
On November 4, 2020, our Canadian subsidiary, Resolute FP Canada Inc., entered into a secured delayed draw term loan facility (or, the “Loan Facility”)
with Investissement Québec as lender, for up to C$220 million ($173 million, based on the exchange rate in effect on December 31, 2020), with an
availability of C$165 million ($130 million) as at December 31, 2020, subject to certain conditions. As of December 31, 2020, the Loan Facility was
undrawn.
On February 2, 2021, we completed the private offering (or, the "Offering") of $300 million aggregate principal amount of our 4.875% senior notes due
2026 (or, the “2026 Notes”) at an issue price of 100%. We used the net proceeds of the Offering, together with cash on hand, to redeem all of the
outstanding $375 million aggregate principal amount of our 5.875% senior notes due 2023 (or, the “2023 Notes”), at a price of 100% of the aggregate
principal amount thereof, plus accrued and unpaid interest to, but not including, the redemption date. The redemption of the 2023 Senior Notes occurred on
February 18, 2021.
See below under “Liquidity and Capital Resources – Capital Resources” for more information.
Share repurchase program
On March 2, 2020, our board of directors authorized a share repurchase program of up to 15% of our common stock, for an aggregate consideration of up
to $100 million. During the year ended December 31, 2020, we repurchased 6.9 million shares at a cost of $30 million under this program.
34
Table of Contents
2020 vs. 2019
Our operating income was $99 million during the year, compared to $17 million in 2019. Excluding special items, we generated operating income of
$169 million in 2020, compared to $46 million in 2019. Special items are described below.
Our net income in 2020 was $10 million, or $0.12 per diluted share, compared to net loss of $47 million, or $0.51 per share, in 2019. Our net income for
2020, excluding special items, was $56 million, or $0.65 per diluted share, compared to net loss of $46 million, or $0.50 per share, in 2019.
Year Ended December 31, 2020
(In millions, except per share amounts)
GAAP, as reported
Adjustments for special items:
Closure costs, impairment and other related charges
Inventory write-downs related to closures
Start-up costs
Net gain on disposition of assets
Other expense, net
Income tax effect of special items
Adjusted for special items
(1)
Year Ended December 31, 2019
(In millions, except per share amounts)
GAAP, as reported
Adjustments for special items:
Closure costs, impairment and other related charges
Inventory write-downs related to closures
Net gain on disposition of assets
Non-operating pension and other postretirement benefit credits
Other expense, net
Income tax effect of special items
Adjusted for special items
(1)
Operating Income
$
99
Net Income
10
$
53
25
3
(11)
—
—
169
$
Operating Income
$
$
17
18
13
(2)
—
—
—
46
53
25
3
(11)
4
(28)
56
$
Net Loss
(47)
$
18
13
(2)
(47)
22
(3)
(46)
$
EPS
0.12
0.61
0.29
0.03
(0.13)
0.05
(0.32)
0.65
EPS
(0.51)
0.19
0.14
(0.02)
(0.51)
0.24
(0.03)
(0.50)
$
$
$
$
(1)
Operating income (loss), net income (loss) and net income (loss) per share (or, “EPS”), in each case as adjusted for special items, are not financial
measures recognized under U.S. generally accepted accounting principles (or, “GAAP”). We calculate operating income (loss), as adjusted for
special items, as operating income (loss) from our Consolidated Statements of Operations, adjusted for items such as closure costs, impairment
and other related charges, inventory write-downs related to closures, start-up costs, and gains and losses on disposition of assets that are excluded
from our segment’s performance from GAAP operating income (loss). We calculate net income (loss), as adjusted for special items, as net income
(loss) from our Consolidated Statements of Operations, adjusted for the same special items applied to operating income (loss), in addition to non-
operating pension and other postretirement benefit (or, “OPEB”) costs and credits, other income and expense, net, and the income tax effect of the
special items. EPS, as adjusted for special items, is calculated as net income (loss), as adjusted for special items, per diluted share. We believe that
using these non-GAAP measures is useful because they are consistent with the indicators management uses internally to measure the Company’s
performance, and it allows the reader to compare our operations and financial performance from period to period. Operating income (loss), net
income (loss) and EPS, in each case as adjusted for special items, are internal measures, and therefore may not be comparable to those of other
companies. These non-GAAP measures should not be viewed as substitutes to financial measures determined under GAAP.
35
Table of Contents
Fourth Quarter Overview
Three months ended December 31, 2020 vs. December 31, 2019
Our operating income was $4 million in the quarter, compared to operating loss of $69 million in the year-ago period. Excluding special items, we incurred
an operating income of $85 million in the quarter, compared to operating loss of $39 million in the year-ago period. Special items are described below.
Our net loss in the quarter was $52 million, or $0.63 per share, compared to net loss of $71 million, or $0.79 per share, in the year-ago period. Our net
income in the quarter, excluding special items, was $45 million, or $0.55 per diluted share, compared to net loss of $53 million, or $0.59 per share, in the
year-ago period.
Three Months Ended December 31, 2020
(In millions, except per share amounts)
GAAP, as reported
Adjustments for special items:
Closure costs, impairment and other related charges
Inventory write-downs related to closures
Start-up costs
Net gain on disposition of assets
Non-operating pension and other postretirement benefit costs
Other expense, net
Income tax effect of special items
Adjusted for special items
(1)
Three Months Ended December 31, 2019
(In millions, except per share amounts)
GAAP, as reported
Adjustments for special items:
Closure costs, impairment and other related charges
Inventory write-downs related to closures
Net gain on disposition of assets
Non-operating pension and other postretirement benefit credits
Income tax effect of special items
Adjusted for special items
(1)
Operating Income Net (Loss) Income
$
(52)
$
$
$
4
55
25
3
(2)
—
—
—
85
55
25
3
(2)
24
28
(36)
45
$
Operating Loss
$
(69)
Net Loss
(71)
$
18
13
(1)
—
—
(39)
$
18
13
(1)
(11)
(1)
(53)
$
EPS
(0.63)
0.67
0.30
0.04
(0.02)
0.29
0.34
(0.44)
0.55
EPS
(0.79)
0.20
0.14
(0.01)
(0.12)
(0.01)
(0.59)
$
$
$
(1)
Operating income (loss), net income (loss) and EPS, in each case as adjusted for special items, are non-GAAP financial measures. For more
information on the calculation and reasons we include these measures, see note 1 under “Overview – 2020 Overview” above.
36
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RESULTS OF OPERATIONS
Consolidated Results
Selected annual financial information
(In millions, except per share amounts)
Sales
Operating (loss) income per segment:
Market pulp
Tissue
Wood products
Paper
Segment total
Corporate and other
Operating income
Net income (loss) attributable to Resolute Forest Products Inc.
Net income (loss) per share attributable to Resolute Forest Products Inc. common
shareholders:
Basic
Diluted
Adjusted EBITDA
(1)
(In millions)
Cash and cash equivalents
Total assets
Years Ended December 31,
2020
2,800
(1)
(1)
276
(46)
228
(129)
99
10
0.12
0.12
338
$
$
$
$
$
$
$
2019
2,923
39
(16)
(6)
82
99
(82)
17
(47)
(0.51)
(0.51)
213
$
$
$
$
$
$
$
2018
3,756
172
(30)
169
114
425
(46)
379
235
2.57
2.52
574
$
$
$
$
$
$
$
As of December 31,
2020
113
3,730
$
$
2019
3
3,626
$
$
(1)
Earnings before interest expense, income taxes, and depreciation and amortization (or, “EBITDA”) and adjusted EBITDA are not financial
measures recognized under GAAP. EBITDA is calculated as net income (loss) including noncontrolling interest from the Consolidated
Statements of Operations, adjusted for interest expense, income taxes, and depreciation and amortization. Adjusted EBITDA means EBITDA,
excluding special items, such as closure costs, impairment and other related charges, inventory write-downs related to closures, start-up costs,
gains and losses on disposition of assets, non-operating pension and OPEB costs and credits, and other income and expense, net. We believe that
using non-GAAP measures such as EBITDA and adjusted EBITDA is useful because they are consistent with the indicators management uses
internally to measure the Company’s performance and it allows the reader to compare our operations and financial performance from period to
period. EBITDA and adjusted EBITDA are internal measures, and therefore may not be comparable to those of other companies. These non-
GAAP measures should not be viewed as substitutes to financial measures determined under GAAP.
37
Table of Contents
(In millions)
Net income (loss) including noncontrolling interest
Interest expense
Income tax provision
Depreciation and amortization
EBITDA
Closure costs, impairment and other related charges
Inventory write-downs related to closures
Start-up costs
Net gain on disposition of assets
Non-operating pension and other postretirement benefit credits
Other expense (income), net
Adjusted EBITDA
2020 vs. 2019
Operating income variance analysis
Years Ended December 31,
2020
10
34
51
169
264
53
25
3
(11)
—
4
338
$
$
2019
(47)
31
58
167
209
18
13
—
(2)
(47)
22
213
$
$
2018
235
47
152
212
646
121
(1)
8
(145)
(50)
(5)
574
$
$
Sales
Sales were $123 million lower in 2020, or 4%, to $2,800 million. After removing the sales related to the acquisition of the U.S. Sawmill Business in the
first quarter of 2020, sales volume declined by $289 million, mainly reflecting lower shipments in paper and market pulp, partly offset by higher shipments
of wood products. Pricing had a favorable impact of $30 million, mainly as a result of an increase in the average transaction price for wood products and
tissue, up by 41% and 6%, respectively, partly offset by lower average transaction price for market pulp and paper, down by 13% and 11%, respectively.
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Table of Contents
Cost of sales, excluding depreciation, amortization and distribution costs
After removing the COS related to the acquisition of the U.S. Sawmill Business, the effects of lower volume and the effect of the weaker Canadian dollar,
COS decreased by $84 million in 2020, largely reflecting:
•
•
•
•
•
favorable maintenance costs ($55 million), largely associated with timing of outages and reduced spending;
lower energy prices ($12 million);
Canada Emergency Wage Subsidy (or “CEWS”) credit ($10 million);
higher contribution from our internal power generation facilities ($7 million); and
lower fiber costs ($6 million);
partially offset by:
•
increase in write-downs of mill stores and other supplies inventory associated with the temporary idling of the Amos and Baie-Comeau paper
mills compared to the prior year write-downs associated to the indefinite idling of the Augusta (Georgia) paper mill ($12 million).
Depreciation and amortization
Depreciation and amortization was $2 million higher in 2020, primarily due to the acquisition of the U.S. Sawmill Business ($7 million), offset by lower
depreciation on the integrated business management software, which was fully depreciated in the fourth quarter of 2019 ($4 million).
Selling, general and administrative expenses
Selling, general and administrative (or, “SG&A”) expenses were unchanged compared to the year-ago period, mainly due to higher incentive plan expense,
which is based on company performance, and higher stock-based compensation expense, offset by lower headcount, travel and entertainment expenses and
overall lower expenses.
Closure costs, impairment and other related charges
See the corresponding variance analysis under “Corporate and Other” below.
Net gain on disposition of assets
See the corresponding variance analysis under “Corporate and Other” below.
Net income (loss) variance analysis
Non-operating pension and other postretirement benefit credits
We recorded non-operating pension and OPEB credits of nil for the full year in 2020, compared to $47 million in the year-ago period. The difference
mainly reflects lower interest cost ($32 million) and an OPEB curtailment credit related to the indefinite idling of our Augusta mill ($14 million), partly
offset by a settlement loss related to the wind-up of the pension plan of the Thorold paper mill that was indefinitely idled in 2017 and sold in 2020 ($28
million), higher amortization of actuarial losses ($29 million) and lower amortization of prior service credits ($7 million), lower expected return on plan
assets ($25 million), and a pension special termination benefit cost related to the indefinite idling of our Augusta mill ($3 million).
Other expense, net
We recorded other expense, net of $4 million in 2020, compared to other expense, net of $22 million in the prior year. The difference mostly reflects a loss
on forward commodities contracts of $22 million, offset by a current period favorable insurance claim settlement of $15 million related to our acquisition
of Atlas in 2015, compared to the $23 million provision related to the Fibrek Inc. (or, “Fibrek”) litigation recorded in the year-ago period.
Income taxes
We recorded an income tax provision of $51 million in 2020, on income before income taxes of $61 million, compared to an expected income tax provision
of $13 million based on the U.S. federal statutory income tax rate of 21%. The difference reflects: U.S. tax on non-U.S. earnings ($23 million); an increase
to our valuation allowance related to our U.S. operations
39
Table of Contents
($11 million) where we recognize a full valuation allowance against our net deferred income tax assets; foreign tax rate differences ($10 million); and
foreign exchange items ($6 million); partly offset by state income taxes ($6 million); and other, net ($6 million) mainly related to the settlement of an
insurance claim in connection with our acquisition of Atlas.
We recorded an income tax provision of $58 million in 2019, on income before income taxes of $11 million, compared to an expected income tax provision
of $2 million based on the U.S. federal statutory income tax rate of 21%. The difference mainly reflects: an increase to our valuation allowance related to
our U.S. operations ($43 million) where we recognize a valuation allowance against virtually all of our net deferred income tax assets; foreign tax rate
differences ($11 million); and U.S. tax on non-U.S. earnings ($7 million); partly offset by state income taxes ($7 million).
Q4 of 2020 vs. Q4 of 2019
Operating income (loss) variance analysis
Sales
Sales increased by $101 million, or 15%, compared to the fourth quarter of 2019, to $769 million. After removing the sales related to the acquisition of the
U.S. Sawmill Business in the first quarter of 2020, sales volume was $40 million lower, mainly due to lower shipments of paper, partially offset by higher
volumes of wood products. Pricing had a favorable impact of $101 million, mainly as a result of an increase in the average transaction price for wood
products, up by 67%, partly offset by lower average transaction price for paper, down by 7%.
Cost of sales, excluding depreciation, amortization and distribution costs
After removing the COS related to the acquisition of the U.S. Sawmill Business, the effects of lower volume and the effect of the weaker Canadian dollar,
COS increased by $1 million in the quarter, mainly reflecting higher stumpage costs related to current wood prices ($9 million) partly offset by favorable
maintenance costs ($6 million), largely associated with timing of outages and reduced spending.
Selling, general and administrative expenses
SG&A expenses increased by $2 million in the quarter, mainly due to higher incentive plan expense, which is based on company performance, and higher
stock-based compensation expense, mostly offset by lower headcount and lower overall expenses.
Closure costs, impairment and other related charges
In the fourth quarter of 2020, we recorded closure costs, impairment and other related charges of $55 million, related to the temporary idling of our Amos
and Baie-Comeau paper mills, including accelerated depreciation charges of $38 million and severance and other costs of $17 million. This compares to
closure costs, impairment and other related charges of $18 million in the year-ago period, mainly due to the indefinite idling of our paper mill at Augusta,
including severance and other costs of $10 million and accelerated depreciation charges of $8 million.
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Table of Contents
Net loss variance analysis
Non-operating pension and other postretirement benefit (costs) credits
We recorded non-operating pension and OPEB costs of $24 million in the quarter, compared to a credit of $11 million in the year-ago period. The
difference mainly reflects: lower interest cost ($8 million); partly offset by settlement loss related to the wind-up of the Thorold pension plan ($28 million),
higher amortization of actuarial losses ($7 million) and lower expected return on plan assets ($6 million).
Other expense, net
We recorded other expense, net of $28 million in the fourth quarter of 2020, compared to nil in the year-ago period. The difference mostly reflects a loss on
forward commodities contracts of $15 million and a foreign exchange loss of $13 million in the current period.
Income taxes
We recorded an income tax benefit of $4 million in the fourth quarter of 2020, on a loss before income taxes of $56 million, compared to an expected
income tax benefit of $12 million based on the U.S. federal statutory income tax rate of 21%. The difference reflects mostly a decrease to our valuation
allowance related to our U.S. operations ($10 million); partly offset by U.S. tax on non-U.S. earnings ($22 million).
We recorded an income tax provision of $6 million in the fourth quarter of 2019, on a loss before income taxes of $65 million, compared to an expected
income tax benefit of $14 million based on the U.S. federal statutory income tax rate of 21%. The difference reflects mostly: an increase to our valuation
allowance related to our U.S. operations ($25 million); partly offset by U.S. tax on non-U.S. earnings ($4 million).
2019 vs. 2018
For a variance analysis of our 2019 vs. 2018 results of operations, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Results of Operations – Consolidated Results – 2019 vs. 2018,” of our annual report on Form 10-K for the year ended
December 31, 2019, filed with the SEC on March 2, 2020 (or, the “2019 Annual Report”).
Segment Earnings
We manage our business based on the products we manufacture. Our reportable segments correspond to our principal product lines: market pulp, tissue,
wood products, and paper. As of the second quarter of 2020, the results from our newsprint and specialty papers operations have been combined to form the
paper reportable segment. This better reflects management’s internal analysis, given the diminishing percentage newsprint and specialty papers represent in
our product portfolio. Comparative information has been modified to conform to this revised segment presentation.
We do not allocate any of the income or loss items following “operating income” in our Consolidated Statements of Operations to our segments because
those items are reviewed separately by management. Similarly, we do not allocate to the segments: closure costs, impairment and other related charges;
inventory write-downs related to closures; start-up costs; gains and losses on disposition of assets; as well as other discretionary charges or credits.
We allocate depreciation and amortization expense to our segments, although the related fixed assets and amortizable intangible assets are not allocated to
segment assets. Additionally, all SG&A expenses are allocated to our segments, with the exception of certain discretionary charges and credits, which we
present under “corporate and other.”
41
Table of Contents
Highlights
MARKET PULP
(In millions, except where otherwise stated)
Sales
Operating (loss) income
EBITDA
(In thousands of metric tons)
Shipments
Downtime
(2)
(1)
(In thousands of metric tons)
Finished goods inventory
Years Ended December 31,
$
$
$
2020
668
(1)
23
1,118
100
2020
53
$
$
$
2019
797
39
62
1,156
56
December 31,
2019
68
$
$
$
2018
1,085
172
199
1,424
93
2018
80
(1)
(2)
Net (loss) income including noncontrolling interest is equal to operating (loss) income in this segment.
EBITDA, a non-GAAP financial measure, is reconciled below. For more information on the calculation and reasons we include this measure, see
note 1 under “Results of Operations – Consolidated Results – Selected annual financial information” above.
(In millions)
Net (loss) income including noncontrolling interest
Depreciation and amortization
EBITDA
Industry trends
Years Ended December 31,
2020
(1)
24
23
$
$
2019
39
23
62
$
$
2018
172
27
199
$
$
World demand for chemical pulp grew by 3% in 2020 compared to the year-ago period, reflecting an increase of 7.7% in China and of 6.5% in North
America, partly offset by a decrease of 6.5% in Western Europe. World capacity grew by 0.8% over the same period.
42
Table of Contents
World demand for softwood pulp fell by 1.7% in 2020, reflecting a decrease of 7.3% and 2.1% in Western Europe and China, respectively, while North
America increased by 4.5%. The operating rate was 91%.
In the same period, demand for hardwood pulp rose by 6.0%, with shipments to China and North America up by 13.0% and 9.6%, respectively, while
Western Europe was down by 6.5%. The operating rate was 94%.
2020 vs. 2019
Operating (loss) income variance analysis
Sales
Sales were $129 million lower, or 16%, decreasing to $668 million in 2020, primarily due to lower pricing, reflecting a $92 per metric ton decline in the
average transaction price across all grades. Volume also decreased sales by $26 million primarily due to pandemic-induced market downtime for recycled
bleached kraft pulp.
Cost of sales, excluding depreciation, amortization and distribution costs
After adjusting for the effect of lower volume and the Canadian dollar fluctuation, manufacturing costs decreased by $59 million, reflecting:
•
•
•
favorable maintenance costs ($26 million), largely associated with timing of outages and reduced spending;
lower wood fiber costs ($16 million); and
lower energy prices ($8 million), including higher contribution from our internal power generation facilities.
Distribution costs
After adjusting for the effect of lower volume, distribution costs were $8 million lower in 2020 due to lower freight rates and favorable destination mix.
2019 vs. 2018
For a variance analysis of our 2019 vs. 2018 results of operations, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Results of Operations – Segment Earnings – Market Pulp – 2019 vs. 2018,” of our 2019 Annual Report.
43
Table of Contents
Highlights
TISSUE
(1)
(In millions, except where otherwise stated)
Sales
Operating loss
EBITDA
(In thousands of short tons)
Shipments
Downtime
(3)
(2)
(In thousands of short tons)
(3)
Finished goods inventory
$
$
$
Years Ended December 31,
$
$
$
2020
173
(1)
17
95
8
2020
6
$
$
$
2019
165
(16)
2
97
2
December 31,
2019
8
2018
130
(30)
(15)
84
2
2018
5
(1)
(2)
(3)
Net loss including noncontrolling interest is equal to operating loss in this segment.
EBITDA, a non-GAAP financial measure, is reconciled below. For more information on the calculation and reasons we include this measure, see
note 1 under “Results of Operations – Consolidated Results – Selected annual financial information” above.
Tissue converted products, which are measured in cases, are converted to short tons.
(In millions)
Net loss including noncontrolling interest
Depreciation and amortization
EBITDA
Industry trends
Years Ended December 31,
2020
(1)
18
17
$
$
2019
(16)
18
2
$
$
2018
(30)
15
(15)
$
$
Total U.S. tissue consumption grew by 8.6% in 2020 compared to the year-ago period. Converted product shipments increased by 8.1%, led by at-home
shipments up by 16.3%, while away-from-home shipments decreased by 8.5%.
U.S. parent roll production increased by 7.0% in 2020, contributing to a 97% average industry production-to-capacity ratio, up from 93% in the year-ago
period.
44
Table of Contents
2020 vs. 2019
Operating loss variance analysis
Sales
Sales were $8 million higher, or 5%, increasing to $173 million in 2020. Shipments were essentially unchanged as productivity gains for retail products
manufactured at the Calhoun operations compensated for a pandemic-driven drop in away-from-home demand affecting Florida operations. The average
transaction price was $107 per short ton higher, mainly due to favorable prices for converted products.
Cost of sales, excluding depreciation, amortization and distribution costs
After removing the effects of lower volume, our manufacturing costs decreased by $3 million compared to 2019, mainly due to lower fiber costs.
Distribution costs
Distribution costs improved by $3 million, mainly as a result of better customer mix.
2019 vs. 2018
For a variance analysis of our 2019 vs. 2018 results of operations, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Results of Operations – Segment Earnings – Tissue – 2019 vs. 2018,” of our 2019 Annual Report.
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Table of Contents
Highlights
WOOD PRODUCTS
(In millions, except where otherwise stated)
Sales
Operating income (loss)
EBITDA
(In million board feet)
(3)
Shipments
Downtime
(2)
(1)
(In million board feet)
Finished goods inventory
(3)
Years Ended December 31,
$
$
$
2020
1,025
276
319
2,043
279
2020
97
$
$
$
2019
616
(6)
28
1,731
242
December 31,
2019
133
$
$
$
2018
823
169
201
1,846
147
2018
157
(1)
(2)
(3)
Net income (loss) including noncontrolling interest is equal to operating income (loss) in this segment.
EBITDA, a non-GAAP financial measure, is reconciled below. For more information on the calculation and reasons we include this measure, see
note 1 under “Results of Operations – Consolidated Results – Selected annual financial information” above.
Includes wood pellets measured by mass, converted to board feet using a density-based conversion ratio.
(In millions)
Net income (loss) including noncontrolling interest
Depreciation and amortization
EBITDA
Industry trends
Years Ended December 31,
2020
276
43
319
$
$
2019
(6)
34
28
$
$
2018
169
32
201
$
$
U.S. housing starts were 1.4 million on a seasonally adjusted basis in 2020, up by 7.9% compared to 2019, which reflects a 12.3% increase in single-family
starts, offset by a decrease of 1.9% in multi-family starts.
The 2x4 – Random Length (or, “RL”) #1-2 Kiln Dried Great Lakes (or, “KD GL”) price rose by 44.3% in 2020 compared to the year ago period, and the
2x4x8 Stud KD GL price rose by 70.4%. The 2x4 – RL #2 KD Southern Pine (Eastside) price increased by 46.3%, and the 2x4 – RL #2 KD Southern Pine
(Westside) price was up by 48.2%.
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Table of Contents
2020 vs. 2019
Operating income (loss) variance analysis
Sales
Sales were $409 million higher, or 66%, to $1,025 million in 2020, reflecting new volume related to the acquisition of the U.S. Sawmill Business, the
increase in market demand for home repairs and remodeling, and stronger U.S. market housing starts. Shipments rose by 312 million board feet and the
average transaction price increased by $146 per thousand board feet, or 41%. After removing the sales related to the acquisition of the U.S. Sawmill
Business, sales were $272 million higher. Pricing contributed to $239 million increase, reflecting a rise in average transaction price, and sales volume was
$33 million higher. Finished goods inventory dropped to 97 million board feet.
Cost of sales, excluding depreciation, amortization and distribution costs
After removing the COS related to the acquisition of the U.S. Sawmill Business, the effects of higher volume and the weaker Canadian dollar,
manufacturing costs increased by $11 million, mainly reflecting higher log costs.
Distribution costs
After removing the COS related to the acquisition of the U.S. Sawmill Business and the effects of higher volume, distribution costs increased by $8 million,
mainly as a result of higher freight rates and unfavorable destination mix.
Depreciation and amortization
Depreciation and amortization increased by $9 million compared to the year-ago period, primarily due to the acquisition of the U.S. Sawmill Business.
2019 vs. 2018
For a variance analysis of our 2019 vs. 2018 results of operations, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Results of Operations – Segment Earnings – Wood Products – 2019 vs. 2018,” of our 2019 Annual Report.
47
Table of Contents
Highlights
PAPER
(In millions, except where otherwise stated)
Sales
Operating (loss) income
EBITDA
(In thousands of metric tons)
Shipments
Downtime
(1)
(2)
(In thousands of metric tons)
Finished goods inventory
Years Ended December 31,
$
$
$
2020
934
(46)
23
1,577
514
2020
96
$
$
$
2019
1,345
82
154
2,017
203
December 31,
2019
142
$
$
$
2018
1,718
114
227
2,532
42
2018
150
(1)
(2)
Net (loss) income including noncontrolling interest is equal to operating (loss) income in this segment.
EBITDA, a non-GAAP financial measure, is reconciled below. For more information on the calculation and reasons we include this measure, see
note 1 under “Results of Operations – Consolidated Results – Selected annual financial information” above.
(In millions)
Net (loss) income including noncontrolling interest
Depreciation and amortization
EBITDA
Industry trends
Years Ended December 31,
2020
(46)
69
23
$
$
2019
82
72
154
$
$
2018
114
113
227
$
$
North American newsprint demand fell by 26.2% in 2020, compared to 2019. Demand from newspaper publishers fell by 29.4%, while demand from
commercial printers also decreased, by 21.4%. The North American shipment-to-capacity ratio was 75%, compared to 83% in the year-ago-period.
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Global demand for newsprint fell by 22.6% in 2020, with Asia down by 20.3%, and Western Europe down by 21.5%. Accordingly, the global operating rate
decreased to 72%, down from 84% in 2019.
North American demand for uncoated mechanical papers was down by 23.2% in 2020 compared to the year-ago-period, reflecting a 29.0% decrease in
supercalendered (or, “SC”) grades, and a 17.3% drop in standard grades. Compared to 2019, the shipment-to-capacity ratio for all uncoated mechanical
papers decreased from 83% to 73%.
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2020 vs. 2019
Operating (loss) income variance analysis
Sales
Sales fell by $411 million, or 31%, to $934 million in 2020. Shipments decreased by 440,000 metric tons, largely reflecting much lower demand levels
since the onset of the pandemic and our resulting capacity adjustments particularly for marketing-dependent products and commercial paper. The average
transaction price dropped by $75 per metric ton compared to 2019 due to weaker market fundamentals accelerated by the pandemic.
Cost of sales, excluding depreciation, amortization and distribution costs
Manufacturing costs decreased by $41 million after adjusting for the effects of lower volume and the weaker Canadian dollar, reflecting:
•
•
•
favorable maintenance costs ($28 million), due to reduced spending as well as the indefinite idling of our Augusta mill, partly offset by the
temporary idling of the Amos and Baie-Comeau paper mills;
lower energy prices ($6 million); and
higher contribution from our internal power generation facilities ($5 million).
Selling, general and administrative expenses
SG&A expenses decreased by $12 million in the year, mainly due to lower headcount and travel and entertainment expenses.
2019 vs. 2018
As of the second quarter of 2020, the results from our newsprint and specialty papers operations have been combined to form the paper reportable segment.
For a variance analysis of our 2019 vs. 2018 results of operations, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Results of Operations – Segment Earnings – Newsprint – 2019 vs. 2018,” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations – Results of Operations – Segment Earnings– Specialty Papers – 2019 vs. 2018,” of our 2019 Annual
Report.
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CORPORATE AND OTHER
Highlights
(In millions)
Cost of sales, excluding depreciation, amortization and distribution costs
Depreciation and amortization
Selling, general and administrative expenses
Closure costs, impairment and other related charges
Net gain on disposition of assets
Operating loss
Interest expense
Non-operating pension and other postretirement benefit credits
Other (expense) income, net
Income tax provision
Net loss including noncontrolling interest
Years Ended December 31,
2020
(34)
(15)
(38)
(53)
11
(129)
(34)
—
(4)
(51)
(218)
$
$
2019
(23)
(20)
(23)
(18)
2
(82)
(31)
47
(22)
(58)
(146)
$
$
2018
(12)
(25)
(33)
(121)
145
(46)
(47)
50
5
(152)
(190)
$
$
The table below shows the reconciliation of net loss including noncontrolling interest to EBITDA and adjusted EBITDA, which are non-GAAP financial
measures. For more information on the calculation and reasons we include these measures, see note 1 under “Results of Operations – Consolidated Results
– Selected annual financial information” above.
(In millions)
Net loss including noncontrolling interest
Interest expense
Income tax provision
Depreciation and amortization
EBITDA
Closure costs, impairment and other related charges
Inventory write-downs related to closures
Start-up costs
Net gain on disposition of assets
Non-operating pension and other postretirement benefit credits
Other expense (income), net
Adjusted EBITDA
Years Ended December 31,
2020
(218)
34
51
15
(118)
53
25
3
(11)
—
4
(44)
$
$
2019
(146)
31
58
20
(37)
18
13
—
(2)
(47)
22
(33)
$
$
2018
(190)
47
152
25
34
121
(1)
8
(145)
(50)
(5)
(38)
$
$
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2020 vs. 2019
Cost of sales, excluding depreciation, amortization and distribution costs
COS was $34 million in 2020, mainly reflecting:
• write-downs of mill stores and other supplies inventory ($25 million) related to the temporary idling of our Amos and Baie-Comeau paper mills;
and
•
start-up costs ($3 million) for the El Dorado sawmill.
In 2019, we incurred COS of $23 million, which included:
• write-downs of mill stores and other supplies inventory ($13 million) related to the indefinite idling of our paper mill at Augusta; and
•
asset preservation costs ($5 million), mainly related to our indefinitely idled Thorold (Ontario) paper mill and our permanently closed Fort Frances
(Ontario) mill.
Depreciation and amortization
Depreciation and amortization was $5 million lower in 2020 as the integrated business management software was fully depreciated in the fourth quarter of
2019 ($4 million).
Selling, general and administrative expenses
SG&A expenses increased by $15 million in 2020, mainly due to higher incentive plan expense, which is based on company performance, and higher
stock-based compensation expense.
Closure costs, impairment and other related charges
In 2020, we recorded closure costs, impairment and other related charges of $55 million, related to the temporary idling of our Amos and Baie-Comeau
paper mills, including: accelerated depreciation charges of $38 million, and severance and other costs of $17 million.
This compares to closure costs, impairment and other related charges of $18 million in 2019, related to the indefinite idling of our paper mill at Augusta,
including: severance and other costs of $10 million; and accelerated depreciation charges of $8 million.
Net gain on disposition of assets
In 2020, we recorded a net gain on disposition of assets of $11 million, compared to $2 million in 2019, which reflected: the sale of the Augusta paper mill
for total cash consideration of $10 million, resulting in a net gain of $9 million; and the sale of the Thorold paper mill for total cash consideration of $4
million, resulting in a net gain of $2 million.
2019 vs. 2018
For a variance analysis of our 2019 vs. 2018 results of operations, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Results of Operations – Corporate and Other – 2019 vs. 2018,” of our 2019 Annual Report.
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LIQUIDITY AND CAPITAL RESOURCES
Capital Resources
We rely on cash and cash equivalents, cash flows provided by operations, and our credit facilities: to fund our operations; to make pension contributions;
and to finance our working capital, capital expenditures, duty cash deposits and opportunities for our growth and transformation strategy. In addition, from
time to time we may use available cash to reduce debt and to return capital to shareholders, including through share repurchases or special dividends. As of
December 31, 2020, we had cash and cash equivalents of $113 million and availability of $580 million under our credit facilities.
Based on our current projections, we expect to have sufficient financial resources available to finance our business plan, make pension contributions, meet
working capital and duty cash deposit requirements, and maintain an appropriate level of capital spending.
Based on market conditions, we may seek to repay or refinance our outstanding indebtedness as we continue to focus on reducing costs and enhancing our
flexibility.
Senior Unsecured Notes
The 2023 Notes, issued on May 8, 2013, were unsecured and guaranteed by substantially all of our U.S. subsidiaries. The 2023 Notes bear interest at a rate
of 5.875%; they were sold at an offering price of 99.062% of the $600 million aggregate principal amount and began paying interest semi-annually on
November 15, 2013. On January 3, 2019, we repurchased $225 million in aggregate principal amount of the 2023 Notes, pursuant to a notes purchase
agreement entered into on December 21, 2018, with certain noteholders, at a purchase price equal to 100% of the principal amount thereof, plus accrued
and unpaid interest. As a result of the repurchase, we recorded a net loss on extinguishment of debt of $3 million in “Other (expense) income, net” in our
Consolidated Statement of Operations for the year ended December 31, 2019.
On February 2, 2021, we completed the Offering of $300 million aggregate principal amount of our 2026 Notes at an issue price of 100%. The 2026 Notes
are unsecured and are guaranteed by all of our current and, subject to certain conditions, future material wholly-owned U.S. subsidiaries. The Notes mature
on March 1, 2026, unless earlier redeemed or repurchased, and will be recorded in “Long-term debt” in our consolidated balance sheet at their fair value of
$300 million. Interest on the notes is payable semi-annually on March 1 and September 1 of each year, beginning on September 1, 2021.
We used the net proceeds of the Offering, together with cash on hand, to redeem all of the remaining outstanding $375 million aggregate principal amount
of our 2023 Notes, at a price of 100% of the aggregate principal amount thereof, plus accrued and unpaid interest to, but not including, the redemption date.
In connection with the redemption of all $375 million aggregate principal amount of the 2023 Notes (or, the “Redemption”), we placed, on February 2,
2021, the net proceeds of the closing of the Offering, together with additional cash, into trust for the benefit of the holders of the 2023 Notes. The
Redemption occurred on February 18, 2021.
For more information, see Note 15, “Long-Term Debt – Debt instruments – Senior Unsecured Notes,” to our Consolidated Financial Statements.
Senior Secured Credit Facility
On September 7, 2016, we entered into a senior secured credit facility for up to $185 million. This senior secured credit facility provided a term loan of $46
million with a maturity date of September 7, 2025, and a revolving credit facility of up to $139 million with a maturity date of September 7, 2022. On
October 28, 2019, we entered into an amended and restated senior secured credit facility (or, the “Senior Secured Credit Facility”) for up to $360 million,
replacing our existing $185 million senior secured credit facility. The Senior Secured Credit Facility provided a term loan facility of up to $180 million
with a delayed draw period of up to three years, and the choice of maturities of six to 10 years (or, the “Term Loan Facility”), and a six-year revolving
credit facility of up to $180 million with a maturity date of October 28, 2025 (or, the “Revolving Credit Facility”). In March 2020, we borrowed $180
million in term loans under the Term Loan Facility for 10 years, maturing in March 2030. There is also an uncommitted option to increase the Senior
Secured Credit Facility by up to an additional $360 million, subject to certain terms and conditions. On October 28, 2019, we repaid our $46 million term
loan by borrowing under the Revolving Credit Facility.
The obligations under the Senior Secured Credit Facility are guaranteed by certain material U.S. subsidiaries of the Company and are secured by a first
priority mortgage on the real property of our Calhoun facility and a first priority security interest on the fixtures and equipment located therein.
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As of December 31, 2020, we had $180 million of availability under the Revolving Credit Facility, which was undrawn.
For more information, see Note 15, “Long-Term Debt – Debt instruments – Senior Secured Credit Facility,” to our Consolidated Financial Statements.
ABL Credit Facility
On May 14, 2019, we entered into an amendment to the five-year credit agreement dated May 22, 2015, for our ABL Credit Facility. The amended credit
agreement provides for an extension of the maturity date to May 14, 2024, with an aggregate lender commitment of up to $500 million at any time
outstanding, subject to borrowing base availability based on specified advance rates, eligibility criteria and customary reserves.
The aggregate lender commitment under the facility includes a $60 million swingline sub-facility and a $200 million letter of credit sub-facility, and we
may convert up to $50 million of the commitments under the facility to a first-in last-out facility, subject to the consent of each converting lender. The ABL
Credit Facility also provides for an uncommitted ability to increase the revolving credit facility by up to $500 million, subject to certain terms and
conditions set forth in the agreement.
The obligations under the credit agreement are guaranteed by certain material subsidiaries of the Company and are secured by first priority liens on and
security interests in accounts receivable, inventory and related assets.
As of December 31, 2020, we had $270 million of availability under the ABL Credit Facility, which was undrawn except for $56 million of ordinary course
letters of credit outstanding.
Effective January 21, 2021, we reduced the commitment under the Canadian tranche of our senior secured asset-based revolving credit facility by $50
million, to $250 million, resulting in an aggregate commitment of $450 million, subject to borrowing base limitations.
For more information, see Note 15, “Long-Term Debt – Debt instruments – ABL Credit Facility,” to our Consolidated Financial Statements.
Loan Facility
On November 4, 2020, our Canadian subsidiary, Resolute FP Canada Inc., entered into a Loan Facility with Investissement Québec as lender for up to
C$220 million ($173 million as of December 31, 2020), representing up to 75% of the countervailing and anti-dumping duty deposits (or, the “Duties”)
imposed or expected to be imposed by the U.S. Department of Commerce and collected by Customs and Border Protection Agency (or, “U.S. Customs”) on
U.S. imports of applicable softwood lumber products produced at sawmills of the Borrower and its affiliates located in the province of Quebec, Canada
from April 28, 2017 to December 31, 2022.
The borrowings under the Loan Facility bear interest at a floating rate equal to 1.45% above the one-month Canadian Banker’s Acceptance rate. The Loan
Facility provides for a maximum of 10 draws and the fulfillment of certain conditions upon each draw. The outstanding principal is repayable in
consecutive monthly installments over a period of eight years, after an interest only period of two years from the date of the first draw. Outstanding
amounts may be prepaid, partially or fully, at any time at our discretion, without premium or penalty, but subject to payment of accrued and unpaid interest.
We are required to make a prepayment equal to any amounts reimbursed by U.S. Customs on account of the U.S. imports of certain softwood lumber
products produced at our sawmills located in the province of Quebec, Canada (or, the “Quebec Prepayments”).
The obligations under the Loan Facility will be secured by a first priority security interest and a control agreement on certain of our bank accounts
identified to receive any Quebec Prepayments. In addition, we have agreed to transfer to the designated bank accounts any amounts constituting Quebec
Prepayments, and may not grant any other security interest on such bank accounts. The Loan Facility is required to be used exclusively to finance certain of
our activities and obligations in the province of Quebec, Canada, and may not be used to pay or reimburse any Duties.
As of December 31, 2020, we had C$165 million ($130 million) of availability under the Loan Facility, subject to certain conditions. The Loan Facility was
undrawn as of December 31, 2020.
For more information, see Note 15, “Long-Term Debt – Loan Facility,” to our Consolidated Financial Statements.
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Credit rating risk
Although our debt agreements do not include any provision that would require material changes in payment schedules or terminations as a result of a credit
rating downgrade, we believe our access to capital markets at a reasonable cost is determined in part by credit quality. A credit rating downgrade could
impact our ability to access capital markets at a reasonable cost. These ratings reflect the views of the rating agencies only. An explanation of the
significance of these ratings can be obtained from each rating agency. The ratings are not a recommendation to buy, sell or hold securities. Any rating can
be revised upward or downward or withdrawn at any time by a rating agency.
Standard & Poor’s
Senior unsecured debt
Long-term corporate credit rating
Outlook
Moody’s Investors Service
Senior unsecured debt
Corporate family rating
Outlook
Liquidity rating
2020
B
B+
Negative
B2
B1
Negative
SGL-2
December 31,
2019
B+
BB-
Stable
B1
Ba3
Stable
SGL-1
2018
B+
BB-
Stable
B1
Ba3
Stable
SGL-1
On January 19, 2021, both rating outlooks were revised from negative to stable and the Moody’s liquidity rating was upgraded to SGL-1.
Flow of Funds
Summary of cash flows
A summary of cash flows for the years ended December 31, 2020, 2019 and 2018 was as follows:
(In millions)
Net cash provided by operating activities
Net cash (used in) provided by investing activities
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents, and restricted cash
Net increase (decrease) in cash and cash equivalents, and restricted cash
2020 vs. 2019
Net cash provided by operating activities
Years Ended December 31,
2020
334
(297)
78
2
117
$
$
2019
85
(162)
(228)
2
(303)
$
$
2018
435
146
(281)
(4)
296
$
$
We generated $334 million of cash from operating activities in 2020, compared to $85 million last year. The increase is attributable to higher profitability, a
favorable working capital variance in the current period, and lower pension contributions.
Net cash used in investing activities
We used $297 million of cash in investing activities in 2020, compared to $162 million in the prior year. The difference reflects:
•
•
the acquisition of the U.S. Sawmill Business, net of cash acquired, in the current period ($172 million); and
higher countervailing and anti-dumping duty cash deposits ($29 million);
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offset in part by:
•
•
lower capital expenditures ($35 million) and higher disposition of assets ($11 million); and
proceeds from an insurance recovery related to our acquisition of Atlas in 2015 ($15 million), in the current period.
Net cash provided by (used in) financing activities
Net cash provided by financing activities was $78 million in 2020, compared to cash used in financing activities of $228 million in 2019. The difference
reflects:
•
proceeds from long term debt of $180 million in 10-year term loans under the Senior Secured Credit Facility to finance the acquisition of the U.S.
Sawmill Business, whereas in the year ago period we repurchased $225 million in aggregate principal amount of our 2023 Notes and repaid our
$46 million term loan;
partly offset by:
•
repayments of $71 million under our revolving credit facilities in the current year, compared to borrowings of $71 million in the prior year.
2019 vs. 2018
For a variance analysis of our 2019 vs. 2018 cash flows, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Liquidity and Capital Resources – Flow of Funds – 2019 vs. 2018,” of our 2019 Annual Report.
2021 outlook
For 2021, we expect to invest $95 million in capital expenditures, net of funding under existing business development programs, including: $10 million for
the recently acquired U.S. Sawmill Business; and investments for the cellulose filament plant in Kénogami, and for the improvement of productivity and
yields at our sawmills.
Countervailing duty and anti-dumping investigations of softwood lumber
We became required to pay cash deposits for estimated countervailing duties and anti-dumping duties on the vast majority of our U.S. imports of softwood
lumber products produced at our Canadian sawmills, since April 28, 2017, and June 30, 2017, respectively. As of December 31, 2020, the rates for these
estimated countervailing duties and anti-dumping duties were 19.10% and 1.15%, respectively. Based on our current operating parameters, the cash
deposits could be as high as $80 million per year.
For additional information, see Part I, Item 1A, “Risk Factors – Legal and Compliance Risks – We are subject to countervailing and anti-dumping duty
orders on the vast majority of our U.S. imports of softwood lumber products produced at our Canadian sawmills, which could materially affect our
operations and cash flows,” of this Form 10‑K, and Note 18, “Commitments and Contingencies – Legal matters – Countervailing duty and anti-dumping
investigations of softwood lumber,” to our Consolidated Financial Statements.
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Employee Benefit Plans
Pension and OPEB plans
In 2020, we contributed $91 million to our defined benefit pension plans and $17 million to our defined contribution pension plans, while recognizing a
$19 million cost in aggregate, before special events. We also made payments of $11 million to OPEB plans, while recognizing a $5 million credit to the net
periodic benefit cost, before special events.
In December 2020, the pension plan of the Thorold paper mill, which was indefinitely idled in 2017 and sold in 2020, was wound-up following the
approval of the pension benefits distribution and assets liquidation. This resulted in the conversion of the buy-in annuity contract to a buy-out contract, and
the recognition of a settlement loss of $28 million in "Non-operating pension and other postretirement benefit credits" in our Consolidated Statements of
Operations for the year ended December 31, 2020, and the reduction of both pension plan assets and pension benefit obligations by $98 million.
For 2021, we expect to make approximately $102 million of contributions to our defined benefit pension plans, $17 million to our defined contribution
pension plans, and $12 million to OPEB plans. The expected $11 million increase in defined benefit pension plan contributions is mainly a result of the
substantial drop in discount rates from prior years.
For 2021, we expect to expense approximately $17 million of defined contribution pension plan costs, with a defined benefit pension cost of $17 million
and a $6 million credit for our defined benefit OPEB plans. The expected $15 million increase in pension plan expenses from 2020 is mainly explained by
higher amortization of actuarial gains and losses, mostly as a result of the substantial drop in discount rates from prior years.
We fund our pension and OPEB plans as required by applicable laws and regulations; we could, from time to time, make additional contributions.
Canadian pension funding
Quebec plans
The funding of our Quebec pension plans is subject to Quebec’s Supplemental Pension Plans Act (or, the “SPPA”), which is the pension plan funding
regime generally applicable to pension plans in that province. Our contributions to our Quebec plans are determined on a going concern basis under the
Quebec’s SPPA.
Ontario plans
Since January 1, 2019, all of our Ontario pension plans are subject to the Ontario Pension Benefits Act (or, the “PBA”), which is the pension plan funding
regime generally applicable to pension plans in that province. The PBA provides for funding pension fund deficits on a going concern basis, or on a
solvency basis if the solvency funded status of a pension plan is below 85%.
Funding deficit calculation
The assumptions used to calculate the pension funding deficit are materially different from the assumptions used to determine the net pension obligations
for purposes of our Consolidated Financial Statements.
The funding deficit calculation of our Quebec pension plans is subject to Quebec’s SPPA, which provides for the funding of pension deficits on a going
concern basis. The funding deficit calculation of our Ontario pension plans is subject to Ontario’s PBA, which provides for the funding of pension fund
deficits on a going concern basis, or on a solvency basis if the solvency funded status of a pension plan is below 85%. Under a going concern basis, the
liabilities are calculated on the assumption that the plans will continue to operate indefinitely, and the liabilities are discounted using a rate determined by a
model that develops an expected long-term return on assets, based on the asset mix of the plans as of the actuarial valuation date. The liabilities also include
a provision for adverse deviation. Under a solvency basis, the liabilities are calculated on the assumption that the plans are terminated at the measurement
date, and the liabilities are discounted primarily using a specified annuity purchase rate, which is the spot interest rate on government securities in Canada
plus a prescribed margin at the measurement date.
The funding of our U.S. pension plan is governed by the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code,
and is also subject to the Moving Ahead for Progress in the 21st Century Act, the Highway and Transportation Funding Act of 2014, and the Bipartisan
Budget Act of 2015. Under these regulations, the liabilities are discounted using 25-year average corporate bond rates within a specified corridor. The
corridor will be maintained at 10% through 2020, will widen to 15% in 2021, and will widen an additional 5% each year to 30% in 2024 and beyond.
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By contrast, for purposes of our Consolidated Financial Statements, the discount rate is determined with a model that develops a hypothetical high-quality
bond portfolio, where the bonds are theoretically purchased to settle the expected benefit payments of the plans.
The weighted-average discount rate, funded ratio, and deficit of the pension plans for both accounting and funding purposes for the years ended December
31, 2020 and 2019, were as follows:
(In millions, except percentages)
Discount rate
Funded ratio
Deficit
Accounting
December 31,
2020
2.5 %
73 %
2019
3.0 %
74 %
Funding
December 31,
(1)
2020
5.1 %
86 %
(2)
2019
5.6 %
88 %
$
(1,440)
$
(1,326)
$
(629)
$
(497)
(1)
(2)
Determined on a going concern basis for Canadian plans, and on a 25-year average interest rate basis for U.S. plans, and assuming actuarial
valuations performed for all plans on December 31, 2020.
Determined on a going concern basis for Canadian plans, and on a 25-year average interest rate basis for U.S. plans.
Additional undertakings
Our principal Canadian subsidiaries had entered into certain undertakings with the Government of Ontario and Quebec, which expired in 2015 and 2016,
respectively. The expiration of those undertakings did not eliminate ongoing obligations we incurred under the terms of those undertakings prior to their
expiration, including the undertaking requiring us to make an additional solvency deficit reduction contribution to our pension plans of C$75, payable over
four years, for each metric ton of capacity reduced in Quebec or Ontario, in the event of downtime of more than six consecutive months or nine cumulative
months over a period of 18 months. Accordingly, we made additional contributions for past capacity reductions of C$4 million and C$2 million in 2019 and
2020, respectively. The 2020 contribution was the last one required to be made in respect of these undertakings.
Partial wind-ups of pension plans
On June 12, 2012, we filed a motion for directives with the Quebec Superior Court, the court with jurisdiction in the creditor protection proceedings under
the Companies’ Creditors Arrangement Act (Canada) (or, the “CCAA Creditor Protection Proceedings”), seeking an order to prevent pension regulators in
each of Quebec, New Brunswick, and Newfoundland and Labrador from declaring partial wind-ups of pension plans relating to employees of former
operations in New Brunswick and Newfoundland and Labrador, or a declaration that any claim for accelerated reimbursements of deficits arising from a
partial wind-up is a barred claim under the CCAA Creditor Protection Proceedings. We contend, among other things, that any such declaration, if issued,
would be inconsistent with the Quebec Superior Court’s sanction order confirming the CCAA debtors’ CCAA Plan of Reorganization and Compromise, as
amended, and the terms of our emergence from the CCAA Creditor Protection Proceedings. A partial wind-up would likely shorten the period in which any
deficit within those plans, which could reach up to C$150 million ($118 million), would have to be funded if we do not obtain the relief sought. The
hearing in this matter could occur in 2021.
Share Repurchase Program
On March 2, 2020, our board of directors authorized a share repurchase program of up to 15% of our common stock, for an aggregate consideration of up
to $100 million. During the year ended December 31, 2020, we repurchased 6.9 million shares at a cost of $30 million under this program. During the year
ended December 31, 2019, we repurchased 4.8 million shares at a cost of $24 million under our $150 million share repurchase program, which was
completed in 2019. We did not repurchase any shares during 2018.
Dividends
We declared and paid a special dividend of $1.50 per share ($136 million) on our common stock in 2018. We did not declare or pay any dividends on our
common stock during the years ended December 31, 2020 and 2019.
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Contractual Obligations
As of December 31, 2020, the Company’s contractual obligations, including payments due by period, were as follows:
(In millions)
Long-term debt
Non-cancelable operating lease obligations
(2)
Purchase obligations
(1)
(2)
Total
656
82
202
940
$
$
2021
28
12
73
113
$
$
2022-2023
419
$
19
109
547
$
2024-2025
10
$
13
4
27
$
2026 and
thereafter
$
199
38
16
253
$
(1)
(2)
Long-term debt obligations primarily represent interest payments and the payment of the remaining principal balance at maturity of our 2023
Notes, assuming no prior redemptions. Interest on our credit facility borrowings is assumed to remain unchanged from the rates in effect as of
December 31, 2020, assuming no additional borrowings or repayments until maturity. Information on our long-term debt can be found in “Note
15, “Long-Term Debt,” to our Consolidated Financial Statements. The 2023 Notes were redeemed subsequent to year-end, see Note 23,
“Subsequent Events,” to our Consolidated Financial Statements.
Information on our operating leases and purchase obligations can be found in Note 12, “Operating Leases” and Note 18, “Commitments and
Contingencies – Commitments,” to our Consolidated Financial Statements.
The above table excludes the future obligations under our pension and OPEB plans due to the uncertainty in the timing and amount of future payments.
Information on our pension and OPEB plans can be found in “Note 16, “Pension and Other Postretirement Benefit Plans,” to our Consolidated Financial
Statements.
RECENT ACCOUNTING GUIDANCE
New accounting pronouncements adopted in 2020
See Note 2, “Summary of Significant Accounting Policies – New accounting pronouncements adopted in 2020,” to our Consolidated Financial Statements
for more information.
Accounting pronouncements not yet adopted as of December 31, 2020
See Note 2, “Summary of Significant Accounting Policies – Accounting pronouncements not yet adopted as of December 31, 2020,” to our Consolidated
Financial Statements for more information.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with GAAP requires us to make accounting estimates based on assumptions, judgments and
projections of future results of operations and cash flows. These estimates and assumptions affect the reported amounts of revenues and expenses during
the periods presented and the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial
statements.
We base our estimates, assumptions and judgments on a number of factors, including historical experience, recent events, existing conditions, internal
budgets and forecasts, projections obtained from industry research firms, and other data that we believe are reasonable under the circumstances. We believe
that our accounting estimates are appropriate and that the resulting financial statement amounts are reasonable. Due to the inherent uncertainties in making
estimates, actual results could differ materially from these estimates, requiring adjustments to financial statement amounts in future periods.
A summary of our significant accounting policies is disclosed in Note 2, “Summary of Significant Accounting Policies,” to our Consolidated Financial
Statements. Based upon a review of our significant accounting policies, we believe the following accounting policies require us to make accounting
estimates that can significantly affect the results reported in our Consolidated Financial Statements. We have reported the development, selection and
disclosures of our critical accounting estimates to the audit committee of our board of directors, and the audit committee has reviewed the disclosures
relating to these estimates.
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Pension and OPEB obligations
Description of accounts impacted by the accounting estimates
We record pension and OPEB obligations, net of pension plan assets that may be considered material to our financial position. We also record net periodic
benefit cost (credit) associated with these net obligations as our employees render service. As of December 31, 2020, we had pension and OPEB
obligations aggregating $5,382 million and accumulated pension plan assets at fair value of $3,806 million. In 2020, we recorded a net periodic benefit cost
of $15 million.
Judgments and uncertainties involved in the accounting estimates
The following inputs are used to determine our net obligations and our net periodic benefit cost (credit) each year and the determination of these inputs
requires judgment:
•
•
•
•
•
discount rate – used to determine the net present value of our pension and OPEB obligations and to determine the interest cost component of our
net periodic benefit cost (credit). The discount rate for our domestic and foreign plans was determined with a model that develops a hypothetical
high-quality bond portfolio, where the bonds are theoretically purchased to settle the expected benefit payments of the plans. The discount rate
reflects the single rate that produces the same discounted values as the value of the theoretical high-quality bond portfolio;
return on assets – used to estimate the growth in the value of invested assets that are available to satisfy pension benefit obligations and to
determine the expected return on plan assets component of our net periodic pension benefit cost (credit). In determining the expected return on
assets, we considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the
pension portfolio;
life expectancy rate – used to estimate the impact of life expectancy on our pension and OPEB obligations. In determining the life expectancy rate
of our domestic and foreign plans, we used the most recent actuarially-determined mortality tables and improvement scales. For the foreign plans,
the mortality tables were adjusted with the result of our historical mortality experience study. The rates used are consistent with our future
expectations of life expectancy for the employees who participate in our pension and OPEB plans;
rate of compensation increase – used to calculate the impact future pay increases will have on our pension obligations. In determining the rate of
compensation increase, we reviewed historical salary increases and promotions, while considering current industry conditions, the terms of
collective bargaining agreements with our employees and the outlook for our industry; and
health care cost trend rate – used to calculate the impact of future health care costs on our OPEB obligations. For the health care cost trend rate,
we considered historical trends for these costs, as well as recently enacted healthcare legislation.
Effect if actual results differ from assumptions
Variations in assumptions could have a significant effect on the net periodic benefit cost and pension and OPEB obligations reported in our Consolidated
Financial Statements. For example, a 25 basis point change in any one of these assumptions would have increased (decreased) our net periodic benefit cost
for our pension and OPEB plans and our pension and OPEB obligations as follows:
(In millions)
Assumption:
Discount rate
Return on assets
Rate of compensation increase
Health care cost trend rate
2020 Net Periodic Benefit Costs
25 Basis Point
Increase
25 Basis Point
Decrease
Pension and OPEB Obligations as of
December 31, 2020
25 Basis Point
Increase
25 Basis Point
Decrease
$
$
$
$
—
(9)
—
—
$
$
$
$
1
9
—
—
$
$
$
$
(128)
—
2
1
$
$
$
$
141
—
(2)
(1)
As of December 31, 2020, the most significant change in our assumptions affecting our pension and OPEB obligations was a decrease in the discount rate
to 2.5% from 3.0% as of December 31, 2019, resulting in an actuarial loss of $285 million and a corresponding increase in our pension and OPEB
obligations.
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The net periodic benefit cost of our pension plans incorporates an expected return on plan assets and not the actual return on plan assets. The difference
between the expected and actual return on plan assets resulted in an actuarial gain of $15 million in 2020.
These net actuarial losses of $244 million in 2020, before tax, were recorded in “accumulated other comprehensive loss” and will be amortized into our
Consolidated Statements of Operations in future years, including approximately $77 million in 2021.
Deferred income tax assets
Description of accounts impacted by the accounting estimates
We have net deferred income tax assets of $915 million recorded in our Consolidated Balance Sheet as of December 31, 2020, all of which is related to our
Canadian operations; and a full valuation allowance is recorded against our U.S. net deferred income tax assets. Our net deferred income tax assets are
primarily comprised of:
U.S.:
•
•
•
Canada:
•
•
•
deferred income tax assets of $804 million, of which $544 million is for federal and state net operating loss carryforwards expiring between 2021
and 2040; $103 million for federal and state net operating loss and deduction limitation carryforwards with no expiry; and $157 million for other
temporary differences, mostly related to pension and OPEB plans;
deferred income tax liabilities of $67 million, mostly related to tax accelerated depreciation on fixed assets; and
a valuation allowance of $737 million against the net deferred income tax assets, which are not more likely than not to be realized in the future;
deferred income tax assets of $981 million, comprised of $195 million related to undeducted research and development expenditures with no
expiry; $78 million for tax credit carryforwards expiring between 2022 and 2040; $12 million for federal and provincial net operating loss
carryforwards expiring between 2028 and 2039; as well as $696 million for other temporary differences, mostly related to fixed asset
undepreciated capital costs with no expiry, as well as pension and OPEB plans;
deferred income tax liabilities of $30 million for various temporary differences; and
a valuation allowance of $36 million, virtually all of which is related to net capital loss carryforwards with no expiry.
Judgments and uncertainties involved in the accounting estimates
At each reporting period, we assess whether it is more likely than not that the deferred income tax assets will be realized, based on the review of all
available positive and negative evidence, including future reversals of existing taxable temporary differences, estimates of future taxable income, past
operating results, and prudent and feasible tax planning strategies. The carrying value of our deferred income tax assets reflects our expected ability to
generate sufficient future taxable income in certain tax jurisdictions to realize these deferred income tax assets.
Following the assessment of our ability to realize the deferred income tax assets of our U.S. operations, we concluded that existing negative evidence
outweighed positive evidence. As a result, we recognized a full valuation allowance against our net U.S. deferred income tax assets. The historical
operating losses of our U.S. operations limited our ability to consider other subjective positive evidence. A valuation allowance does not reduce our
underlying tax attributes, nor hinders our ability to use them in the future. If, in the future, sufficient objective positive evidence becomes available such
that, based on the weight of available evidence, it is determined to be more likely than not that some or all of the deferred income tax assets associated with
our U.S. operations can be realized, the valuation allowance will be reduced as appropriate, with the related adjustment being recognized as a decrease to
the income tax provision.
The positive evidence for our Canadian operations, which included a review of historical cumulative earnings and our forecasted future earnings, resulted
in the conclusion by management that no significant valuation allowances were required for our deferred income tax assets, as they were determined to be
more likely than not to be realized.
The Company calculates its income tax provision for the period based on estimates and assumptions that could differ from the actual results reflected in
income tax returns filed in subsequent years. Adjustments based on actual filed income tax returns are recorded when identified.
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Tax benefits related to uncertain tax positions are recorded when it is more likely than not, based on the technical merits, that the position will be sustained
upon examination by the relevant tax authority. The amount of tax benefit recognized may differ from the amount taken or expected to be taken on a tax
return. These differences represent unrecognized tax benefits and are reviewed at each reporting period based on facts, circumstances and other available
evidence. We have unrecognized tax benefits of $28 million as of December 31, 2020. As income tax legislation and regulations are complex and subject to
interpretation, our tax positions could be challenged by tax authorities.
Effect if actual results differ from assumptions
Our forecasted future earnings represent important positive evidence in determining the recoverability of our deferred income tax assets. If actual future
financial results are not consistent with the assumptions and judgments used, or if additional significant closure-related costs are recorded in future years,
we may be required to reduce the carrying value of our net deferred income tax assets by recording additional valuation allowances, resulting in an income
tax provision that could be material.
We do not expect a significant change to the amount of unrecognized tax benefits over the next 12 months. However, any adjustments arising from certain
ongoing examinations by tax authorities could alter the timing or amount of taxable income or deductions, or the allocation of income among tax
jurisdictions, and these adjustments could differ from the amount accrued.
Long-lived assets
Description of accounts impacted by the accounting estimates
We have long-lived assets recorded in our Consolidated Balance Sheet of $1,564 million as of December 31, 2020. These long-lived assets include fixed
assets, net, amortizable intangible assets, net, and operating lease right-of-use assets. In 2020, we recorded depreciation and amortization of $169 million
and accelerated depreciation charges of $38 million related to fixed assets and amortizable intangible assets. Depreciation and amortization and accelerated
depreciation charges are based on accounting estimates.
The unit of accounting for impairment testing for long-lived assets is its group, see Note 2, “Summary of Significant Accounting Policies – Impairment of
long-lived assets,” to our Consolidated Financial Statements. The unit of accounting for the depreciation and amortization of long-lived assets is at a lower
level, either as a group of closely-related assets or at an individual asset level. The cost of a long-lived asset is amortized over its estimated remaining
useful life, which is subject to change based on events and circumstances or management’s intention for the use of the asset.
Losses related to the impairment of long-lived assets to be held and used are recognized when circumstances indicate the carrying value of an asset group
may not be recoverable, such as continuing losses in certain businesses. When indicators that the carrying value of an asset group may not be recoverable
are triggered, we evaluate the carrying value of the asset group in relation to its expected undiscounted future cash flows. If the carrying value of an asset
group is greater than the expected undiscounted future cash flows to be generated by the asset group, an impairment charge is recognized based on the
excess of the asset group’s carrying value over its fair value. If it is determined that the carrying value of an asset group is recoverable, we review and
adjust, as necessary, the estimated useful lives of the assets in the group.
Our long-lived asset impairment and accelerated depreciation charges are disclosed in Note 5, “Closure Costs, Impairment and Other Related Charges,” to
our Consolidated Financial Statements.
Judgments and uncertainties involved in the accounting estimates
The calculation of depreciation and amortization of long-lived assets requires us to apply judgment in selecting the remaining useful lives of the assets,
which must address both physical and economic considerations. The remaining economic life of a long-lived asset is frequently shorter than its physical
life. Estimates of future economic conditions for our long-lived assets and therefore, their remaining useful economic lives, require considerable judgment.
Asset impairment for long-lived assets to be held and used is tested at the lowest asset group level having largely independent cash flows. Determining the
asset groups for long-lived assets to be held and used requires management’s judgment.
Asset impairment loss calculations require us to apply judgment in estimating asset group fair values and future cash flows, including periods of operation,
projections of product pricing, production levels, product costs, market supply and demand, foreign exchange rates, inflation, projected capital spending
and, specifically for fixed assets acquired, assigned useful lives, functional obsolescence, asset condition and discount rates. When performing impairment
tests, we estimate the fair values of the assets using management’s best assumptions, which we believe would be consistent with the assumptions that a
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hypothetical marketplace participant would use. Estimates and assumptions used in these tests are evaluated and updated as appropriate. The assessment of
whether an asset group should be classified as held for sale requires us to apply judgment in estimating the probable timing of the sale, and in testing for
impairment loss, judgment is required in estimating the net proceeds from the sale.
As a result of operating income observed, the Company performed an impairment test as of November 30, 2020, on one of its long-lived asset groups. The
Company performed a Step 1 test which compares the carrying values of the asset group to its estimated future undiscounted cash flows. The undiscounted
cash flows exceeded the carrying value of the asset group by a substantial margin, so no impairment was recognized.
Effect if actual results differ from assumptions
If our estimate of the remaining useful life changes, such a change is accounted for prospectively in our determination of depreciation and amortization.
Actual depreciation and amortization charges for an individual asset may therefore be significantly accelerated if the outlook for its remaining useful life is
shortened considerably.
A number of judgments were made in the determination of our asset groups. If a different conclusion had been reached for any one of those judgments, it
could have resulted in the identification of asset groups different from those we actually identified, and consequently, could result in a different conclusion
when comparing the expected undiscounted future cash flows or the fair value to the carrying value of the asset group.
Actual asset impairment losses could vary considerably from estimated impairment losses if actual results are not consistent with the assumptions and
judgments used in estimating future cash flows and asset fair values. Assets of facilities that are idled have a greater risk of acceleration in depreciation and
amortization or additional impairment.
Business Combination
Description of accounts impacted by the accounting estimates
On February 1, 2020, we acquired from Conifex Timber Inc. the U.S. Sawmill Business, which produces construction-grade dimensional lumber and
decking products from locally sourced southern yellow pine for distribution within the U.S.
At Acquisition Date, we recognized fixed assets of $114 million, amortizable intangible assets of $21 million, goodwill of $31 million and other assets, net
of other liabilities, of $7 million.
We account for business combinations using the acquisition method as of the date control is transferred to us. Under this approach, identifiable assets
acquired and liabilities assumed are recorded at their respective fair values at the date of acquisition. Any amount of the purchase price paid that is in
excess of the estimated fair values of net identifiable assets acquired is recorded in “Goodwill” in our Consolidated Balance Sheets. In determining the
estimated fair values of identifiable assets acquired and liabilities assumed in a business combination, we use various recognized valuation methods such as
income, cost and market approaches. We utilized both the cost and market approaches to value fixed assets, which consider external transactions and other
comparable transactions, estimated replacement and reproduction costs, and estimated useful lives and consideration for physical, functional and economic
obsolescence. We utilized the income approach to value intangible assets, which considers the present value of the net cash flows expected to be generated
by the intangible assets, and excluding cash flows related to contributory assets. Valuations are performed by management or independent valuation
specialists under management’s supervision, where appropriate.
Judgments and uncertainties involved in the accounting estimates
The judgments made in determining the estimated fair value assigned to the long-lived assets acquired and goodwill, as well as the estimated useful life of
the long-lived assets, could impact the net income of the periods subsequent to the acquisition through depreciation and amortization, and in certain
instances through impairment charges, if the asset becomes impaired in the future.
At Acquisition Date, we identified amortizable intangible assets primarily related to customer relationships. In determining the estimated fair value for
intangible assets, we used the income approach through a multi-period excess earning method. Estimates that are sensitive to the determination of the fair
value of acquired customer intangibles include revenue stream and economic life of each customer relationship, growth or attrition of the existing
customers, forecasted revenues and operating expenses, contributory asset charges and discount rates, all of which can have a material impact on the
estimated fair values of customer relationship intangible assets.
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Other significant judgments include the estimated fair value of fixed assets. We utilized both the cost and the market approaches in the estimation of fair
value of fixed assets. Estimates that are sensitive to the determination of the fair value of fixed assets include external transactions and other comparable
transactions, estimated replacement and reproduction costs, and estimated useful lives and consideration for physical, functional and economic
obsolescence.
We believe that the estimated fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions that a marketplace
participant would use. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date,
our estimates are inherently uncertain and subject to refinement.
Effect if actual results differ from assumptions
During the measurement period, we have recorded adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.
Final determination of the estimated fair values of assets acquired or liabilities assumed has been completed and as such, any subsequent adjustments
would be recorded in our Consolidated Statements of Comprehensive (loss) income.
SUPPLEMENTAL OBLIGOR GROUP INFORMATION
The following information is presented in accordance with Rule 13-01 of Regulation S-X adopted in 2020, and the public information requirements of Rule
144 promulgated pursuant to the Securities Act of 1933, as amended, in connection to the 2023 Notes issued by Resolute Forest Products Inc. (or, the
“Issuer”) and fully guaranteed, on a joint and several basis, by all of our existing and subsequently acquired or organized direct or indirect wholly-owned
U.S. subsidiaries that guarantee the ABL Credit Facility as further defined below (or, the “Guarantor Subsidiaries”) (together, the “Obligor Group”). The
2023 Notes are not guaranteed by our foreign subsidiaries (or, the “Non-Guarantor Subsidiaries”). The 2023 Notes were redeemed subsequent to
December 31, 2020, and are no longer outstanding, see Note 23, “Subsequent Events,” to our Consolidated Financial Statements.
The following summarized financial information of the Obligor Group is presented on a combined basis, with all intercompany transactions between the
Issuer and the Guarantor Subsidiaries eliminated and excluding any earnings from and investments in the Non-Guarantor Subsidiaries. Financial
information of the Non-Guarantor Subsidiaries is not included.
Summarized financial information for the year ended December 31, 2020 was as follows:
(In millions)
(1)
Sales
Operating loss
Net loss
(1)
Includes $41 million of sales to the Non-Guarantor Subsidiaries.
Summarized financial information as of December 31, 2020 was as follows:
(In millions)
Total current assets
Total long-term assets
Total current liabilities
Total long-term liabilities
(1)
$
$
$
$
$
$
$
2,542
(116)
(126)
448
958
800
969
(1)
Includes accounts payable to the Non-Guarantor Subsidiaries of $676 million.
The 2023 Notes are unsecured and effectively junior to indebtedness under each of the ABL Credit Facility, the Senior Secured Credit Facility, and the
Loan Facility, to the extent of the value of the collateral securing each indebtedness and to future secured indebtedness. In addition, the 2023 Notes are
structurally subordinated to all existing and future liabilities of our Non-Guarantor Subsidiaries, including the Loan Facility.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to risks associated with fluctuations in foreign currency exchange rates, prices for the products we manufacture, commodity prices, and
credit risk on accounts receivable from our customers.
Foreign Currency Exchange Risk
We compete with producers from around the world, particularly North America, Europe, and South America, in most of our product lines, with the
exception of wood products and tissue, where we compete primarily with other North American producers. We sell our products mainly in transactions
denominated in U.S. dollars, but we also sell in certain local currencies, including the Canadian dollar, the euro, and the pound sterling. Changes in the
relative strength or weakness of these currencies, particularly the U.S. dollar, could affect international trade flows in these products. A stronger U.S. dollar
might attract imports, thereby increasing product supply and possibly creating downward pressure on prices. On the other hand, a weaker U.S. dollar might
encourage U.S. exports but also increase manufacturing costs in Canadian dollars.
We are particularly sensitive to changes in the value of the Canadian dollar versus the U.S. dollar. The actual impact of these changes depends primarily on
the proportion of our production and sales that occur in Canada, the proportion of our financial assets and liabilities denominated in Canadian dollars, and
the magnitude, direction and duration of changes in the exchange rate. We expect exchange rate fluctuations to continue to impact costs and revenues, but
we cannot predict the magnitude or direction of this effect for any period, and there can be no assurance of any future effects. In 2019 and 2020, the
Canadian dollar fluctuated between a low of US$1.27 in December of 2020 and a high of US$1.45 in March of 2020. Based on operating projections for
2021, if the Canadian dollar strengthens by one cent against the U.S. dollar, we expect that it will decrease our annual operating income by approximately
$16 million, and vice versa.
Furthermore, certain monetary assets and liabilities, including a substantial portion of our net pension and OPEB obligations and our net deferred income
tax assets, are denominated in Canadian dollars. As a result, our earnings can be subject to the potentially significant effect of foreign exchange gains or
losses in respect of these Canadian dollar net monetary items. A fluctuation of the Canadian dollar against the U.S. dollar in any given period would
generally cause a foreign exchange gain or loss.
Product Price Risk
Historically, economic and market shifts, fluctuations in capacity, and changes in foreign currency exchange rates have created cyclical changes in prices,
sales volume and margins for our products. In general, our products, other than tissue, are commodities that are widely available from other producers;
because these products have few distinguishing qualities from producer to producer, competition is based primarily on price, which is determined by supply
relative to demand. The overall levels of demand for the products we manufacture, and consequently our sales and profitability, reflect fluctuations in end
user demand. The demand for some of our products has weakened significantly over the past decade. For example, over the 10 years ended December 31,
2020, according to industry statistics, North American newsprint demand fell by 69%. This trend, which similarly affects our specialty paper, is expected to
continue as a result of developments in non-print media, lower North American newspaper circulation, weaker paper-based advertising, grade substitution
and conservation measures taken by publishers and retailers. Without change in capacity, the lower demand in relation to supply can cause downward
pressure on price.
In the table below, we show the impact of a $25 change to the average transaction price per unit of our products, other than tissue, based on our operating
configuration as of December 31, 2020. This presentation measures only the impact of pricing and items directly related to price, and assumes that every
other factor is held constant.
PRODUCT
Market pulp
Wood products
Paper
Projected change in annualized operating
income ($ millions) based on
$25 change in price per unit
$ / metric ton
$ / thousand board feet
$ / metric ton
29
48
38
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Commodity Price Risk
We purchase significant amounts of wood fiber, chemicals, and energy to supply our manufacturing facilities. These raw materials are market-priced
commodities and as such, are subject to fluctuations in prices. Increases in the prices of these commodities will tend to reduce our reported earnings and
decreases will tend to increase our reported earnings. From time to time, we may enter into contracts aimed at securing a stable source of supply for these
commodities. These contracts typically require us to pay the market price at the time of purchase. Thus, under these contracts, we generally remain subject
to market fluctuations in commodity prices.
Credit Risk
We are exposed to credit risk on the accounts receivable from our customers. In order to manage our credit risk, we have adopted policies, which include
the analysis of the financial position of our customers and the regular review of their credit limits. The credit limits are dynamically reviewed based on
fluctuations in the customers’ financial results and payment behavior. These customer credit limits are critical inputs in determining the conditions under
which credit is extended to customers to reduce exposure to losses. We also subscribe to credit insurance and, in some cases, require bank letters of credit.
Our customers are mainly in the business of newspaper publishing, advertising, printing, paper converting, consumer products, as well as lumber wholesale
and retail.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Consolidated Statements of Operations for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Comprehensive (Loss) Income for the Years Ended December 31, 2020, 2019, and 2018
Consolidated Balance Sheets as of December 31, 2020 and 2019
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Management’s Report on Financial Statements and Assessment of Internal Control over Financial Reporting
Page
68
69
70
71
72
73
112
115
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RESOLUTE FOREST PRODUCTS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions of U.S. dollars, except per share amounts)
Sales
Costs and expenses:
Cost of sales, excluding depreciation, amortization and distribution costs
Depreciation and amortization
Distribution costs
Selling, general and administrative expenses
Closure costs, impairment and other related charges
Net gain on disposition of assets
Operating income
Interest expense
Non-operating pension and other postretirement benefit credits
Other (expense) income, net
Income before income taxes
Income tax provision
Net income (loss) including noncontrolling interest
Net income attributable to noncontrolling interest
Net income (loss) attributable to Resolute Forest Products Inc.
Net income (loss) per share attributable to Resolute Forest Products Inc. common
shareholders:
Basic
Diluted
Weighted-average number of Resolute Forest Products Inc. common shares
outstanding:
Basic
Diluted
Years Ended December 31,
$
$
$
$
2020
2,800
2,010
169
344
136
53
(11)
99
(34)
—
(4)
61
(51)
10
—
10
0.12
0.12
86.1
86.4
$
$
$
$
2019
2,923
2,198
167
389
136
18
(2)
17
(31)
47
(22)
11
(58)
(47)
—
(47)
(0.51)
(0.51)
91.4
91.4
$
$
$
$
2018
3,756
2,549
212
475
165
121
(145)
379
(47)
50
5
387
(152)
235
—
235
2.57
2.52
91.3
93.3
See accompanying notes to Consolidated Financial Statements.
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RESOLUTE FOREST PRODUCTS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In millions of U.S. dollars)
Net income (loss) including noncontrolling interest
Other comprehensive loss:
Unamortized prior service costs
Change in unamortized prior service costs
Income tax benefit
Change in unamortized prior service costs, net of tax
Unamortized actuarial losses
Change in unamortized actuarial losses
Income tax benefit
Change in unamortized actuarial losses, net of tax
Foreign currency translation
Other comprehensive loss, net of tax
Comprehensive (loss) income including noncontrolling interest
Comprehensive loss attributable to noncontrolling interest
Comprehensive (loss) income attributable to Resolute Forest Products Inc.
$
See accompanying notes to Consolidated Financial Statements.
69
Years Ended December 31,
2020
10
$
2019
(47)
$
2018
235
$
(17)
—
(17)
(156)
38
(118)
—
(135)
(125)
—
(125)
(12)
—
(12)
(273)
55
(218)
1
(229)
(276)
—
(276)
$
(25)
1
(24)
(194)
51
(143)
(1)
(168)
67
—
67
$
RESOLUTE FOREST PRODUCTS INC.
CONSOLIDATED BALANCE SHEETS
(In millions of U.S. dollars, except per share amount)
Table of Contents
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net:
Trade
Other
Inventories, net
Other current assets
Total current assets
Fixed assets, net
Amortizable intangible assets, net
Goodwill
Deferred income tax assets
Operating lease right-of-use assets
Other assets
Total assets
Liabilities and equity
Current liabilities:
Accounts payable and accrued liabilities
Current portion of long-term debt
Current portion of operating lease liabilities
Total current liabilities
Long-term debt, net of current portion
Pension and other postretirement benefit obligations
Operating lease liabilities, net of current portion
Other liabilities
Total liabilities
Commitments and contingencies
Equity:
Resolute Forest Products Inc. shareholders’ equity:
Common stock, $0.001 par value. 120.6 million shares issued and 80.8 million shares outstanding as of
December 31, 2020; 119.5 million shares issued and 86.7 million shares outstanding as of December 31,
2019
Additional paid-in capital
Deficit
Accumulated other comprehensive loss
Treasury stock at cost, 39.8 million shares and 32.8 million shares as of December 31, 2020 and 2019,
respectively
Total Resolute Forest Products Inc. shareholders’ equity
Noncontrolling interest
Total equity
Total liabilities and equity
See accompanying notes to Consolidated Financial Statements.
70
December 31,
2020
December 31,
2019
$
113
$
3
230
48
462
47
900
1,441
63
31
915
60
320
3,730
369
2
9
380
559
1,562
55
92
2,648
—
3,804
(1,235)
(1,314)
(174)
1,081
1
1,082
3,730
$
$
$
273
76
522
33
907
1,459
48
—
915
61
236
3,626
342
1
8
351
448
1,460
57
75
2,391
—
3,802
(1,245)
(1,179)
(144)
1,234
1
1,235
3,626
$
$
$
Table of Contents
RESOLUTE FOREST PRODUCTS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In millions of U.S. dollars)
Common
Stock
$ —
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Balance as of December 31, 2017
Share-based compensation, net of
withholding taxes
Net income
Special dividend
Reclassification of stranded income tax
Stock unit awards vested (0.6 million shares),
net of shares forfeited for employee
withholding taxes (Note 20)
Other comprehensive loss, net of tax
Balance as of December 31, 2018
Net loss
Purchase of treasury stock (4.8 million
shares) (Note 19)
Stock unit awards vested (0.7 million shares),
net of shares forfeited for employee
withholding taxes (Note 20)
Other comprehensive loss, net of tax
Balance as of December 31, 2019
Share-based compensation, net of
withholding taxes
Net income
Purchases of treasury stock (6.9 million
shares) (Note 19)
Stock unit awards vested (1.0 million shares),
net of shares forfeited for employee
withholding taxes (Note 20)
Other comprehensive loss, net of tax
Balance as of December 31, 2020
Resolute Forest Products Inc. Shareholders’ Equity
Additional
Paid-in
Capital
3,793
Accumulated Other
Comprehensive Loss
(1,294)
Deficit
(780)
$
$
$
Treasury
Stock
$
(120)
Non-
controlling
Interests
1
$
Total Equity
1,600
$
6
—
3
—
—
—
3,802
—
—
—
—
3,802
2
—
—
235
(141)
2
—
—
(1,198)
(47)
—
—
—
(1,245)
—
10
—
—
—
—
(2)
—
(168)
(950)
—
—
—
(229)
(1,179)
—
—
—
—
—
—
—
—
—
(120)
—
(24)
—
—
(144)
—
—
(30)
—
—
—
—
—
—
1
—
—
—
—
1
—
—
—
—
—
1
6
235
(138)
—
—
(168)
1,535
(47)
(24)
—
(229)
1,235
2
10
(30)
—
(135)
1,082
$
—
—
$ —
—
—
3,804
$
—
—
(1,235)
$
—
(135)
(1,314)
$
—
—
(174)
$
$
See accompanying notes to Consolidated Financial Statements.
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RESOLUTE FOREST PRODUCTS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions of U.S. dollars)
Cash flows from operating activities:
Net income (loss) including noncontrolling interest
Adjustments to reconcile net income (loss) including noncontrolling interest to net cash
provided by operating activities:
Share-based compensation
Depreciation and amortization
Closure costs, impairment and other related charges
Inventory write-downs related to closures
Deferred income taxes
Net pension contributions and other postretirement benefit payments
Net gain on disposition of assets
(Gain) loss on translation of foreign currency denominated deferred income taxes
Loss (gain) on translation of foreign currency denominated pension and other
postretirement benefit obligations
Net planned major maintenance amortization (payments)
Changes in working capital:
Accounts receivable
Inventories
Other current assets
Accounts payable and accrued liabilities
Other, net
Net cash provided by operating activities
Cash flows from investing activities:
Cash invested in fixed assets
Acquisition of business, net of cash acquired
Disposition of assets
Decrease in countervailing duty cash deposits on supercalendered paper, net
Increase in countervailing and anti-dumping duty cash deposits on softwood lumber
Decrease (increase) in countervailing duty cash deposits on uncoated groundwood paper
Proceeds from insurance settlement
Other investing activities, net
Net cash (used in) provided by investing activities
Cash flows from financing activities:
Net (repayments) borrowings under revolving credit facilities
Payment of special dividend
Proceeds from long-term debt
Repayments of debt
Purchases of treasury stock
Payments of financing and credit facility fees
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents, and restricted cash
Net increase (decrease) in cash and cash equivalents, and restricted cash
Cash and cash equivalents, and restricted cash:
Beginning of year
End of year
Cash and cash equivalents, and restricted cash at year end:
Cash and cash equivalents
Restricted cash (included in “Other current assets”)
Restricted cash (included in “Other assets”)
Supplemental disclosures of cash flow information:
Cash paid (received) during the year for:
Interest, including capitalized interest of $1, $0 and $1 in 2020, 2019 and 2018,
respectively
Income taxes
Years Ended December 31,
2020
2019
2018
$
10
$
(47)
$
235
5
169
39
25
51
(87)
(11)
(15)
17
6
80
44
(12)
16
(3)
334
(78)
(172)
14
—
(81)
—
15
5
(297)
(71)
—
180
(1)
(30)
—
78
2
117
42
159
113
4
42
32
(1)
$
$
$
$
$
$
$
$
4
167
8
13
58
(125)
(2)
(42)
43
13
88
(27)
—
(82)
16
85
(113)
—
3
1
(59)
6
—
—
(162)
71
—
—
(271)
(24)
(4)
(228)
2
(303)
345
42
3
—
39
26
(11)
$
$
$
$
$
$
$
$
12
212
120
(1)
164
(144)
(145)
75
(63)
(20)
(19)
(46)
1
38
16
435
(155)
—
336
48
(77)
(6)
—
—
146
(144)
(136)
—
—
—
(1)
(281)
(4)
296
49
345
304
—
41
40
(1)
$
$
$
$
$
$
$
$
See accompanying notes to Consolidated Financial Statements.
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RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
Note 1. Organization and Basis of Presentation
Nature of operations
Resolute Forest Products Inc. (with its subsidiaries, either individually or collectively, unless otherwise indicated, referred to as “Resolute Forest Products,”
“we,” “our,” “us,” “Parent,” or the “Company”) is incorporated in Delaware. We are a global leader in the forest products industry with a diverse range of
products, including market pulp, tissue, wood products, and paper, which are marketed in over 50 countries. We own or operate some 40 facilities, as well
as power generation assets, in the U.S. and Canada.
Financial statements
We have prepared our consolidated financial statements and the accompanying notes (or, the “Consolidated Financial Statements”) in accordance with U.S.
generally accepted accounting principles (or, “GAAP”). All amounts are expressed in U.S. dollars, unless otherwise indicated. Certain prior period amounts
in the accompanying notes to our Consolidated Financial Statements have been reclassified to conform to the 2020 presentation.
Consolidation
Our Consolidated Financial Statements include the accounts of Resolute Forest Products Inc. and its subsidiaries. All transactions and balances between
these companies have been eliminated. All consolidated subsidiaries are wholly-owned as of December 31, 2020, with the exception of the following:
Consolidated Subsidiary
Forest Products Mauricie L.P.
Equity method investments
Resolute Forest Products
Ownership
93.2%
Coopérative Forestière du Haut Saint-Maurice
Partner
Partner
Ownership
6.8%
We account for our investments in companies where we have significant influence or joint control, using the equity method of accounting.
Note 2. Summary of Significant Accounting Policies
Use of estimates
In preparing our Consolidated Financial Statements in accordance with GAAP, management is required to make accounting estimates based on
assumptions, judgments, and projections of future results of operations and cash flows. These estimates and assumptions affect the reported amounts of
revenues and expenses during the periods presented, the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities as
of the date of the financial statements. The most critical estimates relate to the assumptions underlying the benefit obligations of our pension and other
postretirement benefit (or, “OPEB”) plans, the recoverability of deferred income tax assets, the carrying values of our long-lived assets, and the fair value
estimates of the assets acquired and liabilities assumed in a business combination, including goodwill. Estimates, assumptions, and judgments are based on
a number of factors, including historical experience, recent events, existing conditions, internal budgets and forecasts, projections obtained from industry
research firms, and other data that management believes are reasonable under the circumstances. Actual results could differ materially from those estimates
under different assumptions or conditions.
The uncertainties around the novel coronavirus (or, “COVID-19”) pandemic required the use of judgments and estimates that resulted in no significant
impacts to our Consolidated Financial Statements as of and for the year ended December 31, 2020, except as disclosed in Note 5, “Closure Costs,
Impairment and Other Related Charges” and Note 9, “Inventories, Net.” The future impact of the COVID-19 pandemic could generate, in future reporting
periods, a significant risk of material adjustment to the carrying amounts of deferred income tax assets and long-lived assets.
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Business combination
RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
We account for business combinations using the acquisition method as of the date control is transferred to us. Under this approach, identifiable assets
acquired and liabilities assumed are recorded at their respective fair values at the date of acquisition. Any amount of the purchase price paid that is in
excess of the estimated fair values of net identifiable assets acquired is recorded in “Goodwill” in our Consolidated Balance Sheets. In determining the
estimated fair values of identifiable assets acquired and liabilities assumed in a business combination, we use various recognized valuation methods such as
present value modeling and referenced market values (where available). Valuations are performed by management or independent valuation specialists
under management`s supervision, where appropriate. Transaction costs are expensed as incurred in our Consolidated Statements of Operations.
Cash and cash equivalents, and restricted cash
Cash and cash equivalents generally consist of direct obligations of the U.S. and Canadian governments and their agencies, demand deposits, and other
short-term, highly liquid securities with a maturity of three months or less from the date of purchase. Restricted cash consists primarily of deposits held as
collateral for letters of credit.
Accounts receivable
Accounts receivable are recorded at cost, net of an allowance for expected credit losses.
Accounts receivable are subject to impairment review that is based on the aging method. Impairment is calculated based on how long a receivable has been
outstanding. The Company estimates expected credit losses by considering historical credit loss experience (based on days past due), current conditions,
and forward-looking factors specific to the customers and the economic environment.
We also consider if we are no longer doing business with the customer, and any other factors that may affect collectability from customers with significant
outstanding balances. A receivable is written off when there is no reasonable expectation of recovering the contractual cash flows.
Inventories
Inventories are stated at the lower of cost or net realizable value using the average cost method. Cost includes labor, materials and production overhead,
which is based on the normal capacity of our production facilities. Unallocated overhead, including production overhead associated with abnormal
production levels, is recognized in “Cost of sales, excluding depreciation, amortization and distribution costs” in our Consolidated Statements of
Operations when incurred.
Assets held for sale
Assets held for sale are carried in our Consolidated Balance Sheets at the lower of carrying value or fair value less costs to sell. We cease recording
depreciation and amortization when assets are classified as held for sale.
Fixed assets
Fixed assets acquired, including internal-use software, are stated at acquisition cost less accumulated depreciation and impairment. The cost of the fixed
assets is reduced by any investment tax credits or government capital grants earned. Depreciation is provided on a straight-line basis over the estimated
useful lives of the assets. We capitalize interest on borrowings during the construction period of major capital projects as part of the related asset and
amortize the capitalized interest in “Depreciation and amortization” in our Consolidated Statements of Operations over the related asset’s remaining useful
life. Planned major maintenance costs are recorded using the deferral method, whereby the costs of each planned major maintenance activity are capitalized
to “Other current assets” or “Other assets” in our Consolidated Balance Sheets, and amortized to “Cost of sales, excluding depreciation, amortization and
distribution costs” in our Consolidated Statements of Operations on a straight-line basis over the estimated period until the next planned major maintenance
activity. All other routine repair and maintenance costs are expensed as incurred.
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Amortizable intangible assets
RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
Amortizable intangible assets are stated at acquisition cost less accumulated amortization and impairment. Amortization is provided on a straight-line basis
over the estimated useful lives of the assets.
Impairment of long-lived assets
The unit of accounting for impairment testing for fixed assets, net, amortizable intangible assets, net, and operating lease right-of-use assets (collectively,
“long-lived assets”) is its group, which includes long-lived assets and liabilities directly related to those assets (herein defined as “asset group”). For asset
groups that are held and used, that group represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other
asset groups. For asset groups that are to be disposed of by sale or otherwise, that group represents assets to be disposed of together as a group in a single
transaction and liabilities directly associated with those assets that will be transferred in the transaction.
Long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying value of an asset group may no longer be
recoverable. The recoverability of an asset group that is held and used is tested by comparing the carrying value of the asset group to the sum of the
estimated undiscounted future cash flows expected to be generated by that asset group. In estimating the undiscounted future cash flows, we use projections
of cash flows directly associated with, and which are expected to arise as a direct result of, the use and eventual disposition of the asset group. If there are
multiple plausible scenarios for the use and eventual disposition of an asset group, we assess the likelihood of each scenario occurring in order to determine
a probability-weighted estimate of the undiscounted future cash flows. The principal assumptions include periods of operation, projections of product
pricing, production levels and sales volumes, product costs, market supply and demand, foreign exchange rates, inflation, and projected capital spending.
Changes in any of these assumptions could have a material effect on the estimated undiscounted future cash flows expected to be generated by the asset
group. If it is determined that an asset group is not recoverable, an impairment loss is recognized in the amount that the asset group’s carrying value
exceeds its fair value. The fair value of a long-lived asset group is determined in accordance with our accounting policy for fair value measurements, as
discussed below. If it is determined that the carrying value of an asset group is recoverable, we review and adjust, as necessary, the estimated useful lives of
the assets in the group.
Long-lived assets to be disposed of other than by sale are classified as held and used until the asset group is disposed of or use of the asset group has
ceased.
Goodwill
Goodwill is not amortized and is tested for impairment every year at the end of November, or more frequently if events or changes in circumstances
indicate a potential impairment loss. The impairment test of goodwill is performed at the reporting unit’s level.
We have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its
carrying amount including goodwill. In performing the qualitative assessment, we identify the relevant drivers of fair value of a reporting unit and the
relevant events and circumstances that may have an impact on those drivers of fair value. This process involves significant judgment and assumptions
including the assessment of the results of the most recent fair value calculations, the identification of macroeconomic conditions, industry and market
considerations, cost factors, overall financial performance, specific events affecting us and the business, and making the assessment on whether each
relevant factor will impact the impairment test positively or negatively, and the magnitude of any such impact. If the qualitative assessment indicates that it
is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill, then a quantitative impairment test is
performed. We can also elect to bypass the qualitative assessment and proceed directly to the quantitative impairment test.
The quantitative impairment test consists of comparing the fair value of a reporting unit to its carrying amount, including goodwill. Significant judgment is
required to estimate the fair value of a reporting unit.
We determine the fair value of a reporting unit by using the income method. Under this method, we estimate the fair value of a reporting unit based on the
present value of estimated future cash flows. The assumptions used in the model requires estimating future sales volumes, selling prices and costs, changes
in working capital, investments in fixed assets, and the selection of the appropriate discount rate. The assumptions used are consistent with internal
projections and operating plans. Unanticipated market and macroeconomic events and circumstances may occur and could affect the exactitude and validity
of management assumptions and estimates. Sensitivities of these fair value estimates to changes in assumptions are also performed.
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RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
In the event that the net carrying amount of the reporting unit exceeds its fair value, an impairment charge is recognized for the amount by which the
reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill in that reporting unit.
Goodwill is assigned to the wood segment for the purposes of impairment testing.
We elected the optional qualitative assessment for our 2020 annual goodwill impairment test. We concluded that it is not more likely than not that the fair
value of the reporting unit is less than its carrying amount. As a result, no impairment was recognized.
Leases
We engage in short and long-term leases for building, machinery, chemical equipment, rail cars and office equipment. We determine if a contract contains a
lease at inception. Leases are classified as either operating leases or finance leases. Operating leases are included in “Operating lease right-of-use assets,”
“Current portion of operating lease liabilities,” and “Operating lease liabilities, net of current portion,” whereas finance leases are included in “Fixed assets,
net,” “Current portion of long-term debt,” and “Long-term debt, net of current portion” in our Consolidated Balance Sheets. Leases with a term of 12
months or less are not recorded in our Consolidated Balance Sheets, and are expensed over the term of the lease in our Consolidated Statements of
Operations.
Operating and finance lease right-of-use assets and the related liabilities are recognized at the lease commencement date based on the present value of the
future lease payments over the lease term. Renewal and termination options are included in our lease terms when it is reasonably certain that they will be
exercised. In determining the present value of lease payments, we use the implicit rate when readily determinable, or our estimated incremental borrowing
rate, which is based on information available at the lease commencement date. Lease payments are expensed in our Consolidated Statements of Operations
on a straight-line basis over the term of the lease.
For buildings, we account for the lease and non-lease components as a single lease component. For all other contracts, we account for the lease and non-
lease components separately.
Income taxes
We use the asset and liability approach in accounting for income taxes. Under this approach, deferred income tax assets and liabilities are recognized for
the expected future tax consequences attributable to differences between the carrying amounts in our Consolidated Financial Statements of existing assets
and liabilities and their respective tax bases. This approach also requires the recording of deferred income tax assets related to operating loss and tax credit
carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates applicable when temporary differences and carryforwards are
expected to be recovered or settled.
We account for global intangible low-taxed income (or, “GILTI”) as a period cost, if and when incurred, and apply the tax law ordering approach to assess
the impact of GILTI on the realizability of net operating loss carryforwards.
We have not provided for the additional U.S. and foreign income taxes that could become payable upon remittance of undistributed earnings of our foreign
subsidiaries, as we have specific plans for the reinvestment of such earnings.
Valuation allowances are recognized to reduce deferred income tax assets to the amount that is more likely than not to be realized. In assessing the
likelihood of realization, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences,
estimates of future taxable income, past operating results, and prudent and feasible tax planning strategies.
Tax benefits related to uncertain tax positions are recorded when it is more likely than not, based on technical merits, that the position will be sustained
upon examination by the relevant taxing authorities. The amount of tax benefit recognized may differ from the amount taken or expected to be taken on a
tax return. These differences represent unrecognized tax benefits and are reviewed at each reporting period based on facts, circumstances and available
evidence. We recognize accrued interest and penalties related to unrecognized tax benefits as a component of the income tax provision.
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Environmental costs
RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
We expense environmental costs related to existing conditions resulting from past or current operations and from which no current or future benefit is
discernible. These costs are included in “Cost of sales, excluding depreciation, amortization and distribution costs” in our Consolidated Statements of
Operations. Expenditures that extend the life of the related property are capitalized. We determine our liability on a site-by-site basis and record a liability
at the time it is probable and can be reasonably estimated. Such accruals are adjusted as further information develops or circumstances change. Costs of
future expenditures for environmental remediation obligations are discounted to their present value when the amount and timing of expected cash payments
are reliably determinable.
Pension and OPEB plans
For each defined benefit pension and OPEB plan, a liability is recognized for a plan’s under-funded status, net of the fair value of plan assets, and an asset
is recognized for a plan’s over-funded status, net of the plan’s obligations. Changes in the funding status that have not been recognized in our net periodic
benefit cost are reflected as an adjustment to our “Accumulated other comprehensive loss” in our Consolidated Balance Sheets. We recognize net periodic
benefit cost or credit as employees render the services necessary to earn the pension and OPEB. The service cost component of net periodic pension and
OPEB cost or credit is recorded in operating expenses (together with other employee compensation costs arising during the period). The other components
of the net periodic pension and OPEB cost or credit (or, “non-operating pension and OPEB credits”) are reported separately outside any subtotal of
operating income. Amounts we contribute to our defined contribution plans are expensed as incurred.
Fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market
participants at the measurement date, and is based on any principal market for the specific asset or liability. We consider the risk of non-performance of the
obligor, which in some cases reflects our own credit risk, in determining fair value. We categorize assets and liabilities measured at fair value (other than
those measured at net asset value, or “NAV,” per share, or its equivalent) into one of three different levels depending on the observability of the inputs
employed in the measurement. This fair value hierarchy is as follows:
Level 1 -
Level 2 -
Level 3 -
Valuations based on quoted prices in active markets for identical assets and liabilities.
Valuations based on observable inputs, other than Level 1 prices, such as quoted interest or currency exchange rates.
Valuations based on significant unobservable inputs that are supported by little or no market activity, such as discounted cash flow
methodologies based on internal cash flow forecasts.
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair
value measurement. Valuation techniques used in the determination of fair value of our assets and liabilities, when required, maximize the use of
observable inputs and minimize the use of unobservable inputs.
Share-based compensation
We recognize the cost of our share-based compensation over the requisite service period using the straight-line attribution approach, based on the grant date
fair value for equity-based awards, and based on the fair value at the end of each reporting period for liability-based awards. The requisite service period is
reduced for those employees who are retirement eligible at the date of the grant or who will become retirement eligible during the vesting period and who
will be entitled to continue vesting in their entire award upon retirement.
Our stock incentive awards (as defined in Note 20, “Share-Based Compensation”) may be subject to market, performance and/or service conditions. For
equity-based awards, the fair value of stock options is determined using a Black-Scholes option pricing formula, and the fair value of restricted stock units
(or, “RSUs”), deferred stock units (or, “DSUs”) and performance stock units (or, “PSUs”) is determined based on the market price of a share of our
common stock on the grant date. Liability-based awards, consisting of RSUs, DSUs, and PSUs, are initially measured based on the market price of a share
of our common stock on the grant date and remeasured at the end of each reporting period, until settlement. Certain PSUs have a market condition
considered in the determination of the fair value of the award, such that the ultimate number of units that vest will be
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RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
determined in part by total shareholder return relative to a group of peer companies. The fair value of those PSUs is determined using a Monte Carlo
simulation model.
We estimate forfeitures of stock incentive awards and performance adjustments for our PSUs based on historical experience and forecasts, and recognize
compensation cost only for those awards expected to vest. Estimated forfeitures and performance adjustments are updated to reflect new information or
actual experience, as it becomes available.
Revenue recognition
Revenue arises from contracts with customers in which the sale of goods is the main performance obligation. A contract’s transaction price is allocated to
each distinct performance obligation and recognized as revenue when or as the performance obligation is satisfied, which is when (point in time) or as
(over time) control of the promised good or service is transferred to the customer.
Revenue is measured at the amount to which we are expected to be entitled in exchange for transferring goods based on consideration specified in the
contract with the customer. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing
transaction, that we collect from the customer, are excluded from revenue. When a contract with a customer includes variable consideration such as special
pricing agreements and other volume-based incentives, revenue is recognized at the most likely amount based on sales forecasts, for which it is probable
that a revenue reversal will not subsequently occur.
Revenue is recorded at a point in time when control over the goods transfers to the customer, which typically occurs upon shipment or delivery depending
on the terms of the underlying contracts with customers. Pulp, tissue, paper and wood products are delivered to our customers in the U.S. and Canada
directly from our mills primarily by truck or rail. Pulp and paper products are delivered to our international customers primarily by ship. For sales where
control transfers to the customer at the shipping point, revenue is recorded when the product leaves the facility, whereas for sales where control transfers at
the destination, revenue is recorded when the product is delivered to the customer’s delivery site.
Sales of our other products (green power produced from renewable sources and wood-related products) are recognized when the products are delivered and
are included in “Cost of sales, excluding depreciation, amortization and distribution costs” in our Consolidated Statements of Operations.
Distribution costs
Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment
cost and are included in “Distribution costs” in our Consolidated Statements of Operations.
Translation
The functional currency of the majority of our operations is the U.S. dollar. Non-monetary assets and liabilities denominated in foreign currencies of these
operations and the related income and expense items such as depreciation and amortization are remeasured into U.S. dollars using historical exchange rates.
Remaining assets and liabilities are remeasured into U.S. dollars using the exchange rate as of the balance sheet date. Remaining income and expense items
are remeasured into U.S. dollars using a daily or monthly average exchange rate for the period. Gains and losses from foreign currency transactions and
from remeasurement of the balance sheet items are reported in “Other (expense) income, net” in our Consolidated Statements of Operations.
The functional currency of our other operations is their local currency. Assets and liabilities of these operations are translated into U.S. dollars at the
exchange rate in effect as of the balance sheet date. Income and expense items are translated using a daily or monthly average exchange rate for the period.
The resulting translation gains or losses are recognized as a component of equity in “Accumulated other comprehensive loss.”
Derivatives financial instruments
We regularly enter into derivative financial instruments to manage our commodities price risk. These derivative instruments are not designated as hedging
instruments and are recorded as either other assets or other liabilities at fair value in our Consolidated Balance Sheets. Changes in fair value are recognized
in “Other (expenses) income, net” in our Consolidated Statements of Operations.
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Net income (loss) per share
RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
We calculate basic net income (loss) per share attributable to Resolute Forest Products Inc. common shareholders by dividing our net income (loss) by the
basic weighted-average number of outstanding common shares. We calculate diluted net income per share attributable to Resolute Forest Products Inc.
common shareholders by dividing our net income by the basic weighted-average number of outstanding common shares, as adjusted for dilutive potential
common shares using the treasury-stock method. To calculate diluted net income (loss) per share attributable to Resolute Forest Products Inc. common
shareholders, securities that could have potentially dilutive effect on the weighted average number of outstanding common shares include all or a portion of
outstanding stock options, RSUs, DSUs and PSUs.
New accounting pronouncements adopted in 2020
ASU 2016-13 “Measurement of Credit Losses on Financial Instruments”
Effective January 1, 2020, we adopted on a modified retrospective basis Accounting Standards Update (or, “ASU”) 2016-13, “Measurement of Credit
Losses on Financial Instruments,” issued by the Financial Accounting Standards Board (or, the “FASB”) in 2016 and amended in 2018 by ASU 2018-19,
“Codification Improvements to Topic 326, Financial Instruments – Credit Losses,” which introduces the current expected credit losses model in the
estimation of credit losses on financial instruments. The adoption of this new accounting guidance did not impact the opening deficit balance as of January
1, 2020. As a result of the adoption of ASU 2016-13, our accounts receivable accounting policy was updated accordingly.
ASU 2018-13 “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement”
Effective January 1, 2020, we adopted ASU 2018-13 “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure
Requirements for Fair Value Measurement” issued by the FASB in 2018. The adoption of this accounting guidance did not impact our Consolidated
Financial Statements and disclosures.
ASU 2018-15 “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract”
Effective January 1, 2020, we adopted ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement
That Is a Service Contract,” issued by the FASB in 2018, which aligns the requirements for capitalizing implementation costs incurred in a hosting
arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and
hosting arrangements that include an internal-use software license). The adoption of this accounting guidance did not materially impact our results of
operations or financial position.
Accounting pronouncements not yet adopted as of December 31, 2020
ASU 2019-12 “Simplifying the Accounting for Income Taxes”
In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes,” which removes the specific exceptions to the general
principles in ASC 740, “Income Taxes,” and clarifies certain aspects of the existing guidance. This update is effective for fiscal years beginning after
December 15, 2020, including interim periods within those fiscal years, with early adoption being permitted as of the beginning of an interim or annual
reporting period. All amendments to this ASU must be adopted in the same period on a prospective basis, with certain exceptions. We do not expect this
accounting guidance to materially impact our results of operations or financial position.
ASU 2020-04 “Reference Rate Reform”
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform,” which provides optional guidance for a limited period of time to ease the
potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. This update provides optional expedients and
exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate or another
reference rate expected to be discontinued because of reference rate reform. This update is effective as of March 12, 2020, through December 31, 2022. We
are currently evaluating this accounting guidance and have not elected an adoption date. We do not expect this accounting guidance to materially impact
our results of operations or financial position.
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Note 3. Business Acquisition
RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
On February 1, 2020 (or, the “Acquisition Date”), we acquired from Conifex Timber Inc. all of the equity securities and membership interests in certain of
its subsidiaries, the business of which consists mainly in the operation of three sawmills and related assets in Cross City (Florida) and in Glenwood and El
Dorado (Arkansas) (or, the “U.S. Sawmill Business”). The U.S. Sawmill Business acquired produces construction-grade dimensional lumber and decking
products from locally sourced southern yellow pine for distribution within the U.S. This acquisition diversified our lumber production, and increased our
operating capacity in the U.S. South.
The fair value of the consideration, paid in cash, for the U.S. Sawmill Business acquired is $173 million. The acquisition is structured as an asset purchase
for tax purposes, but treated as a business combination for accounting purposes.
The following table summarizes our final allocation of the purchase price to the fair values of assets acquired and liabilities assumed at the Acquisition
Date:
(1)
(In millions)
Current assets
Fixed assets
Amortizable intangible assets
Operating lease right-of-use assets
Goodwill
(3)
(2)
Total assets acquired and goodwill
Current liabilities
Long-term debt, net of current portion
Operating lease liabilities, net of current portion
Total liabilities assumed
Net assets acquired
Fair value of consideration transferred
$
$
$
$
$
$
19
114
21
2
31
187
11
2
1
14
173
173
(1)
(2)
(3)
Includes cash and cash equivalents of $1 million.
Amortizable intangible assets identified relate to customer relationships, which have a weighted-average useful life of 10 years. The fair value of
the customer relationships was determined using the income approach through an excess earnings analysis discounted at a rate of 12.6%.
Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately
recognized and is mostly attributable to the U.S. Sawmill Business’s assembled workforce and synergies expected from combining our operations
with the U.S. Sawmill Business. Goodwill is deductible for tax purposes.
The allocation of the purchase price was based on management’s estimate of the fair values of the acquired identifiable assets and assumed liabilities using
valuation techniques including income, cost and market approaches (Level 3). We utilized both the cost and market approaches to value fixed assets, which
consider external transactions and other comparable transactions, estimated replacement and reproduction costs, and estimated useful lives and
consideration for physical, functional and economic obsolescence. We utilized the income approach to value intangible assets, which considers the present
value of the net cash flows expected to be generated by the intangible assets, and excluding cash flows related to contributory assets.
From the Acquisition Date to the year ended December 31, 2020, our consolidated financial results included sales of $137 million and net income of
$43 million attributable to the U.S. Sawmill Business. The U.S. Sawmill Business results of operations are included in the wood products segment, except
for the El Dorado sawmill, which was idled at the time of the acquisition, and has been restarted in the fourth quarter of 2020. In connection with the
acquisition of the U.S. Sawmill Business, we also recognized transaction costs of $3 million in “Other (expense) income, net” in our Consolidated
Statement of Operations for the year ended December 31, 2020.
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RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
The following unaudited pro forma information for the years ended December 31, 2020 and 2019, represents our results of operations as if the acquisition
of the U.S. Sawmill Business had occurred on January 1, 2019, excluding the results of operations of the El Dorado sawmill that has been idled since
October 2019 and restarted in the fourth quarter of 2020. This pro forma information does not purport to be indicative of the results that would have
occurred for the periods presented or that may be expected in the future.
(Unaudited, in millions)
Sales
Net income (loss) attributable to Resolute Forest Products Inc.
Note 4. Other (Expense) Income, Net
2020
2,808
13
$
$
2019
3,021
(70)
$
$
Other (expense) income, net for the years ended December 31, 2020, 2019 and 2018, was comprised of the following:
(In millions)
Foreign exchange loss
(1)
Insurance recovery
Provision related to a litigation
(Loss) gain on forward commodities contracts
Miscellaneous income
(2)
2020
2019
2018
$
$
(4)
15
—
(22)
7
(4)
$
$
(12)
—
(23)
—
13
(22)
$
$
(2)
—
—
4
3
5
(1)
(2)
We recorded $15 million as other income for the year ended December 31, 2020, from the settlement of an insurance claim in connection with our
acquisition of Atlas Paper Holdings, Inc. (or, “Atlas”) in 2015.
We accrued C$30 million of legal indemnity and interest costs for the year ended December 31, 2019, in connection with the Quebec Superior
Court decision of the fair value of the shares of former dissenting shareholders of Fibrek Inc. (or, “Fibrek”) upon acquisition in 2012. See Note 18,
“Commitments and Contingencies - Fibrek acquisition,” for more information.
Note 5. Closure Costs, Impairment and Other Related Charges
Closure costs, impairment and other related charges for the year ended December 31, 2020, were comprised of the following:
(In millions)
Paper mill at Amos (Quebec)
Paper mill at Baie-Comeau (Quebec)
(1)
(1)
Other
(1)
Accelerated
Depreciation
Severance and
Other Costs
$
$
12
26
—
38
$
$
5
12
(2)
15
Total
17
38
(2)
53
$
$
Due to the overall decrease in demand for newsprint, accelerated by the economic context surrounding the COVID-19 pandemic, the Amos and
Baie-Comeau paper mills have been temporarily idled since April 2020. As a result, we reassessed the remaining useful lives of the fixed assets
and recognized an accelerated depreciation charge of $38 million. We also recognized additional provisions for severance and other costs of $17
million.
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RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
Closure costs, impairment and other related charges for the year ended December 31, 2019, were comprised of the following:
(In millions)
Indefinite idling
Paper mill at Augusta (Georgia)
Accelerated
Depreciation
Severance and
Other Costs
Total
$
8
$
10
$
18
Closure costs, impairment and other related charges were $121 million for the year ended December 31, 2018, including $120 million of impairment
charges related to the assets from the 2015 acquisition of Atlas and its subsidiaries.
Goodwill impairment charge
Following our 2018 annual impairment test of goodwill, we determined that the carrying value of the tissue reporting unit exceeded its estimated fair value.
As a result, we recorded a goodwill impairment charge of $81 million for the year ended December 31, 2018, representing the entire goodwill amount as of
that date. This impairment charge resulted from cumulative losses of the tissue business and lower-than-expected projected cash flows, driven by operating
and market-related factors. The fair value of the reporting unit was determined based on the present value of estimated future cash flows.
Long-lived assets impairment charges
As a result of the deterioration of estimated future cash flows of Atlas, we recorded for the year ended December 31, 2018, fixed assets impairment charges
of $29 million and intangible assets impairment charges of $10 million to reduce the carrying value of these assets to their estimated fair value. The fair
value of fixed assets was estimated using the market approach, by reference to estimated selling prices for similar assets, less costs to sell. The fair value of
intangible assets was estimated using the income approach. Projected discounted cash flows utilized under the income approach included estimates
regarding future revenues and expenses attributable to Atlas, projected capital expenditures and a discount rate of 12%. These fair value measurements are
considered Level 3 measurements due to the significance of their unobservable inputs.
Note 6. Net Gain on Disposition of Assets
During 2020, we recorded a net gain on disposition of assets of $11 million, which included: the sale of the Augusta paper mill for total cash consideration
of $10 million, resulting in a net gain of $9 million; and the sale of the Thorold paper mill for total cash consideration of $4 million, resulting in a net gain
of $2 million.
During 2018, we recorded a net gain on disposition of assets of $145 million, which included: the sale of the paper and pulp mill at Catawba (South
Carolina) for total cash consideration of $280 million, resulting in a net gain of $101 million; and the sale of the recycled bleached kraft pulp mill at
Fairmont (West Virginia) for total cash consideration of $62 million, resulting in a net gain of $40 million.
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RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
Note 7. Accumulated Other Comprehensive Loss
The change in our accumulated other comprehensive loss by component (net of tax) for the years ended December 31, 2020, 2019 and 2018, was as
follows:
(In millions)
Balance as of December 31, 2017
Other comprehensive loss before reclassifications
Amounts reclassified from accumulated other comprehensive loss
Net current period other comprehensive loss
Reclassification of stranded income tax
Balance as of December 31, 2018
Other comprehensive (loss) income before reclassifications
Amounts reclassified from accumulated other comprehensive loss
Net current period other comprehensive (loss) income
Balance as of December 31, 2019
Other comprehensive loss before reclassifications
Amounts reclassified from accumulated other comprehensive loss
Net current period other comprehensive loss
Balance as of December 31, 2020
(1)
(1)
(1)
(1)
See the table below for details about these reclassifications.
Unamortized
Prior Service
(Costs) Credits
Unamortized
Actuarial Losses
$
$
52
(5)
(19)
(24)
—
28
—
(12)
(12)
16
—
(17)
(17)
(1)
$
$
(826)
(162)
19
(143)
(2)
(971)
(240)
22
(218)
(1,189)
(185)
67
(118)
(1,307)
83
Foreign
Currency
Translation
$
(6)
(1)
—
(1)
—
(7)
1
—
1
(6)
—
—
—
(6)
$
Total
(780)
(168)
—
(168)
(2)
(950)
(239)
10
(229)
(1,179)
(185)
50
(135)
(1,314)
$
$
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RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
The reclassifications out of accumulated other comprehensive loss for the years ended December 31, 2020, 2019 and 2018, were comprised of the
following:
(In millions)
Unamortized Prior Service Credits
2020
2019
2018
Affected Line in the Consolidated Statements of
Operations
Amortization of prior service credits
$
(4)
$
(11)
$
(15)
Curtailment gain
Curtailment gain
Net of tax
Unamortized Actuarial Losses
Amortization of actuarial losses
Settlement loss
Curtailment gain
Settlement loss
Other items
Net of tax
Total Reclassifications
$
(13)
—
—
(17)
57
28
—
—
3
(21)
67
50
(1)
—
—
(12)
28
1
—
—
—
(7)
22
10
$
—
(5)
1
(19)
33
1
(8)
2
—
(9)
19
—
$
Non-operating pension and other postretirement benefit
credits
(1)
Non-operating pension and other postretirement benefit
credits
(1)
Net gain on disposition of assets
Income tax provision
(1)
Non-operating pension and other postretirement benefit
credits
(1)
Non-operating pension and other postretirement benefit
credits
(1)
Net gain on disposition of assets
Net gain on disposition of assets
(1)
(1)
Income tax provision
(1)
These items are included in the computation of net periodic benefit cost (credit) related to our pension and OPEB plans summarized in Note 16,
“Pension and Other Postretirement Benefit Plans.”
Note 8. Net Income (Loss) Per Share
The reconciliation of the basic and diluted net income (loss) per share for the years ended December 31, 2020, 2019 and 2018, was as follows:
(In millions, except per share amounts)
Numerator:
2020
2019
2018
Net income (loss) attributable to Resolute Forest Products Inc.
$
10
$
(47)
$
235
Denominator:
Basic weighted-average number of Resolute Forest Products Inc. common shares
outstanding
Dilutive impact of nonvested stock unit awards
Diluted weighted-average number of Resolute Forest Products Inc. common shares
outstanding
Net income (loss) per share attributable to Resolute Forest Products Inc. common
shareholders:
Basic
Diluted
86.1
0.3
86.4
0.12
0.12
$
$
91.4
—
91.4
$
$
(0.51)
(0.51)
$
$
91.3
2.0
93.3
2.57
2.52
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RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
The weighted-average number of outstanding stock options and nonvested equity-classified RSUs, DSUs and PSUs (collectively, “stock unit awards”) that
were excluded from the calculation of diluted net income (loss) per share, as their impact would have been antidilutive, for the years ended December 31,
2020, 2019 and 2018, was as follows:
(In millions)
Stock options
Stock unit awards
Note 9. Inventories, Net
Inventories, net as of December 31, 2020 and 2019, were comprised of the following:
(In millions)
Raw materials
Work in process
Finished goods
Mill stores and other supplies
2020
0.9
0.6
2019
1.0
2.1
2018
1.2
—
2020
132
46
120
164
462
$
$
2019
128
46
164
184
522
$
$
In 2020, we recorded charges of $25 million for write-downs of mill stores and other supplies due to the temporary idling of the Amos and Baie-Comeau
paper mills. In 2019, we recorded charges of $13 million for write-downs of mill stores and other supplies due to the indefinite idling of the Augusta paper
mill. These charges were included in “Cost of sales, excluding depreciation, amortization and distribution costs” in our Consolidated Statements of
Operations.
Note 10. Fixed Assets, Net
Fixed assets, net as of December 31, 2020 and 2019, were comprised of the following:
(Dollars in millions)
Land and land improvements
Buildings
Machinery and equipment
Hydroelectric power plants
Timberlands and timberlands improvements
Construction in progress
(1)
Less: Accumulated depreciation
Estimated Useful
Lives (Years)
5
10
2
10
10
– 20
– 40
– 25
– 40
– 20
2020
52
328
2,128
301
136
100
3,045
(1,604)
1,441
$
$
2019
52
313
2,256
303
128
65
3,117
(1,658)
1,459
$
$
(1)
Internal-use software included in fixed assets, net as of December 31, 2020 and 2019, was as follows:
(In millions)
Machinery and equipment
Less: Accumulated depreciation
2020
124
(90)
34
$
$
2019
115
(76)
39
$
$
Depreciation expense related to internal-use software is estimated to be $14 million in 2021, $10 million in 2022, $5 million in 2023, $2 million in
2024 and $1 million in 2025.
We recorded accelerated depreciation of $38 million for the Amos and Baie-Comeau paper mills for the year ended December 31, 2020. We also recorded
accelerated depreciation of $8 million for the year ended December 31, 2019, as a result of the indefinite idling of our paper mill in Augusta. See Note 5,
“Closure Costs, Impairment and Other Related Charges” for more information.
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RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
Depreciation expense related to fixed assets was $163 million, $164 million, and $207 million for the years ended December 31, 2020, 2019 and 2018,
respectively.
Note 11. Amortizable Intangible Assets, Net
Amortizable intangible assets, net as of December 31, 2020 and 2019, were comprised of the following:
(1)
(Dollars in millions)
Water rights
Energy contracts
Customer relationships
Other
(2)
Estimated
Useful
Lives
(Years)
–
–
10
40
25
10
15
2020
Accumulated
Amortization
$
$
9
21
3
—
33
Net
10
31
20
2
63
$
$
2019
Accumulated
Amortization
$
$
8
18
1
—
27
Net
11
34
1
2
48
$
$
$
Gross
Carrying
Value
19
52
2
2
75
$
$
Gross
Carrying
Value
19
52
23
2
96
$
(1)
(2)
In order to operate our hydroelectric generation and transmission network, we draw water from various rivers in Quebec. For some of our
facilities, the use of such government-owned waters is governed by water power agreements with the province of Quebec, which set out the terms,
conditions, and fees (as applicable). In some cases, the agreements are contingent on the continued operation of the related paper mills and a
minimum level of capital spending in the region. For our other facilities, the right to generate hydroelectricity stems from our ownership of the
riverbed on which these facilities are located.
In connection with our acquisition of the U.S. Sawmill Business, we identified amortizable intangible assets primarily related to customer
relationships. See Note 3, “Business Acquisition” for additional information.
Amortization expense related to amortizable intangible assets was $6 million, $3 million and $5 million for the years ended December 31, 2020, 2019 and
2018, respectively. Amortization expense related to amortizable intangible assets is estimated to be $6 million for 2021 and $5 million per year for 2022,
2023, 2024 and 2025.
Note 12. Operating Leases
We have operating leases for buildings, machinery, chemical equipment, rail cars, and office equipment with remaining terms of less than one year to 22
years. These leases may include renewal options for up to 15 years.
The components of lease expense for the years ended December 31, 2020 and 2019, were as follows:
(In millions)
Operating lease cost
(1)
Variable lease cost
2020
13
20
$
$
2019
13
21
$
$
(1)
Variable lease cost is determined by the consumption of the underlying asset.
Operating lease expense for the year ended December 31, 2018 was $12 million.
Supplemental information related to operating leases was as follows:
Weighted-average remaining operating lease term (in years)
Weighted-average operating lease discount rate
December 31,
2020
10.8
4.6 %
December 31,
2019
11.1
4.7 %
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RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
(In millions)
Operating cash flow payments for operating lease liabilities
Operating lease right-of-use assets obtained in exchange for operating lease liabilities
The maturities of operating lease liabilities as of December 31, 2020, were as follows:
Year Ended December
31, 2020
12
$
8
$
Year Ended December
31, 2019
11
$
4
$
(In millions)
2021
2022
2023
2024
2025
2026 and thereafter
Total lease payments
Less: imputed interest
Total operating lease liabilities
Note 13. Other Assets
Operating Leases
$
$
12
11
8
7
6
38
82
18
64
Other assets include countervailing and anti-dumping duty cash deposits on softwood lumber of $194 million and $49 million, respectively, as of December
31, 2020, and of $128 million and $34 million, respectively, as of December 31, 2019. See Note 18, “Commitments and Contingencies” for more
information.
Note 14. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities as of December 31, 2020 and 2019, were comprised of the following:
(In millions)
Trade accounts payable
Accrued compensation
Accrued interest
Pension and other postretirement benefit obligations
Income and other taxes payable
Other
2020
251
76
4
14
5
19
369
$
$
2019
255
52
3
15
4
13
342
$
$
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Note 15. Long-Term Debt
Overview
RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
Long-term debt, including current portion, as of December 31, 2020 and 2019, was comprised of the following:
(In millions)
5.875% senior unsecured notes due 2023:
Principal amount
Deferred financing costs
Unamortized discount
Total 5.875% senior unsecured notes due 2023
Term loans due 2030
Borrowings under revolving credit facilities
Finance lease obligations
Total debt
Less: Current portion of finance lease obligations
Long-term debt, net of current portion
Debt instruments
Senior Unsecured Notes
2020
2019
$
$
375
(2)
(1)
372
180
—
9
561
(2)
559
$
$
375
(3)
(1)
371
—
71
7
449
(1)
448
We issued $600 million in aggregate principal amount of 5.875% senior unsecured notes due 2023 (or, the “2023 Notes”) on May 8, 2013, pursuant to an
indenture as of that date (or, the “indenture”). Upon their issuance, the notes were recorded at their fair value of $594 million, which reflected a discount of
$6 million that is being amortized to “Interest expense” in our Consolidated Statements of Operations using the interest method over the term of the notes,
resulting in an effective interest rate of 6%. Interest on the notes is payable semi-annually beginning November 15, 2013, until their maturity date of May
15, 2023. In connection with the issuance of the notes, we incurred financing costs of $9 million, which were deferred and recorded as a reduction of the
notes. Deferred financing costs are being amortized to “Interest expense” in our Consolidated Statements of Operations using the interest method over the
term of the notes. On May 27, 2014, the 2023 Notes and related guarantees were registered under the Securities Act of 1933 (as amended, the “Securities
Act”).
On January 3, 2019, we repurchased $225 million in aggregate principal amount of the 2023 Notes, pursuant to a notes purchase agreement entered into on
December 21, 2018, with certain noteholders, at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest. As a
result of the repurchase, we recorded a net loss on extinguishment of debt of $3 million in “Other (expense) income, net” in our Consolidated Statement of
Operations for the year ended December 31, 2019.
The 2023 Notes are guaranteed by all of our existing and subsequently acquired or organized direct or indirect wholly-owned U.S. subsidiaries that
guarantee the ABL Credit Facility (as defined and discussed below). The notes are unsecured and effectively junior to indebtedness under both the ABL
Credit Facility and the Senior Secured Credit Facility (as defined and discussed below), and to future secured indebtedness. In addition, the notes are
structurally subordinated to all existing and future liabilities of our subsidiaries that do not guarantee the notes.
The terms of the indenture impose certain restrictions, subject to a number of exceptions and qualifications, including limits on our ability to: incur, assume
or guarantee additional indebtedness; issue redeemable stock and preferred stock; pay dividends or make distributions or redeem or repurchase capital
stock; prepay, redeem or repurchase certain debt; make loans and investments; incur liens; restrict dividends, loans or transfer assets from our subsidiaries;
sell or otherwise dispose of assets, including capital stock of subsidiaries; consolidate or merge with or into, or sell substantially all of our assets to, another
person; enter into transactions with affiliates; and enter into new lines of business.
In the event of a change of control, each holder has the right to require us to repurchase all or any part of that holder’s notes at a purchase price in cash
equal to 101% of the aggregate principal amount of the notes plus any accrued and unpaid interest. If we sell certain of our assets and do not use the
proceeds to pay down certain indebtedness, purchase additional assets or make
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RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
capital expenditures, each as specified in the indenture, we must offer to purchase the notes at a redemption price of 100% of the principal amount thereof
plus accrued and unpaid interest with the net cash proceeds from the asset sale.
The 2023 Notes are redeemable, in whole or in part, since May 15, 2017, at redemption prices equal to the principal amount plus accrued and unpaid
interest. The fair value of the 2023 Notes (Level 1) was $375 million and $380 million as of December 31, 2020 and 2019, respectively.
On February 2, 2021, we completed the private offering (or, the “Offering”) of $300 million aggregate principal amount of our 4.875% senior notes due
2026 (or, the “2026 Notes”) at an issue price of 100%. We used the net proceeds of the Offering, together with cash on hand, to redeem all of the
outstanding $375 million aggregate principal amount of our 2023 Notes at a price of 100% of the aggregate principal amount thereof, plus accrued and
unpaid interest to, but not including, the redemption date. See Note 23, “Subsequent Events” for additional information.
Senior Secured Credit Facility
On September 7, 2016, we entered into a senior secured credit facility for up to $185 million. This senior secured credit facility provided a term loan of $46
million with a maturity date of September 7, 2025, and a revolving credit facility of up to $139 million with a maturity date of September 7, 2022. On
October 28, 2019, we entered into an amended and restated senior secured credit facility (or, the “Senior Secured Credit Facility”) for up to $360 million,
replacing our existing $185 million senior secured credit facility. The Senior Secured Credit Facility provided a term loan facility of up to $180 million
with a delayed draw period of up to three years, and the choice of maturities of six to 10 years (or, the “Term Loan Facility”), and a six-year revolving
credit facility of up to $180 million with a maturity date of October 28, 2025 (or, the “Revolving Credit Facility”). In March 2020, we borrowed $180
million in term loans under the Term Loan Facility for 10 years, maturing in March 2030. There is also an uncommitted option to increase the Senior
Secured Credit Facility by up to an additional $360 million, subject to certain terms and conditions. On October 28, 2019, we repaid our $46 million term
loan by borrowing under the Revolving Credit Facility.
The obligations under the Senior Secured Credit Facility are guaranteed by certain material U.S. subsidiaries of the Company and are secured by a first
priority mortgage on the real property of our Calhoun (Tennessee) facility and a first priority security interest on the fixtures and equipment located therein.
Interest rates under the Senior Secured Credit Facility are based, at the Company’s election, on either a floating rate based on the London Interbank Offered
Rate (or, the “LIBOR”), or a base rate, in each case plus a spread over the index. The Senior Secured Credit Facility also contains provisions for an
expedited amendment procedure for replacing LIBOR if LIBOR quotes are no longer available. The base rate is the highest of (i) the prime rate; (ii) the
federal funds rate plus 0.5%; and (iii) the one-month LIBOR plus 1%. The applicable spread over the index fluctuates quarterly based upon the Company’s
capitalization ratio, which is defined as the ratio of the Company’s funded indebtedness to the sum of the Company’s funded indebtedness and its adjusted
net worth. For loans under the Term Loan Facility, the applicable spread ranges from 1.0% to 1.5% for base rate loans, and from 2.0% to 2.5% for LIBOR
loans. For loans under the Revolving Credit Facility, the applicable spread ranges from 0.5% to 1.0% for base rate loans, and from 1.5% to 2.0% for
LIBOR loans. The Senior Secured Credit Facility was issued by a syndicate of lenders within the farm credit system and is eligible for patronage refunds.
Patronage refunds are distributions of profits from lenders in the farm credit system, which are cooperatives that are required to distribute profits to their
members. Patronage distributions, which are made in either cash or stock, are received in the year after they were earned. Future refunds are dependent on
future farm credit lender profits, made at the discretion of each farm credit lender.
In addition to paying interest on outstanding principal under the Senior Secured Credit Facility, we are required to pay a fee in respect of unutilized
commitments based on the average daily utilization for the prior fiscal quarter ranging from 0.275% to 0.325% per annum under the Revolving Credit
Facility.
The outstanding principal balance under the Term Loan Facility is subject to annual payments of 5% of the initial principal amount commencing in March
2025 with the balance due at maturity in March 2030. Loans under the Revolving Credit Facility and the Term Loan Facility may be prepaid from time to
time at our discretion without premium or penalty but subject to breakage costs, if any, in the case of LIBOR loans. Amounts repaid on the Term Loan
Facility may not be subsequently re-borrowed. Principal amounts under the Revolving Credit Facility may be drawn, repaid, and redrawn until October 27,
2025.
Pursuant to the Senior Secured Credit Facility, we are also required to maintain (i) a capitalization ratio not greater than 45% at all times; (ii) a collateral
coverage ratio of not less than 1.8:1.0; and (iii) a springing consolidated fixed charge coverage ratio of 1.0:1.0, which is triggered only when adjusted
availability under the ABL Credit Facility falls below the greater of $45 million
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Notes to Consolidated Financial Statements
or 10% of the maximum available borrowing amount under the ABL Credit Facility for two consecutive business days. The consolidated fixed charge
coverage ratio is the ratio of (a) consolidated EBITDA less certain capital expenditures and less cash taxes paid, to (b) consolidated fixed charges, as
determined under the Senior Secured Credit Facility.
In addition, the Senior Secured Credit Facility contains certain covenants applicable to the Company and its subsidiaries, including, among others: (i)
requirements to deliver financial statements, other reports and notices; (ii) restrictions on the existence or incurrence and repayment of indebtedness; (iii)
restrictions on the existence or incurrence of liens; (iv) restrictions on the Company and certain of its subsidiaries making certain restricted payments; (v)
restrictions on making certain investments; (vi) restrictions on certain mergers, consolidations, and asset dispositions; (vii) restrictions on transactions with
affiliates; and (viii) restrictions on modifications to material indebtedness. The Senior Secured Credit Facility includes customary representations,
warranties and events of default subject to customary grace periods and notice requirements.
As of December 31, 2020 we had $180 million of availability under the Revolving Credit Facility, which was undrawn; there were $46 million of
borrowings as of December 31, 2019. The fair value of the Revolving Credit Facility (Level 2) approximated its carrying value as of December 31, 2019
and was bearing interest at LIBOR plus a spread of 1.63%.The fair value of the Term Loan Facility (Level 2) approximated its carrying value as of
December 31, 2020, and was bearing interest at LIBOR plus a spread of 2.13%.
ABL Credit Facility
On May 14, 2019, we entered into an amendment to the five-year credit agreement dated May 22, 2015, for a senior secured asset-based revolving credit
facility (or, “ABL Credit Facility”). The amended credit agreement provides for an extension of the maturity date to May 14, 2024, with an aggregate lender
commitment of up to $500 million at any time outstanding, subject to borrowing base availability based on specified advance rates, eligibility criteria and
customary reserves.
The aggregate lender commitment under the facility includes a $60 million swingline sub-facility and a $200 million letter of credit sub-facility, and we
may convert up to $50 million of the commitments under the facility to a first-in last-out facility (or, “FILO Facility”), subject to the consent of each
converting lender. The ABL Credit Facility also provides for an uncommitted ability to increase the revolving credit facility by up to $500 million, subject
to certain terms and conditions set forth in the agreement.
Revolving loan (and letter of credit) availability under the facility is subject to a borrowing base, which at any time is equal to the sum of (i) 85% of
eligible accounts receivable (or 90% with respect to certain insured or letter of credit backed accounts or with accounts owed by investment grade
obligors), plus (ii) the lesser of (A) 70% of the lesser of the cost or market value of eligible inventory or (B) 85% of the net orderly liquidation value of
eligible inventory, plus (iii) 100% of the value of eligible cash and 95% of the value of permitted investments held in deposit accounts controlled solely by
the administrative and collateral agent (or, the “agent”). The credit agreement includes reserves that reduce the borrowing base, including: (i) a reserve
commencing March 16, 2023 for the outstanding principal amount due under the 2023 Notes; and (ii) a reserve for the outstanding principal amount due
under the Senior Secured Credit Facility, commencing 60 days before its maturity. The borrowing base is subject to other customary reserves and eligibility
criteria, in the exercise of the agent’s reasonable discretion.
The obligations under the credit agreement are guaranteed by certain material subsidiaries of the Company and are secured by first priority liens on and
security interests in accounts receivable, inventory and related assets.
Loans under the credit agreement bear interest at a rate equal to a base rate, the LIBOR, or the Canadian Dollar Offered Rate (or, the “CDOR”), in each
case plus an applicable margin. The applicable margin is between 0.00% and 0.50% with respect to base rate loans and between 1.00% and 1.50% with
respect to LIBOR and CDOR loans, in each case based on availability under the credit facility and a leverage ratio.
In addition to paying interest on outstanding principal under the ABL Credit Facility, we are required to pay a fee in respect of unutilized commitments
under the ABL Credit Facility equal to 0.30% per annum when average daily utilization under the ABL Credit Facility for the prior fiscal quarter is less
than 35% of the total revolving commitments, and 0.25% per annum when average daily utilization under the ABL Credit Facility for the prior fiscal
quarter is greater than or equal to 35% of the total revolving commitments, as well as a fee in respect of outstanding letters of credit (equal to the applicable
margin in respect of LIBOR and CDOR loans plus a fronting fee of 0.125% and certain administrative fees).
Loans under the ABL Credit Facility may be repaid from time to time at our discretion without premium or penalty, with the exception of breakage costs
for LIBOR and CDOR loans, if any. However, no loans under the FILO Facility can be repaid
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Notes to Consolidated Financial Statements
unless all other loans under the credit agreement are repaid first. We are required to repay outstanding loans that exceed the maximum availability then in
effect.
The credit agreement contains customary covenants for asset-based credit agreements of this type, including, among other things: (i) requirements to
deliver financial statements, other reports and notices; (ii) restrictions on the existence or incurrence and repayment of indebtedness by the Company and
its subsidiaries; (iii) restrictions on the existence or incurrence of liens by the Company and its subsidiaries; (iv) restrictions on the Company and certain of
its subsidiaries making certain restricted payments; (v) restrictions on the Company and certain of its subsidiaries making certain investments; (vi)
restrictions on certain mergers, consolidations and asset dispositions; (vii) restrictions on transactions with affiliates; (viii) restrictions on amendments or
modifications to the Canadian pension and benefit plans; (ix) restrictions on modifications to material indebtedness; and (x) a springing requirement for the
Company to maintain a minimum consolidated fixed charge coverage ratio, as determined under the credit agreement, of 1.0:1.0, anytime availability under
the facility falls below the greater of $45 million or 10% of the maximum available borrowing amount for two consecutive business days. Subject to
customary grace periods and notice requirements, the credit agreement also contains certain customary events of default.
As of December 31, 2020, we had $270 million of availability under the ABL Credit Facility, which was undrawn except for $56 million of ordinary course
letters of credit outstanding. The fair value of the ABL Credit Facility (Level 2) approximated its carrying value as of December 31, 2019. There were $25
million of borrowings as of December 31, 2019, bearing interest at the base rate.
Effective January 21, 2021, we reduced the commitment under the Canadian tranche of our senior secured asset-based revolving credit facility. See Note
23, “Subsequent Events” for additional information.
Loan Facility
On November 4, 2020, our Canadian subsidiary, Resolute FP Canada Inc., entered into a secured delayed draw term loan facility (or, the “Loan Facility”)
with Investissement Québec as lender for up to C$220 million ($173 million as of December 31, 2020), representing up to 75% of the countervailing and
anti-dumping duty deposits (or, the “Duties”) imposed or expected to be imposed by the U.S. Department of Commerce and collected by Customs and
Border Protection Agency (or, “U.S. Customs”) on U.S. imports of applicable softwood lumber products produced at sawmills of the Borrower and its
affiliates located in the province of Quebec, Canada from April 28, 2017 to December 31, 2022.
The outstanding principal will be repaid in consecutive monthly installments over a period of eight years, after an interest only period of two years from the
date of the first draw. Outstanding amounts may be prepaid, partially or fully, at any time at our discretion, without premium or penalty, but subject to
payment of accrued and unpaid interest. We are required to make a prepayment equal to any amounts reimbursed by U.S. Customs on account of the U.S.
imports of certain softwood lumber products produced at our sawmills located in the province of Quebec, Canada (or, the “Quebec Prepayments”).
The obligations under the Loan Facility will be secured by a first priority security interest and a control agreement on certain of our bank accounts
identified to receive any Quebec Prepayments. In addition, we have agreed to transfer to the designated bank accounts any amounts constituting Quebec
Prepayments, and may not grant any other security interest on such bank accounts. The Loan Facility is required to be used exclusively to finance certain of
our activities and obligations in the province of Quebec, Canada, and may not be used to pay or reimburse any Duties.
The borrowings under the Loan Facility bear interest at a floating rate equal to 1.45% above the one-month Canadian banker’s acceptance rate. Interest will
be payable on a monthly basis.
The Loan Facility provides for a maximum of 10 draws and the fulfillment of certain conditions upon each draw. We are required to pay a fee of 0.5% of
the amounts drawn at the time of each draw.
The Loan Facility contains certain covenants, including, among others, a requirement that we do not move a substantial part of its assets outside the
province of Quebec. The Lender reserves the right to terminate the Loan Facility in the event that we have not made any draw before June 30, 2023, subject
to certain conditions. The Lender reserves the right to accelerate any outstanding amounts within 60 days of receiving notification of certain change of
control events affecting us, if the Lender deems the transaction not to be in its best interest, acting reasonably.
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Notes to Consolidated Financial Statements
As of December 31, 2020, we had C$165 million (approximately $130 million) of availability under the Loan Facility, which was undrawn.
Finance lease obligations
We have finance lease obligations for machinery with maturity dates up to June 2025, and a warehouse with a maturity date of December 1, 2027 which
can be renewed for 20 years at our option. Minimum monthly payments are determined by an escalatory price clause.
Debt maturities
The aggregate maturities of long-term debt as of December 31, 2020, were as follows:
(In millions)
2021
2022
2023
2024
2025
2026 and thereafter
Assets pledged as collateral
Long-term debt
$
$
2
2
373
1
1
182
561
The carrying value of assets pledged as collateral for our total debt obligations was $1,246 million as of December 31, 2020.
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Notes to Consolidated Financial Statements
Note 16. Pension and Other Postretirement Benefit Plans
We have a number of defined contribution plans covering a portion of our U.S. and Canadian employees. Under the U.S. qualified defined contribution
plan, employees are allowed to make contributions that we match, and most employees also receive an automatic company contribution, regardless of the
employee’s contribution. The amount of the automatic company contribution, in most instances, is a percentage of the employee’s pay, determined based on
age and years of service. The Canadian registered defined contribution plans provide for mandatory contributions by employees and by us, as well as
opportunities for employees to make additional optional contributions and receive, in most cases, matching contributions on those optional amounts. Our
expense for the defined contribution plans totaled $17 million in 2020, $18 million in 2019, and $20 million in 2018.
We also have multiple contributory and non-contributory defined benefit pension plans covering a portion of our U.S. and Canadian employees. Benefits
are based on years of service and, depending on the plan, average compensation earned by employees either during their last years of employment or over
their careers. Our plan assets and cash contributions to the plans have been sufficient to provide pension benefits to participants and meet the funding
requirements of the Employee Retirement Income Security Act of 1974 in the U.S. as well as applicable legislation in Canada. We also sponsor a number
of OPEB plans (e.g., health care and life insurance plans) for retirees at certain locations.
Certain of the above plans are covered under collective bargaining agreements.
In December 2020, the pension plan of the Thorold paper mill, which was indefinitely idled in 2017 and sold in 2020, was wound-up following the
approval of the pension benefits distribution and assets liquidation. This resulted in the conversion of the buy-in annuity contract to a buy-out contract, and
the recognition of a settlement loss of $28 million in “Non-operating pension and other postretirement benefit credits” in our Consolidated Statements of
Operations for the year ended December 31, 2020, and the reduction of both pension plan assets and pension benefit obligations by $98 million.
The following tables include both our foreign (Canada) and domestic plans. The assumptions used to measure the obligations of each of our foreign and
domestic plans are not significantly different from each other, with the exception of the health care trend rates, which are presented below.
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Notes to Consolidated Financial Statements
The changes in our pension and OPEB benefit obligations and plan assets for the years ended December 31, 2020 and 2019, and the funded status and
reconciliation of amounts recognized in our Consolidated Balance Sheets as of December 31, 2020 and 2019, were as follows:
Pension Plans
(In millions)
Change in benefit obligations:
Benefit obligations as of beginning of year
Service cost
Interest cost
Actuarial loss (gain)
Participant contributions
Special termination benefits
Curtailments
Settlements
Benefits paid
Effect of foreign currency exchange rate changes
Benefit obligations as of end of year
Change in plan assets:
Fair value of plan assets as of beginning of year
Actual return on plan assets
Employer contributions
Participant contributions
Settlements
Benefits paid
Effect of foreign currency exchange rate changes
Fair value of plan assets as of end of year
Funded status as of end of year
Amounts recognized in our Consolidated Balance Sheets consisted
of:
Other assets
Accounts payable and accrued liabilities
Pension and OPEB obligations
Net obligations recognized
2020
5,188
14
151
265
7
3
(2)
(118)
(341)
79
5,246
3,862
241
91
7
(118)
(341)
64
3,806
(1,440)
—
(3)
(1,437)
(1,440)
$
$
$
$
2019
4,774
15
181
386
7
—
—
(18)
(347)
190
5,188
3,652
336
81
7
(18)
(347)
151
3,862
(1,326)
2
(4)
(1,324)
(1,326)
$
$
$
$
OPEB Plans
2020
2019
$
$
$
$
147
1
4
(6)
2
—
(1)
—
(13)
2
136
—
—
11
2
—
(13)
—
—
(136)
—
(11)
(125)
(136)
$
$
$
$
148
—
6
1
2
—
—
—
(14)
4
147
—
—
12
2
—
(14)
—
—
(147)
—
(11)
(136)
(147)
The total benefit obligations and the total fair value of plan assets for pension plans with benefit obligations in excess of plan assets were $5,067 million
and $3,627 million, respectively, as of December 31, 2020, and were $4,923 million and $3,595 million, respectively, as of December 31, 2019. The total
accumulated benefit obligations and the total fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were
$5,034 million and $3,627 million, respectively, as of December 31, 2020, and were $4,884 million and $3,595 million, respectively, as of December 31,
2019. The total accumulated benefit obligations for all pension plans were $5,212 million and $5,149 million as of December 31, 2020 and 2019,
respectively.
The actuarial losses and gains impacting the benefit obligations for our pension and OPEB plans in 2020 are primarily due to changes in the economic
environment, which resulted in a decrease to the discount rates selected for the plans as of December 31, 2020, compared to December 31, 2019. The
actuarial losses impacting the benefit obligations for our pension and OPEB plans in 2019 were primarily due to changes in the economic environment,
which resulted in a decrease to the discount rates selected for the plans as of December 31, 2019, compared to December 31, 2018.
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Notes to Consolidated Financial Statements
Components of net periodic benefit cost (credit)
The components of net periodic benefit cost (credit) relating to our pension and OPEB plans for the years ended December 31, 2020, 2019 and 2018, were
as follows:
(In millions)
Interest cost
Expected return on plan assets
Amortization of prior service credits
Amortization of actuarial losses (gains)
Non-operating credits
Service cost
Net periodic benefit costs (credits) before special
events
Curtailments, settlements and other losses (gains)
(1)
Pension Plans
OPEB Plans
2020
151
(226)
—
63
(12)
14
2
32
34
$
$
2019
181
(251)
—
34
(36)
15
(21)
—
(21)
$
$
2018
189
(264)
(1)
38
(38)
19
(19)
3
(16)
$
$
2020
4
—
(4)
(6)
(6)
1
(5)
(14)
(19)
$
$
2019
6
—
(11)
(6)
(11)
—
(11)
—
(11)
$
$
2018
6
—
(14)
(5)
(13)
1
(12)
(13)
(25)
$
$
(1)
Includes a settlement loss of $28 million for the year ended December 31, 2020, resulting from the wind-up of the Thorold pension plan.
The prior service credits and the actuarial gains and losses are amortized to “Non-operating pension and other postretirement benefit credits” in our
Consolidated Statements of Operations, over the expected average remaining service lifetime or the average future lifetime, as applicable, of the respective
plans.
Assumptions used to determine benefit obligations and net periodic benefit costs (credits)
The weighted-average assumptions used to determine the benefit obligations at the measurement dates (each December 31) and the net periodic benefit
costs (credits) for the years ended December 31, 2020, 2019 and 2018, were as follows:
Benefit obligations:
Discount rate
Rate of compensation increase
Net periodic benefit cost (credit):
Discount rate
Expected return on assets
Rate of compensation increase
Pension Plans
2020
2019
2018
2020
OPEB Plans
2019
2018
2.5 %
2.1 %
3.0 %
6.0 %
2.1 %
3.0 %
2.1 %
3.8 %
6.5 %
2.1 %
3.8 %
2.1 %
3.6 %
6.5 %
2.1 %
2.5 %
3.1 %
3.9 %
3.1 %
3.9 %
3.6 %
The discount rate for our domestic and foreign plans was determined with a model that develops a hypothetical high-quality bond portfolio, where the
bonds are theoretically purchased to settle the expected benefit payments of the plans. The discount rate reflects the single rate that produces the same
discounted values as the value of the theoretical bond portfolio. In determining the expected return on assets, we considered the historical returns and the
future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio. In determining the rate of compensation
increase, we reviewed historical salary increases and promotions, while considering current industry conditions, the terms of collective bargaining
agreements with our employees, and the outlook for our industry. In determining the life expectancy rate of our domestic and foreign plans, we used the
most recent actuarially-determined mortality tables and improvement scales. For the foreign plans, the mortality tables were adjusted with the result of our
historical mortality experience study. The rates used are consistent with our future expectations of life expectancy for the employees who participate in our
pension and OPEB plans.
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Notes to Consolidated Financial Statements
The assumed health care cost trend rates used to determine the benefit obligations for our domestic and foreign OPEB plans as of December 31, 2020 and
2019, were as follows:
Health care cost trend rate assumed for next year
Rate to which the cost trend rate is assumed to decline (ultimate trend rate)
Year that the rate reaches the ultimate trend rate
7.2 %
4.5 %
2033
4.8 %
4.5 %
2033
7.2 %
4.5 %
2032
4.8 %
4.5 %
2032
For the health care cost trend rates, we considered historical trends for these costs, actual experience of the plans, recently enacted health care legislation as
well as future expectations.
2020
2019
Domestic Plan
Foreign Plans
Domestic Plan
Foreign Plans
Fair value of plan assets
The fair value of plan assets held by our pension plans as of December 31, 2020, was as follows:
Total
Level 1
Level 2
Level 3
(In millions)
Equity securities:
U.S. companies
Non-U.S. companies
Debt securities:
Corporate and government securities
Asset-backed securities
Cash and cash equivalents
Other plan assets, net
Total before investments measured at NAV
Investments measured at NAV
$
$
$
737
1,197
1,086
148
179
9
3,356
450
3,806
$
$
$
$
737
1,197
36
—
179
—
2,149
Level 1
717
978
145
—
158
—
1,998
$
$
$
$
—
—
1,050
148
—
9
1,207
Level 2
—
—
1,009
294
—
—
1,303
$
$
$
$
—
—
—
—
—
—
—
Level 3
—
—
—
—
—
106
106
The fair value of plan assets held by our pension plans as of December 31, 2019, was as follows:
(In millions)
Equity securities:
U.S. companies
Non-U.S. companies
Debt securities:
Corporate and government securities
Asset-backed securities
Cash and cash equivalents
Certain insurance contracts
Total before investments measured at NAV
Investments measured at NAV
(1)
Total
717
978
1,154
294
158
106
3,407
455
3,862
$
$
$
(1)
The Level 3 plan assets were purchased during the year ended December 31, 2019. In December 2020, the Level 3 plan assets decreased by $106
million. The decrease includes assets settlements and sales of $98 million and $11 million, respectively, offset by gains of $2 million recognized in
Accumulated other comprehensive loss and $1 million recognized in “Non-operating pension and other postretirement benefit credits” in our
Consolidated Statements of Operations.
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Notes to Consolidated Financial Statements
Equity securities include large-cap, mid-cap and small-cap publicly-traded companies mainly located in the U.S., Canada and other developed and
emerging countries, as well as commingled equity funds invested in the same types of securities. The fair value of the equity securities is determined based
on quoted market prices (Level 1).
Debt securities include corporate bonds of U.S. and Canadian companies from diversified industries, bonds and Treasuries issued by the U.S. government
and the Canadian federal and provincial governments, asset-backed securities and commingled fixed income funds invested in these same types of
securities. The fair value of the debt securities is determined based on quoted market prices (Level 1), and market-corroborated inputs such as matrix
prices, yield curves and indices (Level 2).
Certain insurance contracts include group contracts that have been purchased to cover a portion of the plan members. The fair value of annuity buy-in
contracts changes based on fluctuations in the obligation associated with the covered plan members (Level 3).
Other plan assets, net, include accrued interest and dividends, and amounts receivable or payable for unsettled security transactions. The fair value of
accrued interest and dividends is determined based on market-corroborated inputs such as declared dividends and stated interest rates (Level 2). The fair
value of receivables and payables for unsettled security transactions is determined based on market-corroborated inputs such as the trade date fair value of
the security (Level 2).
Investments measured at NAV are excluded from the fair value hierarchy tables. These investments are commingled funds, composed of either debt
securities, equity securities or real estate investments, where the corresponding NAV per share is equal to the total net assets divided by the total number of
shares.
Long-term strategy and objective
Our investment strategy and objective is to maximize the long-term rate of return on our plan assets within an acceptable level of risk in order to meet our
current and future obligations to pay benefits to qualifying employees and their beneficiaries while minimizing and stabilizing pension benefit costs and
contributions. Diversification of assets is achieved through strategic allocations to various asset classes, and by retaining multiple, experienced third-party
investment management firms with complementary investment styles and philosophies to implement these allocations. Risk is further managed by
reviewing our investment policies at least annually and monitoring our fund managers at least quarterly for compliance with mandates and performance
measures. A series of permitted and prohibited investments are listed in our respective investment policies, which are provided to our fund managers. The
use of derivative financial instruments for speculative purposes and investments in the equity or debt securities of Resolute and its affiliates is prohibited.
We have established a target asset allocation policy and ranges for each participating defined benefit pension plan based upon analysis of risk and return
tradeoffs and correlations of asset mixes given long-term historical returns, prospective capital market returns, forecasted benefit payments and the
forecasted timing of those payments. The targeted asset allocation policy of the plan assets is designed to hedge the change in the pension liabilities
resulting from fluctuations in the discount rate by investing in debt and other securities, while also generating excess returns required to reduce the
unfunded pension deficit by investing in equity securities with higher potential returns. The targeted asset allocation policy of each participating defined
benefit pension plan is 50% equity securities, with an allowable range of 30% to 60%, and 50% debt and other securities, with an allowable range of 40%
to 70%, including up to 5% in short-term instruments required for near-term liquidity needs. Approximately 60% of the equity securities are targeted to be
invested in the U.S. and Canada, with the balance in other developed and emerging countries. Substantially all of the debt securities are targeted to be
invested in the U.S. and Canada. The asset allocation for each participating defined benefit pension plan is reviewed periodically and, when necessary,
rebalanced to bring the asset allocation within the prescribed ranges.
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Notes to Consolidated Financial Statements
Expected benefit payments and future contributions
As of December 31, 2020, benefit payments expected to be paid over the next 10 years are as follows:
(In millions)
2021
2022
2023
2024
2025
2026 - 2030
Pension
(1)
Plans
342
335
328
321
314
1,454
$
$
$
$
$
$
OPEB Plans
$
$
$
$
$
$
12
11
10
10
9
40
(1)
Benefit payments are expected to be paid from the plans’ net assets.
We expect our 2021 pension contributions (excluding contributions to our defined contribution plans) to be approximately $102 million.
Canadian pension funding
Quebec plans
The funding of our Quebec pension plans is subject to Quebec’s Supplemental Pension Plans Act (or, the “SPPA”), which is the pension plan funding
regime generally applicable to pension plans in that province. Our contributions to our Quebec plans are determined on a going concern basis under the
Quebec’s SPPA.
Ontario plans
Since January 1, 2019, all of our Ontario pension plans have been subject to the Ontario Pension Benefits Act (or, the “PBA”), which is the pension plan
funding regime generally applicable to pension plans in that province. The PBA provides for funding pension fund deficits on a going concern basis, or on
a solvency basis if the solvency funded status of a pension plan is below 85%.
Additional undertakings
Our principal Canadian subsidiaries had entered into certain undertakings with the Government of Ontario and Quebec, which expired in 2015 and 2016,
respectively. The expiration of those undertakings did not eliminate ongoing obligations we incurred under the terms of those undertakings prior to their
expiration, including the undertaking requiring us to make an additional solvency deficit reduction contribution to our pension plans of C$75, payable over
four years, for each metric ton of capacity reduced in Quebec or Ontario, in the event of downtime of more than six consecutive months or nine cumulative
months over a period of 18 months. Accordingly, we made additional contributions for past capacity reductions of C$4 million and C$2 million in 2019 and
2020, respectively. The 2020 contribution was the last one required to be made.
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Note 17. Income Taxes
RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
Income before income taxes by taxing jurisdiction for the years ended December 31, 2020, 2019 and 2018, was as follows:
(In millions)
U.S.
Foreign
2020
(126)
187
61
$
$
The income tax provision for the years ended December 31, 2020, 2019 and 2018, was comprised of the following:
(In millions)
U.S. Federal and State:
Current
Deferred
Foreign:
Current
Deferred
Total:
Current
Deferred
2020
—
—
—
—
(51)
(51)
—
(51)
(51)
$
$
99
2019
(205)
216
11
2019
—
—
—
—
(58)
(58)
—
(58)
(58)
$
$
$
$
2018
(90)
477
387
2018
—
—
—
12
(164)
(152)
12
(164)
(152)
$
$
$
$
Table of Contents
Effective income tax rate reconciliation
RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
The income tax provision attributable to income before income taxes differs from the amounts computed by applying the U.S. federal statutory income tax
rate of 21% for the years ended December 31, 2020, 2019 and 2018, as a result of the following:
(In millions)
Income before income taxes
Income tax provision:
Expected income tax provision
Changes resulting from:
(1)
Valuation allowance
Foreign exchange
U.S. tax on non-U.S. earnings
State income taxes, net of federal income tax benefit
Foreign tax rate differences
(2)
Nondeductible expenses
(3)
Other, net
2020
61
$
2019
11
$
(13)
(11)
(6)
(23)
6
(10)
—
6
(51)
$
(2)
(43)
2
(7)
7
(11)
(6)
2
(58)
$
2018
387
(81)
59
(29)
(65)
4
(24)
(15)
(1)
(152)
$
$
(1)
(2)
(3)
During 2020 and 2019, we recorded an increase to our valuation allowance of $11 million and $43 million, respectively, related to our U.S.
operations.
During 2018, we recorded a decrease in our valuation allowance of $59 million, primarily related to our U.S. operations.
During 2018, we recorded an income tax provision of $13 million for a nondeductible goodwill impairment charge, before a corresponding
adjustment to valuation allowance.
During 2020, we recorded a $4 million adjustment related to the settlement of an insurance claim in connection with our acquisition of Atlas.
Deferred income taxes
At each reporting period, we assess whether it is more likely than not that the deferred income tax assets will be realized, based on the review of all
available positive and negative evidence, including future reversals of existing taxable temporary differences, estimates of future taxable income, past
operating results, and prudent and feasible tax planning strategies. The carrying value of our deferred income tax assets reflects our expected ability to
generate sufficient future taxable income in certain tax jurisdictions to utilize these deferred income tax assets.
Following the assessment of our ability to realize the deferred income tax assets of our U.S. operations, we concluded that existing negative evidence
outweighed positive evidence. As a result, we recognized a full valuation allowance against our net U.S. deferred income tax assets. The historical
operating losses of our U.S. operations limited our ability to consider other subjective positive evidence. A valuation allowance does not reduce our
underlying tax attributes, nor hinders our ability to use them in the future.
The positive evidence for our Canadian operations, which included a review of historical cumulative earnings and our forecasted future earnings, resulted
in the conclusion by management that no significant valuation allowances were required for our deferred income tax assets, as they were determined to be
more likely than not to be realized.
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Net deferred income tax assets as of December 31, 2020 and 2019, were comprised of the following:
RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
(In millions)
Fixed assets
Operating lease right-of-use assets
Other
Deferred income tax liabilities
Fixed assets
Pension and OPEB plans
Net operating loss carryforwards and deduction limitation
Net capital loss carryforwards
Undeducted research and development expenditures
Tax credit carryforwards
Operating lease liabilities
Other
Deferred income tax assets
Valuation allowance
Net deferred income tax assets
Amounts recognized in our Consolidated Balance Sheets consisted of:
Deferred income tax assets
101
2020
(57)
(15)
(25)
(97)
297
408
660
41
195
98
15
72
1,786
(774)
915
915
$
$
$
2019
(28)
(16)
(28)
(72)
346
378
616
35
188
96
16
65
1,740
(753)
915
915
$
$
$
Table of Contents
The balance of tax attributes and their dates of expiration as of December 31, 2020, were as follows:
RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
(In millions)
Net operating loss carryforwards and deduction limitation:
U.S. federal: $2,072
U.S. federal and deduction limitation: $457
U.S. state: $2,164
U.S. state and deduction limitation: $221
Canadian federal and provincial (excluding Quebec): $39
Quebec: $60
Other
Net capital loss carryforwards:
U.S. federal and state: $23
Canadian federal and provincial (excluding Quebec): $117
Quebec: $53
Undeducted research and development expenditures:
Canadian federal and provincial (excluding Quebec): $697
Quebec: $831
Tax credit carryforwards:
Canadian research and development, and other
U.S. state and other
Related
Deferred
Income Tax
Asset
$
$
$
$
$
$
$
$
435 (1)
96 (1)
109 (1)
7 (1)
7
5
1
660
5 (1)
31
5
41
119
76
195
78
20 (1)
98
Year of
Expiration
2023 – 2037
Indefinite
2021 – 2040
Indefinite
2030 – 2039
2028 – 2039
Indefinite
2025
Indefinite
Indefinite
Indefinite
Indefinite
2022 – 2040
2021 – 2035
(1)
As of December 31, 2020, we had a full valuation allowance against our U.S. operations net deferred income tax assets.
Our U.S. federal net operating loss carryforwards are subject to annual limitations under § 382 of the U.S. Internal Revenue Code of 1986, as amended, (or,
“IRC § 382”), resulting from a previous ownership change. We do not expect that IRC § 382 would limit the utilization of our available U.S. federal net
operating loss carryforwards prior to their expiration.
We consider our foreign earnings to be permanently invested. Accordingly, we do not provide for the additional U.S. and foreign income taxes that could
become payable upon remittance of undistributed earnings of our foreign subsidiaries. It is not practicable to estimate the income tax liability that might be
incurred if such earnings were remitted to the U.S.
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Unrecognized tax benefits
RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
The following table summarizes the activity related to our gross unrecognized tax benefits for the years ended December 31, 2020 and 2019:
(In millions)
Beginning of year
Increase (decrease) resulting from:
Settlements with taxing authorities
Positions taken in the prior period
Expirations of statute of limitations
End of year
2020
29
(2)
1
—
28
$
$
2019
28
—
2
(1)
29
$
$
If the total amount of unrecognized tax benefits were recognized as of December 31, 2020, $2 million would affect the effective tax rate.
In the normal course of business, we are subject to audits from federal, state, provincial and other tax authorities. U.S. federal tax returns for 2016 and
subsequent years, as well as Canadian tax returns for 2016 and subsequent years, remain subject to examination by tax authorities.
We do not expect a significant change to the amount of unrecognized tax benefits over the next 12 months. However, any adjustments arising from certain
ongoing examinations by tax authorities could alter the timing or amount of taxable income or deductions, or the allocation of income among tax
jurisdictions, and these adjustments could differ from the amount accrued. We believe that taxes accrued in our Consolidated Balance Sheets fairly
represent the amount of income taxes to be settled or realized in the future.
Note 18. Commitments and Contingencies
Commitments
In the normal course of business, we have entered into various supply agreements, water rights agreements, purchase commitments and harvesting rights
agreements (for land that we manage for which we make payments to various Canadian provinces based on the amount of timber harvested).
As of December 31, 2020, these commitments were as follows:
(In millions)
2021
2022
2023
2024
2025
2026 and thereafter
Commitments
(1)
$
$
73
64
45
3
1
16
202
(1)
Includes energy purchase obligations of $148 million through 2027 for certain of our pulp and paper mills.
Legal matters
We become involved in various legal proceedings, claims and governmental inquiries, investigations, and other disputes in the normal course of business,
including matters related to contracts, commercial and trade disputes, taxes, environmental issues, activist damages, employment and workers’
compensation claims, grievances, human rights complaints, pension and benefit plans and obligations, health and safety, product safety and liability,
asbestos exposure, financial reporting and disclosure obligations, corporate governance, Indigenous peoples’ claims, antitrust, governmental regulations,
and other matters. Although the final outcome is subject to many variables and cannot be predicted with any degree of certainty, we regularly assess the
status of the matters and establish provisions (including legal costs expected to be incurred) when we believe an adverse
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RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
outcome is probable, and the amount can be reasonably estimated. Except as described below and for claims that cannot be assessed due to their
preliminary nature, we believe that the ultimate disposition of these matters outstanding or pending as of December 31, 2020, will not have a material
adverse effect on our Consolidated Financial Statements.
Asbestos-related lawsuits
We are involved in a number of asbestos-related lawsuits filed primarily in U.S. state courts, including certain cases involving multiple defendants. These
lawsuits principally allege direct or indirect personal injury or death resulting from exposure to asbestos-containing premises. While we dispute the
plaintiffs’ allegations and intend to vigorously defend these claims, the ultimate resolution of these matters cannot be determined at this time. These
lawsuits frequently involve claims for unspecified compensatory and punitive damages, and we are unable to reasonably estimate a range of possible
losses. However, unfavorable rulings, judgments or settlement terms could materially impact our Consolidated Financial Statements. Hearings for certain
of these matters are scheduled to occur in 2021.
Countervailing duty and anti-dumping investigations of softwood lumber
On November 25, 2016, countervailing duty and anti-dumping petitions were filed with the U.S. Department of Commerce (or, “Commerce”) and the U.S.
International Trade Commission (or, “ITC”) by certain U.S. softwood lumber products producers and forest landowners, requesting that the U.S.
government impose countervailing and anti-dumping duties on Canadian-origin softwood lumber products exported to the U.S. One of our subsidiaries was
identified in the petitions as being a Canadian exporting producer of softwood lumber products to the U.S. and was selected as a mandatory respondent to
be investigated by Commerce in both the countervailing duty and anti-dumping investigations.
On April 24, 2017, Commerce announced its preliminary determination in the countervailing duty investigation and, as a result, after April 28, 2017, we
were required to pay cash deposits to U.S. Customs at a rate of 12.82% for estimated countervailing duties on the vast majority of our U.S. imports of
softwood lumber products produced at our Canadian sawmills. The preliminary rate remained in effect until August 26, 2017. Commerce changed the rate
in its final affirmative determination on November 2, 2017, but the new rate did not take effect until December 28, 2017, following the ITC’s final
affirmative determination and the publication by Commerce of a countervailing duty order. Until November 30, 2020, we have been required to pay cash
deposits to U.S. Customs at a rate of 14.70% for the vast majority of our U.S. imports of Canadian-produced softwood lumber products. On December 1,
2020, Commerce issued its final results in the countervailing duties first administrative review and established our new rate at 19.10% for countervailing
duties. This rate will apply until Commerce sets a new duty rate in subsequent administrative reviews, or a new rate may be set through a remand
determination by a binational panel formed pursuant to the North American Free Trade Agreement or United States-Mexico-Canada Agreement, as the case
may be (or, “Panel”) on appeal. Through December 31, 2020, our cash deposits totaled $194 million and, based on the 19.10% rate and our current
operating parameters, could be as high as $75 million per year.
On June 26, 2017, Commerce announced its preliminary determination in the anti-dumping investigation and, as a result, after June 30, 2017, we were
required to pay cash deposits to U.S. Customs at a rate of 4.59% for estimated anti-dumping duties on the vast majority of our U.S. imports of softwood
lumber products produced at our Canadian sawmills. On November 2, 2017, Commerce announced its final affirmative determination in the anti-dumping
investigation and, as a result, from November 8, 2017 to November 29, 2020, we have been required to pay cash deposits to U.S. Customs, at a rate of
3.20% for the vast majority of our U.S. imports of Canadian-produced softwood lumber products. On November 30, 2020, Commerce issued its final
results in the anti-dumping first administrative review and established our new rate at 1.15% for anti-dumping duties. This rate will apply until Commerce
sets a new duty rate in subsequent administrative reviews, or a new rate may be set through a remand determination by a Panel on appeal. Through
December 31, 2020, our cash deposits totaled $49 million and, based on the 1.15% rate and our current operating parameters, could be as high as $5 million
per year.
On April 1, 2019, Commerce published a notice initiating the administrative reviews of the countervailing duty and anti-dumping orders on softwood
lumber products from Canada. We were selected as a mandatory respondent in these administrative reviews and we are in the process of responding to
Commerce with the information requested. On March 10, 2020, Commerce published a notice initiating the second administrative review of the
countervailing duty and anti-dumping orders on softwood lumber products from Canada. We were selected as a mandatory respondent for the second
administrative review of the countervailing duty order.
In parallel, on September 4, 2019, a Panel issued an interim decision upholding the affirmative final injury determinations of the ITC in both investigations
of softwood lumber products from Canada. The Panel remanded the ITC to reconsider several findings and ordered the ITC to submit its redetermination
on remand within 90 days from the date of the Panel interim
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RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
decision. On December 19, 2019, the ITC issued its redetermination on remand that maintained the affirmative final injury determinations, and on May 22,
2020, the Panel issued its final decision and affirmed in its entirety the ITC’s injury determination on remand. On January 6, 2021, and January 19, 2021,
we filed our complaints supporting Panel reviews of the final results in the countervailing and anti-dumping first administrative reviews.
In addition, on August 24, 2020, the World Trade Organization’s (or, “WTO”) dispute panel issued a report (or, the “Panel Report”) in the case brought by
the government of Canada in “United States — Countervailing Measures on Softwood Lumber from Canada” (DS533), concluding, among other things,
that Commerce acted inconsistently with the Agreement on Subsidies and Countervailing Measures on most of the matters. On September 28, 2020, the
United States notified the WTO’s dispute settlement body of its decision to appeal the Panel Report.
We are not presently able to determine the ultimate resolution of these matters, but we believe it is not probable that we will ultimately be assessed with
significant duties, if any, on our U.S. imports of Canadian-produced softwood lumber products. Accordingly, no contingent loss was recorded in respect of
these petitions in our Consolidated Statements of Operations, and our cash deposits were recorded in “Other assets” in our Consolidated Balance Sheets.
Fibrek acquisition
Effective July 31, 2012, we completed the final step of the transaction pursuant to which we acquired the remaining 25.40% of the outstanding Fibrek Inc.
(or, “Fibrek”) shares, following the approval of Fibrek’s shareholders on July 23, 2012, and the issuance of a final order by the Quebec Superior Court in
Canada (or, “Quebec Superior Court”) approving the arrangement on July 27, 2012. Certain former shareholders of Fibrek exercised rights of dissent in
respect of the transaction, asking for a judicial determination of the fair value of their claim under the Canada Business Corporations Act. On September
26, 2019, the Quebec Superior Court rendered a decision fixing the fair value of the shares of the dissenting shareholders at C$1.99 per share, or C$31
million in aggregate, plus interest and an additional indemnity, for a total currently estimated at C$44 million payable in cash. We had previously accrued
C$14 million for the payment of the dissenting shareholders’ claims. Following the court decision, we accrued an additional C$30 million ($23 million),
and as a result recorded $23 million in “Other (expense) income, net” in our Consolidated Statement of Operations for the year ended on December 31,
2019. Of the total amount of C$44 million, C$19 million ($14 million) was payable immediately and paid on October 2, 2019, bringing the remaining
balance to C$25 million ($20 million and $19 million as of December 31, 2020 and 2019, respectively), which was recorded in “Other liabilities” in our
Consolidated Balance Sheets as of December 31, 2020 and 2019. We are appealing the decision, therefore the payment of any additional consideration and
its timing will depend on the outcome of the appeal. On November 13, 2019, a legal hypothec in the amount of C$30 million ($24 million) was registered
on our Saint-Félicien (Quebec) immovable and movable property to secure the payment of any additional amounts following the outcome of the appeal.
The hearing in this matter has not yet been scheduled but could occur in 2021.
Partial wind-ups of pension plans
On June 12, 2012, we filed a motion for directives with the Quebec Superior Court, the court with jurisdiction in the creditor protection proceedings under
the Companies’ Creditors Arrangement Act (Canada) (or, the “CCAA Creditor Protection Proceedings”), seeking an order to prevent pension regulators in
each of Quebec, New Brunswick, and Newfoundland and Labrador from declaring partial wind-ups of pension plans relating to employees of former
operations in New Brunswick, and Newfoundland and Labrador, or a declaration that any claim for accelerated reimbursements of deficits arising from a
partial wind-up is a barred claim under the CCAA Creditor Protection Proceedings. We contend, among other things, that any such declaration, if issued,
would be inconsistent with the Quebec Superior Court’s sanction order confirming the CCAA debtors’ CCAA Plan of Reorganization and Compromise, as
amended, and the terms of our emergence from the CCAA Creditor Protection Proceedings. A partial wind-up would likely shorten the period in which any
deficit within those plans, which could reach up to C$150 million ($118 million), would have to be funded if we do not obtain the relief sought. The
hearing in this matter has not yet been scheduled but could occur in 2021.
Environmental matters
We are subject to a number of federal or national, state, provincial, and local environmental laws, regulations, and orders in various jurisdictions. We
believe our operations are in material compliance with current applicable environmental laws and regulations. Environmental regulations promulgated and
orders issued in the future could require substantial additional expenditures for compliance and could have a material impact on us, in particular, and the
industry in general.
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RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
We have environmental liabilities of $15 million and $8 million recorded as of December 31, 2020 and 2019, primarily related to environmental
remediation related to closed sites. The amount of these liabilities represents management’s estimate of the ultimate settlement based on an assessment of
relevant factors and assumptions and could be affected by changes in facts or assumptions not currently known to management for which the outcome
cannot be reasonably estimated at this time. These liabilities are included in “Accounts payable and accrued liabilities” or “Other liabilities” in our
Consolidated Balance Sheets.
We also have asset retirement obligations of $25 million and $26 million recorded as of December 31, 2020 and 2019, primarily consisting of liabilities
associated with landfills, sludge basins and the dismantling of retired assets. These liabilities are included in “Accounts payable and accrued liabilities” and
“Other liabilities” in our Consolidated Balance Sheets.
Note 19. Share Capital
Common stock
We are authorized under our certificate of incorporation, as amended and restated, to issue up to 190 million shares of common stock, par value $0.001 per
share, of which 14,320,960 shares have been reserved for issuance under the Incentive Plans (as defined in Note 20, “Share-Based Compensation”).
Treasury stock
On March 2, 2020, our board of directors authorized a share repurchase program of up to 15% of our common stock, for an aggregate consideration of up
to $100 million. During the year ended December 31, 2020, we repurchased 6.9 million shares at a cost of $30 million under this program. During the year
ended December 31, 2019, we repurchased 4.8 million shares at a cost of $24 million under our $150 million share repurchase program, which was
completed in 2019. We did not repurchase any shares during 2018.
Dividends
We declared and paid a special dividend of $1.50 per share ($136 million) on our common stock in 2018. We did not declare or pay any dividends on our
common stock during the years ended December 31, 2020 and 2019.
Preferred stock
We are authorized under our certificate of incorporation, as amended and restated, to issue 10 million shares of preferred stock, par value $0.001 per share.
As of December 31, 2020 and 2019, no preferred shares were issued and outstanding.
Note 20. Share-Based Compensation
Incentive Plans
The Resolute Forest Products Equity Incentive Plan, as amended (or, the “Incentive Plan”), administered by the human resources and
compensation/nominating and governance committee of the board of directors, became effective in 2010 and provides for the grant of equity-based and
liability-based awards, including stock options, stock appreciation rights, restricted stock, RSUs, DSUs, PSUs (collectively, “stock incentive awards”), and
cash incentive awards to certain of our officers, directors, employees, consultants and advisors. The Incentive Plan reserved for issuance 9 million shares
for stock incentive awards. In 2019, we established and adopted the Resolute Forest Products 2019 Equity Incentive Plan (or, the “2019 Incentive Plan”),
which authorized 3 million shares to be issued as stock incentive awards. In 2020, an additional 2.3 million shares were authorized, for a total of 5.3 million
shares. Since the adoption of the 2019 Incentive Plan, no more awards can be granted under the Incentive Plan. As of December 31, 2020, 2.2 million
shares were available for grants under the 2019 Incentive Plan. We refer to both the Incentive Plan and the 2019 Incentive Plan as the “Incentive Plans”.
Awards for employees who retire (upon meeting certain age and service criteria) at least six months after the grant date and prior to the end of the vesting
period will continue to vest after retirement, in accordance with the normal vesting schedule. The requisite service periods for the stock incentive awards
are reduced on an individual basis, as necessary, to reflect the grantee’s individual retirement eligibility date.
For the years ended December 31, 2020, 2019 and 2018, share-based compensation expense under the Incentive Plans was $14 million ($1.2 million tax
benefit), $2 million (no tax benefit) and $17 million ($1 million tax benefit), respectively. As of
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RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
December 31, 2020, there was $13 million of unrecognized compensation cost, which is expected to be recognized over a remaining service period of three
years.
Stock options
Under the Incentive Plans, stock options become exercisable ratably over a period of four years and, unless terminated earlier in accordance with their
terms, expire 10 years from the date of grant. New shares of our common stock are issued upon the exercise of a stock option. In certain cases, we withhold
shares in respect of option costs and applicable taxes. We have not granted any stock options since 2013. Since the adoption of the 2019 Incentive Plan,
stock options can no longer be granted under our Incentive Plans.
The activity of outstanding stock options for the year ended December 31, 2020, was as follows:
Balance as of December 31, 2019
Forfeited
Balance as of December 31, 2020
Exercisable as of December 31, 2020
Number of
Shares
959,399
(46,498)
912,901
912,901
Weighted-
Average
Exercise
Price
16.09
16.14
16.09
16.09
$
$
$
$
Weighted-
Average
Contractual
Life (years)
2.8
1.8
1.8
The total intrinsic value of stock options exercised in 2018 was less than $1 million. No stock options were exercised in 2020 and 2019.
Restricted stock units and deferred stock units
Under the Incentive Plans, each RSU and DSU granted provides the holder upon vesting the right to receive one share of our common stock for equity-
based awards, and the equivalent in cash for liability-based awards. The awards vest ratably over a period of four years for employees and one year for
directors. Awards to employees are settled upon vesting, while awards to directors are settled ratably over a period of three years or upon separation from
the board of directors, as applicable, based on the director’s country of residency. We withhold shares in respect of applicable taxes.
The activity of nonvested RSUs and DSUs for the year ended December 31, 2020, was as follows:
Balance as of December 31, 2019
Granted
Vested
Forfeited
Balance as of December 31, 2020
Number of Units
Equity-Based
Awards
Liability-Based
Awards
1,356,016
688,797
(688,126)
(77,672)
1,279,015
755,934
1,200,163
(695,347)
(132,486)
1,128,264
Total
2,111,950
1,888,960
(1,383,473)
(210,158)
2,407,279
Weighted-
Average Fair
Value at Grant
Date
6.32
3.87
5.20
5.24
5.14
$
$
$
$
$
There were 225,168 equity-based and 316,435 liability-based RSUs and DSUs granted to directors that vested but were not settled as of December 31,
2020.
The weighted-average grant-date fair value of all RSUs and DSUs granted in 2019 and 2018, was $5.55 and $8.93, respectively. The total fair value of
RSUs and DSUs vested in 2020, 2019 and 2018, was $7 million, $5 million and $12 million, respectively. We paid $3 million, $1 million and $2 million
for liability-based RSUs and DSUs in 2020, 2019 and 2018, respectively.
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Performance stock units
RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
Under the Incentive Plans, each PSU provides the holder the right to receive upon vesting one share of our common stock for equity-based awards, and the
equivalent in cash for liability-based awards, subject to an adjustment based on market and/or performance conditions. The awards vest after a period of up
to 40 months upon which they are settled. No awards vest when the minimum thresholds are not achieved. We withhold shares in respect of applicable
taxes. The fair value of PSUs granted was estimated using a Monte Carlo simulation model, using the following assumptions:
Expected volatility
Risk-free interest rate
2020
57% - 77%
0.11% - 2.99%
2019
56% - 58%
1.58% - 1.70%
2018
57 %
2.73% - 2.99%
The activity of nonvested PSUs for the year ended December 31, 2020, was as follows:
Balance as of December 31, 2019
Granted
Vested
Performance adjustment
Forfeited
Balance as of December 31, 2020
Number of Units
Equity-Based
Awards
Liability-Based
Awards
2,353,420
688,797
(1,271,527)
103,703
(78,990)
1,795,403
1,127,021
700,693
(420,137)
34,265
(130,515)
1,311,327
Total
3,480,441
1,389,490
(1,691,664)
137,968
(209,505)
3,106,730
Weighted-
Average Fair
Value at Grant
Date
$
$
$
$
$
$
5.99
4.09
4.22
3.95
5.38
6.05
The weighted-average grant-date fair value of all PSUs granted in 2019 and 2018, was $5.29 and $9.01, respectively. The total fair value of PSUs vested in
2020, 2019 and 2018, was $5 million, $7 million and $2 million, respectively. We paid $1 million and $1 million for liability-based PSUs in 2020 and
2019, respectively. There was no cash paid for liability-based PSUs in 2018.
Deferred Compensation Plan
In 2011, the board of directors adopted the Resolute Forest Products Outside Director Deferred Compensation Plan (the “Deferred Compensation Plan”),
which allows non-employee directors to surrender 50% or 100% of their cash fees in exchange for DSUs or RSUs, as applicable, based on the director’s
country of residency. The number of awards issued pursuant to the Deferred Compensation Plan is based on 110% of the fees earned, resulting in a 10%
premium incentive.
Under the Deferred Compensation Plan, each RSU and DSU granted provides the holder the right to receive payment in cash in an amount equal to the fair
market value of one share of our common stock upon vesting. The awards have a nonforfeitable right or vest ratably over a period of three years, as
applicable, and are settled with cash ratably over a period of three years or upon separation from the board of directors, as applicable, based on the
director’s country of residency. All of our outstanding stock incentive awards pursuant to the Deferred Compensation Plan were accounted for as liability
awards.
Share-based compensation expense under the Deferred Compensation plan for the years ended December 31, 2020 and 2018 was $2 million and less than
$1 million, respectively. There was a $1 million reversal in share-based compensation expense for the year ended December 31, 2019.
RSUs and DSUs outstanding under the Deferred Compensation Plan as of December 31, 2020 and 2019 were 481,056 and 330,900, respectively. The total
fair value of RSUs and DSUs vested in 2020, 2019 and 2018 was less than $1 million, less than $1 million and $1 million, respectively.
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Note 21. Segment Information
RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
We manage our business based on the products we manufacture. Accordingly, our reportable segments correspond to our principal product lines: market
pulp, tissue, wood products, and paper. As of the second quarter of 2020, the results from our newsprint and specialty papers operations have been
combined to form the paper reportable segment. This better reflects management’s internal analysis, given the diminishing percentage newsprint and
specialty papers represent in our product portfolio. Comparative year information has been modified to conform to this revised segment presentation.
None of the income or loss items following “Operating income” in our Consolidated Statements of Operations are allocated to our segments, since those
items are reviewed separately by management. For the same reason, closure costs, impairment and other related charges, inventory write-downs related to
closures, start-up costs, gains and losses on disposition of assets, as well as other discretionary charges or credits are not allocated to our segments. We
allocate depreciation and amortization expense to our segments, although the related fixed assets and amortizable intangible assets are not allocated to
segment assets. Additionally, all selling, general and administrative expenses are allocated to our segments, with the exception of certain discretionary
charges and credits, which we present under “corporate and other.”
In each of 2020, 2019 and 2018, no assets were identifiable by segment and reviewed by management.
Information about certain segment data for the years ended December 31, 2020, 2019 and 2018, was as follows:
(In millions)
Sales
2020
2019
2018
Depreciation and amortization
2020
2019
2018
Operating income (loss)
2020
2019
2018
Capital expenditures
Market
(1)
Pulp
Tissue
(2)
Wood
Products
(3)
$
$
$
668
797
1,085
$
$
$
$
$
$
$
$
$
24
23
27
(1)
39
172
15
29
53
$
$
$
$
$
$
$
$
$
$
$
$
173
165
130
18
18
15
(1)
(16)
(30)
8
8
27
$
$
$
$
$
$
$
$
$
$
$
$
1,025
616
823
43
34
32
276
(6)
169
26
23
37
Paper
934
1,345
1,718
69
72
113
(46)
82
114
23
43
34
$
$
$
$
$
$
$
$
$
$
$
$
Segment
Total
Corporate
and Other
$
$
$
$
$
$
$
$
$
$
$
$
2,800
2,923
3,756
154
147
187
228
99
425
72
103
151
$
$
$
$
$
$
$
$
$
$
$
$
—
—
—
15
20
25
(129)
(82)
(46)
6
10
4
Total
2,800
2,923
3,756
169
167
212
99
17
379
78
113
155
$
$
$
$
$
$
$
$
$
$
$
$
Inter-segment sales of $28 million, $36 million and $39 million, were excluded from market pulp sales for the years ended December 31, 2020,
2019 and 2018, respectively. Effective July 1, 2019, these sales were transacted either at the lowest market price of the previous month or cost.
Previously, these sales were transacted at cost.
The operating results of our Calhoun tissue operations, previously recorded under “corporate and other,” have been recorded in our tissue segment
since April 1, 2018.
Wood products sales to our joint ventures, which are transacted at arm’s length negotiated prices, were $28 million, $22 million and $26 million
for the years ended December 31, 2020, 2019 and 2018, respectively.
109
2020
2019
2018
(1)
(2)
(3)
Table of Contents
RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
Sales are attributed to countries based on the location of the customer. No single customer, related or otherwise, accounted for 10% or more of our 2020,
2019 or 2018 consolidated sales. No country in the “Other countries” group in the table below exceeded 2% of consolidated sales. Sales by country for the
years ended December 31, 2020, 2019 and 2018, were as follows:
(In millions)
U.S.
Foreign countries:
Canada
Mexico
Other countries
Long-lived assets by country as of December 31, 2020 and 2019, were as follows:
(In millions)
U.S.
Canada
110
2020
2,038
463
63
236
762
2,800
$
$
2019
2,026
405
87
405
897
2,923
2020
666
898
1,564
$
$
$
$
2018
2,581
513
148
514
1,175
3,756
2019
540
1,028
1,568
$
$
$
$
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Note 22. Quarterly Information (Unaudited)
RESOLUTE FOREST PRODUCTS INC.
Notes to Consolidated Financial Statements
(In millions, except per share amounts)
Sales
Operating (loss) income
Net (loss) income attributable to Resolute Forest Products Inc.
Basic net (loss) income per share attributable to Resolute Forest
Products Inc. common shareholders
Diluted net (loss) income per share attributable to Resolute Forest
Products Inc. common shareholders
First Quarter
$
$
$
689
(8)
(1)
$
$
(0.01)
(0.01)
Second
Quarter
612
6
6
0.07
0.07
$
$
$
$
$
2020
Third Quarter
$
$
$
$
$
730
97
57
0.66
0.66
2019
Fourth
Quarter
769
4
(52)
(0.63)
(0.63)
$
$
$
$
$
(In millions, except per share amounts)
Sales
Operating income (loss)
Net income (loss) attributable to Resolute Forest Products Inc.
Basic net income (loss) per share attributable to Resolute Forest
Products Inc. common shareholders
Diluted net income (loss) per share attributable to Resolute Forest
Products Inc. common shareholders
First Quarter
$
$
$
795
64
42
$
$
0.45
0.45
Second Quarter Third Quarter
Fourth Quarter
$
$
$
$
$
755
40
25
0.27
0.27
$
$
$
$
$
705
(18)
(43)
(0.47)
(0.47)
$
$
$
$
$
668
(69)
(71)
(0.79)
(0.79)
Year
2,800
99
10
0.12
0.12
Year
2,923
17
(47)
(0.51)
(0.51)
$
$
$
$
$
$
$
$
$
$
Note 23. Subsequent Events
The following significant events occurred subsequent to December 31, 2020:
• On February 2, 2021, we completed the Offering of $300 million aggregate principal amount of our 4.875% senior notes due 2026 at an issue
price of 100%. The 2026 Notes are unsecured and are guaranteed by all of our current and, subject to certain conditions, future material wholly-
owned U.S. subsidiaries. The Notes mature on March 1, 2026, unless earlier redeemed or repurchased, and will be recorded in “Long-term debt”
in our consolidated balance sheet at their fair value of $300 million. Interest on the notes is payable semi-annually on March 1 and September 1 of
each year, beginning on September 1, 2021.
We used the net proceeds of the Offering, together with cash on hand, to redeem all of the outstanding $375 million aggregate principal amount of
our 5.875% senior notes due 2023, at a price of 100% of the aggregate principal amount thereof, plus accrued and unpaid interest to, but not
including, the redemption date. In connection with the redemption of all $375 million aggregate principal amount of the 2023 Notes (the
“Redemption”), we placed the net proceeds of the closing of the Offering, together with additional cash, into trust for the benefit of the holders of
the 2023 Notes. The Redemption occurred on February 18, 2021.
•
Effective January 21, 2021, we reduced the commitment under the Canadian tranche of our senior secured asset-based revolving credit facility by
$50 million, to $250 million, resulting in an aggregate commitment of $450 million, subject to borrowing base limitations.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of Resolute Forest Products Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Resolute Forest Products Inc. and its subsidiaries (the “Company”) as of December 31,
2020 and 2019, and the related consolidated statements of operations, comprehensive (loss) income, changes in equity and cash flows for each of the three
years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). We also have
audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of
December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in
conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated
Framework (2013) issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting,
and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Financial
Statements and Assessment of Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial
statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the
US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective
internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing
such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
As described in Management’s Report on Financial Statements and Assessment of Internal Control over Financial Reporting, management has excluded the
subsidiaries acquired from Conifex Timber Inc. on February 1, 2020, the business of which consists mainly in the operation of three sawmills and related
assets in Cross City (Florida) and in Glenwood and El Dorado (Arkansas), (the US Sawmill Business) from its assessment of internal control over financial
reporting as of December 31, 2020 because it was acquired by the Company in a purchase business combination during 2020. We have also excluded the
US Sawmill Business from our audit of internal control over financial reporting. The US Sawmill Business consists of wholly‑owned subsidiaries whose
total assets and total sales excluded from management’s assessment and our audit of internal control over financial reporting represent $256 million and
$137 million, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2020.
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Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were
communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated
financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not
alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below,
providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Long‑lived Assets Impairment Assessment for an asset group for which management identified impairment indicators
As described in notes 2, 10, 11 and 12 to the consolidated financial statements, the Company’s consolidated long‑lived assets balance was $1,564 million as
of December 31, 2020 and comprised $1,441 million fixed assets, net, $63 million amortizable intangible assets, net and $60 million operating lease
right‑of‑use assets. Management reviews long‑lived assets for impairment when events or changes in circumstances indicate that the carrying value of an
asset group may no longer be recoverable. For asset groups that are held and used, the asset group represents the lowest level for which identifiable cash
flows are largely independent of the cash flows of other asset groups. The recoverability of an asset group that is held and used is tested by comparing the
carrying value of the asset group to the sum of the estimated undiscounted future cash flows expected to be generated by that asset group. The principal
assumptions used by management to estimate these undiscounted future cash flows include, but are not limited to, periods of operation, projections of
product pricing, production levels and sales volumes, product costs, market supply and demand, foreign exchange rates, inflation, and projected capital
spending. If it is determined that an asset group is not recoverable, an impairment loss is recognized in the amount by which the asset group’s carrying
value exceeds its fair value. No impairment charge was required in the current year.
The principal considerations for our determination that performing procedures relating to long‑lived assets impairment assessment for an asset group for
which management identified impairment indicators is a critical audit matter are (i) the high degree of auditor judgment and subjectivity in applying
procedures relating to the recoverability of the asset group being tested for impairment due to the significant judgment required by management when
developing the undiscounted future cash flows and (ii) significant audit effort in evaluating the principal assumptions related to the projections of product
pricing and sales volumes, product costs and projected capital spending.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated
financial statements. These procedures included testing the effectiveness of controls relating to management’s long‑lived assets impairment assessment for
an asset group for which management identified impairment indicators, including controls over (i) the development of principal assumptions used in the
undiscounted cash flow model and (ii) the determination of the recoverable amount of an asset group for which management identified impairment
indicators. These procedures also included, among others, (i) testing management’s process for determining the recoverable amount of the asset group
tested for impairment, (ii) evaluating the appropriateness of the undiscounted cash flow model, (iii) testing the completeness and accuracy of the underlying
data used in the models and (iv) evaluating the reasonableness of the principal assumptions used by management, including projections of product pricing
and sales volumes, product costs and projected capital spending. Evaluating the reasonableness of the principal assumptions related to projections of
product pricing and sales volumes, product costs and projected capital spending involved considering the current and past performance of the asset group
tested for impairment, management’s strategic plan, comparing market‑related assumptions used in the model to external market and industry data and
whether these assumptions were consistent with evidence obtained in other areas of the audit.
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Valuation of Fixed Assets acquired related to the US Sawmill Business
As described in notes 2 and 3 to the consolidated financial statements, in 2020 the Company completed the acquisition of certain subsidiaries, the business
of which consisted mainly of three operating sawmills (the US Sawmill Business) for consideration of $173 million paid in cash. Management accounted
for this transaction as a business combination using the acquisition method. Under this method, identifiable assets acquired and liabilities assumed are
recorded at their respective fair values at the date of acquisition. Management recorded the acquired fixed assets at an aggregated fair value of $114 million
on the date of acquisition based on both cost and market approaches. Management applied significant judgment in estimating the fair value of fixed assets
acquired using the cost approach, which involved the use of principal assumptions with respect to estimated replacement and reproduction costs, estimated
useful lives, and physical, functional and economic obsolescence at the time of acquisition.
The principal considerations for our determination that performing procedures relating to the valuation of fixed assets acquired related to the US Sawmill
Business is a critical audit matter are (i) the high degree of auditor judgment and subjectivity in performing procedures relating to the fair value
measurement of fixed assets acquired due to the significant amount of judgment required by management when developing the fair value applying the cost
approach and (ii) the significant audit effort in evaluating the principal assumptions relating to this estimate, including replacement and reproduction costs,
estimated useful lives and physical, functional and economic condition obsolescence at the time of acquisition. In addition, the audit effort involved the use
of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated
financial statements. These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over
management’s valuation of the acquired fixed assets and controls over the development of the principal assumptions used in the valuation of acquired fixed
assets. These procedures also included, among others, (i) reading the securities purchase agreement, (ii) testing management’s process for estimating the
fair value of the acquired fixed assets using the cost approach, (iii) testing the completeness and accuracy of underlying data used in the models, and (iv)
with the assistance of professionals with specialized skill and knowledge, evaluating whether the principal assumptions were reasonable considering
consistency with external market and industry data. Professionals with specialized skill and knowledge were also involved in evaluating the
appropriateness of the valuation approach.
/s/ PricewaterhouseCoopers LLP
Montréal, Canada
March 1, 2021
We have served as the Company’s auditor since 2007.
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MANAGEMENT’S REPORT ON FINANCIAL STATEMENTS AND ASSESSMENT OF INTERNAL CONTROL OVER FINANCIAL
REPORTING
Financial Statements
Management of Resolute Forest Products Inc. is responsible for the preparation of the financial information included in this Form 10-K. The accompanying
consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles and include amounts that are based
on the best estimates and judgments of management.
Assessment of Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act of 1934. Resolute Forest Products Inc.’s internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
U.S. generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that:
—
—
—
—
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of
Resolute Forest Products Inc.;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S.
generally accepted accounting principles;
provide reasonable assurance that receipts and expenditures of Resolute Forest Products Inc. are being made only in accordance with the
authorizations of management and directors of Resolute Forest Products Inc.; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a
material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of Resolute Forest Products Inc.’s internal control over financial reporting as of December 31, 2020. Management
based this assessment on the criteria for effective internal control over financial reporting described in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management has elected to exclude from its assessment of internal
control over financial reporting as of December 31, 2020, the subsidiaries acquired from Conifex Timber Inc. on February 1, 2020, the business of which
consists mainly in the operation of three sawmills and related assets in Cross City and in Glenwood and El Dorado, included in our consolidated financial
statements with sales and assets of $137 million and $256 million, respectively, for the year ended December 31, 2020 because it was acquired by the
Company in a purchase business combination during 2020. Management’s assessment included an evaluation of the design of Resolute Forest Products
Inc.’s internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Management
reviewed the results of its assessment with the audit committee of our board of directors.
Based on this assessment, management determined that, as of December 31, 2020, Resolute Forest Products Inc.’s internal control over financial reporting
was effective.
The effectiveness of Resolute Forest Products Inc.’s internal control over financial reporting as of December 31, 2020, has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report above.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) are our controls and other procedures that are designed to
ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated
and communicated to our management, including our president and chief executive officer and chief financial officer, as appropriate to allow timely
decisions regarding required disclosure.
We have evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of
the Securities Exchange Act of 1934, as of December 31, 2020. Based on that evaluation, the president and chief executive officer and chief financial
officer concluded that our disclosure controls and procedures were effective as of such date in recording, processing, summarizing and timely reporting
information required to be disclosed in our reports to the SEC.
Management’s Report on Internal Control over Financial Reporting
Management has issued its report on internal control over financial reporting, which included management’s assessment that the Company’s internal
control over financial reporting was effective as of December 31, 2020. Management’s report on internal control over financial reporting can be found on
page 116 of this Form 10-K. Our independent registered public accounting firm, PricewaterhouseCoopers LLP, has issued an attestation report on the
effectiveness of internal control over financial reporting as of December 31, 2020. This report can be found on page 113 of this Form 10-K.
Changes in Internal Control over Financial Reporting
In connection with the evaluation of internal control over financial reporting, there were no changes during the quarter ended December 31, 2020, that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
The information appearing under the captions entitled “Management Proposals – Vote on the Election of Directors,” “Delinquent Section 16(a) Reports,”
and “Corporate Governance and Board Matters” in our definitive proxy statement for our 2021 annual meeting of shareholders to be held on May 21, 2021
(or, our “2021 proxy statement”), which will be filed within 120 days of the end of our fiscal year ended December 31, 2020, is incorporated herein by
reference.
Information regarding our executive officers is presented in Part I, Item 1, “Business – Executive Officers,” of this Form 10-K and is incorporated by
reference herein.
We have adopted a code of ethics that applies to our principal executive officer, principal financial officer and principal accounting officer. This code of
ethics (which is entitled “Code of Business Conduct”) and our corporate governance policies are posted on our website at www.resolutefp.com. We intend
to satisfy disclosure requirements regarding amendments to or waivers from our code of ethics by posting such information on this website. The charters of
the Audit Committee and the Human Resources and Compensation/Nominating and Governance Committee of our Board of Directors are available on our
website as well. This information is also available in print free of charge to any person who requests it.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing under the captions entitled “Executive Compensation,” “Corporate Governance and Board Matters,” “Director Compensation,”
and “Compensation Committee Interlocks and Insider Participation” in our 2021 proxy statement is incorporated herein by reference.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
The information appearing under the caption entitled “Information on Stock Ownership” in our 2021 proxy statement is incorporated herein by reference.
Equity Compensation Plan Information
The following table provides information as of December 31, 2020, regarding securities to be issued upon exercise of outstanding stock options or pursuant
to outstanding stock unit awards, and securities remaining available for issuance under our equity compensation plans. The Incentive Plans are the only
compensation plans with shares authorized.
(a)
Number of securities to be
issued upon exercise of
outstanding options, warrants
and rights
(b)
Weighted-average exercise
price of outstanding options,
warrants and rights
(c)
Number of securities
remaining available for future
issuance under equity
compensation plans
(excluding securities
reflected in column (a))
Plan category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
(2)
3,012,924 (1)
2,043,813 (3)
5,056,737
$
$
$
—
16.09 (4)
16.09
2,211,394
—
2,211,394
(1)
(2)
(3)
(4)
Includes shares issuable upon the exercise of 1,087,568 RSUs issued under the 2019 Incentive Plan, at a rate of one share per unit. Also includes
shares issuable upon the settlement of 1,241,295 PSUs issued under the 2019 Incentive Plan at the maximum payout rate (1,925,356 shares).
The Incentive Plan was approved by the Courts in connection with the CCAA Creditor Protection Proceedings, and the creditor protection
proceedings under Chapter 11 of the United States Bankruptcy Code, as amended, as applicable.
Includes shares issuable upon the exercise of 912,901 stock options and shares issuable upon the settlement of 416,615 RSUs and DSUs issued
under the Incentive Plan, at a rate of one share per unit. Also includes shares issuable upon the settlement of 554,107 PSUs issued under the
Incentive Plan at the maximum payout rate (714,297 shares).
The weighted-average exercise price in column (b) represents the weighted-average exercise price of the outstanding stock options disclosed in
column (a). The stock unit awards do not have an exercise price and are not included in the calculation of the weighted-average exercise price in
column (b).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information appearing under the captions entitled “Related Party Transactions” and “Corporate Governance and Board Matters – Director
Independence” in our 2021 proxy statement is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information appearing under the caption entitled “Management Proposals – Vote on the Ratification of the Appointment of PricewaterhouseCoopers
LLP” in our 2021 proxy statement is incorporated herein by reference.
118
Table of Contents
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) The following are filed as a part of this Form 10-K:
(1) The following are included at the indicated page of this Form 10-K:
PART IV
Consolidated Statements of Operations for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Comprehensive (Loss) Income for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Balance Sheets as of December 31, 2020 and 2019
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Management’s Report on Financial Statements and Assessment of Internal Control over Financial Reporting
Page
68
69
70
71
72
73
112
115
(2) Exhibits (numbered in accordance with Item 601 of Regulation S-K):
Exhibit No.
Description
#2.1
#2.2
#2.3
3.1
3.2
4.1
4.2
10.1
10.2
Asset Purchase Agreement between Resolute FP US Inc., New-Indy Containerboard LLC and New-Indy Catawba LLC, dated
October 2, 2018 (incorporated by reference from Exhibit 2.1 to Resolute Forest Products Inc.’s Current Report on Form 8-K filed on
January 7, 2019, SEC File No. 001-33776).
Amendment to the Asset Purchase Agreement between Resolute FP US Inc., New-Indy Containerboard LLC and New-Indy
Catawba LLC, dated December 27, 2018 (incorporated by reference from Exhibit 2.2 to Resolute Forest Products Inc.’s Current
Report on Form 8-K filed on January 7, 2019, SEC File No. 001-33776).
Securities Purchase Agreement, dated December 23, 2019, among Conifex USA Inc., Conifex Holdco LLC, Conifex Timber Inc.
and Resolute FP US Inc.(incorporated by reference from Exhibit 2.1 to Resolute Forest Products Inc.’s Current Report on Form 8-K
filed on December 27, 2019, SEC File No. 001-33776).
Amended and Restated Certificate of Incorporation of Resolute Forest Products Inc. (incorporated by reference from Exhibit 3.1 to
Resolute Forest Product Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012, filed March 1, 2013, SEC File
No. 001-33776).
By-laws of Resolute Forest Products Inc., as amended through March 23, 2020 (incorporated by reference from Exhibit 3.1 to
Resolute Forest Products Inc.’s Current Report on Form 8-K filed on March 27, 2020, SEC File No. 001-33776).
Description of the Securities Registered under Section 12 of the Securities Exchange Act of 1934.
Indenture, dated as of February 2, 2021. among Resolute Forest Products Inc., the guarantors party thereto and Wells Fargo Bank,
National Association, as trustee.
Credit Agreement, dated as of May 22, 2015, among Resolute Forest Products Inc., Resolute FP Canada Inc., certain other
subsidiaries of Resolute Forest Products Inc. as borrowers or guarantors, various lenders, Bank of America, N.A., as U.S.
Administrative Agent and Collateral Agent, and Bank of America, N.A. (through its Canada branch), as Canadian Administrative
Agent (incorporated by reference from Exhibit 10.1 to Resolute Forest Products Inc.’s Current Report on Form 8-K filed May 26,
2015, SEC file No. 001-033776).
Amended and Restated Credit Agreement, dated as of October 28, 2019, among Resolute Forest Products Inc., certain U.S.
subsidiaries of Resolute Forest Products Inc. as borrowers and guarantors, various lenders, and American AgCredit, FLCA, as
administrative agent and collateral agent (incorporated by reference from Exhibit 10.1 to Resolute Forest Products Inc.’s Current
Report on Form 8-K filed October 30, 2019, SEC file No. 001-33776).
119
Table of Contents
Exhibit No.
10.3
10.4
†10.5
†10.6
†10.7
†10.8
†10.9
†10.10
10.11
10.12
†10.13
†10.14
†10.15
†10.16
†10.17
†10.18
Description
Second Amendment to the Credit Agreement, dated as of May 14, 2019, among Resolute Forest Products Inc., Resolute FP Canada
Inc., certain other subsidiaries of Resolute Forest Products Inc. as borrowers or guarantors, various lenders, Bank of America, N.A.,
as U.S. Administrative Agent and Collateral Agent, and Bank of America, N.A. (through its Canada branch), as Canadian
Administrative Agent (incorporated by reference from Exhibit 10.1 to Resolute Forest Products Inc.’s Current Report on Form 8-K
filed May 20, 2019, SEC file No. 001-33776).
Secured Delayed Draw Term Loan Facility, dated as of November 4, 2020, among Resolute FP Canada Inc., a subsidiary of Resolute
Forest Products Inc. as borrower, and Investissement Quebec, as lender.
AbitibiBowater 2010 Canadian DB Supplemental Executive Retirement Plan, effective as of December 9, 2010 (incorporated by
reference from Exhibit 10.4 to AbitibiBowater Inc.’s Annual Report on Form 10-K for the year ended December 31, 2010, filed
April 5, 2011, SEC File No. 001-33776).
AbitibiBowater Inc. 2010 Equity Incentive Plan Form of Director Nonqualified Stock Option Agreement (incorporated by reference
from Exhibit 10.3 to AbitibiBowater Inc.’s Registration Statement on Form S-8 filed January 7, 2011, SEC Registration No. 333-
171602).
AbitibiBowater Inc. 2010 Equity Incentive Plan Form of Employee Nonqualified Stock Option Agreement (incorporated by
reference from Exhibit 10.4 to AbitibiBowater Inc.’s Registration Statement on Form S-8 filed January 7, 2011, SEC Registration
No. 333-171602).
AbitibiBowater Inc. 2010 Equity Incentive Plan Form of Employee Nonqualified Stock Option Agreement (incorporated by
reference from Exhibit 10.14 to AbitibiBowater Inc.’s Annual Report on Form 10-K for the year ended December 31, 2011, filed
February 29, 2012, SEC File No. 001-33776).
AbitibiBowater Executive Restricted Stock Unit Plan, effective as of April 1, 2011 (incorporated by reference from Exhibit 10.13 to
AbitibiBowater Inc.’s Annual Report on Form 10-K for the year ended December 31, 2010, filed April 5, 2011, SEC File No. 001-
33776).
Retirement Compensation Trust Agreement (with Letter of Credit) between AbiBow Canada Inc. and AbitibiBowater Inc. and CIBC
Mellon Trust Company, dated and effective as of November 1, 2011 (incorporated by reference from Exhibit 10.39 to
AbitibiBowater Inc.’s Annual Report on Form 10-K for the year ended December 31, 2011, filed February 29, 2012, SEC File No.
001-33776).
Agreement Concerning the Pulp and Paper Operations of AbiBow Canada in Ontario, dated November 10, 2010, between Bowater
Canadian Forest Products Inc. and Abitibi-Consolidated Company of Canada and The Province of Ontario (incorporated by
reference from Exhibit 10.32 to AbitibiBowater Inc.’s Annual Report on Form 10-K for the year ended December 31, 2010, filed
April 5, 2011, SEC File No. 001-33776).
Agreement Concerning the Pulp and Paper Operations of AbiBow Canada in Quebec, dated September 13, 2010, between Bowater
Canadian Forest Products Inc. and Abitibi-Consolidated Company of Canada and The Government of Quebec (incorporated by
reference from Exhibit 10.33 to AbitibiBowater Inc.’s Annual Report on Form 10-K for the year ended December 31, 2010, filed
April 5, 2011, SEC File No. 001-33776).
Offer Letter between Jacques Vachon and AbitibiBowater Inc., dated March 19, 2012 (incorporated by reference from Exhibit 10.2
to AbitibiBowater Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, filed May 10, 2012, SEC File No.
001-33776).
Resolute Forest Products DC Make-up Program, effective January 1, 2012 (incorporated by reference from Exhibit 10.3 to
AbitibiBowater Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, filed May 10, 2012, SEC File No. 001-
33776).
Resolute Forest Products Inc. Severance Policy – Chief Executive Officer and Direct Reports, effective as of August 1, 2012
(incorporated by reference from Exhibit 10.1 to Resolute Forest Products Inc.’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2012, filed August 9, 2012, SEC File No. 001-33776).
Resolute Forest Products Equity Incentive Plan (previously named the AbitibiBowater Inc. 2010 Equity Incentive Plan), effective as
of December 9, 2010 (incorporated by reference from Exhibit 10.2 to Resolute Forest Products Inc.’s Quarterly Report on Form 10-
Q for the quarter ended September 30, 2012, filed November 9, 2012, SEC File No. 001-33776).
Resolute Forest Products Outside Director Deferred Compensation Plan (previously named the AbitibiBowater Inc. Outside Director
Deferred Compensation Plan), effective as of April 1, 2011 (incorporated by reference from Exhibit 10.3 to Resolute Forest Products
Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, filed November 9, 2012, SEC File No. 001-33776).
Form of Indemnification Agreement for Directors and Officers of Resolute Forest Products Inc. (incorporated by reference from
Exhibit 10.41 to Resolute Forest Products Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012, filed March 1,
2013, SEC File No. 001-33776).
120
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Exhibit No.
†10.19
Description
Resolute Forest Products Equity Incentive Plan Form of Employee Nonqualified Stock Option Agreement (incorporated by reference
from Exhibit 10.41 to Resolute Forest Products Inc.’s Annual Report on Form 10-K for the year ended December 31, 2013, filed
March 3, 2014, SEC File No. 001-33776).
†10.20
†10.21
†10.22
†10.23
†10.24
†10.25
†10.26
†10.27
†10.28
†10.29
†10.30
†10.31
†10.32
†10.33
†10.34
Offer Letter between Richard Tremblay and Resolute Forest Products Inc., dated February 4, 2014 (incorporated by reference from
Exhibit 10.43 to Resolute Forest Products Inc.’s Annual Report on Form 10-K for the year ended December 31, 2013, filed March 3,
2014, SEC File No. 001-33776).
First Amendment dated February 14, 2014 to the AbitibiBowater 2010 Canadian DB Supplemental Executive Retirement Plan,
effective as of December 9, 2010 (incorporated by reference from Exhibit 10.44 to Resolute Forest Products Inc.’s Annual Report on
Form 10-K for the year ended December 31, 2014, filed March 2, 2015, SEC File No. 001-33776).
Resolute FP Canada Inc. and Resolute Forest Products Inc. Security Protocol with respect to the Resolute Forest Products 2010
Canadian DB Supplemental Executive Retirement Plan and the Resolute Canada SERP, amended and restated effective April 11,
2014 (incorporated by reference from Exhibit 10.45 to Resolute Forest Products Inc.’s Annual Report on Form 10-K for the year
ended December 31, 2014, filed March 2, 2015, SEC File No. 001-33776).
Form of Indemnification Agreement for Directors and Officers of Resolute Forest Products Inc. (incorporated by reference from
Exhibit 10.46 to Resolute Forest Products Inc.’s Annual Report on Form 10-K for the year ended December 31, 2014, filed March 2,
2015, SEC File No. 001-33776).
Resolute Forest Products Equity Incentive Plan Form of Director Deferred Stock Unit Agreement (incorporated by reference from
Exhibit 10.39 to Resolute Forest Products Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016, filed March 1,
2017, SEC File No. 001-33776).
Resolute Forest Products Equity Incentive Plan Form of Director Restricted Stock Unit Agreement (incorporated by reference from
Exhibit 10.40 to Resolute Forest Products Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016, filed March 1,
2017, SEC File No. 001-33776).
Indemnification Policy for the Executive Officers and Chief Accounting Officer of Resolute Forest Products Inc (incorporated by
reference from Exhibit 10.41 to Resolute Forest Products Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016,
filed March 1, 2017, SEC File No. 001-33776).
Guarantee Agreement, entered into on February 21, 2017, and dated as of June 18, 2014, between Resolute FP Canada Inc. and
Resolute FP US Inc. as Guarantors, and Jacques Vachon as the Guaranteed Party (incorporated by reference from Exhibit 10.42 to
Resolute Forest Products Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016, filed March 1, 2017, SEC File
No. 001-33776).
First Amendment to the Resolute Forest Products Equity Incentive Plan, dated February 28, 2017 (incorporated by reference from
Exhibit 10.43 to Resolute Forest Products Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016, filed March 1,
2017, SEC File No. 001-33776).
Offer Letter between Patrice Minguez and Resolute Forest Products Inc., dated July 24, 2017 (incorporated by reference from
Exhibit 10.1 to Resolute Forest Products Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed August 9,
2017, SEC File No. 001-33776).
Form of Resolute Forest Products Equity Incentive Plan Executive Stock Settled Performance Stock Unit Agreement (incorporated
by reference from Exhibit 10.2 to Resolute Forest Products Inc.’s Quarterly Report on Form 10-Q for the quarter ended September
30, 2017, filed November 9, 2017, SEC File No. 001-33776).
Second Amendment to the Resolute Forest Products Equity Incentive Plan, dated October 31, 2017 (incorporated by reference from
Exhibit 10.3 to Resolute Forest Products Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, filed
November 9, 2017, SEC File No. 001-33776).
Executive Employment Agreement between Resolute Forest Products Inc. and Yves Laflamme, dated February 1, 2018
(incorporated by reference from Exhibit 10.51 to Resolute Forest Products Inc.’s Annual Report on Form 10-K for the year ended
December 31, 2017, filed March 1, 2018, SEC File No. 001-33776).
Change in Control Agreement between Resolute Forest Products Inc. and Yves Laflamme, dated February 1, 2018 (incorporated by
reference from Exhibit 10.52 to Resolute Forest Products Inc.’s Annual Report on Form 10-K for the year ended December 31, 2017,
filed March 1, 2018, SEC File No. 001-33776).
Director Compensation Program Chart, dated February 27, 2018 (incorporated by reference from Exhibit 10.54 to Resolute Forest
Products Inc.’s Annual Report on Form 10-K for the year ended December 31, 2017, filed March 1, 2018, SEC File No. 001-33776).
121
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Exhibit No.
†10.35
Description
Offer Letter between Remi Lalonde and Resolute Forest Products Inc., dated January 30, 2019 (incorporated by reference from
Exhibit 10.46 to Resolute Forest Products Inc.’s Annual Report on Form 10-K for the year ended December 31, 2018, filed March 1,
2019, SEC File No. 001-33776).
†10.36
†10.37
†10.38
†10.39
†10.40
†10.41
†10.42
†10.43
†10.44
†10.45
†10.46
†10.47
†10.48
†10.49
†10.50
†10.51
21.1
22
23.1
24.1
Form of Resolute Forest Products Equity Incentive Plan Director Cash-Settled Deferred Stock Unit Agreement (incorporated by
reference from Exhibit 10.47 to Resolute Forest Products Inc.’s Annual Report on Form 10-K for the year ended December 31, 2018,
filed March 1, 2019, SEC File No. 001-33776).
Form of Resolute Forest Products Equity Incentive Plan Director Cash-Settled Restricted Stock Unit Agreement (incorporated by
reference from Exhibit 10.48 to Resolute Forest Products Inc.’s Annual Report on Form 10-K for the year ended December 31, 2018,
filed March 1, 2019, SEC File No. 001-33776).
Form of First Amendment to the Resolute Forest Products Equity Incentive Plan Director Deferred Stock Unit Agreement
(incorporated by reference from Exhibit 10.51 to Resolute Forest Products Inc.’s Annual Report on Form 10-K for the year ended
December 31, 2018, filed March 1, 2019, SEC File No. 001-33776).
Form of First Amendment to the Resolute Forest Products Equity Incentive Plan Director Restricted Stock Unit Agreement
(incorporated by reference from Exhibit 10.52 to Resolute Forest Products Inc.’s Annual Report on Form 10-K for the year ended
December 31, 2018, filed March 1, 2019, SEC File No. 001-33776).
2020 Resolute Forest Products Inc. Short-Term Incentive Plan – U.S. (incorporated by reference from Exhibit 10.1 to Resolute
Forest Products Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, filed August 10, 2020, SEC File No. 001-
33776).
2020 Resolute Forest Products Inc. Short-Term Incentive Plan – Canada / International (incorporated by reference from Exhibit 10.2
to Resolute Forest Products Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, filed August 10, 2020, SEC
File No. 001-33776).
Resolute Forest Products Inc. 2019 Equity Incentive Plan (incorporated by reference from Exhibit 10.4 to Resolute Forest Products
Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed August 9, 2019, SEC File No. 001-33776).
Form of Resolute Forest Products 2019 Equity Incentive Plan Cash Settled Restricted Stock Unit Agreement (incorporated by
reference from Exhibit 10.2 to Resolute Forest Products Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30,
2019, filed November 12, 2019, SEC File No. 001-33776).
Form of Resolute Forest Products 2019 Equity Incentive Plan Stock Settled Performance Stock Unit Agreement (incorporated by
reference from Exhibit 10.49 to Resolute Forest Products Inc.’s Annual Report on Form 10-K for the year ended December 31, 2018,
filed March 1, 2019, SEC File No. 001-33776).
Form of Resolute Forest Products 2019 Equity Incentive Plan Stock Settled Performance Stock Unit Agreement.
Form of Resolute Forest Products 2019 Equity Incentive Plan Stock Settled Restricted Stock Unit Agreement (incorporated by
reference from Exhibit 10.4 to Resolute Forest Products Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30,
2019, filed November 12, 2019, SEC File No. 001-33776).
Summary of 2021 Resolute Forest Products Inc. Short-Term Incentive Plan (incorporated by reference from the description in
Resolute Forest Products Inc.’s Current Report on Form 8-K filed February 9, 2021, SEC File No. 001-33776).
Offer letter between John Lafave and AbitibiBowater Inc., dated February 14, 2011 (incorporated by reference from Exhibit 10.29 to
AbitibiBowater Inc’s Annual Report on Form 10-K for the year ended December 31, 2010, filed April 5, 2011, SEC File No. 001-
33776).
Letter Agreement between Yves Laflamme and Resolute Forest Products Inc., dated February 8, 2021.
Offer Letter between Sylvain A. Girard and Resolute Forest Products Inc., dated January 15, 2021.
First Amendment to the Resolute Forest Products Inc. 2019 Equity Incentive Plan (incorporated by reference from Exhibit 10.1 to
Resolute Forest Products Inc.’s Registration Statement on Form S-8 filed August 5, 2020, SEC Registration No. 333-241026).
Subsidiaries of the registrant.
Guarantor subsidiaries of the registrant.
Consent of PricewaterhouseCoopers LLP.
Power of attorney for certain Directors of the registrant.
122
Table of Contents
Exhibit No.
Description
31.1
31.2
32.1
32.2
101.INS*
101.SCH*
101.CAL*
101.LAB*
101.PRE*
101.DEF*
Certification of President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of President and Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
XBRL Instance Document.
XBRL Taxonomy Extension Schema Document.
XBRL Taxonomy Extension Calculation Linkbase Document.
XBRL Taxonomy Extension Label Linkbase Document.
XBRL Taxonomy Extension Presentation Linkbase Document.
XBRL Taxonomy Extension Definition Linkbase Document.
#
†
*
(b)
(c)
Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be
furnished supplementally to the SEC upon request; provided, however, that the registrant may request confidential treatment pursuant to Rule
24b-2 of the Securities Exchange Act, as amended, for any schedules or exhibits so furnished.
This is a management contract or compensatory plan or arrangement.
Interactive data files furnished with this Form 10-K, which represent the following materials from this Form 10-K formatted in XBRL
(eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive
(Loss) Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statement of Changes in Equity, (v) the Consolidated Statements of
Cash Flows, and (vi) the Notes to Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because
its XBRL tags are embedded within the inline XBRL document.
The above-referenced exhibits are being filed with this Form 10-K.
None.
ITEM 16. FORM 10-K SUMMARY
None.
123
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: March 1, 2021
RESOLUTE FOREST PRODUCTS INC.
By:
/s/ Remi G. Lalonde
Remi G. Lalonde
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
Signature
/s/ Remi G. Lalonde
Remi G. Lalonde
/s/ Bradley P. Martin*
Bradley P. Martin
/s/ Remi G. Lalonde
Remi G. Lalonde
/s/ Hugues Dorban
Hugues Dorban
/s/ Randall C. Benson*
Randall C. Benson
/s/ Suzanne Blanchet*
Suzanne Blanchet
/s/ Jennifer C. Dolan*
Jennifer C. Dolan
/s/ Alain Rhéaume*
Alain Rhéaume
/s/ Michael S. Rousseau*
Michael S. Rousseau
Title
President and Chief Executive Officer
(Principal Executive Officer)
Chairman, Director
Chief Financial Officer
(Principal Financial Officer)
Vice President and Chief Accounting Officer
(Principal Accounting Officer)
Director
Director
Director
Director
Director
Date
March 1, 2021
March 1, 2021
March 1, 2021
March 1, 2021
March 1, 2021
March 1, 2021
March 1, 2021
March 1, 2021
March 1, 2021
* Remi G. Lalonde, by signing his name hereto, does sign this document on behalf of the persons indicated above pursuant to powers of attorney duly
executed by such persons that are filed herewith as Exhibit 24.1.
By:
/s/ Remi G. Lalonde
Remi G. Lalonde, Attorney-in-Fact
124
EXHIBIT 4.1
DESCRIPTION OF SECURITIES REGISTERED UNDER
SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934
References to “Resolute” and the “Company” herein are, unless the context otherwise indicates, only to Resolute Forest Products, Inc., and not to any of
its subsidiaries.
As of December 31, 2019, Resolute’s common stock, par value $0.001 per share (the “Common Stock”) was registered under Section 12 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). Resolute had no other class of securities registered under Section 12 of the Exchange
Act.
The following description of Resolute’s capital stock and certain provisions of the Company’s Third Amended and Restated Certificate of
Incorporation (the “Certificate”) and the Company’s By-Laws as amended through December 4, 2014 (the “By-laws”), is a summary and is qualified in its
entirety by the full text of the Certificate and the By-laws. The Certificate and the By-laws are filed as Exhibits to Resolute’s Annual Report on Form 10-K
for the year ended December 31, 2019.
Pursuant to the Certificate, the Company is authorized to issue 190,000,000 shares of Common Stock and 10,000,000 shares of preferred stock, par
value $0.001 per share. The Certificate also provides that the Company will not issue any class of non-voting equity securities unless, and solely to the
extent, permitted by section 1123(a)(6) of title 11 of the United States Code until such time as the Certificate is amended to remove such restriction.
Common Stock
Each holder of the Common Stock is entitled to one vote per each outstanding share registered in the holder’s name with respect to the election of
directors and on all other matters submitted to the vote of the Company’s stockholders. In a “non-contested” election, directors are elected by a majority of
the votes cast by stockholders present, in person or by proxy, entitled to vote in the election at a stockholders meeting at which a quorum is present. In a
“contested” election, directors are elected by a plurality of the votes cast by the stockholders present, in person or by proxy, entitled to vote in the election
at a stockholders meeting at which a quorum is present. An election will be considered “contested” if, as of the last day on which a stockholder may
propose the nomination of a director for election in such election pursuant to the By-laws, there are more nominees than positions on the board of directors
to be filled by election at the meeting. No holder of the Common Stock may cumulate votes in voting for directors.
Except as provided by the Certificate, the By-laws or applicable law, all other questions presented to the stockholders shall be decided by the
affirmative vote of the stockholders present, in person or by proxy, entitled to cast at least a majority of the votes, which all stockholders present are entitled
to cast on the particular matter.
The holders of shares of the Common Stock are entitled to receive dividends as may be declared from time to time by the Company’s board of
directors out of funds legally available for dividend payments, subject to any dividend preferences of any holders of any preferred stock and any contractual
restrictions. In the event of the Company’s liquidation, dissolution or winding up, after full payment of all liabilities and liquidation preferences of any
preferred stock, the holders of shares of the Common Stock are entitled to share ratably in all remaining assets. The Common Stock has no preemptive or
conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the shares of the Common Stock.
The Common Stock is listed on the New York Stock Exchange and the Toronto Stock Exchange under the symbol “RFP”.
Preferred Stock
The Company’s board of directors may, without stockholder approval, issue up to 10,000,000 shares of preferred stock in one or more series and,
subject to Delaware corporation law, may determine:
•
•
•
the designations, powers and preferences, and relative, participating, optional or other rights, if any, of any series of preferred stock;
the number of shares to constitute such series and the distinctive designation thereof;
the dividend rate or rates to which the shares of such series shall be entitled and whether dividends shall be cumulative;
• whether the holders of shares of such series shall be entitled to receive, in the event of the liquidation, dissolution or winding up of the Company,
an amount equal to the dividends accumulated and unpaid thereon;
• whether the shares of such series shall be subject to the operation of a purchase, retirement or sinking fund and, if so, the terms and provisions in
respect of the operation thereof;
• whether the shares of such series shall be convertible into, or exchangeable for, shares of stock of any other class or series of the same class, and
if so convertible or exchangeable, the terms of such conversion or exchange;
•
•
the voting powers, if any, of the shares of such series in addition to the voting powers provided by law; and
any other powers, designations, preferences and rights, and qualifications, limitations or restrictions, not inconsistent with law or the provisions
of the Certificate.
If the Company’s board of directors were to issue a new series of preferred stock, the issuance of such shares could:
• decrease the amount of earnings and assets available for distribution to common stockholders;
• make removal of the present management more difficult;
•
result in restrictions upon the payment of dividends and other distributions to the common stockholders;
• delay or prevent a change in control of the Company; and
•
limit the price that investors are willing to pay in the future for the Common Stock.
Limitations on Directors’ Liability
The Certificate contains a provision eliminating the personal liability of the Company’s directors to Resolute and its stockholders to the fullest extent
permitted by applicable law. The Certificate also contains provisions generally providing for indemnification and advancement of expenses to the
Company’s directors and certain officers to the fullest extent permitted by applicable law.
Possible Anti-Takeover Effects of Delaware Law and Provisions of Resolute’s Certificate and Amended By-Laws
Certain provisions of Delaware corporate law, the Certificate and the By-laws may have the effect of delaying, deferring or preventing a change in
control of Resolute. These provisions include the following:
• The Certificate provides that stockholder action can be taken only at an annual or special meeting of stockholders and may not be taken by
written consent without a meeting. Special meetings of stockholders may be called only by the Company’s board of directors, by certain
executive officers that have been duly provided the power and authority to call such meetings or at the request of the holders of one-third of the
total number of shares of stock entitled to vote on the matter.
• As discussed above under “—Preferred Stock,” the Certificate permits the Company’s board of directors to issue a new series of preferred stock
with terms that may make an acquisition by a third person more difficult or less attractive.
• The By-laws provide time limitations and notice requirements that must be met by stockholders who desire to present proposals or nominate
persons for election to the Company’s board of directors at stockholder meetings.
The Certificate provides that the Company’s board of directors shall not adopt a stockholders rights plan (which for this purpose shall mean any
arrangement pursuant to which, directly or indirectly, Common Stock or preferred stock purchase rights may be distributed to stockholders that provide all
stockholders, other than persons who meet certain criteria specified in the arrangement, are entitled to purchase the Common Stock or preferred stock at
less than the prevailing market price of the Common Stock or preferred stock), unless such rights plan is approved by the affirmative vote of the holders of
a majority of the shares entitled to vote at an election of directors.
Transfer Agent
American Stock Transfer & Trust Company, LLC is the appointed transfer agent for the Common Stock.
EXHIBIT 4.2
RESOLUTE FOREST PRODUCTS INC.
4.875% SENIOR NOTES DUE 2026
INDENTURE
Dated as of February 2, 2021
WELLS FARGO BANK, NATIONAL ASSOCIATION
as
Trustee
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE
Definitions
Other Definitions
Incorporation by Reference of Trust Indenture Act
Rules of Construction
Section 1.01
Section 1.02
Section 1.03
Section 1.04
ARTICLE 2 THE NOTES
Section 2.01
Section 2.02
Section 2.03
Section 2.04
Section 2.05
Section 2.06
Section 2.07
Section 2.08
Section 2.09
Section 2.10
Section 2.11
Section 2.12
Form and Dating
Execution and Authentication
Registrar and Paying Agent
Paying Agent to Hold Money in Trust
Holder Lists
Transfer and Exchange
Replacement Notes
Outstanding Notes
Treasury Notes
Temporary Notes
Cancellation
Defaulted Interest
ARTICLE 3 REDEMPTION
Section 3.01
Section 3.02
Section 3.03
Section 3.04
Section 3.05
Section 3.06
Section 3.07
Optional Redemption
Notices to Trustee
Selection of Notes to Be Redeemed
Notice of Redemption
Effect of Notice of Redemption
Deposit of Redemption Price
Notes Redeemed in Part
ARTICLE 4 COVENANTS
Section 4.01
Section 4.02
Section 4.03
Section 4.04
Section 4.05
Section 4.06
Payment of Notes
Maintenance of Office or Agency
Reports
Compliance Certificate
Taxes
Stay, Extension and Usury Laws
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1
38
39
39
40
40
41
41
41
42
42
54
55
55
55
55
56
56
56
56
56
57
58
58
58
59
59
59
59
64
64
64
Section 4.07
Section 4.08
Section 4.09
Section 4.10
Section 4.11
Section 4.12
Section 4.13
Section 4.14
Section 4.15
Section 4.16
Section 4.17
Restricted Payments
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
Incurrence of Indebtedness and Issuance of Preferred Stock
Asset Sales
Transactions with Affiliates
Liens
Corporate Existence
Offer to Repurchase upon Change of Control
Termination of Certain Covenants When Notes Rated Investment Grade
Additional Note Guarantees
Designation of Restricted and Unrestricted Subsidiaries
ARTICLE 5 SUCCESSORS
Section 5.01
Section 5.02
Merger, Consolidation, or Sale of Assets
Successor Corporation Substituted
ARTICLE 6 DEFAULTS AND REMEDIES
Section 6.01
Section 6.02
Section 6.03
Section 6.04
Section 6.05
Section 6.06
Section 6.07
Section 6.08
Section 6.09
Section 6.10
Section 6.11
ARTICLE 7 TRUSTEE
Section 7.01
Section 7.02
Section 7.03
Section 7.04
Section 7.05
Section 7.06
Section 7.07
Events of Default
Acceleration
Other Remedies
Waiver of Past Defaults
Control by Majority
Limitation on Suits
Rights of Holders of Notes to Receive Payment
Collection Suit by Trustee
Trustee May File Proofs of Claim
Priorities
Undertaking for Costs
Duties of Trustee
Rights of Trustee
Individual Rights of Trustee
Trustee’s Disclaimer
Notice of Defaults
Preferential Collection of Claims Against the Issuer
Compensation and Indemnity
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70
73
78
84
86
87
87
89
90
90
91
91
92
93
93
95
95
95
96
96
96
97
97
97
98
98
98
99
101
101
101
101
102
Section 7.08
Section 7.09
Section 7.10
Replacement of Trustee
Successor Trustee by Merger, etc
Eligibility; Disqualification
ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01
Section 8.02
Section 8.03
Section 8.04
Section 8.05
Section 8.06
Section 8.07
Option to Effect Legal Defeasance or Covenant Defeasance
Legal Defeasance and Discharge
Covenant Defeasance
Conditions to Legal or Covenant Defeasance
Deposited Money and Government Obligations to Be Held in Trust; Other Miscellaneous
Provisions
Repayment to Issuer
Reinstatement
ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01
Section 9.02
Section 9.03
Section 9.04
Section 9.05
Without Consent of Holders of Notes
With Consent of Holders of Notes
Revocation and Effect of Consents
Notation on or Exchange of Notes
Trustee to Sign Amendments, etc
ARTICLE 10 NOTE GUARANTEES
Section 10.01
Section 10.02
Section 10.03
Section 10.04
Section 10.05
Guarantee
Limitation on Guarantor Liability
Execution and Delivery of Note Guarantee
Guarantors May Consolidate, etc., on Certain Terms
Releases
ARTICLE 11 SATISFACTION AND DISCHARGE
Section 11.01
Section 11.02
ARTICLE 12 MISCELLANEOUS
Section 12.01
Section 12.02
Section 12.03
Section 12.04
Section 12.05
Section 12.06
Section 12.07
Satisfaction and Discharge
Application of Trust Money
Notices
U.S.A. Patriot Act and Force Majeure
Certificate and Opinion as to Conditions Precedent
Statements Required in Certificate or Opinion
Rules by Trustee and Agents
No Personal Liability of Directors, Officers, Employees and Stockholders
Governing Law
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104
104
104
104
104
105
105
106
107
107
107
107
108
110
110
110
111
111
113
113
113
114
115
115
116
117
117
118
118
119
119
119
119
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Section 12.08
Section 12.09
Section 12.10
Section 12.11
Section 12.12
Section 12.13
No Adverse Interpretation of Other Agreements
Successors
Severability
Counterpart Originals
Table of Contents, Headings, etc
Jurisdiction; Consent to Service of Process
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120
120
120
120
120
EXHIBITS
Exhibit A-1 – FORM OF NOTE
Exhibit B – FORM OF CERTIFICATE OF TRANSFER
Exhibit C – FORM OF CERTIFICATE OF EXCHANGE
Exhibit D – FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Exhibit E – FORM OF NOTATION OF NOTE GUARANTEE
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INDENTURE dated as of February 2, 2021 among RESOLUTE FOREST PRODUCTS INC., a Delaware corporation
(the “Issuer”), each of the Guarantors from time to time party hereto, as guarantors, and WELLS FARGO BANK, NATIONAL
ASSOCIATION, as trustee (the “Trustee”).
In this Indenture, except where otherwise indicated, all references to “dollars” and “$” are to the lawful currency of the
United States. References to “CDN$” are to the lawful currency of Canada.
The Issuer, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable
benefit of the Holders (as defined) of the 4.875% Senior Notes due 2026 (the “Notes”):
ARTICLE 1.
Section 1.01 Definitions
DEFINITIONS AND INCORPORATION BY REFERENCE
“144A Global Note” means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend
and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its
nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule
144A.
“ABL Credit Agreement” means the credit agreement, dated as of May 22, 2015, as amended on December 22, 2017 and
on May 14, 2019 (as further amended) among the Issuer, Resolute FP Canada Inc., Resolute FP US Inc. and certain of the
Issuer’s subsidiaries from time to time party thereto as borrowers and guarantors, the various lenders and agents party thereto and
Bank of America, N.A., as U.S. Administrative Agent and Collateral Agent, and Bank of America, N.A. (acting through its
Canada Branch), as Canadian Administrative Agent, together with any amendments, supplements, modifications, extensions,
renewals, restatements or refundings thereof and any indentures or credit facilities, receivables securitization facilities or
commercial paper facilities with banks or other institutional lenders or investors that replace, refund or refinance any part of the
loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility
or indenture that increases the amount borrowable thereunder, alters the maturity thereof or adds or eliminates Restricted
Subsidiaries as additional borrowers or guarantors thereunder and whether by the same or any other agent, lender, group of
lenders or investors. Any agreement or instrument other than the ABL Credit Agreement in effect on the Issue Date must be
designated in a writing delivered to
Doc#: US1:14429903v18
the Trustee by the Issuer as an “ABL Credit Agreement” for purposes of this Indenture in order to be an ABL Credit Agreement.
“Acceptable Commitment” has the meaning assigned to that term in Section 4.10(c) of this Indenture.
“Acquired Debt” means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a
Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation
of, such other Person merging with or into, or becoming a Restricted Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.
“Additional Commitment” has the meaning assigned to that term in Section 4.10(c) of this Indenture.
“Additional Notes” means additional Notes (other than the Initial Notes) issued under this Indenture in accordance with
Section 2.02, as part of the same series as the Initial Notes.
“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person. For purposes of this definition, “control,” as used with respect to
any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. For purposes of this
definition, the terms “controlling,” “controlled by” and “under common control with” have correlative meanings.
“Agent” means any Registrar, co-registrar, Paying Agent or additional paying agent.
“Applicable Accounting Standards” means, as of the Issue Date, U.S. GAAP; provided, however, that the Issuer may,
upon not less than 60 days’ prior written notice to the Trustee, change to IFRS; provided, however, that notwithstanding the
foregoing, if the Issuer changes to IFRS, it may elect, in its sole discretion, to continue to utilize U.S. GAAP for the purposes of
making all calculations under this Indenture that are subject to Applicable Accounting Standards and the notice to the Trustee
required upon the change to IFRS shall set forth whether or not the Issuer intends to continue to use U.S. GAAP for purposes of
making all calculations under this Indenture. In the event the Issuer elects to change to IFRS for purposes of making calculations
under this Indenture, references in this Indenture to a standard or rule under U.S. GAAP shall be deemed to refer to the most
nearly comparable standard or rule under IFRS.
Notwithstanding anything to the contrary in this definition or in the definitions of “U.S. GAAP,” “IFRS” or “Capital
Lease Obligations,” notwithstanding any rule before or after the Issue Date under the Applicable Accounting Standard (or the
application thereof) any Operating Lease shall not be treated as a finance or capital lease (or Indebtedness or a Capital Lease
Obligation) for purposes of calculations under this Indenture; provided that the Issuer may, by
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written notice to the Trustee, elect to treat any Operating Lease as a finance or capital lease (or Indebtedness or a Capital Lease
Obligation) for purposes of calculations under this Indenture, which election shall be irrevocable.
“Applicable Premium” means, with respect to a Note and as calculated by the Issuer, the greater of:
(1) 1.0% of the then outstanding principal amount of such Note and
(2) (a) the present value of all remaining required interest and principal payments due on such Note and all
premium payments relating to such Note assuming a redemption date of the First Call Date, computed using a discount
rate equal to the Treasury Rate plus 50 basis points, minus
(b) the then outstanding principal amount of such Note, minus
(c) accrued interest paid on the date of redemption;
provided that such calculation will not be the duty or obligation of the Trustee.
“Applicable Procedures” means, with respect to any transfer or exchange of or for beneficial interests in any Global Note,
the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange.
“Asset Sale” means:
(1) the sale, lease, conveyance or other disposition of any assets or rights; provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the Issuer and its Restricted Subsidiaries taken as
a whole will be governed by Section 4.14 and/or Section 5.01 and not by the provisions of Section 4.10; and
(2) the issuance of Equity Interests by any of the Issuer’s Restricted Subsidiaries or the sale of Equity Interests in
any of the Issuer’s Subsidiaries (other than directors’ qualifying Equity Interests or Equity Interests required by applicable
law to be held by a Person other than the Issuer or one of its Restricted Subsidiaries).
Notwithstanding the preceding, none of the following items will be deemed to be an Asset Sale:
(1) any single transaction or series of related transactions that involves assets having a Fair Market Value of less
than $50.0 million;
(2) a transfer of assets between or among the Issuer and its Restricted Subsidiaries;
(3) an issuance of Equity Interests by a Restricted Subsidiary of the Issuer to the Issuer or to a Restricted
Subsidiary of the Issuer;
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(4) the sale or lease of products, services or accounts receivable in the ordinary course of business and the lease,
assignment or sublease of any real or personal property in the ordinary course of business;
(5) (a) the sale, lease, sublease, conveyance, disposition or other transfer of surplus, damaged, worn-out or
obsolete assets, (b) the sale, lease, sublease, conveyance, disposition or other transfer of assets (including, without
limitation, facilities or real property) no longer used or useful or economically practicable to maintain in the conduct of
the business of the Issuer and other Restricted Subsidiaries, (c) the sale, lease, sublease, conveyance, disposition or other
transfer of assets necessary in order to comply with applicable law (including, without limitation, competition law
applicable to an acquisition) or licensure requirements (as determined by the Issuer in good faith), (d) leases or subleases
with respect to facilities that are temporarily not in use or pending their disposition and (e) the sale, lease, sublease,
conveyance, disposition or other transfer of inventory or other assets determined by the Issuer to be no longer used, useful
or necessary in the operation of the business of the Issuer and its Restricted Subsidiaries, including, in each of the above
cases, to realize cost savings, synergies or complementarities with Permitted Businesses;
(6) the sale or other disposition of Cash Equivalents;
(7) a Restricted Payment that does not violate Section 4.07 or a Permitted Investment;
(8) the licensing of intellectual property or other general intangibles to third persons on customary terms in the
ordinary course of business;
(9) the sale, lease, sublease, license, sublicense, consignment, conveyance or other disposition of inventory in
the ordinary course of business, including accounts receivable in connection with the compromise, settlement or
collection thereof;
(10) any transfer of property or assets that is a surrender or waiver of a contract, regulatory or legal right or a
settlement, surrender or release of a contract, regulatory, legal or tort claim;
(11) dispositions of accounts receivable, Qualified Receivable Assets and other assets to a Receivables Entity in
connection with a Qualified Receivables Transaction;
(12) a disposition of leasehold improvements or leased assets in connection with the termination of any
operating lease;
(13) dispositions of receivables in connection with the compromise, settlement or collection thereof in the
ordinary course of business or in bankruptcy or similar proceedings or pursuant to supply chain or “reverse” factoring
programs or similar arrangements established by a customer of the Issuer or any Restricted Subsidiary;
(14) any sale of Equity Interests in, or other ownership interests in or assets or property, including Indebtedness,
or other securities of, an Unrestricted Subsidiary;
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(15) (a) any exchange of assets (including a combination of assets and Cash Equivalents) for assets related to a
Permitted Business of comparable or greater market value or usefulness to the business of the Issuer and the Restricted
Subsidiaries as a whole, as determined in good faith by the Issuer and (b) in the ordinary course of business, any swap of
assets, or lease, assignment or sublease of any real or personal property, in exchange for services (including in connection
with any outsourcing arrangements) of comparable or greater value or usefulness to the business of the Issuer and the
Restricted Subsidiaries as a whole, as determined in good faith by the Issuer;
(16) any sale, conveyance or other disposition of assets of any Restricted Subsidiary that is not a Wholly Owned
Restricted Subsidiary, except to the extent that the proceeds thereof are distributed to the Issuer or a Wholly Owned
Restricted Subsidiary;
(17) any foreclosure or any similar action with respect to the property or other assets of the Issuer or any
Restricted Subsidiary;
(18) a Sale and Leaseback Transaction with respect to (a) any assets made subject to a Sale and Leaseback
Transaction within 180 days of the acquisition of such assets, (b) any assets subject to a Sale and Leaseback Transaction
in a Tax Incentive Transaction or (c) any other assets, to the extent the Net Proceeds of the Asset Sale (calculated as if
such Sale and Leaseback Transaction were an Asset Sale) are applied in accordance with Section 4.10;
(19) the creation of or realization on a Lien to the extent that the granting of such Lien was not in violation of
Section 4.12;
(20) dispositions of Investments in joint ventures, to the extent required by, or made pursuant to customary
buy/sell arrangements between joint venture parties set forth in joint venture arrangements and similar binding
agreements;
(21) the settlement, unwinding or early termination of hedging, option, warrant or other derivative transactions
(including, without limitation, with respect to Hedging Obligations or Permitted Convertible Notes Offerings); and
(22) dispositions of Investments where such Investments were permitted under clause (23) of the definition of
Permitted Investments.
Notwithstanding the foregoing, the Issuer may voluntarily treat any transaction otherwise exempt from the definition of
“Asset Sale” pursuant to clauses (1) through (22) above as an “Asset Sale” by designating such transaction as an Asset Sale for
purposes of this Indenture in an Officer’s Certificate delivered to the Trustee.
“Bankruptcy Law” means Title 11, U.S. Code, the BIA, the CCAA, the WURA or any similar federal, provincial or state
law for the relief or bankruptcy of debtors.
“Below Investment Grade Rating Event” means that the Notes become rated below Baa3 (stable) by Moody’s or below
BBB- (stable) by Standard & Poor’s (or, if either such entity ceases to rate the Notes for reasons outside of the control of the
Issuer, below the equivalent
5
investment grade credit rating from any other “nationally recognized statistical rating organization” within the meaning of
Section 3(a)(62) under the Exchange Act, selected by the Issuer as a replacement agency ) on any date from the date of the public
notice of an arrangement that results in a Change of Control until the end of the 60 day period following public notice of the
occurrence of a Change of Control (which period shall be extended so long as the rating of the Notes is under publicly announced
consideration for possible downgrade by any of such rating agencies). In determining whether a Change of Control has occurred
for purposes of this definition, clause (F) of the last paragraph of the definition of Change of Control shall be disregarded.
“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except
that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange
Act), such “person” will be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by
conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of
time. The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning.
“BIA” means the Bankruptcy and Insolvency Act (Canada).
“Board of Directors” means:
(1) with respect to a corporation, the board of directors of the corporation or any committee thereof duly
authorized to act on behalf of such board;
(2) with respect to a partnership, the Board of Directors of the general partner of the partnership;
(3) with respect to a limited liability company, the managing member or members or any controlling committee
of managing members thereof; and
(4) with respect to any other Person, the board or committee of such Person serving a similar function.
Unless the context requires otherwise, the Board of Directors shall refer to the Board of Directors of the Issuer.
“Borrowing Base” means, as of any date, an amount equal to:
(1) 90% of the book value of all trade accounts receivable owned by the Issuer and its Restricted Subsidiaries as
of the end of the most recent fiscal quarter preceding such date; plus
(2) 70% of the book value of all inventory owned by the Issuer and its Restricted Subsidiaries as of the end of
the most recent fiscal quarter preceding such date;
provided that accounts receivable and inventory shall be calculated after giving pro forma effect to all
Investments, acquisitions, dispositions, mergers, consolidations
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and disposed operations that have been made by the Issuer and its Restricted Subsidiaries prior to or substantially
contemporaneous with the date of any calculation (and subsequent to the end of such most recent fiscal quarter), with
such calculations made in good faith by a responsible financial or accounting officer of the Issuer.
“Business Day” means any day other than a Legal Holiday.
“Canadian Reports” has the meaning assigned to that term in Section 4.03(b) of this Indenture.
“Canadian Securities Legislation” means all applicable securities laws in each of the provinces and territories of Canada
and the respective regulations and rules under such laws together with applicable published rules, policy statements, blanket
orders, instruments, rulings and notices of the regulatory authorities in such provinces or territories, in effect from time to time.
“Capital Lease Obligation” means, at the time any determination is to be made, the amount of the liability in respect of a
finance lease that would at that time be required to be capitalized on a balance sheet prepared in accordance with Applicable
Accounting Standards, and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under
such lease prior to the first date upon which such lease may be prepaid by the lessee without payment of a penalty.
“Capital Stock” means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock;
(3) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or
membership interests; and
(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses
of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible
into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.
“Cash Equivalents” means:
(1) United States dollars and Canadian dollars or any other currency freely convertible into United States or
Canadian dollars;
(2) securities issued or directly and fully guaranteed or insured by the Canadian or United States government or
any agency or instrumentality of the Canadian or United States government (provided that the full faith and credit of
Canada or the
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United States is pledged in support of those securities) having maturities of not more than six months from the date of
acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers’ acceptances with maturities not exceeding six months and overnight bank deposits, in each case,
with any lender party to the ABL Credit Agreement or the Farm Credit Agreement or with any Canadian or United States
commercial bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of “B” or
better;
(4) repurchase obligations with a term of not more than seven days for underlying securities of the types
described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in
clause (3) above;
(5) commercial paper having one of the two highest ratings obtainable from Moody’s or S&P and, in each case,
maturing within nine months after the date of acquisition;
(6) securities issued by any state of the United States of America, any province of Canada or any political
subdivision or any public instrumentality of any such state or province maturing within one year from the date of
acquisition thereof and at the time of acquisition thereof, having one of the two highest ratings obtainable from either
S&P or Moody’s;
(7) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in
clauses (1) through (6) of this definition; and
(8) local currencies held by the Issuer or any of its Restricted Subsidiaries, from time to time in the ordinary
course of business and consistent with past practice.
“CCAA” means the Companies’ Creditors Arrangement Act (Canada).
“Change of Control” means the occurrence of any of the following:
(1) the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Issuer
and its Subsidiaries taken as a whole to any “person” (as that term is used in Section 13(d)(3) of the Exchange Act);
(2) the adoption of a plan relating to the liquidation or dissolution of the Issuer (other than a plan of liquidation
of the Issuer that is a liquidation for tax purposes only);
(3) the consummation of any transaction (including, without limitation, any merger or consolidation), the result
of which is that any “person” (as defined above) becomes the Beneficial Owner, directly or indirectly, of more than 50%
of the Voting Stock of the Issuer, measured by voting power rather than number of shares; or
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(4) the Issuer consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges
with or into, the Issuer, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of the
Issuer or such other Person is converted into or exchanged for cash, securities or other property, other than any such
transaction where the Voting Stock of the Issuer outstanding immediately prior to such transaction constitutes or is
converted into or exchanged for a majority of the outstanding shares of the Voting Stock of such surviving or transferee
Person (immediately after giving effect to such transaction).
Notwithstanding the foregoing: (A) any holding company whose only significant asset is Equity Interests of the Issuer or
any of its direct or indirect parent companies shall not itself be considered a “person” or “group” for purposes of clause (2)
above; (B) the transfer of assets between or among the Issuer and its Restricted Subsidiaries shall not itself constitute a Change of
Control; (C) the term “Change of Control” shall not include a merger or consolidation of the Issuer with, or the sale, assignment,
conveyance, transfer, lease or other disposition of all or substantially all of the Issuer’s assets to, an Affiliate incorporated or
organized solely for the purpose of reincorporating or reorganizing the Issuer in another jurisdiction and/or for the sole purpose of
forming or collapsing a holding company structure; (D) a “person” or “group” shall not be deemed to have beneficial ownership
of securities subject to a stock purchase agreement, merger agreement or similar agreement (or voting or option agreement related
thereto) until the consummation of the transactions contemplated by such agreement; (E) a transaction in which the Issuer or any
direct or indirect parent of the Issuer becomes a Subsidiary of another Person (other than a Person that is an individual, such
Person that is not an individual, the “New Parent”) shall not constitute a Change of Control if (a) the shareholders of the Issuer or
such parent immediately prior to such transaction “beneficially own” (as such term is defined in Rule 13d-3 and Rule 13d-5
under the Exchange Act), directly or indirectly through one or more intermediaries, at least a majority of the voting power of the
outstanding voting stock of such parent immediately following the consummation of such transaction or (b) immediately
following the consummation of such transaction, no “person” (as such term is defined above), other than the New Parent,
“beneficially owns” (as such term is defined above), directly or indirectly through one or more intermediaries, more than 50% of
the voting power of the outstanding Voting Stock of the Issuer or the New Parent; and (F) any of the events described above in
clauses (1) through (4) shall not constitute a “Change of Control” after a Covenant Termination Event unless a Below Investment
Grade Rating Event also occurs in connection therewith.
“Clearstream” means Clearstream Banking, S.A.
“Consolidated Cash Flow” means, with respect to any specified Person for any period, the Consolidated Net Income of
such Person for such period plus, without duplication:
(1) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period,
to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus
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(2) the Fixed Charges of such Person and its Restricted Subsidiaries for such period, to the extent that such Fixed
Charges were deducted in computing such Consolidated Net Income; plus
(3) depreciation, amortization (including amortization of intangibles, deferred financing fees, debt incurrence
costs, commissions, fees and expenses, but excluding amortization of prepaid cash expenses that were paid in a prior
period), depletion and other non-cash expenses or charges (including any write-offs of debt issuance or deferred financing
costs or fees and impairment charges and the impact on depreciation and amortization of purchase accounting, but
excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted
Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses or charges
were deducted in computing such Consolidated Net Income; plus
(4) the amount of net loss resulting from the payment of any premiums, fees or similar amounts that are required
to be paid under the terms of the instrument(s) governing any Indebtedness upon the repayment, prepayment or other
extinguishment of such Indebtedness in accordance with the terms of such Indebtedness; plus
(5) any impairment charges or asset write-offs, in each case pursuant to Applicable Accounting Standards, and
the amortization of intangibles arising pursuant to Applicable Accounting Standards; plus
(6) any fees and expenses, including deferred amortization and deferred financing costs, paid in connection with
the Transactions; minus
(7) non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue
in the ordinary course of business,
in each case, on a consolidated basis and determined in accordance with Applicable Accounting Standards.
Notwithstanding the preceding, the provision for taxes based on the income or profits of, and the depreciation and
amortization and other non-cash expenses of, a Restricted Subsidiary of the Issuer will be added to Consolidated Net Income to
compute Consolidated Cash Flow of the Issuer only to the extent that a corresponding amount would be permitted at the date of
determination to be dividended to the Issuer by such Restricted Subsidiary without prior governmental approval (that has not
been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Restricted Subsidiary or its
stockholders.
“Consolidated Net Income” means, with respect to any specified Person for any period, the aggregate of the net income
(loss) of such Person and its Restricted Subsidiaries for such period, on a consolidated basis determined in accordance with
Applicable Accounting Standards
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and without any reduction in respect of preferred stock dividends; provided that, to the extent included therein:
(1) all extraordinary gains and losses and all gains and losses realized in connection with any sale or other disposition of
assets outside of the ordinary course of business, the disposition of securities or the early extinguishment or repurchase of
Indebtedness or Hedging Obligations, together with any related provision for taxes on any such gain, will be excluded;
(2) the net income (or loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity
method of accounting will be excluded, except to the extent of the amount of dividends or similar distributions paid in cash to the
specified Person or a Restricted Subsidiary of the Person;
(3) the net income (or loss) of any Restricted Subsidiary will be excluded to the extent that the declaration or payment
of dividends or similar distributions by that Restricted Subsidiary of that net income is not at the date of determination permitted
without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders; provided that for purposes of determining Consolidated Cash Flow, the net income of
any such Restricted Subsidiary that is a Guarantor will be included;
(4) the cumulative effect of a change in accounting principles will be excluded;
(5) any gains, losses, expenses or charges resulting from the settlement, unwinding or early termination of hedging,
option, warrant or other derivative transactions (including, without limitation, with respect to Hedging Obligations or Permitted
Convertible Notes Offerings) will be excluded;
(6) any (a) non-cash compensation charges, (b) non-cash costs or expenses resulting from stock option plans, employee
benefit plans, compensation charges or postemployment benefit plans, or grants or awards of stock, stock appreciation or similar
rights, stock options, restricted stock, preferred stock or other rights and (c) impairments, write-offs or write-downs of goodwill
or other assets will be excluded;
(7) any gain or loss for such period from currency translation gains or losses or net gains or losses related to currency
remeasurements of Indebtedness (including any net loss or gain resulting from Hedging Obligations for currency exchange risk
entered in relation with Indebtedness) will be excluded;
(8) any unrealized net after-tax income (loss) from Hedging Obligations or cash management Obligations and the
application of Accounting Standards Codification Topic 815 “Derivatives and Hedging” or from other derivative instruments will
be excluded;
(9) any non-cash interest expense resulting from the application of Accounting Standards Codification Topic 470-20
“Debt — Debt with Conversion Options — Recognition” will be excluded;
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(10) any charges resulting from the application of Accounting Standards Codification Topic 805 “Business
Combinations,” Accounting Standards Codification Topic 350 “Intangibles — Goodwill and Other,” Accounting Standards
Codification Topic 360-10-35-15 “Impairment or Disposal of Long-Lived Assets,” Accounting Standards Codification Topic
480-10-25-4 “Distinguishing Liabilities from Equity — Overall — Recognition” or Accounting Standards Codification Topic
820 “Fair Value Measurements and Disclosures” shall be excluded;
(11) any charges resulting from amortization of actuarial gains and losses under Accounting Standards Codification
Topic 715 “Compensation — Retirement Benefits” will be excluded;
(12) any deferred financing costs and original issue discounts amortized or written off, any premiums and prepayment
penalties, breakage costs, other related fees, expenses or reserves paid or recorded in connection with any acquisition, disposition,
financing, refinancing or repayment, including the expensing of bridge, commitment and other financing costs, and any fees,
expenses, charges or change in control payments related to such transactions (including any costs relating to auditing prior
periods, any transition-related expenses, and transaction expenses incurred before, on or after the effective date of such
transactions and costs and expenses after the effective date of such transactions related to the employment or transition of
terminated employees) will be excluded;
(13) any non-cash costs related to the termination of any employee benefit plan will be excluded;
(14) any non-recurring or unusual charges, expenses, gains or losses will be excluded;
(15) non-cash charges for deferred tax asset valuation allowances shall be excluded; and
(16) any expenses or charges related to streamlining and restructuring activities (including related payroll, relocation
and contract termination charges or expenses), facilities-exiting or facilities closure, idling or repurposing activities, business
optimization activities, asset write-downs or write-offs, reductions in force, furloughs, severance, retention bonuses and
professional fees related to any of the foregoing, will be excluded.
“Consolidated Total Debt” means, as of any date of determination, an amount, without duplication, equal to the aggregate
principal amount of all outstanding Indebtedness of the Issuer and the Restricted Subsidiaries as of such date.
“Corporate Trust Office of the Trustee” will be at the address of the Trustee specified in Section 12.01 or such other
address as to which the Trustee may give notice to the Issuer.
“Credit Facilities” means one or more debt facilities or commercial paper facilities (including without limitation the credit
facilities provided under the ABL Credit Agreement and the Farm Credit Agreement), in each case, with banks or other lenders
or credit providers or a trustee providing for revolving credit loans, term loans, receivables financing (including through the sale
of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables),
bankers’ acceptances, letters of credit or issuances of senior
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secured notes, including any related notes, guarantees, collateral documents, instruments, documents and agreements executed in
connection therewith and in each case, as amended, restated, modified, renewed, extended, supplemented, restructured, refunded,
replaced in any manner (whether upon or after termination or otherwise) or refinanced (including, in each case, by means of sales
of debt securities to institutional investors) in whole or in part from time to time, in one or more instances and including any
amendment increasing the amount of Indebtedness incurred or available to be borrowed thereunder, extending the maturity of any
Indebtedness incurred thereunder or contemplated thereby or deleting, adding or substituting one or more parties thereto (whether
or not such added or substituted parties are banks or other institutional lenders), including into one or more separate instruments
or facilities, in each case, whether any such amendment, restatement, modification, renewal, extension, supplement, restructuring,
refunding, replacement or refinancing occurs simultaneously or not with the termination or repayment of a prior Credit Facility.
Any agreement or instrument other than the ABL Credit Agreement or the Farm Credit Agreement, in each case, in effect on the
Issue Date must be designated in a writing delivered to the Trustee by the Issuer as a “Credit Facility” for purposes of this
Indenture in order to be a Credit Facility.
“Custodian” means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto.
“Deemed Date” has the meaning assigned to that term in Section 4.09(e) of this Indenture.
“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of
Default.
“Definitive Note” means a certificated Note registered in the name of the Holder thereof and issued in accordance with
Section 2.06, substantially in the form of Exhibit A hereto except that such Note shall not bear the Global Note Legend and shall
not have the “Schedule of Exchanges of Interests in the Global Note” attached thereto.
“Depositary” means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified
in Section 2.03 as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder
and having become such pursuant to the applicable provision of this Indenture.
“Designated Non-cash Consideration” means the Fair Market Value of non-cash consideration received by the Issuer or
any of its Restricted Subsidiaries in connection with an Asset Sale that is so designated as Designated Non-cash Consideration
pursuant to an Officer’s Certificate delivered to the Trustee, setting forth the basis of such valuation.
“Disqualified Stock” means any Capital Stock that, by its terms (or by the terms of any security into which it is
convertible, or for which it is exchangeable, in each case, at the option of the holder of the Capital Stock), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the
option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the
Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because
the holders of the Capital Stock have the
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right to require the Issuer to repurchase such Capital Stock upon the occurrence of a Change of Control or an Asset Sale will not
constitute Disqualified Stock if the terms of such Capital Stock provide that the Issuer may not repurchase or redeem any such
Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.07. The amount of
Disqualified Stock deemed to be outstanding at any time for purposes of this Indenture will be the maximum amount that the
Issuer and its Restricted Subsidiaries may become obligated to pay upon the maturity of, or pursuant to any mandatory
redemption provisions of, such Disqualified Stock, exclusive of accrued dividends.
“Election Date” has the meaning assigned to that term in Section 4.07(e) of this Indenture.
“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding
any debt security that is convertible into, or exchangeable for, Capital Stock).
“Euroclear” means Euroclear Bank, S.A./N.V., as operator of the Euroclear system.
“Event of Default” has the meaning assigned to that term in Section 6.01.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Existing Indebtedness” means all Indebtedness of the Issuer and its Subsidiaries (other than Indebtedness under the ABL
Credit Agreement, the Farm Credit Agreement or the Québec Credit Agreement) in existence on the Issue Date, until such
amounts are repaid.
“Fair Market Value” means the value that would be paid by a willing buyer to an unaffiliated willing seller in a transaction
not involving distress or necessity of either party, determined in good faith by (unless otherwise provided in this Indenture) (i) if
such Fair Market Value is less than $50.0 million, the Chief Financial Officer of the Issuer and (ii) if such Fair Market Value is
$50.0 million or greater, the Board of Directors of the Issuer.
“Farm Credit Agreement” means the amended and restated credit agreement, dated as of October 28, 2019, among the
Issuer and certain of the Issuer’s subsidiaries from time to time party thereto as borrowers and guarantors, the various lenders
party thereto and American AgCredit, FLCA, as Administrative Agent, together with any amendments, supplements,
modifications, extensions, renewals, restatements or refundings thereof and any indentures or credit facilities, receivables
securitization facilities or commercial paper facilities with banks or other institutional lenders or investors that replace, refund or
refinance any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement,
refunding or refinancing facility or indenture that increases the amount borrowable thereunder, alters the maturity thereof or adds
or eliminates Restricted Subsidiaries as additional borrowers or guarantors thereunder and whether by the same or any other
agent, lender, group of lenders or investors. Any agreement or instrument other than the Farm Credit Agreement in effect on the
Issue Date must be designated in a writing delivered to the Trustee by the Issuer as a “Farm Credit Agreement” for purposes of
this Indenture in order to be a Farm Credit Agreement.
“First Call Date” means March 1, 2023.
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“Fixed Charge Coverage Ratio” means with respect to any specified Person for any period, the ratio of the Consolidated
Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the specified
Person or any of its Restricted Subsidiaries incurs, assumes, guarantees, repays, repurchases, redeems, defeases or otherwise
discharges any Indebtedness (other than ordinary working capital borrowings) or issues, repurchases or redeems preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to
the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the “Calculation Date”), then
the Fixed Charge Coverage Ratio will be calculated giving pro forma effect, in the good-faith judgment of the Chief Financial
Officer of the Issuer, to such incurrence, assumption, Guarantee, repayment, repurchase, redemption, defeasance or other
discharge of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom,
as if the same had occurred at the beginning of the applicable four-quarter reference period; provided that the pro forma
calculation shall not give effect to any Indebtedness incurred on such Calculation Date (or any other subsequent date which
would otherwise require that pro forma effect be given to such incurrence of Indebtedness) pursuant to the provisions of the
definition of “Permitted Debt” (except that, when calculating the amount of Indebtedness that may be incurred under clause (1)
(ii)(y) or clause (22) of such definition, the amount of Indebtedness incurred under such clause shall be included in such
calculation of the amount of Indebtedness that may be incurred under such clause).
In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions, dispositions, discontinued operations or other operational changes that have been made by the
specified Person or any of its Restricted Subsidiaries, including through Investments, mergers or consolidations, or any
Person or any of its Restricted Subsidiaries acquired by the specified Person or any of its Restricted Subsidiaries, and
including all related financing transactions and including increases in ownership of Restricted Subsidiaries, during the
four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date, or that are to
be made on the Calculation Date, will be given pro forma effect, in the good-faith judgment of the Chief Financial Officer
of the Issuer, as if they had occurred on the first day of the four-quarter reference period, and such pro forma calculations
may reflect operating expense reductions and other operating improvements or synergies expected to result from the
applicable event based on actions to be taken within 18 months after the relevant event (to the extent set forth in an
Officer’s Certificate in reasonable detail, including the cost and timing of such expense reductions or other operating
improvements or synergies), in each case, net of all costs required to achieve such expense reduction or other operating
improvement or synergy;
(2) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with
Applicable Accounting Standards, and operations or businesses (and ownership interests therein) disposed of prior to the
Calculation Date, will be excluded;
(3) the Fixed Charges attributable to discontinued operations, as determined in accordance with Applicable
Accounting Standards, and operations or businesses (and
15
ownership interests therein) disposed of prior to the Calculation Date, will be excluded, but only to the extent that the
obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its Restricted
Subsidiaries following the Calculation Date;
(4) any Person that is a Restricted Subsidiary on the Calculation Date will be deemed to have been a Restricted
Subsidiary at all times during such four-quarter period;
(5) any Person that is not a Restricted Subsidiary on the Calculation Date will be deemed not to have been a
Restricted Subsidiary at any time during such four-quarter period;
(6) if any Indebtedness bears a floating rate of interest, the interest expense on such Indebtedness will be
calculated as if the rate in effect on the Calculation Date had been the applicable rate for the entire period (taking into
account any Hedging Obligation applicable to such Indebtedness if such Hedging Obligation has a remaining term as at
the Calculation Date in excess of 12 months);
(7) where a pro forma calculation (as described above) is required to be made with respect to a transaction, the
Calculation Date for such pro forma calculation relating to such transaction may be, at the election of the Issuer, either (i)
the time such transaction is completed or implemented or (ii) the time such transaction is approved by the Board of
Directors or other appropriate governing authority of the Issuer; and
(8) if any transaction or event would result in an adjustment to Consolidated Cash Flow of less than $5.0 million
or an adjustment to Fixed Charges of less than $5.0 million, the Issuer may, in its discretion, not make such adjustment in
connection with the calculation of the Fixed Charge Coverage Ratio.
For the avoidance of doubt, the foregoing calculation method shall apply in connection with the initial incurrence
of Indebtedness and any classification or reclassification thereof in accordance with Section 4.09.
“Fixed Charges” means, with respect to any specified Person for any period, the sum, without duplication, of:
(1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid
or accrued, including, without limitation, amortization of original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts, yield and other fees and charges (including interest) incurred in connection with any
Qualified Receivables Transaction and, in the case of any of the foregoing, net of the effect of all payments made or
received pursuant to Hedging Obligations in respect of interest rates; provided that the amortization or write-off of
deferred financing fees shall be excluded from Fixed Charges; plus
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(2) the product of (a) all dividends, whether paid or accrued and whether or not in cash, on any series of
Disqualified Stock of the Issuer or preferred stock of any Restricted Subsidiaries, other than dividends on Equity Interests
payable solely in Equity Interests of the Issuer (other than Disqualified Stock) or to the Issuer or a Restricted Subsidiary
of the Issuer, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case,
determined on a consolidated basis in accordance with Applicable Accounting Standards.
Notwithstanding the foregoing, any charges arising from (i) the application of Accounting Standards Codification Topic
480-10-25-4 “Distinguishing Liabilities from Equity—Overall—Recognition” to any series of preferred stock other than
Disqualified Stock or (ii) the application of Accounting Standards Codification Topic 470-20 “Debt—Debt with Conversion
Options—Recognition,” in each case, shall be disregarded in the calculation of Fixed Charges.
“Foreign Disposition” has the meaning assigned to that term in Section 4.10(m)(1) of this Indenture.
“Foreign Subsidiary” means, with respect to any Person, any Subsidiary of such Person that is not a U.S. Subsidiary and
any Subsidiary of such a Subsidiary, whether or not a U.S. Subsidiary.
“Global Note Legend” means the legend set forth in Section 2.06(f)(2), which is required to be placed on all Global Notes
issued under this Indenture.
“Global Notes” means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global
Notes deposited with or on behalf of and registered in the name of the Depositary or its nominee, substantially in the form of
Exhibit A hereto and that bears the Global Note Legend and that has the “Schedule of Exchanges of Interests in the Global Note”
attached thereto, issued in accordance with Section 2.01, 2.06(b)(3), 2.06(b)(4) or 2.06(d).
“Government Obligations” means securities that are:
(1) direct obligations of the United States of America for the timely payment of which its full faith and credit is
pledged, or
(2) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United
States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in each case, are not callable or redeemable at the option of the issuer thereof, and shall
also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with
respect to any such U.S. government obligations or a specific payment of principal of or interest on any such U.S.
government obligations held by such custodian for the account of the holder of such depository receipt; provided,
however, that (except as required by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S.
17
government obligations or the specific payment of principal of or interest on the U.S. government obligations evidenced
by such depository receipt.
“Guarantee” means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course
of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of
credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take or pay or to
maintain financial statement conditions or otherwise).
“Guarantors” means any Restricted Subsidiary of the Issuer that executes a Note Guarantee in accordance with the
provisions of this Indenture, and their respective successors and assigns, in each case, until the Note Guarantee of such Person
has been released in accordance with the provisions of this Indenture.
“Hedging Obligations” means, with respect to any specified Person, the obligations of such Person under:
(1) agreements for the purpose of (i) fixing or hedging interest rate risk with respect to any Indebtedness that is
permitted by the terms of this Indenture to be outstanding; (ii) fixing or hedging currency exchange rate risk with respect
to any currency exchanges; or (iii) fixing or hedging (A) Pension Obligation risk, (B) commodity price risk (including the
price or cost of natural resources, energy, fuel, raw materials, emission, pollution, carbon, forest and other environmental
permits and rights, manufactured products or related commodities) or (C) macroeconomic, regulatory or tariff risk; and
(2) (a) any rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions,
commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond
index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap
transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or
any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any
such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the
related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement
published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master
Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master
Agreement”), including any such obligations or liabilities under any Master Agreement.
“Holder” means a Person in whose name a Note is registered.
“IAI Global Note” means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and
the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee that
will be issued in a
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denomination equal to the outstanding principal amount of the Notes sold to Institutional Accredited Investors.
“IFRS” means the International Financial Reporting Standards, as promulgated by the International Accounting Standards
Board (or any successor board or agency), as in effect on the date of, and as in effect from time to time after, the election, if any,
by the Issuer to change Applicable Accounting Standards to IFRS; provided that IFRS shall not include any provision of such
standards that would require a lease that would be classified as an operating lease under U.S. GAAP as in effect on the Issue Date
to be classified as Indebtedness or a finance or capital lease; provided, further, that the Issuer may at any time elect by written
notice to the Trustee to fix IFRS as in effect on the date specified in such notice and, upon any such notice, references herein to
IFRS will thereafter be construed to mean for all purposes of this Indenture (other than for financial reporting purposes):
(a) for periods beginning on and after the date specified in such notice, IFRS as in effect on the date specified in such
notice; and
(b) for prior periods, IFRS as in effect from time to time during such periods.
“Impediment to Net Proceeds Application” has the meaning assigned to that term in Section 4.10(m)(1) of this Indenture.
“Increased Amount” has the meaning assigned to that term in Section 4.12(c) of this Indenture.
“Indebtedness” means, with respect to any specified Person, any indebtedness of such Person (excluding accrued
expenses and trade payables), whether or not contingent:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof);
(3) in respect of banker’s acceptances;
(4) representing Capital Lease Obligations in respect of Sale and Leaseback Transactions;
(5) representing the balance deferred and unpaid of the purchase price of any property or services due more than
six months after such property is acquired or such services are completed but excluding other accrued liabilities being
contested in good faith by appropriate proceedings promptly instituted and diligently conducted; or
(6) representing any Hedging Obligations,
if and to the extent any of the preceding items would appear as a liability upon a balance sheet (excluding the footnotes) of the
specified Person prepared in accordance with Applicable Accounting Standards. In addition, the term “Indebtedness” includes all
Indebtedness of others
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secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person),
except for any pledge of the Equity Interests of an Unrestricted Subsidiary as permitted by clause (20) of the definition of
“Permitted Liens,” and, to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any
other Person as shall equal the lesser of (x) the Fair Market Value of such asset as of the date of determination or (y) the amount
of such Indebtedness and, to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any
other Person.
Notwithstanding the foregoing, the term “Indebtedness” will not include (a) in connection with the purchase by the Issuer
or any of its Restricted Subsidiaries of any business, post-closing payment adjustments to which the seller may become entitled to
the extent such payment is determined by a final closing balance sheet or such payment depends on the performance of such
business after the closing unless such payments are required under Applicable Accounting Standards to appear as a liability on
the balance sheet (excluding the footnotes); provided, however, that at the time of closing, the amount of any such payment is not
determinable and, to the extent such payment thereafter becomes fixed and determined, the amount is paid within 30 days
thereafter; (b) contingent obligations incurred in the ordinary course of business and not in respect of borrowed money;
(c) deferred or prepaid revenues; (d) purchase price holdbacks in respect of a portion of the purchase price of an asset to satisfy
warranty or other unperformed obligations of the respective seller; or (e) any effects of the application of Accounting Standards
Codification Topic 815 “Derivatives and Hedging” that would increase or decrease the outstanding amount of Indebtedness due
to accounting for any embedded derivatives created by the terms of such Indebtedness.
“Indenture” means this Indenture, as amended or supplemented from time to time.
“Indirect Participant” means a Person who holds a beneficial interest in a Global Note through a Participant.
“Initial Notes” means the first $300.0 million aggregate principal amount of Notes issued under this Indenture on the
Issue Date.
“Initial Purchasers” means BofA Securities, Inc. and the other initial purchasers named in the Offering Memorandum.
“Institutional Accredited Investor” means an institution that is an “accredited investor” pursuant to Rule 501(a)(1), (2),
(3) or (7) under the Securities Act that is also not a QIB.
“Investment Grade Rating” means a rating equal to or higher than Baa3 (stable) (or the equivalent) by Moody’s and BBB-
(stable) (or the equivalent) by S&P, or an equivalent rating by any other Rating Agency.
“Investments” means, with respect to any Person, all direct or indirect investments by such Person in other Persons
(including Affiliates) in the forms of loans (including Guarantees of Indebtedness or other obligations), advances or capital
contributions (excluding (i) commission, travel and similar advances to officers and employees made in the ordinary course of
business and (ii) extensions of credit to customers or advances, deposits or payment to or with suppliers, lessors or utilities or for
workers’ compensation, in each case, that are incurred in the ordinary
20
course of business and recorded as accounts receivable, prepaid expenses or deposits on the balance sheet of such Person
prepared in accordance with Applicable Accounting Standards), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a
balance sheet prepared in accordance with Applicable Accounting Standards. The acquisition by the Issuer or any Restricted
Subsidiary of the Issuer of a Person that holds an Investment in a third Person will be deemed to be an Investment by the Issuer
or such Restricted Subsidiary in such third Person in an amount equal to the Fair Market Value of the Investments held by the
acquired Person in such third Person in an amount determined as provided in Section 4.07(c). Except as otherwise provided in
this Indenture, the amount of an Investment will be determined at the time the Investment is made and without giving effect to
subsequent changes in value but giving effect (without duplication) to all subsequent reductions in the amount of such Investment
as a result of (x) the repayment or disposition thereof for cash, (y) the redesignation of an Unrestricted Subsidiary as a Restricted
Subsidiary (valued proportionately to the equity interest in such Unrestricted Subsidiary of the Issuer or such Restricted
Subsidiary owning such Unrestricted Subsidiary at the time of such redesignation) at the Fair Market Value of the net assets of
such Unrestricted Subsidiary at the time of such redesignation or (z) at the time that a subsidiary that has been designated as
having a “de minimis” value ceases to satisfy the requirements for such designation (valued proportionately to the equity interest
in such subsidiary having “de minimis” value at the time such subsidiary ceases to satisfy the requirement for the designation as
having “de minimis” value) at the Fair Market Value of the net assets of such “de minimis” subsidiary at the time it ceases to
satisfy such requirements, in the case of clauses (x), (y) and (z), not to exceed the original amount, or Fair Market Value, of such
Investment.
“Issue Date” means February 2, 2021.
“Legal Holiday” means a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place
of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place
of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue on such payment for the intervening period.
“Lien” means, with respect to any asset, any mortgage, hypothecation, lien, pledge, charge, security interest or
encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to
sell or give a security interest in; provided that in no event shall an operating lease, rights of set-off or netting arrangements in the
ordinary course of business be deemed to constitute a Lien.
“Long-Term Capital Project” has the meaning assigned to that term in Section 4.10(c) of this Indenture.
“Moody’s” means Moody’s Investors Service, Inc. and its successors.
“Net Proceeds” means the aggregate cash proceeds and Cash Equivalents received by the Issuer or any of its Restricted
Subsidiaries in respect of any Asset Sale (including, without
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limitation, any cash or Cash Equivalents received upon the sale or other disposition of any non-cash consideration received in any
Asset Sale), net of the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment
banking fees, and sales commissions, any relocation expenses incurred as a result of the Asset Sale and taxes paid or payable as a
result of the Asset Sale, after taking into account, without duplication, (1) any available tax credits or deductions and any tax
sharing arrangements, and amounts required to be applied to the repayment of Indebtedness secured by a Permitted Lien on the
asset or assets that were the subject of such Asset Sale (other than Obligations in respect of the ABL Credit Agreement, the
Indenture and Pari Passu Indebtedness) and any reserve for adjustment in respect of the sale price of such asset or assets
established in accordance with Applicable Accounting Standards, (2) any reserve or payment with respect to liabilities associated
with such asset or assets and retained by the Issuer or any of its Restricted Subsidiaries after such sale or other disposition
thereof, including, without limitation, severance costs, pension and other post-employment benefit liabilities and liabilities related
to environmental matters or against any indemnification obligations associated with such transaction, and (3) any cash escrows in
connection with purchase price adjustments, reserves or indemnities (until released).
“Net Proceeds Offer” has the meaning assigned to that term in Section 4.10(d) of this Indenture.
“Non-U.S. Person” means a Person who is not a U.S. Person.
“Note Guarantee” means the Guarantee by each Guarantor of the Issuer’s obligations under this Indenture and the Notes
on the terms set forth in Article 10.
“Notes” has the meaning assigned to it in the preamble to this Indenture. The Initial Notes and any Additional Notes shall
be treated as a single class for all purposes under this Indenture, and unless the context otherwise requires, all references to the
Notes shall include the Initial Notes and any Additional Notes.
“Obligations” means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
“Offering Memorandum” means the Offering Memorandum, dated January 19, 2021, relating to the Initial Notes.
“Officer” means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the
Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Chief Legal
Officer, the Secretary, any Assistant Secretary or any Vice-President of such Person.
“Officer’s Certificate” means a certificate signed on behalf of the Issuer by an Officer of the Issuer, who must be the
principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Issuer, that meets
the requirements of Section 12.04.
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“Operating Lease” means any leases that would have been treated as operating leases under U.S. GAAP immediately
prior to the adoption of ASC 842 (had such leases been in effect at such time).
“Opinion of Counsel” means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the
requirements of Section 12.04. The counsel may be an employee of or counsel to the Issuer, any Subsidiary of the Issuer or the
Trustee. Such opinion may be subject to customary assumptions, exceptions and qualifications.
“Participant” means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the
Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream).
“Pension Obligation” means any liability that would be classified as a “pension and other postretirement obligation” or
under the equivalent line item under the Applicable Accounting Standards.
“Permitted Business” means (a) any business of the type engaged in by the Issuer or any of its Restricted Subsidiaries on
the Issue Date (either directly or through joint ventures), (b) any business in the forest products, paper products, agricultural,
energy and recycling industries (including, without limitation, the manufacturing and production of paper, tissue, packaging
products, forest fiber, wood pulp, lumber and other construction products, and activities involving associated materials and
byproducts thereof) and (c) any business or other activities that are reasonably similar, ancillary, incidental, synergistic,
complementary or related thereto, or a reasonable extension, derivation, development, innovation or expansion of, any of the
foregoing.
“Permitted Convertible Notes Offering” means any offering by the Issuer or any of the Restricted Subsidiaries after the
Issue Date of unsecured convertible notes or debentures (including by means of being a co-obligor or guarantor of convertible
notes or debentures issued by a direct or indirect parent of the Issuer); provided that such notes or debentures or guarantees are
permitted to be incurred pursuant to Section 4.09.
“Permitted Debt” has the meaning assigned to that term in Section 4.09(b) of this Indenture.
“Permitted Hedging Obligations” means any Hedging Obligations that would constitute Permitted Debt pursuant to clause
(9) of the definition of “Permitted Debt.”
“Permitted Investments” means:
(1) any Investment in the Issuer or a Restricted Subsidiary;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Issuer or any Restricted Subsidiary of the Issuer in a Person, if as a result of such Investment:
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(a) such Person becomes a Restricted Subsidiary of the Issuer; or
(b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of
its assets to, or is liquidated into, the Issuer or a Restricted Subsidiary of the Issuer.
(4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant
to and in compliance with Section 4.10 or from a sale or other disposition of assets not constituting an Asset Sale;
(5) any acquisition of assets or Capital Stock solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Issuer;
(6) any Investments received in compromise or resolution of (A) obligations of trade creditors or customers that were
incurred in the ordinary course of business of the Issuer or any of its Restricted Subsidiaries, including pursuant to
any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or
customer; or (B) litigation, arbitration or other disputes;
(7) Investments represented by Hedging Obligations;
(8) loans and advances to officers, directors or employees (a) for business-related travel expenses, moving expenses and
other similar expenses, including as part of a recruitment or retention plan, in each case incurred in the ordinary
course of business or consistent with past practice or to fund such Person’s purchase of Equity Interests of the
Issuer or any direct or indirect parent entity of the Issuer, (b) required by applicable laws and (c) other loans and
advances not to exceed $5.0 million at any one time outstanding;
(9) Investments in joint ventures or other Persons in an aggregate amount not to exceed, in any one fiscal year of the
Issuer, $50.0 million, net of any return of or on any Investments made pursuant to this clause (9) received by the
Issuer or any Restricted Subsidiary during such fiscal year; provided that (i) up to $50.0 million able to be invested
pursuant to this clause (9) in any fiscal year and not so invested may be carried over to the next fiscal year; and (ii)
any amount able to be invested in the next succeeding fiscal year may be carried backward to the current fiscal
year, which amount carried backward may no longer be used in such future fiscal year;
(10) repurchases of the Notes;
(11) any Investment of the Issuer or any of its Restricted Subsidiaries existing on the Issue Date, and any extension,
modification or renewal of such existing Investments, to the extent not involving any additional Investment other
than as the result of the accrual or accretion of interest or original issue discount or the issuance of pay-in-kind
securities, in each case, pursuant to the terms of such Investments as in effect on the Issue Date;
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(12) Guarantees otherwise permitted by the terms of this Indenture;
(13) receivables owing to the Issuer or any of its Restricted Subsidiaries, prepaid expenses, and lease, utility, workers’
compensation, trade and other deposits, if created, acquired or entered into in the ordinary course of business;
(14) payroll, business-related travel, and similar advances to cover matters that are expected at the time of such
advances to be ultimately treated as expenses for accounting purposes and that are made in the ordinary course of
business;
(15) Investments resulting from the acquisition of a Person, otherwise permitted by this Indenture, which Investments at
the time of such acquisition were held by the acquired Person;
(16) reclassification of any Investment initially made in (or reclassified as) one form into another (such as from equity
to loan or vice versa); provided in each case that the amount of such Investment is not increased thereby;
(17) any Investment in any Subsidiary of the Issuer or any joint venture in the ordinary course of business in connection
with intercompany cash management arrangements or related activities;
(18) other Investments in any Person having an aggregate Fair Market Value (measured on the date each such
Investment was made and without giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (18) that are at the time outstanding not to exceed the greater of (x)
$200.0 million or (y) 5.0% of Total Assets, net of any return of or on such Investments received by the Issuer or
any Restricted Subsidiary;
(19) the acquisition by a Receivables Entity in connection with a Qualified Receivables Transaction of Equity Interests
of a trust or other Person established by such Receivables Entity to effect such Qualified Receivables Transaction
and any other Investment by the Issuer or a Restricted Subsidiary in a Receivables Entity or any Investment by a
Receivables Entity in any other Person in connection with a Qualified Receivables Transaction;
(20) the pledge of the Equity Interests of an Unrestricted Subsidiary as security for Indebtedness that is permitted by
clause (20) of the definition of “Permitted Liens”;
(21) Investments in a Qualified IPO Entity in connection with a Qualified IPO; provided that, to the extent such
Qualified IPO occurs, any net cash proceeds received by the Issuer or any of its Restricted Subsidiaries from the
sale of equity securities of the Qualified IPO Entity in such Qualified IPO (or any subsequent sale of equity
securities in the Qualified IPO Entity) are applied in accordance with this Indenture as if such net cash proceeds
arose from an Asset Sale, and in which case, notwithstanding anything else in this Indenture, (i) such Investment
shall be governed by the covenant under Section 4.07 and (ii) such sale of equity
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securities shall be governed by the covenant under Section 4.10 with respect to the application of the net cash
proceeds therefrom, and (in each case) not by Article 5 or Section 4.14;
(22) Investments in a Person engaged in a Permitted Business, having an aggregate Fair Market Value (measured on the
date each such Investment was made and without giving effect to subsequent changes in value), when taken
together with all other Investments made pursuant to this clause (22) that are at the time outstanding not to exceed
the greater of (x) $200.0 million or (y) 5.0% of Total Assets, net of any return of or on such Investments received
by the Issuer or any Restricted Subsidiary; and
(23) Investments in natural resources, energy, fuel, raw materials, emission, pollution, carbon, forest and other
environmental permits, rights and credits, manufactured products or related commodities.
“Permitted Liens” means:
(1) any Lien securing obligations under a Tax Incentive Transaction on the property subject thereto, so long as the
related Indebtedness is permitted under clause (26) of the definition of “Permitted Debt”;
(2) any Lien securing Indebtedness incurred under clause (1) of the definition of “Permitted Debt”;
(3) Liens in favor of the Issuer or the Guarantors;
(4) Liens on property or assets of a Person existing at the time such Person becomes a Restricted Subsidiary of the
Issuer or is merged with or into or consolidated with the Issuer or any Restricted Subsidiary of the Issuer (and
additions, accessions, improvements and replacements and customary deposits in connection therewith and
proceeds, distributions and products of the foregoing), whether such Liens were in existence prior to such Person
becoming a Restricted Subsidiary or such merger or consolidation or were incurred in contemplation thereof;
provided that such Liens do not extend to any assets other than those of the Person that becomes a Restricted
Subsidiary of the Issuer or is merged into or consolidated with the Issuer or a Restricted Subsidiary of the Issuer
(and additions, accessions, improvements and replacements and customary deposits in connection therewith and
proceeds, distributions and products of the foregoing);
(5) Liens on property or assets (including Capital Stock) existing at the time of acquisition of the property by the Issuer
or any Restricted Subsidiary of the Issuer (and additions, accessions, improvements and replacements and
customary deposits in connection therewith and proceeds, distributions and products of the foregoing), whether
such Liens were in existence prior to such acquisition or were incurred in contemplation of such acquisition;
provided that such Liens do not extend to any assets other than those acquired by the Issuer (and additions,
26
accessions, improvements and replacements and customary deposits in connection therewith and proceeds,
distributions and products of the foregoing);
(6) Liens to secure the performance of tenders, completion guarantees, statutory obligations, surety, environmental or
appeal bonds, bids, leases, government contracts, performance bonds or other obligations of a like nature incurred
in the ordinary course of business;
(7) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (5) of the definition of
“Permitted Debt” covering only the assets acquired with or financed by such Indebtedness (and additions,
accessions, improvements and replacements and customary deposits in connection therewith and proceeds,
distributions and products of the foregoing);
(8) Liens existing on the Issue Date;
(9) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested
in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve
or other appropriate provision as is required in conformity with Applicable Accounting Standards has been made
therefor;
(10) Liens consisting of carriers’, warehousemen’s, landlord’s and mechanics’, suppliers, materialmen’s, repairmen’s
and similar Liens not securing Indebtedness or in favor of customs or revenue authorities or freight forwarders or
handlers to secure payment of customs duties, in each case, incurred in the ordinary course of business;
(11) any state of facts an accurate survey would disclose, public and private roads, timber cutting and hauling contracts,
timber sales contracts, prescriptive easements or adverse possession claims, minor encumbrances, easements or
reservations of, or rights of others for, pursuant to any leases, licenses, rights-of-way or other similar agreements
or arrangements, development, air or water rights, sewers, electric lines, telegraph and telephone lines and other
utility lines, pipelines, service lines, railroad lines, improvements and structures located on, over or under any
property, drains, drainage ditches, culverts, electric power or gas generating or co-generation, storage and
transmission facilities and other similar purposes, zoning or other restrictions as to the use of real property or
minor defects in title, which were not incurred to secure payment of Indebtedness and that do not in the aggregate
materially adversely affect the value of said properties or materially impair their use in the operation of the
business of such Person;
(12) Liens on the assets of a Restricted Subsidiary that is not a Guarantor securing Indebtedness or other obligations of
such Restricted Subsidiary permitted by this Indenture;
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(13) Liens to secure any Permitted Refinancing Indebtedness permitted to be incurred under this Indenture (other than
the ABL Credit Agreement or the Farm Credit Agreement); provided, however, that the new Lien is limited to all
or part of the same property and assets that secured or, under the written agreements pursuant to which the original
Lien arose, could secure the original Lien (and additions, accessions, improvements and replacements and
customary deposits in connection therewith and proceeds, distributions and products of the foregoing);
(14) Liens on real property consisting of public and private roads, timber cutting and hauling contracts, timber sales
contracts, prescriptive easements or adverse possession claims, minor encumbrances, easements or reservations of,
or rights of others for, pursuant to any leases, licenses, rights-of-way or other similar agreements or arrangements,
development, air or water rights, sewers, electric lines, telegraph and telephone lines and other utility lines,
pipelines, service lines, railroad lines, improvements and structures located on, over or under any property, drains,
drainage ditches, culverts, electric power or gas generating or co-generation, storage and transmission facilities
and other similar purposes, zoning or other restrictions as to the use of real property or minor defects in title,
which were not incurred to secure payment of Indebtedness and that do not in the aggregate materially adversely
affect the value of said properties or materially impair their use in the operation of the business of the Issuer and
its Restricted Subsidiaries;
(15) Liens on specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations
in respect of bankers’ acceptances, tender, bid, judgment, appeal, performance or governmental contract bonds and
completion guarantees, surety, standby letters of credit and warranty and contractual service obligations of a like
nature, trade letters of credit and documentary letters of credit and similar bonds or guarantees provided by the
Issuer or any Subsidiary of the Issuer;
(16) Liens incurred or pledges or deposits made in the ordinary course of business in connection with workers’
compensation, unemployment insurance and other types of social security and employee health and disability
benefits, or casualty-liability insurance or self-insurance or securing letters of credit issued in the ordinary course
of business;
(17) judgment and attachment Liens not giving rise to an Event of Default and notices of lis pendens and associated
rights related to litigation being contested in good faith by appropriate proceedings and for which adequate
reserves have been made in conformity with Applicable Accounting Standards;
(18) Liens on assets securing Permitted Hedging Obligations;
(19) any interest or title of a lessor, licensor or sublicense under any operating lease, license or sublicense, as applicable;
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(20) Liens on the Equity Interests of an Unrestricted Subsidiary of the Issuer or of a Person that is not a Subsidiary of
the Issuer securing Indebtedness of such Unrestricted Subsidiary or other Person if recourse to the Issuer and its
Restricted Subsidiaries with respect to such Indebtedness is limited to such Equity Interests;
(21) Liens in favor of collecting or payor banks having a right of setoff, revocation, refund or chargeback with respect to
money or instruments of the Issuer or any Restricted Subsidiary thereof on deposit with or in possession of such
bank;
(22) any obligations or duties affecting any of the property of the Issuer or any of its Restricted Subsidiaries to any
municipality or public authority with respect to any franchise, grant, license, or permit that do not impair the use
of such property for the purposes for which it is held;
(23) Liens on any property in favor of domestic or foreign governmental bodies to secure partial, progress, advance or
other payment pursuant to any contract or statute, not yet due and payable;
(24) Liens with respect to so-called “greenbelt” or “buffer zone” properties;
(25) leases and ground leases of underutilized or vacant properties of the Issuer or any of its Restricted Subsidiaries to
third parties with which the Issuer or such Restricted Subsidiary has a production, co-production, operating or
other arrangement or to third party providers of natural resources, energy, fuel, transportation services or raw
materials in the ordinary course of business, provided such leases do not materially interfere with the operation of
the business of the Issuer or any of its Restricted Subsidiaries or secure any Indebtedness;
(26) Liens consisting of any law or governmental regulation or permit requiring the Issuer or any of its Restricted
Subsidiaries to maintain certain facilities or perform certain acts as a condition of its occupancy of or interference
with any public lands or any river or stream or navigable waters;
(27) Liens on assets of Foreign Subsidiaries securing Indebtedness of such Foreign Subsidiaries that is permitted under
Section 4.09;
(28) Liens securing Indebtedness incurred under clause (2)(ii) of the definition of “Permitted Debt”;
(29) Liens on the unearned premiums under the insurance policies permitted by clause (16) of the definition of
“Permitted Debt” securing Indebtedness incurred pursuant to clause (16) of the definition of “Permitted Debt”;
(30) any amounts held by a trustee in the funds and accounts under an indenture securing any revenue bonds issued for
the benefit of the Issuer or any Restricted Subsidiary;
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(31) Liens incurred to secure cash management services or to implement cash pooling arrangements in the ordinary
course of business;
(32) any netting or set-off arrangements entered into by the Issuer or any Restricted Subsidiary in the ordinary course of
its banking arrangements (including, for the avoidance of doubt, cash pooling arrangements) for the purposes of
netting debit and credit balances of the Issuer or any Restricted Subsidiary of the Issuer, including pursuant to any
cash management agreement;
(33) Liens deemed to exist in connection with Investments in repurchase agreements permitted under Section 4.09;
provided that such Liens do not extend to any assets other than those that are the subject of such repurchase
agreements;
(34) leases and subleases of real property which do not materially interfere with the ordinary conduct of the business of
the Issuer or any of its Restricted Subsidiaries and other Liens incidental to the conduct of the business of the
Issuer and its Restricted Subsidiaries that do not materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the Issuer’s and the Restricted Subsidiaries’ business taken as a whole;
(35) Liens arising from UCC financing statement filings regarding operating leases entered into by the Issuer and its
Restricted Subsidiaries in the ordinary course of business or other precautionary UCC financing statement filings;
(36) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods
entered into in the ordinary course of business;
(37) Liens on assets of the Issuer or a Receivables Entity incurred in connection with a Qualified Receivables
Transaction;
(38) Liens on any claims or refunds with respect to deposits for estimated customs duties (including, but not limited to,
countervailing and/or anti-dumping duties), together with any deposit account which is established for holding
such refunds (and no other amounts);
(39) Liens not otherwise permitted hereunder securing Indebtedness in an aggregate principal amount not to exceed the
greater of (x) $75.0 million and (y) 1.75% of Total Assets at any one time outstanding; and
(40) Liens on Equity Interests of a joint venture securing Indebtedness of such joint venture;
provided, that upon the occurrence of a Covenant Termination Event: (a) clause (13) of the foregoing definition shall be deleted,
and Liens incurred to refinance or replace other Permitted Liens, which new Liens do not extend to any assets or properties of the
Issuer and its Restricted Subsidiaries other than the assets or properties (and additions, accessions, improvements and
replacements and customary deposits in connection therewith and proceeds, distributions and products of the foregoing) that were
subject to the Permitted Lien being replaced or refinanced,
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shall be Permitted Liens; (b) clauses (7) and (29) of the foregoing definition shall remain in effect as if the limitations in clause
(5) and (16) (respectively) of the definition of “Permitted Debt” were still in effect; (c) clause (27) of the foregoing definition
shall be deleted, and Liens on the assets of Foreign Subsidiaries securing Indebtedness of Foreign Subsidiaries shall be Permitted
Liens; (d) clause (33) of the foregoing definition shall be deleted, and Liens deemed to exist in connection with Investments in
repurchase agreements that do not extend to any assets other than those that are the subject of such repurchase agreements shall
be Permitted Liens; (e) Liens existing on the date of such Covenant Termination Event shall be Permitted Liens; (f) clause (2) of
the foregoing definition shall be deleted, and (g) other Liens securing Indebtedness which, at the time of the incurrence of such
Lien, does not exceed 15% of Total Assets as shown on the most recent internal balance sheet of the Issuer prior to the incurrence
of such Lien shall be Permitted Liens.
For the avoidance of doubt, where a Permitted Lien secures Indebtedness, Liens on the same assets subject to such
Permitted Lien that secure Obligations related to any such Indebtedness shall also be permitted.
“Permitted Refinancing Indebtedness” means any Indebtedness of the Issuer or any of its Restricted Subsidiaries issued in
exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge other Indebtedness
of the Issuer or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not
exceed the principal amount (or accreted value, if applicable) of the Indebtedness renewed, refunded, refinanced,
replaced, defeased or discharged (plus all accrued interest on the Indebtedness, any Increased Amount and the amount of
all fees and expenses, including premiums, incurred in connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and
has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged;
(3) if the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged is subordinated in
right of payment to the Notes, such Permitted Refinancing Indebtedness is subordinated in right of payment to the Notes
on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness
being renewed, refunded, refinanced, replaced, defeased or discharged; and
(4) Permitted Refinancing Indebtedness may not be incurred by a Person other than the Issuer or a Guarantor to
renew, refund, refinance, replace, defease or discharge any Indebtedness of the Issuer or a Guarantor.
“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, limited liability company or government or other entity.
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“Private Placement Legend” means the legend set forth in Section 2.06(f)(1) to be placed on all Notes issued under this
Indenture except where otherwise permitted by the provisions of this Indenture.
“QIB” means a “qualified institutional buyer” as defined in Rule 144A.
“QSPEs” means each of the following: (1) Calhoun Note Holdings AT LLC, (2) Calhoun Note Holdings TI LLC and
(3) any other qualified special purpose entity created to facilitate the sale and/or the monetization of receivables from the sale of
Timberlands.
“Qualified Equity Offering” means (i) a public or private equity offering of Capital Stock (other than Disqualified Stock
and other than issuances solely to an Affiliate of the Issuer) of the Issuer or any direct or indirect parent company of the Issuer, of
at least $50.0 million or (ii) a Qualified IPO; provided that, in the case of an offering or sale by a direct or indirect parent
company of the Issuer, such parent company contributes to the capital of the Issuer the portion of the net cash proceeds of such
offering or sale necessary to pay the aggregate Redemption Price (plus accrued interest to the redemption date) of the Notes to be
redeemed pursuant to Section 5(c) of the Notes.
“Qualified IPO” means, with respect to a Qualified IPO Entity, (i) a bona-fide initial public offering, registered under the
Securities Act, of at least 15% of the outstanding common equity securities of such Qualified IPO Entity, resulting in the listing
of such common equity securities on a U.S. national stock exchange; and/or (ii) a bona-fide initial public offering in Canada of at
least 15% of the outstanding common equity securities of such Qualified IPO Entity, resulting in the listing of such common
equity securities on the Toronto Stock Exchange, the TSX Venture Exchange or any successor exchange.
“Qualified IPO Entity” means an entity (which shall be designated as an Unrestricted Subsidiary) holding or formed to
hold assets and/or businesses of the Issuer and/or its Restricted Subsidiaries.
“Qualified Receivables Assets” means any of the following assets (or interests therein) from time to time originated,
acquired or otherwise owned by the Issuer or any Restricted Subsidiary or in which the Issuer or any Restricted Subsidiary has
any rights or interests, in each case, without regard to where such assets or interests are located: (1) franchise fee payments and
other revenues related to franchise agreements, (2) royalty and other similar payments made related to the use of trade names and
other intellectual property, business support, training and other services, (3) revenues related to distribution and merchandising of
the products of the Issuer and the Restricted Subsidiaries, (4) rents, real estate taxes and other non-royalty amounts due from
franchisees, (5) intellectual property rights relating to the generation of any of the foregoing types of assets, (6) parcels of or
interests in real property, together with all easements, hereditaments and appurtenances thereto, all improvements and
appurtenant fixtures and equipment, incidental to the ownership, lease or operation thereof, (7) any Equity Interests of any
Receivables Entity or any Subsidiary of a Receivables Entity and any rights under any limited liability company agreement, trust
agreement, shareholders agreement, organization or formation documents or other agreement entered into in furtherance of the
organization of such entity, (8) any equipment, contractual rights with unaffiliated third parties, website domains and associated
32
property and rights necessary for a Receivables Entity to operate in accordance with its stated purposes, (9) any rights and
obligations associated with gift card or similar programs and (10) any other assets and property (or proceeds of such assets or
property) to the extent customarily included in securitization transactions of the relevant type in the applicable jurisdictions (as
determined by the Issuer in good faith).
“Qualified Receivables Transaction” means any transaction or series of transactions entered into by the Issuer, any of its
Restricted Subsidiaries, any Receivables Entity or any of their respective Subsidiaries pursuant to which the Issuer, such
Restricted Subsidiaries, such Receivables Entity or any of their respective Subsidiaries sells, conveys or otherwise transfers to a
Receivables Entity or any other Person, and/or finances, securitizes or grants a security interest in, any accounts receivable
(whether now existing or arising or acquired in the future) of the Issuer, its Restricted Subsidiaries or any of their respective
Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such accounts receivable, all
contracts and all guarantees or other obligations in respect of such accounts receivable, proceeds of such accounts receivable and
other Qualified Receivables Assets.
“Québec Credit Agreement” means the credit agreement, dated as of November 6, 2020 (as further amended from time to
time) between Resolute FP Canada Inc. and Investissement Québec, together with any amendments, supplements, modifications,
extensions, renewals, restatements or refundings thereof and any indentures or credit facilities, receivables securitization facilities
or commercial paper facilities with banks or other institutional lenders or investors that replace, refund or refinance any part of
the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing
facility or indenture that increases the amount borrowable thereunder, alters the maturity thereof or adds or eliminates Restricted
Subsidiaries as additional borrowers or guarantors thereunder and whether by the same or any other agent, lender, group of
lenders or investors. Any agreement or instrument other than the Québec Credit Agreement in effect on the Issue Date must be
designated in a writing delivered to the Trustee by the Issuer as a “Québec Credit Agreement” for purposes of this Indenture in
order to be a Québec Credit Agreement.
“Rating Agency” means (1) each of Moody’s and S&P and (2) if Moody’s or S&P ceases to rate the Notes for reasons
outside of the Issuer’s control, a “nationally recognized statistical rating organization” registered under Section 3(a)(62) the
Exchange Act selected by the Issuer as a replacement agency for Moody’s or S&P, as the case may be.
“Receivables Entity” means a Subsidiary of the Issuer or any Restricted Subsidiary that engages in no activities other than
in connection with a Qualified Receivables Transaction or the holding of other Receivables Entities and which is designated by
the Board of Directors of the Issuer (as provided below) as a Receivables Entity. Any such designation by the Board of Directors
of the Issuer will be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution of the Board of Directors
of the Issuer giving effect to such designation and an Officer’s Certificate certifying that such designation complied with the
foregoing conditions.
“Regulation S” means Regulation S promulgated under the Securities Act.
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“Regulation S Global Note” means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note
Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its
nominee, issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 903 of
Regulation S.
“Responsible Officer,” when used with respect to the Trustee, means any officer within the Corporate Trust
Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
“Restricted Definitive Note” means a Definitive Note bearing the Private Placement Legend.
“Restricted Global Note” means a Global Note bearing the Private Placement Legend.
“Restricted Investment” means an Investment other than a Permitted Investment.
“Restricted Subsidiary” of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary.
“Rule 144” means Rule 144 promulgated under the Securities Act.
“Rule 144A” means Rule 144A promulgated under the Securities Act.
“Rule 903” means Rule 903 promulgated under the Securities Act.
“Rule 904” means Rule 904 promulgated under the Securities Act.
“S&P” means Standard & Poor’s Rating Services and its successors.
“Sale and Leaseback Transaction” means any arrangement with any Person providing for the leasing by the Issuer or any
Restricted Subsidiary of any real or tangible personal property, which property has been or is to be sold or transferred by the
Issuer or such Restricted Subsidiary to such Person in contemplation of such leasing.
“SEC” means the Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended.
“Signature Law” has the meaning assigned to that term in Section 12.11 of this Indenture.
“Significant Subsidiary” means any Restricted Subsidiary that would be a “significant subsidiary” as defined in Article 1,
Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the Issue Date;
provided that in no event will
34
any Restricted Subsidiary that, together with its consolidated Restricted Subsidiaries, accounts for less than 5.0% of the
consolidated revenue of the Issuer, for the Issuer’s most recently ended four full fiscal quarters for which internal financial
statements are available, be considered a Significant Subsidiary.
“SpinCo” has the meaning assigned to that term in Section 5.01(a)(4)(c) of this Indenture.
“Standard Securitization Undertakings” means representations, warranties, covenants, indemnities and guarantees of
performance entered into by the Issuer or any Subsidiary of the Issuer that the Issuer has determined in good faith to be
customary in a Qualified Receivables Transaction including, without limitation, those relating to the servicing of the assets of a
Receivables Entity, it being understood that any receivables repurchase obligation will be deemed to be a Standard Securitization
Undertaking.
“Stated Maturity” means, with respect to any installment of interest or principal on any series of Indebtedness, the date on
which the payment of interest or principal was scheduled to be paid in the documentation governing such Indebtedness as of the
Issue Date, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to
the date originally scheduled for the payment thereof.
“Subsidiary” means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more than 50% of the total voting power of
shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting
agreement or stockholders’ agreement that effectively transfers voting power) to vote in the election of directors,
managers or Trustees of the corporation, association or other business entity is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that
Person (or any combination thereof) to the extent such partnership is included in the consolidated financial statements of
such Person;
provided, however, that notwithstanding the foregoing, “Subsidiary” shall not include direct or indirect subsidiaries of the Issuer
that have a “de minimis” value as described below and are designated by the Board of Directors of the Issuer as having a “de
minimis” value. A Subsidiary may be designated as having a “de minimis” value if both the following conditions are met: (i) its
market value is less than 0.25% of the consolidated total assets of the Issuer and its subsidiaries (as determined in accordance
with Applicable Accounting Standards) as of the most recently completed fiscal quarter for which internal financial statements
are available (it being understood that a negative value shall be deemed to comply with the foregoing clause) and (ii) the
aggregate market value of subsidiaries which, at the time of such proposed subsidiary designation, have been designated as
having and continue to have “de minimis” value, including the subsidiary to be designated, is less than 0.50% of the consolidated
total assets of the Issuer and its subsidiaries (as determined in accordance with Applicable Accounting Standards) as of the most
recently
35
completed fiscal quarter for which internal financial statements are available. For purposes of the foregoing sentence, “market
value” shall be determined in good faith by the Board of Directors of the Issuer, which determination may be based on the
valuation opinion of a reputable investment bank, valuation firm or accounting firm. At any time that a subsidiary that has been
designated as having a “de minimis” value is determined to have ceased to satisfy the requirements for such designation, such
subsidiary shall, within 20 Business Days of such determination, again be a Subsidiary.
“TIA” means the Trust Indenture Act of 1939, as amended (15 U.S.C. §§ 77aaa-77bbbb).
“Tax Incentive Transaction” means any arrangement between any Subsidiary of the Issuer and a development authority or
other similar governmental authority or entity for the purpose of providing property tax incentives to such Subsidiary structured
as a Sale and Leaseback Transaction whereby the development authority (i) acquires property from or on behalf of such
Subsidiary, (ii) leases such property back to such Subsidiary, (iii) if and to the extent the development authority issues the bonds
to finance such acquisition, 100% of such bonds are purchased and held by the Issuer or a Wholly Owned Subsidiary of the
Issuer, (iv) the rental payments on the lease (disregarding any amount that is concurrently repaid to the Issuer or a Subsidiary in
the form of debt service on any bonds or otherwise) does not exceed amounts such Subsidiary would have paid in taxes and other
amounts had the Sale and Leaseback Transaction not occurred and (v) the Issuer or such Subsidiary has the option to terminate its
lease and reacquire the property for nominal consideration (disregarding any additional consideration that is concurrently repaid
to the Issuer or a Subsidiary in the form of repayment of any bonds or otherwise) at any time; provided that if at any time any of
the foregoing conditions shall cease to be satisfied, such transaction shall cease to be a Tax Incentive Transaction.
“Timberlands” means any real property of the Issuer or any Restricted Subsidiary which contains standing timber which is
(or upon completion of a growth cycle then in process is expected to become) of a commercial quantity and of merchantable
quality, excluding, however, any such real property which at the time of determination is held primarily for development or sale,
and not primarily for the production of any lumber or other timber products.
“Total Assets” means the total assets of the Issuer and its Restricted Subsidiaries, as shown on the most recent internal
balance sheet of the Issuer, excluding deferred income tax assets, prepared on a consolidated basis (excluding Unrestricted
Subsidiaries) in accordance with Applicable Accounting Standards with such pro forma adjustments as are consistent with the
pro forma adjustment provisions set forth in the definition of “Fixed Charge Coverage Ratio.”
“Total Leverage Ratio” means, as of any date of determination, the ratio of (a) Consolidated Total Debt on the date of
determination to (b) Consolidated Cash Flow of the Issuer and its Restricted Subsidiaries for the most recently ended four full
fiscal quarters for which internal financial statements are available, in each case with such pro forma adjustments as are
consistent with the pro forma adjustment provisions set forth in the definition of “Fixed Charge Coverage Ratio.”
“Transactions” means, collectively, the initial issuance of the Notes and the application of the net proceeds thereof in the
manner set forth in the Offering Memorandum.
36
“Treasury Rate” means the rate per annum equal to the yield to maturity at the time of computation of United States
Treasury securities with a constant maturity most nearly equal to the period from such date of redemption to the First Call Date;
provided that if the period from such date of redemption to the First Call Date is not equal to the constant maturity of a United
States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which
such yields are given, except that if the period from such date of redemption to the First Call Date is less than one year, the
weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be
used.
“Trustee” means Wells Fargo Bank, National Association until a successor replaces it in accordance with the applicable
provisions of this Indenture and thereafter means the successor serving hereunder.
“Unrestricted Definitive Note” means a Definitive Note that does not bear and is not required to bear the Private
Placement Legend.
“Unrestricted Global Note” means a Global Note that does not bear and is not required to bear the Private Placement
Legend.
“Unrestricted Subsidiary” means (a) the QSPEs, (b) Resolute FP Sub 1 Inc., (c) Serres Toundra Inc. (to the extent it is a
Subsidiary of the Issuer), and (d) any Subsidiary of the Issuer that is designated by the Board of Directors of the Issuer as an
Unrestricted Subsidiary pursuant to Section 4.17 and (d) any Subsidiary of an Unrestricted Subsidiary.
“U.S. GAAP” means generally accepted accounting principles in the United States of America as in effect from time to
time, including those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as approved by a significant segment of the accounting profession (but excluding the
policies, rules and regulations of the SEC applicable only to public companies); provided that the Issuer may at any time elect by
written notice to the Trustee to fix U.S. GAAP as in effect on the date specified in such notice and, upon any such notice,
references herein to U.S. GAAP will thereafter be construed to mean for all purposes of this Indenture (other than for financial
reporting purposes):
(a) for periods beginning on and after the date specified in such notice, U.S. GAAP as in effect on the date specified in
such notice; and
(b) for prior periods, U.S. GAAP as in effect from time to time during such periods.
“U.S. Person” means a U.S. Person as defined in Rule 902(k) promulgated under the Securities Act.
“U.S. Reports” has the meaning assigned to that term in Section 4.03(a) of this Indenture.
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“U.S. Subsidiary” means, with respect to any Person, any Subsidiary of such Person that is organized or existing under the
laws of the United States, any state thereof, or the District of Columbia.
“Voting Stock” of any specified Person as of any date means the Capital Stock of such Person that is at the time entitled to
vote in the election of the Board of Directors of such Person.
“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained
by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking
fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the
Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the
making of such payment; by
(2) the then outstanding principal amount of such Indebtedness.
“Wholly Owned Restricted Subsidiary” of any specified Person means a Restricted Subsidiary of such Person all of the
outstanding Capital Stock or other ownership interests of which (other than directors’ qualifying shares) will at the time be
owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person.
“Wholly Owned Subsidiary” of any specified Person means a Subsidiary of such Person all of the outstanding Capital
Stock or other ownership interests of which (other than directors’ qualifying shares) will at the time be owned by such Person or
by one or more Wholly Owned Subsidiaries of such Person.
“WURA” means the Wind-Up and Restructuring Act (Canada).
Section 1.02 Other Definitions
Term
$
Affiliate Transaction
Aggregate Payments
Authentication Order
Change of Control Offer
Change of Control Payment
Change of Control Payment Date
Contributing Guarantors
Covenant Defeasance
Covenant Termination Event
dollars
DTC
Event of Default
Section
Preamble
4.11(a)
10.01(e)
2.02
4.14(a)
4.14(a)
4.14(a)(2)
10.01(e)
8.03
4.15
Preamble
2.03
6.01
38
Excess Proceeds
Fair Share
Fair Share Contribution Amount
Funding Guarantor
incur
Initial Lien
Issuer
Legal Defeasance
Net Proceeds Offer
Notes
Offer Amount
Offer Period
Pari Passu Indebtedness
Paying Agent
Payment Default
Permitted Debt
Purchase Date
Registrar
Restricted Payments
Trustee
4.10(d)
10.01(e)
10.01(e)
10.01(e)
4.09(a)
4.12(a)
Preamble
8.02
4.10(d)
Recitals
4.10(e)
4.10(e)
4.10(d)
2.03
6.01(5)(i)
4.09(b)
4.10(e)
2.03
4.07(a)(4)
Preamble
Section 1.03 Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the
TIA, the provision is incorporated by reference in and made a part of this Indenture. Unless specifically referred to herein, the
TIA shall not apply to this Indenture except to the extent required by law.
The interpretation of terms used in this Indenture that are not otherwise defined and are used or defined in the TIA shall
not be influenced by the meanings ascribed to them by the TIA.
Section 1.04 Rules of Construction. Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to it in accordance with U.S. GAAP;
(3) “or” is not exclusive;
(4) words in the singular include the plural, and in the plural include the singular;
(5) “will” shall be interpreted to express a command;
(6) provisions apply to successive events and transactions;
39
deemed to include substitute, replacement or successor sections or rules or forms adopted by the SEC from time to time;
(7) references to sections of or rules or forms under the Securities Act, the Exchange Act, or the TIA will be
successor laws, statutes and accounting standards and interpretations thereto; and
(8) references to laws, statutes and accounting standards and interpretations shall be deemed to refer to
(9) For the avoidance of doubt, the term “all or substantially all,” as used herein shall not be read to mean
“any” of the assets of the Issuer or the Guarantors due to qualitative factors, including as a result of the Issuer or the relevant
Guarantor being in the “zone of insolvency”; and
being unsecured or secured by collateral by liens of lower priority to such other Indebtedness.
(10) Indebtedness shall not be deemed to be “subordinated” to other Indebtedness due to such Indebtedness
Section 2.01 Form and Dating
ARTICLE 2
THE NOTES
(a) General. The Notes and the Trustee’s certificate of authentication will be substantially in the form of Exhibit A
hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note will be
dated the date of its authentication. The Notes shall be in denominations of $2,000 and integral multiples of $1,000 in excess
thereof.
The terms and provisions contained in the Notes will constitute, and are hereby expressly made, a part of this Indenture
and the Issuer, the Guarantors and the Trustee, by their execution and delivery of this Indenture (or any indenture supplemental
hereto), expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note
conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling.
(b) Global Notes. Notes issued in global form will be substantially in the form of Exhibit A hereto (including the
Global Note Legend thereon and the “Schedule of Exchanges of Interests in the Global Note” attached thereto). Notes issued in
definitive form will be substantially in the form of Exhibit A hereto (but without the Global Note Legend thereon and without the
“Schedule of Exchanges of Interests in the Global Note” attached thereto). Each Global Note will represent such of the
outstanding Notes as will be specified therein and each shall provide that it represents the aggregate principal amount of
outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement
of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes
represented thereby will be
40
made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof
as required by Section 2.06.
Section 2.02 Execution and Authentication. At least one Officer must sign the Notes for the Issuer by manual or
facsimile signature.
If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note will
nevertheless be valid.
A Note will not be valid until authenticated by the manual signature of the Trustee. The signature will be conclusive
evidence that the Note has been authenticated under this Indenture.
The Trustee will, upon receipt of a written order of the Issuer signed by an Officer (an “Authentication Order”),
authenticate Notes for original issue that may be validly issued under this Indenture, including any Additional Notes. The
aggregate principal amount of Notes outstanding at any time may not exceed the aggregate principal amount of Notes authorized
for issuance by the Issuer pursuant to one or more Authentication Orders, except as provided in Section 2.07.
The Trustee may appoint an authenticating agent acceptable to the Issuer to authenticate Notes. An authenticating agent
may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee
includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Issuer.
Section 2.03 Registrar and Paying Agent. The Issuer will maintain an office or agency where Notes may be presented
for registration of transfer or for exchange (“Registrar”) and an office or agency where Notes may be presented for payment
(“Paying Agent”). The Registrar will keep a register of the Notes and of their transfer and exchange. The Issuer may appoint one
or more co-registrars and one or more additional paying agents. The term “Registrar” includes any co-registrar and the term
“Paying Agent” includes any additional paying agent. The Issuer may change any Paying Agent or Registrar without prior notice
to any Holder. The Issuer will notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If
the Issuer fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Issuer or any
of its Affiliates may not act as Paying Agent or Registrar.
The Issuer initially appoints The Depository Trust Company (“DTC”) to act as Depositary with respect to the Global
Notes.
The Issuer initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to
the Global Notes and the Trustee hereby agrees so to initially act.
Section 2.04 Paying Agent to Hold Money in Trust. The Issuer will require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying
Agent for the payment of principal and premium, if any, or interest on the Notes, and will notify the Trustee in writing of any
default by the Issuer in making any such payment. While any such default continues, the
41
Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Issuer at any time may require a Paying Agent
to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent will have no further liability for
the money.
Section 2.05 Holder Lists. The Trustee will preserve in as current a form as is reasonably practicable the most recent list
available to it of the names and addresses of all Holders. If the Trustee is not the Registrar, the Issuer will furnish to the Trustee at
least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list
in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes.
Section 2.06 Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be transferred except as a whole by the
Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All
Global Notes will be exchanged by the Issuer for Definitive Notes if:
(1) the Issuer delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to
act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor
Depositary is not appointed by the Issuer within 90 days after the date of such notice from the Depositary;
exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; or
(2) the Issuer in its sole discretion determines that the Global Notes (in whole but not in part) should be
requests.
(3) there has occurred and is continuing an Event of Default with respect to the Notes and the Holder so
Upon the occurrence of either of the preceding events in (1) or (2) above, Definitive Notes shall be issued in such names
as the Depositary shall instruct the Trustee in writing. Global Notes also may be exchanged or replaced, in whole or in part, as
provided in Sections 2.07 and 2.10. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any
portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10, shall be authenticated and delivered in the form of, and shall
be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however,
beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b) and (c).
(b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial
interests in the Global Notes will be effected through the Depositary, in accordance with the provisions of this Indenture and the
Applicable Procedures. Beneficial interests in the Restricted Global Notes will be subject to restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also will
require compliance with either subparagraph
42
(1) or (2) below, as applicable, as well as one or more of the other following subparagraphs, as applicable:
(1) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global
Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global
Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the
expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Global Note may not be made to a U.S.
Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted
Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global
Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this
Section 2.06(b)(1).
(2) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all
transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(1) above, the transferor of such beneficial
interest must deliver to the Registrar either:
(i) both:
(A) a written order from a Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest
in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged; and
regarding the Participant account to be credited with such increase; or
(B) instructions given in accordance with the Applicable Procedures containing information
(ii) both:
(A) a written order from a Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount
equal to the beneficial interest to be transferred or exchanged; and
Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above.
(B) instructions given by the Depositary to the Registrar containing information regarding the
Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in
this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount
of the relevant Global Note(s) pursuant to Section 2.06(h).
43
(3) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted
Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted
Global Note if the transfer complies with the requirements of Section 2.06(b)(2) above and the Registrar receives the following:
then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof;
(i) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note,
Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof;
and
(ii) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global
the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of
Counsel required by item (3) thereof, if applicable.
(iii) if the transferee will take delivery in the form of a beneficial interest in the IAI Global Note, then
(4) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an
Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any Holder thereof for a
beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(2) above
and:
(i) the Registrar receives the following:
beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(a) thereof, or
(A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such
beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;
(B) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such
and, in each such case set forth in this subparagraph (i), if the Registrar so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect
that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act; and
44
effect that the transfer of Restricted Notes to Unrestricted Notes complies with the Securities Act.
(ii) the Issuer delivers to the Trustee an Officer’s Certificate and an Opinion of Counsel, each to the
If any such transfer is effected pursuant to subparagraph (i)(A) or (i)(B) above at a time when an
Unrestricted Global Note has not yet been issued, the Issuer shall issue and, upon receipt of an Authentication
Order in accordance with Section 2.02, the Trustee shall authenticate one or more Unrestricted Global Notes in an
aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (i)(A) or (i)(B) above.
Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery
thereof in the form of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(1) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a
beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to
transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon
receipt by the Registrar of the following documentation:
beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the
certifications in item (2)(a) thereof;
(i) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such
certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;
(ii) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A, a
(iii) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item
(2) thereof;
requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(a) thereof;
(iv) if such beneficial interest is being transferred pursuant to an exemption from the registration
(v) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on
an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (ii) through
(iv) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable;
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to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or
(vi) if such beneficial interest is being transferred to the Issuer or any of its Subsidiaries, a certificate
under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof,
(vii) if such beneficial interest is being transferred pursuant to an effective registration statement
the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to
Section 2.06(h), and the Issuer shall execute and the Trustee shall authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through
instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the
Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.06(c)(1) shall bear the Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
(2) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial
interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer
such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if the Registrar
receives the following:
beneficial interest for an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including
the certifications in item (1)(b) thereof; or
(i) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such
beneficial interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from
such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and
(ii) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such
if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the
Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities
Act.
(3) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a
beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to
transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of
the conditions set forth in Section 2.06(b)(2), the Trustee will cause the aggregate principal amount of the applicable Global Note
to be reduced accordingly pursuant to Section 2.06(h), and
46
the Issuer will execute and the Trustee will authenticate and deliver to the Person designated in the instructions a Definitive Note
in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(3) will be registered in such name or names and in such authorized denomination or denominations as the holder
of such beneficial interest requests through instructions to the Registrar from or through the Depositary and the Participant or
Indirect Participant. The Trustee will deliver such Definitive Notes to the Persons in whose names such Notes are so registered.
Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(3) will not bear the Private
Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(1) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a
Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such
Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note,
then, upon receipt by the Registrar of the following documentation:
interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in
item (2)(b) thereof;
(i) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial
certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;
(ii) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a
transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (2) thereof;
(iii) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore
registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (3)(a) thereof;
(iv) if such Restricted Definitive Note is being transferred pursuant to an exemption from the
(v) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration requirements of the Securities Act other than those listed in
subparagraphs (ii) through (iv) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if applicable;
certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or
(vi) if such Restricted Definitive Note is being transferred to the Issuer or any of its Subsidiaries, a
47
(vii) if such Restricted Definitive Note is being transferred pursuant to an effective registration
statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)
(c) thereof, the Trustee will cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal
amount of, in the case of clause (i) above, the appropriate Restricted Global Note, in the case of clause (ii) above, the 144A
Global Note, in the case of clause (iii) above, the Regulation S Global Note, and in all other cases, the IAI Global Note.
(2) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted
Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted
Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if
the Registrar receives the following:
the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item
(1)(c) thereof; or
(i) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in
(ii) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take
delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of
Exhibit B hereto, including the certifications in item (4) thereof,
and, if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably
acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
Upon satisfaction of the conditions of this Section 2.06(d)(2), the Trustee will cancel the Definitive Notes and increase or
cause to be increased the aggregate principal amount of the Unrestricted Global Note.
(3) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an
Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such
Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any
time.
Upon receipt of a request for such an exchange or transfer, the Trustee will cancel the applicable Unrestricted Definitive
Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to this clause (3) at a
time when an Unrestricted Global Note has not yet been issued, the Issuer will issue and, upon receipt of an Authentication Order
in accordance with Section 2.02, the Trustee will authenticate one or more Unrestricted Global Notes in an aggregate principal
amount equal to the principal amount of Definitive Notes so transferred.
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(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes
and such Holder’s compliance with the provisions of this Section 2.06(e), the Registrar will register the transfer or exchange of
Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder must present or surrender to the
Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the
Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder must
provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of
this Section 2.06(e).
(1) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be
transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the
Registrar receives the following:
the form of Exhibit B hereto, including the certifications in item (1) thereof,
(i) if the transfer will be made pursuant to Rule 144A, then the transferor must deliver a certificate in
certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof, and
(ii) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a
of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if applicable.
(iii) if the transfer will be made pursuant to any other exemption from the registration requirements
(2) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be
exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery
thereof in the form of an Unrestricted Definitive Note if the Registrar receives the following:
(i) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an
Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item
(1)(d) thereof; or (ii) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take
delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
(ii) and if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the
Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities
Act.
Notes may transfer such Notes to a Person who takes delivery
(3) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive
49
thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall
register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof.
(f) Legends. The following legends will appear on the face of all Global Notes and Definitive Notes issued under
this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture.
(1) Private Placement Legend.
all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form:
(i) Except as permitted by subparagraph (ii) below, each Global Note and each Definitive Note (and
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE
HEREOF, AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR
WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO THE DATE (THE “RESALE RESTRICTION TERMINATION DATE”) THAT IS [IN
THE CASE OF RULE 144A NOTES: ONE YEAR] [IN THE CASE OF REGULATION S NOTES: 40 DAYS]
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE ISSUER, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED
INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
“ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE
SECURITY FOR ITS OWN
50
ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN
EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION
WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE ISSUER’S AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY
OF AN OPINION OF COUNSEL, CERTIFICATION AND/ OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER
THE RESALE RESTRICTION TERMINATION DATE. [IN THE CASE OF REGULATION S NOTES: BY ITS
ACQUISITION HEREOF, THE HOLDER HEREOF REPRESENTS THAT IT IS NOT A U.S. PERSON NOR IS
IT PURCHASING FOR THE ACCOUNT OF A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT.
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST
NOT TRADE THE SECURITY IN CANADA BEFORE [INSERT DATE THAT IS 4 MONTHS AND A DAY
AFTER DISTRIBUTION DATE].
subparagraphs (b)(4), (c)(2), (c)(3), (d)(2), (d)(3), (e)(2) or (e)(3) of this Section 2.06 (and all Notes issued in exchange therefor
or substitution thereof) will not bear the Private Placement Legend.
(ii) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to
(2) Global Note Legend. Each Global Note will bear a legend in substantially the following form:
“THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED
IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO
SECTION 2.11 OF THE INDENTURE AND (4) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A
SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUER.
51
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM,
THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (“DTC”), TO THE ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR
SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.”
(g) Original Issue Discount Legend. Each Note issued hereunder that has more than a de minimis amount of original
issue discount for U.S. federal income tax purposes as determined by the Issuer shall also bear the following legend on the face
thereof:
“THE NOTES HAVE BEEN ISSUED WITH “ORIGINAL ISSUE DISCOUNT” (WITHIN THE MEANING OF
SECTION 1273 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED). UPON WRITTEN
REQUEST ADDRESSED TO SECRETARY, RESOLUTE FOREST PRODUCTS INC., 111 ROBERT-
BOURASSA BLVD., SUITE 5000, MONTREAL, QUEBEC, CANADA H3C 2M1, THE ISSUER WILL
PROMPTLY MAKE AVAILABLE TO ANY HOLDER OF THE NOTES THE FOLLOWING INFORMATION:
(1) THE ISSUE PRICE AND ISSUE DATE OF THE NOTES, (2) THE AMOUNT OF ORIGINAL ISSUE
DISCOUNT ON THE NOTES AND (3) THE YIELD TO MATURITY OF THE NOTES.”
(h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global
Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole
and not in part, each such Global Note will be returned to or retained and canceled by the Trustee in accordance with
Section 2.11. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a
Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the
principal amount of Notes represented by such Global Note will be reduced accordingly and an endorsement will be made on
such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial
interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in
another Global Note, such
52
other Global Note will be increased accordingly and an endorsement will be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(1) To permit registrations of transfers and exchanges, the Issuer will execute and the Trustee will
authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order in accordance with Section 2.02 or at the
Registrar’s request.
(2) No service charge will be made to a Holder of a beneficial interest in a Global Note or to a Holder of a
Definitive Note for any registration of transfer or exchange, but the Issuer may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar
governmental charge payable upon exchange or transfer pursuant to Section 2.10, Article 3 and Sections 4.10, 4.14 and 9.04).
redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part.
(3) The Registrar will not be required to register the transfer of or exchange of any Note selected for
(4) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global
Notes or Definitive Notes will be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits
under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange.
(5) Neither the Registrar nor the Issuer will be required:
except the unredeemed portion of any Note being redeemed in part; or
(i) to register the transfer of or to exchange any Note selected for redemption in whole or in part,
Notes to be redeemed.
(ii) to register the transfer of or to exchange a Note for a period of fifteen days before a selection of
(6) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the
Issuer may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of
receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the
Issuer shall be affected by notice to the contrary.
Section 2.02.
(7) The Trustee will authenticate Global Notes and Definitive Notes in accordance with the provisions of
to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile.
(8) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant
53
(9) To the extent that any Notes are issued at a discount to their stated redemption price at maturity and bear
the legend required by Section 2.06(g), each group of Notes bearing a given amount of original issue discount shall be treated as
a separate series only for purposes of the transfer and exchange provisions of this Section 2.06 and may trade under a separate
CUSIP number.
(10) The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents in connection with a transfer of Notes. Holders will be required to pay all taxes due on
transfer.
(11) The transferor of any Security shall provide or cause to be provided to the Trustee all information
reasonably requested by the Trustee to allow the Trustee to comply with any applicable tax reporting obligations, including
without limitation any cost basis reporting obligations under Section 6045 of the United States Internal Revenue Code of 1986, as
amended (the “Code”). The Trustee may rely on information provided to it and shall have no responsibility to verify or ensure the
accuracy of such information.
(12) In connection with any proposed exchange of Securities in definitive form for a Global Security, the
Issuer or the Depository shall be required to provide or cause to be provided to the Trustee all information necessary to allow the
Trustee to comply with any applicable tax reporting obligations, including without limitation any cost basis reporting obligations
under Section 6045 of the Code. The Trustee may rely on information provided to it and shall have no responsibility to verify or
ensure the accuracy of such information.
(13) For certain payments made in connection with these Notes, the Trustee may be required to make a
“reportable payment” or “withholdable payment” and in such cases the Trustee shall have the duty to act as a payor or
withholding agent, respectively, that is responsible for any tax withholding and reporting required under Chapters 3, 4, and 61 of
the United States Internal Revenue Code of 1986, as amended (the “Code”). The Trustee shall have the sole right to make the
determination as to which payments are “reportable payments” or “withholdable payments.” All parties to this transaction shall
provide an executed IRS Form W-9 or appropriate IRS Form W-8 (or, in each case, any successor form) to the Trustee prior to
closing, and shall promptly update any such form to the extent such form expires or becomes inaccurate in any respect because of
a change in circumstances. The Trustee shall have the right to request from any party or any other Person entitled to payment
hereunder, any additional forms, documentation or other information as may be reasonably necessary for the Trustee to satisfy its
reporting and withholding obligations under the Code. To the extent any such forms required to be delivered are not provided
prior to or by the time the related payment is required to be made or are determined by the Trustee to be incomplete and/or
inaccurate in any respect, the Trustee shall be entitled to withhold on any such payments hereunder to the extent withholding is
required under Chapters 3, 4, or 61 of the Code, and shall have no obligation to gross up any such payment.
Section 2.07 Replacement Notes. If any mutilated Note is surrendered to the Trustee or the Issuer and the Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Issuer will issue and the Trustee, upon receipt
of an Authentication Order, will authenticate a replacement Note if the Trustee’s requirements are met. If required by the Trustee
54
or the Issuer, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Issuer to
protect the Issuer, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Issuer may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Issuer and will be entitled to all of the benefits of this Indenture
equally and proportionately with all other Notes duly issued hereunder.
Section 2.08 Outstanding Notes. The Notes outstanding at any time are all the Notes authenticated by the Trustee except
for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions, and those described in this Section 2.08 as not outstanding. Except as set forth in
Section 2.09, a Note does not cease to be outstanding because the Issuer or an Affiliate of the Issuer holds the Note.
If a Note is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee receives proof satisfactory to
it that the replaced Note is held by a protected purchaser.
If the principal amount of any Note is considered paid under Section 4.01, it ceases to be outstanding and interest on it
ceases to accrue.
If the Paying Agent (other than the Issuer, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or
maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes will be deemed to be no
longer outstanding and will cease to accrue interest.
Section 2.09 Treasury Notes. In determining whether the Holders of the required principal amount of Notes have
concurred in any direction, waiver or consent, Notes owned by the Issuer or any of its Subsidiaries, or by any Person directly or
indirectly controlled by the Issuer or any of its Subsidiaries, will be considered as though not outstanding, except that for the
purposes of determining whether the Trustee will be protected in relying on any such direction, waiver or consent, only Notes
that the Trustee knows are so owned will be so disregarded.
Section 2.10 Temporary Notes. Until certificates representing Notes are ready for delivery, the Issuer may prepare and
the Trustee, upon receipt of an Authentication Order, will authenticate temporary Notes. Temporary Notes will be substantially in
the form of certificated Notes but may have variations that the Issuer considers appropriate for temporary Notes and as may be
reasonably acceptable to the Trustee. Without unreasonable delay, the Issuer will prepare and the Trustee will authenticate
definitive Notes in exchange for temporary Notes.
Holders of temporary Notes will be entitled to all of the benefits of this Indenture.
Section 2.11 Cancellation. The Issuer at any time may deliver Notes to the Trustee for cancellation. The Registrar and
Paying Agent will forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else will cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or
cancellation and will destroy canceled Notes (subject to the record retention requirement of the
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Exchange Act). Certification of the destruction of all canceled Notes will be delivered to the Issuer. The Issuer may not issue new
Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation.
Section 2.12 Defaulted Interest. If the Issuer defaults in a payment of interest on the Notes, it will pay the defaulted
interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders
on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01. The Issuer will notify the
Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment.
The Issuer will fix or cause to be fixed each such special record date and payment date; provided that no such special record date
may be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record
date, the Issuer (or, upon the written request of the Issuer, the Trustee in the name and at the expense of the Issuer) will send or
cause to be sent to Holders a notice that states the special record date, the related payment date and the amount of such interest to
be paid.
ARTICLE 3
REDEMPTION
Section 3.01 Optional Redemption. The Notes may be redeemed, in whole, or from time to time in part, subject to the
conditions and at the redemption prices set forth in Section 5 of the form of Note set forth in Exhibit A hereto.
Section 3.02 Notices to Trustee. If the Issuer elects to redeem Notes pursuant to Section 3.01, it shall notify the Trustee,
Registrar and each Paying Agent in writing of (i) the Section of this Indenture and the Notes pursuant to which the redemption
shall occur (including the relevant provision of the Notes), (ii) the redemption date, (iii) the principal amount of Notes to be
redeemed and (iv) the redemption price. The Issuer shall give notice to the Trustee provided for in this paragraph at least five
Business Days before a redemption notice is required to be provided to each Holder of the Note pursuant to Section 3.04 or in
connection with a satisfaction or discharge pursuant to Article 11, unless a shorter period is acceptable to the Trustee. Such notice
shall be accompanied by an Officer’s Certificate and Opinion of Counsel from the Issuer to the effect that such redemption will
comply with the conditions herein, as well as such notice required to be delivered under Section 3.04 below. If fewer than all the
Notes are to be redeemed, the record date relating to such redemption shall be selected by the Issuer and given to the Trustee,
which record date shall be not fewer than 15 days after the date of notice to the Trustee. Any such notice pursuant to Section 3.01
may be canceled at any time prior to notice of such redemption being mailed to any Holder and shall thereby be void and of no
effect.
Section 3.03 Selection of Notes to Be Redeemed. Selection of Notes for redemption will be made by the Registrar on a
pro rata basis by lot to the extent practicable; provided that no Notes of $2,000 principal amount or less shall be redeemed in
part.
Notwithstanding anything else contained in this Section 3.03, the parties acknowledge and agree that any partial
redemption of a Global Note will be made by the Depository among the Beneficial Owners in accordance with the rules and
regulations of the Depository and that the
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Trustee shall have no liability in connection with the selection of Beneficial Owners whose interest in the Global Security will be
redeemed or any other actions taken by the Depository in connection therewith, and by accepting the Notes, the Holders shall
waive and release any and all such liability.
Section 3.04 Notice of Redemption.
(a) At least 15 days but not more than 60 days before a redemption date pursuant to Section 3.01, the Issuer shall
mail or cause to be mailed by first-class mail a notice of redemption to each Holder whose Notes are to be redeemed.
Any such notice shall identify the Notes to be redeemed and shall state:
(b) the redemption date;
(c) the redemption price and the amount of accrued interest to the redemption date;
(d) the name and address of the Paying Agent;
(e) the provision of the Notes or this Indenture pursuant to which the redemption is occurring;
(f) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price;
(g) if fewer than all the outstanding Notes are to be redeemed, the certificate numbers and principal amounts of the
particular Notes to be redeemed, the aggregate principal amount of Notes to be redeemed and the aggregate principal amount of
Notes to be outstanding after such partial redemption;
(h) if the redemption is subject to conditions precedent, a description of such conditions precedent and any terms
pursuant to Section 3.05(b);
(i) that, unless the Issuer defaults in making such redemption payment or the Paying Agent is prohibited from
making such payment pursuant to the terms of this Indenture, interest on Notes (or portion thereof) called for redemption ceases
to accrue on and after the redemption date;
(j) the CUSIP number, ISIN and/or “Common Code” number, if any, printed on the Notes being redeemed; and
(k) that no representation is made as to the correctness or accuracy of the CUSIP number or ISIN and/or “Common
Code” number, if any, listed in such notice or printed on the Notes.
At the Issuer’s request, the Registrar and each Paying Agent shall give the notice of redemption in the Issuer’s name and at the
Issuer’s expense. In such event, the Issuer shall provide the
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Registrar and each Paying Agent with the information required by this Section 3.04 at least two Business Days prior to the date
such notice is to be provided to Holders in the final form such notice is to be delivered to Holders.
Section 3.05 Effect of Notice of Redemption.
(a) Once notice of redemption is mailed in accordance with Section 3.04, Notes called for redemption become
due and payable on the redemption date and at the redemption price stated in the notice, except as provided in the
Section 3.05(b). Upon surrender to the Paying Agent, such Notes shall be paid at the redemption price stated in the notice;
provided, however, that if the redemption date is after a regular Record Date and on or prior to the Interest Payment Date, the
accrued interest shall be payable to the Holder of the redeemed Notes registered on the relevant Record Date. Failure to give
notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder.
(b) Notwithstanding the foregoing, any notice of redemption may be given prior to the redemption of any Notes,
and any such redemption or notice may, at the Issuer’s discretion, in whole or in part, be subject to one or more conditions
precedent, including, but not limited to, completion of a Qualified Equity Offering, Qualified IPO or other transaction or event. In
addition, if such redemption or notice is subject to satisfaction of one or more conditions precedent, such notice may, at the
option of the Issuer, state that, in the Issuer’s discretion, the redemption date may be delayed until such time as any or all such
conditions shall be satisfied or waived, or such redemption may not occur and such notice may be rescinded in the event that any
or all such conditions shall not have been satisfied or waived by the redemption date, or by the redemption date so delayed;
provided, however, that the Issuer shall provide written notice to the Trustee no later than 10:00 a.m. New York City time on such
redemption date, if any such conditions have not been satisfied or waived at that time, stating that such condition has not been
satisfied or waived, the notice of redemption is rescinded or delayed and the redemption shall not occur or shall be delayed.
Section 3.06 Deposit of Redemption Price. Prior to 11:00 a.m. New York City time on each redemption date, the Issuer
shall deposit with the Paying Agent funds sufficient to pay the redemption price of all Notes to be redeemed on that date. The
Paying Agent shall promptly return to the Issuer any amount so deposited that is not required for that purpose, except with
respect to monies owed as obligations to the Trustee pursuant to Article 7.
Unless the Issuer fails to comply with the preceding paragraph and defaults in the payment of such redemption price,
interest on the Notes to be redeemed will cease to accrue on and after the applicable redemption date, whether or not such Notes
are presented for payment.
Section 3.07 Notes Redeemed in Part. Upon surrender of a Note that is redeemed or purchased in part, the Issuer shall
issue and, upon receipt of an Authentication Order, the Trustee shall authenticate for the Holder at the expense of the Issuer a new
Note in principal amount equal to the unredeemed portion of the Note being redeemed or purchased in part in the name of the
Holder thereof.
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ARTICLE 4
COVENANTS
Section 4.01 Payment of Notes. The Issuer will pay or cause to be paid the principal of and premium, if any, and interest
on, the Notes on the dates and in the manner provided in the Notes. Principal and premium, if any, will be considered paid on the
date due if the Paying Agent, if other than the Issuer or a Subsidiary thereof, holds as of 11:00 a.m. Eastern Time on the due date
money deposited by the Issuer in immediately available funds and designated for and sufficient to pay all principal and premium,
if any, and interest then due.
The Issuer will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue
principal at the rate equal to the lesser of the then applicable interest rate on the Notes and the maximum rate permitted by
applicable law; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace period) at the same rate to the extent lawful.
Section 4.02 Maintenance of Office or Agency. The Issuer will maintain an office or agency (which may be an office of
the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or
for exchange and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The
Issuer will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at
any time the Issuer fails to maintain any such required office or agency or fails to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.
The Issuer may also from time to time designate one or more other offices or agencies where the Notes may be presented
or surrendered for any or all such purposes and may from time to time rescind such designations. The Issuer will give prompt
written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or
agency.
The Issuer hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Issuer in
accordance with Section 2.03.
Section 4.03 Reports.
(a) Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, except as
otherwise provided under this Section 4.03, the Issuer will furnish to the Trustee the following information under this clause (a)
(the “U.S. Reports”):
(1) all annual financial information that would be required to be contained in a filing with the SEC on Form
10-K if the Issuer were required to file such report including (A) “Management’s Discussion and Analysis of Financial Condition
and Results of Operations,” (B) audited financial statements prepared in accordance with Applicable Accounting Standards and
(C) a presentation of EBITDA and Adjusted EBITDA consistent with
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the presentations thereof in the Offering Memorandum, within the time period required for filing such form as specified in the
SEC’s rules and regulations assuming the Issuer was a “non-accelerated filer” (as defined under the SEC’s rules and regulations,
or any successor term that provides an entity with the greatest time period for filing periodic reports with the SEC) plus five
business days;
(2) all quarterly financial information that would be required to be contained in a filing with the SEC on
Form 10-Q if the Issuer were required to file such report including (A) “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” (B) unaudited quarterly financial statements prepared in accordance with Applicable
Accounting Standards and reviewed pursuant to Statement on Auditing Standards No. 100 of the American Institute of Certified
Public Accountants (or similar standard) and (C) a presentation of EBITDA and Adjusted EBITDA consistent with the
presentation thereof in the Offering Memorandum, within 15 days after the time period required for filing such form as specified
in the SEC’s rules and regulations assuming the Issuer were a “non-accelerated filer” (as defined under the SEC’s rules and
regulations, or any successor term that provides an entity with the greatest time period for filing periodic reports with the SEC)
plus five business days; and
(3) within five business days after the occurrence of each event that would have been required to be
reported in a current report on Form 8-K under the Exchange Act pursuant to Item 1.01 (Entry into a Material Definitive
Agreement), Item 1.02 (Termination of a Material Definitive Agreement), Item 1.03 (Bankruptcy or Receivership), Item 2.01
(Completion of Acquisition or Disposition of Assets), Item 2.03 (Creation of a Direct Financial Obligation or an Obligation under
an Off-Balance Sheet Arrangement of a Registrant), Item 2.04 (Triggering Events that Accelerate or Increase a Direct Financial
Obligation or an Obligation under an Off-Balance Sheet Arrangement), Item 2.05 (Costs Associated with Exit or Disposal
Activities), Item 2.06 (Material Impairments), Item 3.03 (Material Modifications to Rights of Security Holders), Item 4.01
(Changes in Registrant’s Certifying Accountant), Item 4.02 (Non-Reliance on Previously Issued Financial Statements or a
Related Audit Report or Completed Interim Review), Item 5.01 (Changes in Control of Registrant), Item 5.02 (Departure of
Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers) (other than pursuant to Item 5.02(e)), Item 5.03 (Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year) and Item 9.01 (Financial Statements and Exhibits, but only with respect to financial statements and pro forma financial
information relating to transactions required to be reported pursuant to Item 2.01) if the Issuer had been a reporting company
under the Exchange Act, reports containing substantially all of the information that would have been required to be contained in
such items if the Issuer had been a reporting company under the Exchange Act; provided, however, that no such current report
will be required to be furnished if the chief financial officer or principal financial or accounting officer of the Issuer determines in
its good faith judgment that such event is not material to holders of the Notes or the business, assets, operations, financial
position or prospects of the Issuer and its Restricted Subsidiaries, taken as a whole; provided further that no such current report
will be required to be furnished with respect to any Unrestricted Subsidiary of the Issuer to the extent furnishing such report
would violate any law or contractual obligation applicable to such Unrestricted Subsidiary; provided further that no such current
report shall be required to include as an exhibit, or to include a summary of the terms of, any employment or compensatory
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arrangement agreement, plan or understanding between the Issuer (or any of its Subsidiaries) and any director, manager or
executive officer, of the Issuer (or any of its Subsidiaries); provided further that in no event shall such current reports be required
to include as an exhibit copies of any agreements, financial statements or other items that would be required to be filed as
exhibits to a current report on Form 8-K except for (x) agreements evidencing material Indebtedness and (y) historical and pro
forma financial statements to the extent reasonably available and, in any case with respect to pro forma financial statements, to
include only pro forma revenues, Consolidated EBITDA and capital expenditures in lieu thereof and only to the extent material to
the business, assets, operations, financial position or prospects of the Issuer and its Restricted Subsidiaries, taken as a whole.
Notwithstanding the foregoing, the reports referred to in clauses (1), (2) and (3) above (A) will not be required to comply
with Section 302 or Section 404 of the Sarbanes-Oxley Act of 2002, or related Items 307 and 308 of Regulation S-K promulgated
by the SEC, or Item 10(e) of Regulation S-K or Regulation G (with respect to any non-GAAP financial measures contained
therein), (B) will not be required to contain the separate financial information for Guarantors or Subsidiaries whose securities are
pledged to secure the Notes contemplated by Rule 3-05, Rule 3-09, Rule 3-10 or Rule 3-16 of Regulation S-X, (C) will not be
required to contain information required by Item 601 of Regulation S-K, and (D) will not be required to include the schedules
identified in Section 5-04 of Regulation S-X under the Securities Act.
If, at any time, the Notes are guaranteed by a direct or indirect parent of the Issuer, and such parent has complied with the
reporting requirements of Section 13 or 15(d) of the Exchange Act, if applicable, and has filed with the SEC the reports described
above with respect to such direct or indirect parent (including any financial information required by Regulation S-X under the
Exchange Act), as applicable, the Issuer shall be deemed to have complied with the provisions of this covenant.
(b) Notwithstanding Section 4.03(a), if the Issuer redomiciles to Canada or a subdivision thereof, the Issuer may
elect, in its sole and absolute discretion, to comply with this Section 4.03(b) in lieu of complying with 4.03(a). For so long as any
Notes are outstanding, the Issuer will furnish the following information under this clause (b) (the “Canadian Reports”):
(1) on or prior to the later of (A) 90 days after the end of each fiscal year of the Issuer or (B) the date on
which the Issuer is required to file (after giving effect to any available extension or exemptive relief) such information pursuant
to Canadian Securities Legislation, the annual “Management’s Discussion & Analysis” and audited financial statements in
respect of such fiscal year that the Issuer would be required to file as a reporting issuer under Canadian Securities Legislation and
a presentation of EBITDA and Adjusted EBITDA consistent with the presentation thereof in the Offering Memorandum;
(2) on or prior to the later of (A) 45 days after the end of each of the first three fiscal quarters of each fiscal
year of the Issuer or (B) the date on which the Issuer is required to file (after giving effect to any available extension or
exemptive relief) such information pursuant to Canadian Securities Legislation, the quarterly “Management’s Discussion &
Analysis” and unaudited quarterly financial statements in respect of the relevant interim period that the Issuer would be required
to file as a reporting issuer under Canadian
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Securities Legislation and a presentation of EBITDA and Adjusted EBITDA consistent with the presentation thereof in the
Offering Memorandum; and
(3) if the Issuer is a reporting issuer under Canadian Securities Legislation, on or prior to the later of the
tenth business day (after giving effect to any available extension or exemptive relief) following the events giving rise to the
requirements for the Issuer to file a material change report pursuant to Canadian Securities Legislation, such material change
report (other than any material change report that the Issuer is permitted to treat as a confidential material change report under
Canadian Securities Legislation).
If, at any time, the Notes are guaranteed by a direct or indirect parent of the Issuer, and such parent has complied with the
reporting requirements of the Canadian Securities Legislation, and has filed pursuant to the Canadian Securities Legislation the
reports described above with respect to such direct or indirect parent (including any financial information required by the
Canadian Securities Legislation), as applicable, the Issuer shall be deemed to have complied with the provisions of this covenant.
(c) For so long as any Notes remain outstanding, if at any time they are not required to file with the SEC the reports
required by paragraph (a) of this Section 4.03, the Issuer and the Guarantors will furnish to the Holders and to securities analysts
and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
(d) The Issuer shall
(1) furnish U.S. Reports or Canadian Reports (collectively, “Reports”) electronically to the Trustee; and
(2) make the Reports available to any Holder of the Notes by posting such Reports on IntraLinks or a
comparable password protected online data system, and, upon request, shall make such information and reports (and any
necessary password or other login information, if applicable) readily available to any prospective investor, any securities analyst
or any market maker in the Notes by posting such Reports on IntraLinks or a comparable password protected online data system;
provided, however, the Issuer may deny access to any competitively-sensitive information otherwise to be provided hereto to any
such Holder, prospective investor, security analyst or market maker that is a competitor of the Issuer and its Subsidiaries or to the
extent that the Issuer determines in good faith that the provision of such information to such Person would be competitively
harmful to the Issuer and its Subsidiaries; provided, further, that Holders, prospective investors, security analysts or market
makers shall agree to (i) treat all such reports (and the information contained therein) and information as confidential, (ii) not use
such reports and the information contained therein for any purpose other than their investment or potential investment in the
Notes and (iii) not publicly disclose any such reports (and the information contained therein).
(e) The Issuer shall, for so long as any Notes remain outstanding, use commercially reasonable efforts to hold and
participate in quarterly conference calls with the Holders and securities analysts to discuss such financial information no later
than ten business days after distribution of financial information referred to in Sections 4.03(a)(1) and (2) or
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Sections 4.03(b)(1) and (2), as the case may be. No fewer than three business days prior to the date of the conference call
required to be held in accordance with this paragraph, the Issuer shall make available on the aforementioned IntraLinks or
comparable password protected online data system, information announcing the time and date of such conference call and either
including all information necessary to access the call or directing holders of the Notes, prospective investors, broker-dealers and
securities analysts to contact the appropriate person at the Issuer to obtain such information (collectively, “Quarterly Call
Information”). If the Issuer holds and participates in quarterly conference calls to discuss its results of operations pursuant to SEC
or Canadian rules and regulations, as the case may be, it shall be deemed to have satisfied the requirements of this clause (e).
(f) The filing or furnishing (as the case may be) by the Issuer of U.S. Reports or related Quarterly Call Information
with the SEC on its EDGAR system (or a similar system) or of Canadian Reports or related Quarterly Call Information on
SEDAR (or a similar system), in each case, in compliance with the relevant deadlines therefor (including any late filing
allowances thereunder) shall be sufficient to comply with the requirements of the foregoing Section 4.03(d) or Section 4.03(e), as
the case may be, and the requirement to furnish such Reports and Quarterly Call Information.
(g) At any time that any of the Issuer’s Subsidiaries are Unrestricted Subsidiaries, then the Reports with respect to
quarterly and annual fiscal periods will include a reasonably detailed presentation in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” MD&A or other comparable section, of the total assets, net income and Adjusted
EBITDA (which presentation may be consistent with that presented by the Issuer or its direct or indirect parent in its earnings
press releases) for the Issuer and its Restricted Subsidiaries on one hand, and for the Unrestricted Subsidiaries of the Issuer, on
the other hand; provided, however, that such reasonably detailed presentation shall not be required if the Total Assets of all
Unrestricted Subsidiaries are less than 15.0% of the Issuer’s Total Assets.
(h) In the event that any parent of the Issuer is or becomes a Guarantor of the Notes, the Issuer may satisfy its
obligations under this covenant with respect to financial information relating to the Issuer required in Reports by furnishing
financial information relating to such parent, provided that the same is accompanied by consolidating information that explains in
reasonable detail the differences between the information relating to such parent and any of its Subsidiaries other than the Issuer
and its Subsidiaries, on the one hand, and the information relating to the Issuer, the Guarantors and the other Subsidiaries of the
Issuer on a stand-alone basis, on the other hand.
(i) The Trustee shall have no obligation whatsoever to determine whether or not such information, documents,
Reports or Quarterly Call Information have been filed or furnished with the EDGAR system (or similar system), SEDAR (or
similar system) or whether or not conference calls required by Section 4.03(e) above have occurred.
(j) Notwithstanding anything herein to the contrary, the Issuer will not be deemed to have failed to comply with this
Section 4.03 for the purposes of Section 6.01(4) until 120 days after the proper notice under such clause (4) has been provided.
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(k) For the avoidance of doubt, a Default or an Event of Default resulting from a failure to provide any report
required by this Section 4.03 shall be cured upon the provision of such report prior to the acceleration of the Notes pursuant to
Section 6.02.
Section 4.04 Compliance Certificate.
(a) The Issuer shall deliver to the Trustee, within 120 days after the end of each fiscal year commencing with the
fiscal year ending December 31, 2021, an Officer’s Certificate stating that a review of the activities of the Issuer and its
Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to
determining whether the Issuer has kept, observed, performed and fulfilled its obligations under this Indenture, and further
stating, as to such Officer signing such certificate, that to the best of his or her knowledge the Issuer has kept, observed,
performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default has occurred,
describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Issuer is taking or
proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence
by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has
occurred, a description of the event and what action the Issuer is taking or proposes to take with respect thereto.
(b) So long as any of the Notes are outstanding, the Issuer will deliver to the Trustee, within five Business Days
after any Officer becoming aware of any Default or Event of Default, an Officer’s Certificate specifying such Default or Event of
Default and what action the Issuer is taking or proposes to take with respect thereto.
Section 4.05 Taxes. The Issuer will pay, and will cause each of its Subsidiaries to pay, prior to delinquency, all taxes,
assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the
failure to effect such payment would not reasonably be expected to have a material adverse effect on the Issuer and its
Subsidiaries, taken as a whole.
Section 4.06 Stay, Extension and Usury Laws. The Issuer and each of the Guarantors covenants (to the extent that it
may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the
covenants or the performance of this Indenture; and the Issuer and each of the Guarantors (to the extent that it may lawfully do
so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law has been enacted.
Section 4.07 Restricted Payments.
(a) The Issuer will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly:
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(1) declare or pay any dividend or make any other payment or distribution on or in respect of the Issuer’s or
any Restricted Subsidiary’s Equity Interests (including any such payment in connection with any merger or consolidation
involving such Person) or to the direct or indirect holders of the Issuer’s or any Restricted Subsidiary’s Equity Interests, except
dividends or distributions payable solely in Equity Interests of the Issuer or such Restricted Subsidiary (other than Disqualified
Stock) and except dividends or distributions to the extent payable to the Issuer or a Restricted Subsidiary (and, if such Restricted
Subsidiary is not a Wholly Owned Subsidiary, to the other Equity Interest holders of such Restricted Subsidiary on a pro rata
basis or on a basis that results in the receipt by the Issuer or a Restricted Subsidiary of dividends or distributions of greater value
than it would receive on a pro rata basis);
(2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection
with any merger or consolidation involving the Issuer) any Equity Interests of the Issuer (other than any Equity Interests of the
Issuer held by a Restricted Subsidiary);
(3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness of the Issuer or any Guarantor that is contractually subordinated to the Notes or to any Note Guarantee
(excluding any intercompany Indebtedness between or among the Issuer and any of its Restricted Subsidiaries), except (a) a
payment of interest or principal at the Stated Maturity thereof or (b) the purchase, repurchase or other acquisition or retirement
for value of any such Indebtedness in anticipation of satisfying a sinking fund obligation, principal installment or final maturity,
in each case, due within one year of the date of such purchase, repurchase or other acquisition or retirement for value; or
(4) make any Restricted Investment
(all such payments and other actions set forth in these clauses (1) through (4) above being collectively referred to as “Restricted
Payments”), unless, at the time of and after giving effect to such Restricted Payment:
such Restricted Payment;
(i) no Default or Event of Default has occurred and is continuing or would occur after giving effect to
have been permitted to incur at least $1.00 of additional Indebtedness pursuant to Section 4.09(a); and
(ii) the Issuer would, at the time of such Restricted Payment and after giving pro forma effect thereto,
(iii) such Restricted Payment, together with the aggregate amount of all other Restricted Payments
made by the Issuer and its Restricted Subsidiaries since the Issue Date (excluding Restricted Payments permitted by clauses (2),
(3), (4), (5), (6), (7), (8), (9), (10), (11), (12), (13), (14), (15), (16) and (17) of Section 4.07(b)), is less than the sum, without
duplication (the “Available Amount”) of:
(A) 50% of the Consolidated Net Income of the Issuer for the period (taken as one accounting
period) from January 1, 2011 to the end of the Issuer’s most recently ended fiscal quarter for which internal financial
statements are available at
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the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such
deficit); plus
(B) 100% of the aggregate net cash proceeds (or the Fair Market Value of any property or assets)
received by the Issuer since January 1, 2011 as a contribution to its common equity capital or from the issue or sale of
Equity Interests (other than Disqualified Stock) of the Issuer or from the issue or sale of convertible or exchangeable
Disqualified Stock of the Issuer or convertible or exchangeable debt securities of the Issuer, in each case that have been
converted into or exchanged for Equity Interests of the Issuer (other than Disqualified Stock, Equity Interests and
convertible or exchangeable Disqualified Stock or debt securities sold to a Subsidiary of the Issuer); plus
(C) to the extent that any Restricted Investment that was made after January 1, 2011 is or was
sold or otherwise liquidated or repaid, the amount of the cash return of or on capital (or the Fair Market Value of any
property or assets) with respect to such Restricted Investment (less the cost of disposition, if any); plus
(D) to the extent that any Unrestricted Subsidiary of the Issuer designated as such after January 1,
2011 is or was redesignated as a Restricted Subsidiary after January 1, 2011, the Fair Market Value of the Issuer’s
Restricted Investment in such Restricted Subsidiary as of the date of such redesignation; plus
(E) cash dividends received by the Issuer or a Restricted Subsidiary of the Issuer that is a
Guarantor after the Issue Date from an Unrestricted Subsidiary of the Issuer, to the extent that such dividends were not
otherwise included in the Consolidated Net Income of the Issuer for such period.
(b) The provisions of Section 4.07(a) will not prohibit:
(1) the payment of any dividend or distribution on account of Equity Interests or the consummation of any
redemption within 60 days after the date of declaration of the dividend or distribution on account of Equity Interests or giving of
the redemption notice, as the case may be, if at the date of declaration or notice, the dividend, distribution or redemption payment
would have complied with the provisions of this Section 4.07 (assuming, in the case of a redemption payment, the giving of the
notice of such redemption payment would have been deemed to be a Restricted Payment at such time);
(2) the making of any Restricted Payment in exchange for, or out of or with the net proceeds of the sale
(other than to a Subsidiary of the Issuer) of, Equity Interests of the Issuer (other than Disqualified Stock) or from the contribution
of common equity capital to the Issuer; provided that the amount of any such net proceeds that are utilized for any such
Restricted Payment will not be considered to be net proceeds of Equity Interests of the Issuer for purposes of clause (iii)(B) of
Section 4.07(a);
(3) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of
Indebtedness of the Issuer or any Guarantor that is contractually subordinated to the Notes or to any Note Guarantee in exchange
for, by conversion into or out of,
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or with the net cash proceeds from, an incurrence of Permitted Refinancing Indebtedness, which incurrence occurs within 60 days
of such purchase, repurchase, redemption, defeasance or other acquisition or retirement for value;
(4) so long as no Default or Event of Default has occurred and is continuing, the repurchase, redemption or
other acquisition or retirement for value of any Equity Interests of the Issuer or any Restricted Subsidiary of the Issuer held by
any current or former officer, director or employee of the Issuer or any of its Restricted Subsidiaries pursuant to any equity
subscription agreement, stock option agreement, shareholders’ agreement or similar agreement; provided that the aggregate price
paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed $20.0 million in any twelve-month
period; provided, further, that such amount in any twelve-month period may be increased by an amount not to exceed:
(i) the cash proceeds from the sale of Equity Interests (other than Disqualified Stock) of the Issuer
and, to the extent contributed to the Issuer as common equity capital, the cash proceeds from the sale of Equity Interests of any of
the Issuer’s direct or indirect parent companies, in each case to members of management, directors or consultants of the Issuer,
any of its Subsidiaries or any of its direct or indirect parent companies that occurs after the Issue Date to the extent the cash
proceeds from the sale of such Equity Interests have not otherwise been applied to the making of Restricted Payments pursuant to
clause (iii)(B) of Section 4.07(a) or Section 4.07(b)(2) above; plus
Subsidiaries after the Issue Date; and
(ii) the cash proceeds of key man life insurance policies received by the Issuer or its Restricted
in addition, cancellation of Indebtedness owing to the Issuer or any Guarantor from any current or former officer, director or
employee (or any permitted transferees thereof) of the Issuer or any of its Restricted Subsidiaries in connection with a repurchase
of Equity Interests of the Issuer or any of its Restricted Subsidiaries from such Persons will not be deemed to constitute a
Restricted Payment for purposes of this Section 4.07 or any other provisions of this Indenture;
(5) the repurchase of Equity Interests deemed to occur upon the exercise of stock options, warrants or similar
rights to the extent such Equity Interests represent a portion of the exercise price of those stock options, warrants or similar rights
or the payment of related withholding taxes;
(6) so long as no Default or Event of Default has occurred and is continuing, the declaration and payment of
regularly scheduled or accrued dividends to holders of any class or series of Disqualified Stock of the Issuer or any Restricted
Subsidiary of the Issuer issued on or after the Issue Date pursuant to Section 4.09(a);
(7) so long as no Default or Event of Default has occurred and is continuing or would be caused thereby,
upon the occurrence of a Change of Control and within 60 days after completion of the offer to repurchase Notes pursuant to
Section 4.14, any purchase or redemption of Indebtedness of the Issuer that is contractually subordinated to the Notes or any Note
Guarantee that is required to be repurchased or redeemed pursuant to the terms thereof as a result of such Change of Control, at a
purchase price not greater than 101% of the outstanding
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principal amount thereof (plus accrued and unpaid interest); provided that, prior to such repayment or repurchase, the Issuer shall
have made the Change of Control Offer with respect to the Notes as required by Section 4.14, and the Issuer shall have
repurchased all Notes validly tendered for payment and not withdrawn in connection with such Change of Control Offer;
(8) so long as no Default or Event of Default has occurred and is continuing or would be caused thereby,
after the completion of a Net Proceeds Offer pursuant to Section 4.10, any purchase or redemption of Indebtedness of the Issuer
or any Restricted Subsidiary that is contractually subordinated to the Notes or any Note Guarantee that is required to be
repurchased or redeemed pursuant to the terms thereof as a result of such Asset Sale, at a purchase price not greater than 100% of
the outstanding principal amount thereof (plus accrued and unpaid interest) with any Excess Proceeds that remain after
consummation of a Net Proceeds Offer; provided that, prior to such repayment or repurchase, the Issuer shall have made the Net
Proceeds Offer with respect to the Notes as required by Section 4.10, and the Issuer shall have repurchased all Notes validly
tendered for payment and not withdrawn in connection with such Net Proceeds Offer;
(9) the redemption, repurchase or other acquisition for value of any Equity Interests of any Foreign
Subsidiary of the Issuer that are held by a Person that is not an Affiliate of the Issuer; provided that the consideration for such
redemption, repurchase or other acquisition is not in excess of either (i) the Fair Market Value of such common Equity Interests
or (ii) such amount required by applicable laws, rules or regulations;
(10) payments or distributions to dissenting stockholders pursuant to applicable law, pursuant to or in
connection with a consolidation, amalgamation, merger or transfer of all or substantially all of the assets of the Issuer and its
Restricted Subsidiaries, taken as a whole, that complies with Section 5.01; provided that, as a result of such consolidation,
amalgamation, merger or transfer of assets, the Issuer shall have made a Change of Control Offer (if required by this Indenture)
and that all Notes tendered by holders in connection with such Change of Control Offer have been repurchased, redeemed or
acquired for value;
distribution of fees in connection therewith;
(11) purchases of receivables pursuant to a Qualified Receivables Transaction and the payment or
greater of (x) $200.0 million or (y) 5.0% of Total Assets, net of any return of or on such Investments;
(12) Investments in joint ventures and Unrestricted Subsidiaries in an aggregate amount not to exceed the
(13) so long as no Default or Event of Default has occurred and is continuing, other Restricted Payments in
an aggregate amount not to exceed the greater of (x) $100.0 million or (y) 2.25% of Total Assets, net of return of or on any
Investments made pursuant to this clause (13);
with a Permitted Convertible Notes Offering or any early termination thereof;
(14) Restricted Payments under hedge and warrant or other derivative transactions entered into in connection
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(15) the making of cash payments in satisfaction of the conversion obligation upon conversion of convertible
Indebtedness issued in a Permitted Convertible Notes Offering since the Issue Date; provided that, to the extent the aggregate
amount of such cash payments made since the Issue Date exceeds the sum of (x) the principal amount of such convertible
Indebtedness plus (y) the amount of any payments received by the Issuer or any of its Restricted Subsidiaries since the Issue Date
pursuant to the exercise, settlement or termination of any Convertible Notes Transactions, such cash payments shall be subtracted
from the Available Amount;
(16) Restricted Payments in an amount not to exceed, in any fiscal quarter of the Issuer, $15.0 million, in
order to pay regular quarterly dividends to holders of the equity of the Issuer or a direct or indirect parent of the Issuer, or to
engage in share repurchases of the equity of the Issuer or a direct or indirect parent of the Issuer; and
(17) in addition to the Restricted Payments permitted by the preceding clauses (1) through (16), other
Restricted Payments so long as, (i) no Default or Event of Default has occurred and is continuing and (ii) at the time of and after
giving effect to the making of such Restricted Payment and the consummation of all other related transactions, the Total Leverage
Ratio would not exceed 3.00:1.00.
(c) The amount of all Restricted Payments (other than cash) will be the Fair Market Value on the date of the
Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Issuer or such Restricted Subsidiary, as
the case may be, pursuant to the Restricted Payment. The Fair Market Value of any assets or securities that are required to be
valued by this Section 4.07 will be determined by the Issuer or, if such Fair Market Value is in excess of $50.0 million, by the
Board of Directors of the Issuer whose resolution with respect thereto shall be delivered to the Trustee. The Board of Directors’
determination must be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of
national standing if the Fair Market Value exceeds $100.0 million. Notwithstanding the foregoing, the Fair Market Value of any
publicly traded securities required to be valued by this covenant will be determined by the Issuer based on the trading price of
such securities and no resolution, opinion or appraisal related to such determination shall be required.
(d) For purposes of determining compliance with this Section 4.07, in the event that a proposed Restricted Payment
(or portion thereof) meets the criteria of more than one of the categories of Restricted Payments described in Sections 4.07(b)(1)
through 4.07(b)(17) above or one or more clauses of the definition of “Permitted Investments” (or portions of any of the
foregoing), or is entitled to be made pursuant to Section 4.07(a), the Issuer will be entitled to classify or reclassify (based on
circumstances existing at the time of such reclassification) such Restricted Payment or portion thereof in any manner that
complies with this Section 4.07 and such Restricted Payment or portion thereof will be treated as having been made pursuant to
only such clause or clauses (or portions thereof) or Section 4.07(a); provided that the Issuer and its Restricted Subsidiaries may
reclassify all or a portion of such Restricted Payment or Permitted Investment in any manner that complies with this covenant
(based on circumstances existing at the time of such reclassification), and following such reclassification such Restricted
Payment or Permitted Investment shall be treated as having been made pursuant to only the clause or clauses
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(or portions thereof) to which such Restricted Payment or Permitted Investment has been reclassified.
(e) In connection with any commitment, definitive agreement or similar event relating to a Restricted Payment or
Investment, the Issuer or applicable Restricted Subsidiary may, at its option, designate such Restricted Payment or Investment as
having occurred on the date of the commitment, definitive agreement or similar event relating thereto (such date, the “Election
Date”) if, after giving pro forma effect to such Restricted Payment or Investment and all related transactions in connection
therewith and any related pro forma adjustments, the Issuer or any of its Restricted Subsidiaries would have been permitted to
make such Restricted Payment or Investment on the relevant Election Date in compliance with this Indenture, and any related
subsequent actual making of such Investment will be deemed for all purposes under this Indenture to have been made on such
Election Date, including, without limitation, for purposes of calculating any ratio, compliance with any test, usage of the
Available Amount or any exceptions described under this covenant and for purposes of determining whether there exists any
Default or Event of Default (and all such calculations on and after the Election Date until the termination, expiration, passing,
rescission or retraction of such commitment, definitive agreement or similar event shall be made on a pro forma basis giving
effect thereto and all related transactions in connection therewith).
Section 4.08 Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.
(a) The Issuer will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or
permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock to the Issuer or any of its Restricted
Subsidiaries or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to
the Issuer;
(2) make loans or advances to the Issuer; or
(3) sell, lease or transfer any of its properties or assets to the Issuer.
(b) The restrictions in Section 4.08(a) will not apply to encumbrances or restrictions existing under or by reason of:
(1) agreements governing Existing Indebtedness, Credit Facilities and the Québec Credit Agreement, in each
case, as in effect on the Issue Date and any amendments, restatements, modifications, renewals, supplements, refundings,
replacements or refinancings of those agreements; provided that the amendments, restatements, modifications, renewals,
supplements, refundings, replacements or refinancings are not, in the good faith judgment of the Board of Directors of the Issuer,
materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in
those agreements on the Issue Date;
(2) this Indenture, the Notes and the Note Guarantees;
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(3) applicable law, rule, regulation, order, approval, license, permit or similar restriction;
(4) (i) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Issuer or any of
its Restricted Subsidiaries as in effect at the time of such acquisition, which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired;
provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred and
(ii) any amendment, modification, replacement or refinancing thereof; provided, however, that such encumbrances or restrictions
are not, in the good faith judgment of the Board of Directors of the Issuer, materially more restrictive, taken as a whole, with
respect to consensual encumbrances or restrictions set forth in clause (1), (2) or (3) of Section 4.08(a) than on such encumbrances
or restrictions prior to such amendment, modification, replacement or refinancing;
business;
(5) customary non-assignment provisions in contracts and licenses entered into in the ordinary course of
Obligations that impose restrictions on the property purchased or leased of the nature described in Section 4.08(a)(3);
(6) purchase money obligations for property acquired in the ordinary course of business and Capital Lease
that restricts distributions by that Restricted Subsidiary pending such sale or other disposition;
(7) any agreement for the sale or other disposition of the Capital Stock or assets of a Restricted Subsidiary
(8) Permitted Refinancing Indebtedness; provided that, the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are not, in the good faith judgment of the Board of Directors of the Issuer,
materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being
refinanced, extended, renewed, refunded, replaced, defeased or discharged;
subject to such Liens;
(9) Liens permitted to be incurred under Section 4.12 that limit the right of the debtor to dispose of the assets
(10) customary provisions in joint venture agreements or other similar agreements;
(11) customary provisions in Permitted Hedging Obligations;
(12) provisions limiting the disposition or distribution of assets or property in joint venture agreements, asset
sale agreements, sale-leaseback agreements, stock sale agreements and other similar agreements entered into with the approval of
the Issuer’s Board of Directors, which limitation is applicable only to the assets that are the subject of such agreements;
agreements entered into in the ordinary course of business;
(13) restrictions on cash or other deposits or net worth imposed by customers under contracts or other
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(14) restrictions in other Indebtedness incurred in compliance with Section 4.09; provided that such
restrictions in the good faith determination of the Issuer (made at the time of the imposition of such restrictions) do not materially
and adversely affect payment on the Notes;
Restricted Subsidiary;
(15) encumbrances on property that exist at the time such property was acquired by the Issuer or any
documentation governing Indebtedness of Foreign Subsidiaries that is permitted to be incurred by this Indenture;
(16) restrictions applicable to Foreign Subsidiaries of the Issuer or of any Guarantor, arising under the
Receivables Transaction; provided that such restrictions apply only to such Receivables Entity;
(17) Indebtedness or other contractual requirements of a Receivables Entity in connection with a Qualified
leasehold interests to the extent such provisions restrict the transfer of the lease or the property leased thereunder;
(18) encumbrances or restrictions consisting of customary non-assignment provisions in leases governing
leases, licenses and other agreements entered into by the Subsidiary in the ordinary course of business;
(19) customary guarantees by the Issuer under non-Indebtedness obligations of a Subsidiary set forth in
(20) any legislation, regulation, order-in-council or similar enactment, whether in effect on the Issue Date or
adopted thereafter, pursuant to which the Issuer or any Subsidiary is eligible for funding relief in respect of its pension deficit
funding obligations and any agreements or arrangements entered into (i) for purposes of effecting any such legislation, regulation,
order-in-council or similar enactment or (ii) with a view to providing funding relief; and
(21) contractual encumbrances or restrictions in effect on the Issue Date, and any amendments, restatements,
modifications, supplements, renewals, extensions, refundings, replacements, or refinancings of those agreements; provided that,
the amendments, restatements, modifications, supplements, renewals, extensions, refundings, replacements, or refinancings are
not, in the good faith judgment of the Board of Directors of the Issuer, materially more restrictive, taken as a whole, with respect
to consensual encumbrances or restrictions set forth in clause (1), (2) or (3) of Section 4.08(a) than those contained in those
agreements on the Issue Date.
(c) For purposes of determining compliance with this Section 4.08, (i) the priority of any Capital Stock in receiving
dividends or liquidating distributions prior to dividends or liquidating distributions being paid on other Capital Stock shall not be
deemed a restriction on the ability to make distributions on Capital Stock, and (ii) the subordination of loans or advances made to
the Issuer or a Restricted Subsidiary to other Indebtedness incurred by the Issuer or any such Restricted Subsidiary shall not be
deemed a restriction on the ability to make or repay loans or advances.
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Section 4.09 Incurrence of Indebtedness and Issuance of Preferred Stock.
(a) The Issuer will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively,
“incur”) any Indebtedness (including Acquired Debt), and the Issuer will not issue any Disqualified Stock and will not permit any
of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that the Issuer may incur Indebtedness
(including Acquired Debt) or issue Disqualified Stock, and its Restricted Subsidiaries may incur Indebtedness (including
Acquired Debt) or issue preferred stock, if the Fixed Charge Coverage Ratio for the Issuer’s most recently ended four full fiscal
quarters for which internal financial statements are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock or such preferred stock is issued, as the case may be, would have been at least
2.0 to 1.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred or the Disqualified Stock or the preferred stock had been issued, as the case may be, at the
beginning of such four-quarter period.
(b) The provisions of Section 4.09(a) will not prohibit the incurrence of any of the following items of Indebtedness
or the issuance of any of the following Disqualified Stock (collectively, “Permitted Debt”):
(1) the incurrence by the Issuer and any Restricted Subsidiary and the Guarantee thereof by any Restricted
Subsidiary of Indebtedness and letters of credit (and reimbursement obligations with respect thereto) under one or more Credit
Facilities (with letters of credit being deemed to have a principal amount equal to the maximum remaining potential liability of
the Issuer and its Restricted Subsidiaries thereunder) in an aggregate principal amount at any one time outstanding under this
clause (1) not to exceed the sum of:
plus
(i) the greater of (x) $800.0 million and (y) the Borrowing Base as of the date of such incurrence;
(ii) the greater of (x) $600.0 million and (y) the amount of Indebtedness that would cause the
Consolidated Total Debt incurred under this Section 4.09(b)(1)(ii) to be equal to or less than 2.0 times Consolidated Cash Flow
(after giving effect to such pro forma adjustments to Consolidated Cash Flow as are consistent with the pro forma adjustment
provisions set forth in the definition of “Fixed Charge Coverage Ratio”) for the period of the most recently completed four
consecutive fiscal quarters for which internal financial statements are available;
(2) the incurrence by the Issuer and its Restricted Subsidiaries of
(i) the Existing Indebtedness; and
time outstanding;
(ii) Indebtedness under the Québec Credit Agreement not to exceed CDN$220.0 million at any one
Note Guarantees issued on the Issue Date;
(3) the incurrence by the Issuer and the Guarantors of Indebtedness represented by the Notes and the related
73
contained in supply arrangements, in each case, in the ordinary course of business;
(4) Indebtedness of the Issuer or any of its Restricted Subsidiaries consisting of take-or-pay obligations
(5) the incurrence by the Issuer or any of its Restricted Subsidiaries of Indebtedness represented by Capital
Lease Obligations, mortgage financings or purchase money obligations, in each case, incurred for the purpose of financing all or
any part of the purchase price or cost of design, development, construction, installation, expansion, repair or improvement of
property (either real or personal), plant or equipment used in the business of the Issuer or any of its Restricted Subsidiaries (in
each case, whether through the direct purchase of such assets or the purchase of Equity Interests of any Person owning such
assets), which incurrence occurs within 270 days of such purchase, design, development, construction, installation, expansion,
repair or improvement in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to renew,
refund, refinance, replace, defease or discharge any Indebtedness incurred pursuant to this clause (5), not to exceed, outstanding
as of any date of incurrence of Indebtedness pursuant to this clause (5), the greater of (x) $175.0 million or (y) 4.25% of Total
Assets;
(6) the incurrence by the Issuer or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness
in exchange for, or the net proceeds of which are used to extend, renew, refund, refinance, replace, defease or discharge any
Indebtedness (other than intercompany Indebtedness) that was permitted to be incurred under Section 4.09(a) or clause (2), (3),
(4), (5), (6), (17), (22), or (25) of this Section 4.09(b);
or among the Issuer and any of its Restricted Subsidiaries; provided, however, that:
(7) the incurrence by the Issuer or any of its Restricted Subsidiaries of intercompany Indebtedness between
held by a Person other than the Issuer or a Restricted Subsidiary of the Issuer; and
(i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being
Restricted Subsidiary of the Issuer,
(ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Issuer or a
will be deemed, in each case, to constitute an incurrence of such Indebtedness by the Issuer or such Restricted Subsidiary, as the
case may be, that was not permitted by this clause (7);
Subsidiaries of shares of preferred stock; provided, however, that:
(8) the issuance by any of the Issuer’s Restricted Subsidiaries to the Issuer or to any of its Restricted
being held by a Person other than the Issuer or a Restricted Subsidiary of the Issuer; and
(i) any subsequent issuance or transfer of Equity Interests that results in any such preferred stock
Restricted Subsidiary of the Issuer,
(ii) any sale or other transfer of any such preferred stock to a Person that is not either the Issuer or a
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will be deemed, in each case, to constitute an issuance of such preferred stock by such Restricted Subsidiary that was not
permitted by this clause (8);
(9) Hedging Obligations not for speculative purposes;
(10) the Guarantee by the Issuer or any of the Guarantors of Indebtedness of the Issuer or a Restricted
Subsidiary that was permitted to be incurred by another provision of this Section 4.09; provided that, if the Indebtedness being
Guaranteed is subordinated in right of payment to the Notes, then the Guarantee must be subordinated in right of payment to the
same extent as the Indebtedness Guaranteed;
(11) the incurrence by the Issuer or any of its Restricted Subsidiaries of Indebtedness in respect of workers’
compensation claims, unemployment or other insurance or self-insurance obligations, bankers’ acceptances, performance,
completion and surety bonds, completion guarantees and similar obligations in the ordinary course of business;
(12) the incurrence by the Issuer or any of its Restricted Subsidiaries of Indebtedness arising from the
honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient
funds, so long as such Indebtedness is covered within five Business Days;
(13) the incurrence by the Issuer or any of its Restricted Subsidiaries of Indebtedness arising from
agreements of the Issuer or such Restricted Subsidiary providing for indemnification, earn-out, adjustment of purchase price or
similar obligations, in each case, incurred or assumed in connection with any acquisition of, Investment in or sale or other
disposition of any business, assets or Capital Stock, other than Guarantees of Indebtedness incurred by any Person acquiring all
or any portion of such business, assets or Capital Stock; provided that such Indebtedness (other than in respect of an earnout) is
not reflected in the balance sheet of the Issuer or any of its Restricted Subsidiaries (contingent obligations referred to in a
footnote to financial statements and not otherwise reflected on its balance sheet will not be deemed to be reflected on such
balance sheet for purposes of this clause (13));
instruments for deposit or collection in the ordinary course of business;
(14) the incurrence of contingent liabilities arising out of endorsements of checks and other negotiable
(15) the incurrence of Indebtedness consisting of Guarantees of loans or other extensions of credit to or on
behalf of current or former officers, directors, employees, or consultants of the Issuer, any of its Restricted Subsidiaries, or any
direct or indirect parent of the Issuer for the purpose of permitting such Persons to purchase Capital Stock of the Issuer or any
direct or indirect parent of the Issuer; provided that, the aggregate amount of such Indebtedness and Investments made pursuant
to clause (8) of the definition of “Permitted Investments” may not exceed $20.0 million at any one time outstanding;
(16) the incurrence by the Issuer and/or any of its Restricted Subsidiaries of Indebtedness solely in respect of
premium financing or similar deferred payment obligations with respect to insurance policies purchased in the ordinary course of
business;
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(17) (a) the incurrence by a wholly owned Foreign Subsidiary (other than a Foreign Subsidiary organized
under the laws of Canada or any province thereof) of the Issuer of additional Indebtedness in an aggregate principal amount,
including all Permitted Refinancing Indebtedness incurred to renew, refund, refinance, replace, defease or discharge any
Indebtedness incurred pursuant to this clause (17)(a), not to exceed the greater of (x) $65.0 million or (y) 1.5% of Total Assets at
any time outstanding and (b) the incurrence by a wholly owned Foreign Subsidiary organized under the laws of Canada or any
province thereof of the Issuer or of any Guarantor of additional Indebtedness in an aggregate principal amount, including all
Permitted Refinancing Indebtedness incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness incurred
pursuant to this clause (17)(b) not to exceed greater of (x) $65.0 million or (y) 1.5% of Total Assets at any time outstanding;
(18) the incurrence of Indebtedness under any agreement between the Issuer or any Restricted Subsidiary
and any commercial bank or other financial institution relating to treasury, depository and cash management services, employee
credit card arrangements or automated clearinghouse transfers of funds;
obligations entered into in the ordinary course of business;
(19) the incurrence of Indebtedness of the Issuer or any Restricted Subsidiary consisting of take-or-pay
joint ventures not to exceed $150.0 million at any time outstanding;
(20) the incurrence of Indebtedness incurred on behalf of, or representing Guarantees of Indebtedness of,
(21) the incurrence by the Issuer or any Restricted Subsidiaries of Obligations in respect of bankers’
acceptances, tender, bid, judgment, appeal, performance or governmental contract bonds and completion guarantees, surety,
standby letters of credit and warranty and contractual service obligations of a like nature, trade letters of credit and documentary
letters of credit and similar bonds or Guarantees provided by the Issuer or any Restricted Subsidiary in the ordinary course of
business;
(22) Indebtedness, Disqualified Stock or preferred stock of Persons that are acquired by the Issuer or any
Restricted Subsidiary or merged into the Issuer or a Restricted Subsidiary in accordance with the terms of this Indenture;
provided that after giving pro forma effect to such acquisition or merger, either:
(A) the Issuer would be permitted to incur at least $1.00 of additional Indebtedness pursuant to
Section 4.09(a); or
acquisition or merger;
(B) the Fixed Charge Coverage Ratio would be greater than that immediately prior to such
(23) the incurrence by the Issuer or any of its Restricted Subsidiaries of additional Indebtedness or
Disqualified Stock in an aggregate principal amount at any time outstanding, including all Permitted Refinancing Indebtedness
incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness incurred pursuant to this clause (23), not to
exceed greater of (x) $200.0 million or (y) 5.0% of Total Assets at any time outstanding;
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acceptances not to exceed $100.0 million at any time outstanding;
(24) the incurrence by Foreign Subsidiaries of Indebtedness in the form of letters of credit or bankers’
(25) Indebtedness incurred by a Receivables Entity in a Qualified Receivables Transaction that is not
recourse to the Issuer or any Restricted Subsidiary other than a Receivables Entity (except for Standard Securitization
Undertakings); and
(26) Indebtedness under a Tax Incentive Transaction.
(c) Any Indebtedness incurred under a Credit Facility pursuant to Section 4.09(b)(1) shall be deemed for purposes of
this covenant to have been incurred on the date such Indebtedness was first incurred until such Indebtedness is actually repaid,
other than pursuant to “cash sweep” provisions or any similar provisions under any Credit Facility that provide that such
Indebtedness is deemed to be repaid daily (or otherwise periodically). For the avoidance of doubt, any Indebtedness incurred to
refinance, refund or replace Indebtedness incurred pursuant to any provision in the definition of Permitted Debt that is limited by
a percentage of Total Assets or by a multiple of Consolidated Cash Flow may be incurred pursuant to such provision, even if such
refinancing, refunding or replacing Indebtedness could not be itself incurred pursuant to such provision at such time.
(d) For purposes of determining compliance with this Section 4.09, in the event that an item of proposed
Indebtedness, Disqualified Stock or preferred stock meets the criteria of more than one of the categories of Permitted Debt
described in clauses (1) through (26) above (or portions thereof), or is entitled to be incurred pursuant to Section 4.09(a), the
Issuer shall, in its sole discretion, divide, classify or reclassify, or later divide, classify, or reclassify, such Indebtedness,
Disqualified Stock or preferred stock (or any portion thereof) in any manner that complies (as if such Indebtedness were incurred
at the time of such reclassification) with this covenant, except that (A) any Indebtedness outstanding under the ABL Credit
Agreement and the Farm Credit Agreement on the Issue Date will be deemed to have been incurred on such date in reliance on
the exception provided by clause (1) of the definition of “Permitted Debt” until repaid, and (B) any Indebtedness outstanding
under the Québec Credit Agreement on the Issue Date will be deemed to have been incurred on such date in reliance on the
exception provided by clause (2)(ii) of the definition of “Permitted Debt” until repaid. The accrual of interest, the accretion or
amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with
the same terms, the reclassification of preferred stock as Indebtedness due to a change in accounting principles, and the payment
of dividends on Disqualified Stock or preferred stock in the form of additional shares of the same class of Disqualified Stock or
preferred stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock or preferred stock for
purposes of this Section 4.09; provided, in each such case, that the amount of any such accrual, accretion or payment is included
in Fixed Charges of the Issuer as accrued. Notwithstanding any other provision of this Section 4.09, the maximum amount of
Indebtedness, Disqualified Stock or preferred stock that the Issuer or any Restricted Subsidiary may incur pursuant to this Section
4.09 shall not be deemed to be exceeded solely as a result of fluctuations in exchange rates or currency values. The amount of
any Indebtedness, Disqualified Stock or preferred stock incurred to refinance other Indebtedness, Disqualified Stock or preferred
stock, if incurred in a different currency from the Indebtedness, Disqualified Stock or preferred stock being refinanced, shall be
calculated based on the currency
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exchange rate applicable to the currencies in which such Permitted Refinancing Indebtedness is denominated that is in effect on
the date of such refinancing.
(e) In connection with the incurrence or issuance, as applicable, of (x) revolving loan Indebtedness under this
covenant or (y) any commitment or other transaction relating to the incurrence or issuance of Indebtedness, Disqualified Stock or
preferred stock under this covenant and the granting of any Lien to secure such Indebtedness, the Issuer or applicable Restricted
Subsidiary may designate such incurrence or issuance and the granting of any Lien therefor as having occurred on the date of first
incurrence of such revolving loan Indebtedness or commitment or intention to consummate such transaction (such date, the
“Deemed Date”), and any related subsequent actual incurrence or issuance and granting of such Lien therefor will be deemed for
all purposes under this Indenture to have been incurred or issued and granted on such Deemed Date, including, without
limitation, for purposes of calculating the Fixed Charge Coverage Ratio, usage of any baskets hereunder (if applicable), the Total
Leverage Ratio, Consolidated Total Debt and Consolidated Cash Flow (and all such calculations on and after the Deemed Date
until the termination or funding of such commitment or until such transaction is consummated or abandoned or such election is
rescinded shall be made on a pro forma basis giving effect to the deemed incurrence or issuance, the granting of any Lien therefor
and related transactions in connection therewith).
(f) The amount of any Indebtedness outstanding as of any date will be:
(1) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue
discount;
lesser of:
(2) the principal amount of the Indebtedness, in the case of any other Indebtedness; and
(3) in respect of Indebtedness of another Person secured by a Lien on the assets of the specified Person, the
(i) the Fair Market Value of such assets at the date of determination; and
(ii) the amount of the Indebtedness of the other Person.
Section 4.10 Asset Sales.
(a) The Issuer will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless:
Sale at least equal to the Fair Market Value of the assets or Equity Interests issued or sold or otherwise disposed of;
(1) the Issuer (or its Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset
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in the form of cash or Cash Equivalents. For purposes of this clause (2), each of the following shall be deemed to be cash:
(2) at least 75% of the consideration received in the Asset Sale by the Issuer or such Restricted Subsidiary is
(i) any liabilities, as shown on the Issuer’s most recent consolidated balance sheet, of the Issuer or
any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any
Note Guarantee) that are (A) assumed by the transferee of any such assets pursuant to a customary assumption or similar
agreement or (B) retired, cancelled or otherwise terminated in connection with such Asset Sale;
(ii) any securities, notes or other obligations received by the Issuer or any such Restricted Subsidiary
from such transferee that are converted by the Issuer or such Restricted Subsidiary into cash or Cash Equivalents within 180 days
of receipt thereof, to the extent of the cash or Cash Equivalents received in that conversion;
(iii) any Designated Non-cash Consideration received by the Issuer or any Restricted Subsidiary
thereof in such Asset Sale having a Fair Market Value, taken together with all other Designated Non-cash Consideration received
pursuant to this clause (iii) that is at that time outstanding, not to exceed the greater of (A) $75.0 million or (B) 2.0% of Total
Assets at the time of receipt of such Designated Non-cash Consideration, with the Fair Market Value of each item of Designated
Non-cash Consideration being measured at the time received without giving effect to subsequent changes in value; and
(iv) any stock or assets of the kind referred to in clause (2), (3) or (4) of Section 4.10(b);
provided that (A) clause Section 4.10(a)(2) above shall not apply if the after-tax portion of the proceeds from the Asset Sale that
are cash and Cash Equivalents is at least equal to what the after-tax proceeds from such Asset Sale that are cash and Cash
Equivalents would have been had Section 4.10(a)(2) been applicable; and (B) with respect to any Asset Sale, the determination of
compliance with Sections 4.10(a)(1) and 4.10(a)(2) above may be made, at the Issuer’s option, at either (x) the time such Asset
Sale is completed or implemented or (y) the time such Asset Sale is approved by the Board of Directors or other appropriate
governing authority of the Issuer.
(b) Within 450 days after the receipt of any Net Proceeds from an Asset Sale, the Issuer (or the applicable Restricted
Subsidiary, as the case may be) may apply such Net Proceeds at its option:
(1) (A) in the case of Net Proceeds from any Asset Sale of assets of any Restricted Subsidiary who is not a
Guarantor, to repay Indebtedness or Pension Obligations of a Restricted Subsidiary or the Issuer or (B) in the case of any other
Net Proceeds, to repay the Credit Facilities or other Indebtedness of the Issuer or a Guarantor and permanently reduce the related
loan commitments or repay Pension Obligations of a Restricted Subsidiary or the Issuer;
(2) to acquire all or substantially all of the assets of, or any Capital Stock of, another Permitted Business, if,
after giving effect to any such acquisition of Capital Stock, the Permitted Business is or becomes a Restricted Subsidiary of the
Issuer;
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(3) to make a capital expenditure; and/or
(4) to acquire other assets that are used or useful in a Permitted Business.
(c) Pending the final application of any Net Proceeds, the Issuer or the applicable Restricted Subsidiary, as the case
may be, may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not
prohibited by this Indenture. Any binding commitment to apply Net Proceeds in accordance with clause (1), (2), (3) or (4) of
Section 4.10(b) shall be treated as a permitted final application of Net Proceeds from the date of such commitment so long as the
Issuer or such Restricted Subsidiary enters into such commitment with the good faith expectation that substantially all of such
Net Proceeds will be applied to satisfy such commitment within such 450-day period (an “Acceptable Commitment”); provided
that in the event any Acceptable Commitment is later cancelled or terminated for any reason before all or some of the Net
Proceeds are so applied in connection therewith, then such Net Proceeds not so applied shall constitute Excess Proceeds (as
defined in the next succeeding paragraph) unless the Issuer or such Restricted Subsidiary enters into another Acceptable
Commitment prior to the date which is the later of (i) the date which is 180 days after such cancellation or termination (but not
later than 630 days after the receipt of any Net Proceeds) and (ii) the date which is 450 days after the receipt of any Net Proceeds
(an “Additional Commitment”); provided, further, that to the extent any such remaining Net Proceeds are not applied prior to the
later of the date which is 180 days after such Additional Commitment and the date which is 450 days after the receipt of any Net
Proceeds or if such Additional Commitment is later cancelled or terminated for any reason before such Net Proceeds are so
applied and another Additional Commitment is not entered into in the time period described above, then such Net Proceeds not so
applied shall constitute Excess Proceeds. For purposes of the foregoing paragraph, the commencement of the construction or
improvement of a facility or site or other long-term capital or engineering project (each, a “Long-Term Capital Project”) shall
constitute the application of the Net Proceeds expected in good faith by the Issuer to be used in such Long-Term Capital Project,
notwithstanding the fact that such Net Proceeds may not be actually used until after the deadlines set forth in the foregoing
paragraph; provided that, to the extent such Net Proceeds are not actually used in such Long-Term Capital Project prior to its
completion, they shall constitute Excess Proceeds as of the date such Long-Term Capital Project is complete.
(d) Any Net Proceeds from Asset Sales that are not applied or invested as provided in Section 4.10(b) and (c) will
constitute “Excess Proceeds.” When the aggregate amount of Excess Proceeds exceeds $50.0 million, within 30 days thereof, the
Issuer will make an offer (a “Net Proceeds Offer”) to all Holders of Notes and to the holders of any Indebtedness ranking pari
passu with the Notes (“Pari Passu Indebtedness”) containing provisions similar to those set forth in this Section 4.10 with respect
to asset sales to purchase the maximum principal amount of Notes and such other Pari Passu Indebtedness (plus all accrued
interest and the amount of all fees and expenses, including premiums, incurred in connection therewith) that may be purchased
out of the Excess Proceeds. The offer price in any Net Proceeds Offer will be equal to 100% of the principal amount (or 100% of
the accreted value thereof, in the case of Notes or Pari Passu Indebtedness issued with more than de minimis original issue
discount for purposes of the Code), plus accrued and unpaid interest, if any, to, but not including, the date of purchase, and will
be payable in cash.
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(e) The Net Proceeds Offer shall be made to all Holders and, except as provided Section 4.10(b), all holders of Pari
Passu Indebtedness containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem
with the proceeds of sales of assets. The Net Proceeds Offer will remain open for a period of at least 20 Business Days following
its commencement and not more than 30 Business Days, except to the extent that a longer period is required by applicable law
(the “Offer Period”). No later than three Business Days after the termination of the Offer Period (the “Purchase Date”), the Issuer
will apply all Excess Proceeds (the “Offer Amount”) to the purchase of Notes and, except as provided above, such other Pari
Passu Indebtedness (on a pro rata basis, with such adjustments as may be needed so that only Notes in minimum amounts of
$2,000 and integral multiples of $1,000 in excess thereof will be purchased) or, if less than the Offer Amount has been tendered,
all Notes and such other Pari Passu Indebtedness tendered in response to the Net Proceeds Offer. Payment for any Notes so
purchased will be made in the same manner as interest payments are made.
(f) If the Purchase Date is on or after a Record Date and on or before the related Interest Payment Date, any accrued
and unpaid interest will be paid to the Person in whose name a Note is registered at the close of business on such Record Date,
and no additional interest will be payable to Holders who tender Notes pursuant to the Net Proceeds Offer.
(g) Upon the commencement of a Net Proceeds Offer, the Issuer will send a notice thereof to each of the Holders,
with a copy to the Trustee. The notice will contain all instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Net Proceeds Offer. The notice, which will govern the terms of the Net Proceeds Offer, will state:
Proceeds Offer will remain open;
(1) that the Net Proceeds Offer is being made pursuant to this Section 4.10 and the length of time the Net
(2) the Offer Amount, the purchase price and the Purchase Date;
(3) that any Note not tendered or accepted for payment will continue to accrue interest;
Net Proceeds Offer will cease to accrue interest on and after the Purchase Date;
(4) that, unless the Issuer defaults in making such payment, any Note accepted for payment pursuant to the
(5) that Holders electing to have a Note purchased pursuant to any Net Proceeds Offer may elect to have
Notes purchased in denominations of $1,000 or integral multiples of $1,000 in excess thereof only (except that no Note may be
purchased in part to the extent the remaining portion of such Note would be less than $2,000);
(6) that Holders electing to have Notes purchased pursuant to any Net Proceeds Offer will be required to
surrender the Note, with the form entitled “Option of Holder to Elect Purchase” attached to the Notes completed, or transfer by
book-entry transfer, to the Issuer, a Depositary, if appointed by the Issuer, or a Paying Agent at the address specified in the notice
at least three days before the Purchase Date;
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(7) that Holders will be entitled to withdraw their election if the Issuer, the Depositary or the Paying Agent,
as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(8) that, except as provided above, if the aggregate principal amount of Notes and other Pari Passu
Indebtedness surrendered by holders thereof exceeds the Offer Amount, the Issuer will select the Notes and other Pari Passu
Indebtedness to be purchased on a pro rata basis based on the principal amount of Notes and such other Pari Passu Indebtedness
surrendered (with such adjustments as may be deemed appropriate by the Issuer so that only Notes in denominations of $2,000
and integral multiples of $1,000 in excess thereof will remain outstanding); and
amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer).
(9) that Holders whose Notes were purchased only in part will be issued new Notes equal in principal
(h) On or before the Purchase Date, the Issuer will, to the extent lawful, accept for payment, on a pro rata basis to
the extent necessary and consistent with the provisions of this Section 4.10, the Offer Amount of Notes or portions thereof
tendered pursuant to the Net Proceeds Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and will
deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officer’s Certificate stating that such
Notes or portions thereof were accepted for payment by the Issuer in accordance with the terms of this Section 4.10. The Issuer,
the Depositary or the Paying Agent, as the case may be, will promptly (but in any case not later than five days after the Purchase
Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and
accepted by the Issuer for purchase, and the Issuer will promptly issue a new Note, and the Trustee, upon written request from the
Issuer, will authenticate and mail or deliver (or cause to be transferred by book-entry) such new Note to such Holder, in a
principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed
or delivered by the Issuer to the Holder thereof. The Issuer will publicly announce the results of the Net Proceeds Offer on the
Purchase Date.
(i) If any Excess Proceeds remain after consummation of a Net Proceeds Offer, the Issuer may use those Excess
Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and Pari Passu
Indebtedness tendered into such Net Proceeds Offer exceeds the amount of Excess Proceeds, the Issuer will apply the Excess
Proceeds to the Notes and Pari Passu Indebtedness on a pro rata basis with such adjustments as may be needed so that only Notes
in minimum amounts of $2,000 and integral multiples of $1,000 in excess thereof will be purchased. Upon completion of each
Net Proceeds Offer, the amount of Excess Proceeds will be reset at zero. If the Issuer makes a Net Proceeds Offer prior to the
deadline specified in Section 4.10(d), as applicable, with respect to any Net Proceeds, the Issuer’s obligations with respect to such
Net Proceeds under this covenant shall be deemed satisfied after completion of such Net Proceeds Offer.
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(j) The Issuer will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are applicable in connection with each repurchase of
Notes pursuant to a Net Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict with the
provisions of this Section 4.10, the Issuer will comply with the applicable securities laws and regulations and will not be deemed
to have breached its obligations under this Section 4.10 by virtue of such compliance.
(k) For purposes of this Section 4.10, any Additional Notes shall be deemed to be Notes and not Pari Passu
Indebtedness.
(l) For the avoidance of doubt, even if a transaction falls into one or more categories of the exceptions to the
definition of “Asset Sale,” the Issuer may choose to treat such transaction as an Asset Sale in accordance with this Section 4.10.
(m) Notwithstanding any other provisions of this Section 4.10:
(1) To the extent that the Issuer determines in good faith (as evidenced by an Officer’s Certificate setting
forth in reasonable detail the grounds for such determination) that the application of an amount equal to any of or all the Net
Proceeds of any Asset Sale by a Foreign Subsidiary (a “Foreign Disposition”) in accordance with the terms of this covenant is (x)
prohibited or delayed by applicable local law or (y) would result in the Issuer having to make a tax payment that would be
material to the Issuer and its Subsidiaries, taken as a whole (each of (x) and (y) an “Impediment to Net Proceeds Application”), in
each case, after the Issuer and the Restricted Subsidiaries have used all commercially reasonable efforts to remove or eliminate
such Impediment to Net Proceeds Application, an amount equal to the portion of such Net Proceeds so affected will not be
required to be applied in compliance with this covenant (the Issuer hereby agreeing to continue to take and to cause the
applicable Foreign Subsidiary to continue to take all commercially reasonable actions available to remove or eliminate such
Impediment to Net Proceeds Application), and once such Impediment to Net Proceeds Application is no longer applicable, any
affected amounts of Net Proceeds will be promptly (and in any event not later than 10 business days after such application could
be made) applied (net of additional taxes payable or reserved against as a result thereof) (whether or not any application or
associated repatriation actually occurs) in compliance with this covenant;
(2) To the extent that the Issuer has determined in good faith (as evidenced by an Officer’s Certificate setting
forth in reasonable detail the grounds for such determination) that application of any of or all the Net Proceeds of any Foreign
Disposition would have an adverse tax consequence that would be material to the Issuer and its Subsidiaries, taken as a whole
(which for the avoidance of doubt, includes, but is not limited to, any repatriation whereby doing so the Issuer, any Restricted
Subsidiary, or any of their respective affiliates and/or equity owners would incur a tax liability that would be material to the
Issuer and its Subsidiaries, taken as a whole, including as a result of a dividend or deemed dividend, or a withholding tax that
would be material to the Issuer and its Subsidiaries, taken as a whole, but taking into account any foreign tax credit or benefit
received in connection with such application) with respect to such Net Proceeds, an amount equal to the Net Proceeds so affected
will not be required to be applied in accordance with this covenant; provided that, in any event,
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the Issuer shall take all commercially reasonable actions available to remove or eliminate such tax effects; and
for the avoidance of doubt, constitute a Default or an Event of Default.
(3) The non-application of any prepayment amounts as a consequence of the foregoing provisions will not,
Section 4.11 Transactions with Affiliates.
(a) The Issuer will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or
amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of
the Issuer (each an “Affiliate Transaction”) involving aggregate payments or consideration in excess of $25.0 million, unless:
(1) the Affiliate Transaction (or series of related Affiliate Transactions, taken together as a whole) is on
terms that are no less favorable to the Issuer or the relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Issuer or such Restricted Subsidiary with an unrelated Person; and
(2) the Issuer delivers to the Trustee with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $50.0 million, a resolution of the Board of Directors of the Issuer set
forth in an Officer’s Certificate certifying that such Affiliate Transaction complies with this Section 4.11 and that such Affiliate
Transaction has been approved by a majority of the members of the Board of Directors of the Issuer.
(b) The following items will not be deemed to be Affiliate Transactions and, therefore, will not be subject to the
provisions of Section 4.11(a):
(1) any consulting or employment agreement or arrangements, incentive compensation plan, stock option or
stock ownership plan, employee benefit plan, severance arrangements, officer or director indemnification agreement or any
similar arrangement entered into by the Issuer or any of its Restricted Subsidiaries in the ordinary course of business for the
benefit of directors, officers, employees and consultants of the Issuer or a direct or indirect parent of the Issuer and payments and
transactions pursuant thereto and payments pursuant thereto;
(2) transactions between or among the Issuer and/or its Restricted Subsidiaries;
(3) transactions with a Person (other than an Unrestricted Subsidiary of the Issuer) that is an Affiliate of the
Issuer solely because the Issuer owns, directly or through a Restricted Subsidiary, an Equity Interest in, or controls, such Person;
(4) payment of reasonable directors’ fees;
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of Equity Interests (other than Disqualified Stock) of the Issuer or any contribution of capital to the Issuer;
(5) any transaction in which the only consideration paid by the Issuer or any Restricted Subsidiary consists
described in clauses (4), (5), (10) and (12) of the definition thereof);
(6) Restricted Payments that do not violate Section 4.07 or that are Permitted Investments (other than those
(7) any agreement, instrument or arrangement as in effect on the Issue Date or any amendment thereto (so
long as such amendment is not materially more disadvantageous, taken as a whole, than the applicable agreement, instrument or
arrangement, as in effect on the Issue Date, as determined in good faith by the Issuer);
(8) the provision by the Issuer or any of its Restricted Subsidiaries of ordinary-course administrative and
other services, including, without limitation, any accounting, legal, treasury, credit and cash management, management,
marketing, sales, labor, customer relations, indemnification, logistics, human resources, tax, insurance and procurement services,
to joint ventures and Unrestricted Subsidiaries;
aggregate at any one time outstanding;
(9) loans or advances to employees in the ordinary course of business not to exceed $5.0 million in the
(10) transactions between the Issuer or any Restricted Subsidiary and any Person that is an Affiliate of the
Issuer or any Restricted Subsidiary solely because a director of such Person is also a director of the Issuer or any direct or indirect
parent entity of the Issuer; provided that such director abstains from voting as a director of the Issuer or any direct or indirect
parent entity of the Issuer, as the case may be, on any matter involving such other Person;
(11) purchase or sale of goods and/or services in the ordinary course of business on terms that are no less
favorable to the Issuer or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction
by the Issuer or such Restricted Subsidiary with an unrelated Person;
(12) if such Affiliate Transaction is with an Affiliate in its capacity as a holder of Indebtedness of the Issuer
or any Restricted Subsidiary, a transaction in which such Affiliate is treated no more favorably than other similarly situated
holders of Indebtedness of the Issuer or such Restricted Subsidiary;
(13) any capital contribution to any Affiliate otherwise permitted by this Indenture;
(14) transactions with any joint venture engaged in a Permitted Business; provided that all the outstanding
ownership interests of such joint venture are owned only by the Issuer, its Restricted Subsidiaries and other wholly owned
Subsidiaries and other Persons that are not Affiliates of the Issuer;
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(15) any Investment of the Issuer or any of its Restricted Subsidiaries existing on the Issue Date, and any
extension, modification or renewal of such existing Investments, to the extent not involving any additional Investment other than
as the result of the accrual or accretion of interest or original issue discount or the issuance of pay-in-kind securities, in each case,
pursuant to the terms of such Investments as in effect on the Issue Date;
Investment;
(16) transactions between a Receivables Entity and any Person in which the Receivables Entity has an
(17) pledges of Equity Interests of Unrestricted Subsidiaries; and
(18) the formation and maintenance of any consolidated group or subgroup for tax, accounting or cash
pooling or management purposes in the ordinary course of business or transactions undertaken in good faith for the purpose of
improving the consolidated tax efficiency of the Issuer and its Subsidiaries and not for the purpose of circumventing any
provision of this Indenture.
Section 4.12 Liens.
(a) The Issuer will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly create, incur or
assume any Lien (each, an “Initial Lien”) of any kind securing Indebtedness on any asset now owned or hereafter acquired,
except Permitted Liens, unless;
(1) in the case of Liens securing Indebtedness that is contractually subordinated to the Notes or any Note
Guarantee, the Notes and related Note Guarantees are secured by a Lien on such property, assets or proceeds that is senior in
priority to such Liens; or
(2) in all other cases, the Notes or the Note Guarantees are secured in a senior basis to the Initial Lien or are
equally and ratably secured with such Initial Lien, except that the foregoing shall not apply to Liens securing the Notes and the
related Note Guarantees.
Any Lien created for the benefit of the holders of the Notes pursuant to the preceding sentence shall provide by its terms that
such Lien shall be automatically and unconditionally released and discharged upon the release and discharge of the Initial Lien.
(b) For purposes of determining compliance with this Section 4.12, (A) a Lien securing an item of Indebtedness
need not be permitted solely by reference to paragraph (a) above or to one category (or portion thereof) of Permitted Liens
described in clauses (1) through (40) of the definition of ‘‘Permitted Liens’’ but may be permitted in part under any combination
thereof and (B) in the event that a Lien securing an item of Indebtedness (or any portion thereof) meets the criteria of paragraph
(a) above or one or more of the categories (or portions thereof) of Permitted Liens described in clauses (1) through (40) of the
definition of ‘‘Permitted Liens,’’ the Issuer shall, in its sole discretion, divide, classify or reclassify, or later divide, classify, or
reclassify, such Lien securing such item of Indebtedness (or any portion thereof) in any manner that complies (as if such Lien
were incurred at the time of such reclassification) with this Section 4.12.
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(c) With respect to any Lien securing Indebtedness that was permitted to secure such Indebtedness at the time of the
incurrence of such Indebtedness, such Lien shall also be permitted to secure any Increased Amount of such Indebtedness. The
‘‘Increased Amount’’ of any Indebtedness shall mean any increase in the amount of such Indebtedness in connection with any
accrual of interest, the accretion of accreted value, the amortization of original issue discount, the payment of interest in the form
of additional Indebtedness with the same terms or in the form of common equity of the Issuer or any direct or indirect parent of
the Issuer and increases in the amount of Indebtedness outstanding solely as a result of fluctuations in the exchange rates or
currency values or increases in the value of property securing Indebtedness described in the definition of “Indebtedness.”
Section 4.13 Corporate Existence. Subject to Article 5, the Issuer shall do or cause to be done all things necessary to
preserve and keep in full force and effect:
(a) its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance
with the respective organizational documents of the Issuer or any such Subsidiary; and
(b) the rights (charter and statutory), licenses and franchises of the Issuer and its Subsidiaries; provided, however,
that the Issuer shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other
existence of any of its Subsidiaries (other than the Issuer), if the Issuer shall determine in good faith that the preservation thereof
is no longer desirable in the conduct of the business of the Issuer and its Subsidiaries, taken as a whole, and that the loss thereof
would not reasonably be expected to have a material adverse effect on the Issuer and its Subsidiaries, taken as a whole.
Section 4.14 Offer to Repurchase upon Change of Control.
(a) Upon the occurrence of a Change of Control, the Issuer will make an offer (a “Change of Control Offer”) to each
Holder to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in excess thereof) of that Holder’s Notes at
a purchase price in cash equal to 101% of the aggregate principal amount of Notes repurchased, plus accrued and unpaid interest
on the Notes repurchased to, but not including, the date of purchase, subject to the rights of Holders on the relevant Record Date
to receive interest due on the relevant Interest Payment Date (the “Change of Control Payment”). Within 30 days following any
Change of Control, the Issuer will send a notice to each Holder with a copy to the Trustee describing the transaction or
transactions that constitute the Change of Control and stating:
will be accepted for payment;
(1) that the Change of Control Offer is being made pursuant to this Section 4.14 and that all Notes tendered
from the date such notice is sent (the “Change of Control Payment Date”);
(2) the purchase price and the purchase date, which shall be no earlier than 15 days and no later than 60 days
(3) that any Note not tendered will continue to accrue interest;
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(4) that, unless the Issuer defaults in the payment of the Change of Control Payment, all Notes accepted for
payment pursuant to the Change of Control Offer will cease to accrue interest on and after the Change of Control Payment Date;
(5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required
to surrender the Notes, with the form entitled “Option of Holder to Elect Purchase” attached to the Notes completed, or transfer
by book-entry transfer, to the Paying Agent at the address specified in the notice prior to the close of business on the third
Business Day preceding the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the
close of business on the second Business Day preceding the Change of Control Payment Date, a facsimile transmission or letter
setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is
withdrawing his election to have the Notes purchased; and
(7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal
amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $2,000 in principal
amount or an integral multiple of $1,000 in excess thereof.
(b) On the Change of Control Payment Date, the Issuer will, to the extent lawful:
Offer;
(1) accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control
or portions of Notes properly tendered; and
(2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes
Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Issuer.
(3) deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officer’s
The Paying Agent will promptly pay to each Holder of Notes properly tendered the Change of Control Payment for such
Notes as directed by the Issuer in writing, and the Trustee will promptly authenticate upon an authentication order from the Issuer
and deliver (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased
portion of the Notes surrendered, if any; provided that each new Note will be in denominations of $2,000 and integral multiples
of $1,000 in excess of $2,000. The Issuer will publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(c) The Issuer will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the
Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the
provisions of this Section 4.14, the Issuer will comply with the applicable
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securities laws and regulations and will not be deemed to have breached its obligations under this Section 4.14 by virtue of such
compliance.
(d) Notwithstanding anything to the contrary in this Section 4.14, the Issuer will not be required to make a Change
of Control Offer upon a Change of Control if (1) a third party makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in this Section 4.14 and purchases all Notes properly tendered and not
withdrawn under the Change of Control Offer or (2) a notice of redemption has been given for all of the Notes pursuant to this
Indenture as described in Article 3, unless and until there is a default in payment of the applicable redemption price.
Notwithstanding anything to the contrary contained herein, a Change of Control Offer may be made in advance of a Change of
Control or conditional upon the consummation of such Change of Control, if a definitive agreement is in place for the Change of
Control at the time the Change of Control Offer is made.
(e) For the avoidance of doubt, any dividends or distributions on Capital Stock will not be deemed to be the sale,
lease, transfer, conveyance or other disposition of “all or substantially all” of the properties or assets of the Issuer and its
Subsidiaries taken as a whole to a “Person or group” that is subject to this Section 4.14 and will be subject to Section 4.07.
Section 4.15 Termination of Certain Covenants When Notes Rated Investment Grade.
If on any date following the Issue Date (i) the Notes have Investment Grade Ratings from both Rating Agencies, and
(ii) no Default has occurred and is continuing under this Indenture (the occurrence of the events described in the foregoing
clauses (i) and (ii) being collectively referred to as a “Covenant Termination Event”), then, beginning on that day and for all
periods thereafter, the following covenants and the related Events of Default pursuant to these specific covenants will cease to
apply and will not be later reinstated even if one or both of the Rating Agencies withdraw their Investment Grade Rating or
downgrade the rating assigned to the Notes below an Investment Grade Rating:
(1) Section 4.07;
(2) Section 4.08;
(3) Section 4.09;
(4) Section 4.10;
(5) Section 4.11;
(6) Section 4.16;
(7) Section 4.17; and
(8) Section 5.01(a)(4).
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No Subsidiaries shall be designated as Unrestricted Subsidiaries following a Covenant Termination Event. The Issuer
shall send written notice to the Trustee promptly after the occurrence of any Covenant Termination Event; provided that the
failure to so notify the Trustee shall not be a default or breach under this Indenture. The Trustee shall have no duty to monitor the
ratings of the Notes, shall not be deemed to have any knowledge of the ratings of the Notes and shall have no duty to notify
Holders if a Covenant Termination Event has occurred.
Section 4.16 Additional Note Guarantees. If (a) the Issuer or any of its Restricted Subsidiaries acquires or creates
another Wholly Owned Restricted Subsidiary after the Issue Date and such Wholly Owned Restricted Subsidiary guarantees a
Credit Facility of the Issuer or a Guarantor, or (b) any of the Issuer’s Restricted Subsidiaries that is not a Guarantor guarantees a
Credit Facility of the Issuer or a Guarantor, then that newly acquired or created Wholly Owned Restricted Subsidiary or
Restricted Subsidiary, as applicable, will become a Guarantor of the Notes and execute a supplemental indenture, and deliver an
opinion of counsel that such supplemental indenture is authorized or permitted under this Indenture and an Officer’s Certificate
with respect to such supplemental indenture reasonably satisfactory to the Trustee within 20 business days of the date on which it
guaranteed a Credit Facility. The preceding sentence shall not apply to (x) a Foreign Subsidiary or (y) a Restricted Subsidiary
that, when taken together with each other Restricted Subsidiary that is not a Guarantor solely as a result of this clause (y)
accounts for less than 1.0% of the Total Assets of the Issuer and its consolidated Restricted Subsidiaries and less than 1.0% of the
consolidated revenue of the Issuer and its Restricted Subsidiaries.
Section 4.17 Designation of Restricted and Unrestricted Subsidiaries. The Board of Directors of the Issuer may
designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted
Subsidiary is designated as an Unrestricted Subsidiary, the aggregate Fair Market Value of all outstanding Investments owned by
the Issuer and its Restricted Subsidiaries in the Restricted Subsidiary designated as an Unrestricted Subsidiary will be deemed to
be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under
Section 4.07 or under one or more clauses of the definition of “Permitted Investments”, as determined by the Issuer. That
designation will only be permitted if the Investment would be permitted at that time. The Board of Directors of the Issuer may
redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if that redesignation would not cause a Default.
Any designation of a Subsidiary of the Issuer as an Unrestricted Subsidiary will be evidenced to the Trustee by filing with
the Trustee a certified copy of a resolution of the Board of Directors giving effect to such designation and an Officer’s Certificate
certifying that such designation complied with the preceding conditions and was permitted by Section 4.07. The Board of
Directors of the Issuer may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary of the Issuer;
provided that such designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Issuer of any
outstanding Indebtedness of such Unrestricted Subsidiary, and such designation will only be permitted if (1) such Indebtedness is
permitted under Section 4.09, calculated on a pro forma basis as if such designation had occurred at the beginning of the four-
quarter reference period; and (2) no Default or Event of Default would be in existence following such designation.
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ARTICLE 5
SUCCESSORS
Section 5.01 Merger, Consolidation, or Sale of Assets.
(a) The Issuer shall not, directly or indirectly: (i) consolidate, merge or amalgamate with or into another Person
(whether or not the Issuer is the surviving corporation); or (ii) sell, assign, transfer, convey or otherwise dispose of all or
substantially all of the properties or assets of the Issuer and its Restricted Subsidiaries taken as a whole, in one or more related
transactions, to another Person, unless:
(1) either:
(i) the Issuer is the surviving corporation;
(ii) the Person formed by or surviving any such consolidation, merger or amalgamation (if other than
the Issuer) or to which such sale, assignment, transfer, conveyance or other disposition has been made is organized or existing
under the laws of the United States, any state of the United States or the District of Columbia and is either (A) a corporation or
(B) a partnership or limited liability company and is (or has previously been) joined by a corporation as a co-issuer of the Notes;
or
(iii) the Person formed by or surviving any such consolidation, merger or amalgamation (if other than
the Issuer) or to which such sale, assignment, transfer, conveyance or other disposition has been made is organized or existing
under the laws of Canada or a subdivision thereof and is joined as a co-issuer of the Notes by a corporation organized or existing
organized or existing under the laws of the United States, any state of the United States or the District of Columbia;
(2) the Person formed by or surviving any such consolidation, merger or amalgamation (if other than the
Issuer) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes by a
supplemental indenture all the obligations of the Issuer under the Notes and this Indenture;
(3) immediately after such transaction, no Default or Event of Default exists; and
(4) the Issuer or the Person formed by or surviving any such consolidation, merger or amalgamation (if other
than the Issuer), or to which such sale, assignment, transfer, conveyance or other disposition has been made would, on the date of
such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the
beginning of the applicable four-quarter period, (i) be permitted to incur at least $1.00 of additional Indebtedness pursuant to
Section 4.09(a) or (ii) have had a Fixed Charge Coverage Ratio equal to or greater than the Fixed Charge Coverage Ratio of the
Issuer immediately prior to such transaction.
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(b) In addition, the Issuer will not, directly or indirectly, lease all or substantially all of the properties and assets of
the Issuer and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to any other Person.
(c) In the case of a dividend of the shares of a Person (the “SpinCo”) that constitutes a sale, assignment, transfer,
conveyance or disposition of all or substantially all of the properties or assets of the Issuer and its Restricted Subsidiaries taken as
a whole, Sections 5.01(a)(1), 5.01(a)(2) and 5.01(a)(4) shall be deemed satisfied if the SpinCo satisfies the requirements of
Sections 5.01(a)(1), 5.01(a)(2) and 5.01(a)(4) in lieu of the “Person” referred to therein.
(d) This Section 5.01 will not apply to:
(1) a merger, amalgamation or consolidation of the Issuer with an Affiliate solely for the purpose of
(i) reorganizing the Issuer as a different type of entity; provided that in the case where the surviving
entity in such merger, amalgamation or consolidation is not a corporation, a corporation becomes (or has previously become) a
co-issuer of the Notes; or
complies with Sections 5.01(a)(1) and (2); or
(ii) reincorporating or reorganizing the Issuer in another jurisdiction, in each case in a transaction that
disposition of assets between or among the Issuer and its Restricted Subsidiaries.
(2) any consolidation, amalgamation or merger, or any sale, assignment, transfer, conveyance, lease or other
Section 5.02 Successor Corporation Substituted. Upon any consolidation, amalgamation or merger, or any sale,
assignment, transfer, lease, conveyance or other disposition of all or substantially all of the properties or assets of the Issuer in a
transaction that is subject to, and that complies with the provisions of, Section 5.01, the successor Person formed by such
consolidation or amalgamation or into or with which the Issuer is merged or to which such sale, assignment, transfer, lease,
conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such
consolidation, amalgamation, merger, sale, assignment, transfer, lease, conveyance or other disposition, the provisions of this
Indenture referring to “the Issuer” shall refer instead to the successor Person and not to previous Issuer), and may exercise every
right and power of the Issuer under this Indenture with the same effect as if such successor Person had been named as the Issuer
herein; provided, however, that the predecessor Issuer shall not be relieved from the obligation to pay the principal of and
premium, if any, or interest on the Notes in the case of a lease of all or substantially all of the Issuer’s property and assets in a
transaction that is subject to, and that complies with the provisions of, Section 5.01.
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ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 Events of Default.
Each of the following is an “Event of Default”:
(1) default for 30 days in the payment when due of interest on the Notes;
premium, if any, on, the Notes;
(2) default in the payment when due (at maturity, upon redemption or otherwise) of the principal of and
(3) failure by the Issuer or any of its Restricted Subsidiaries for 30 days after notice to the Issuer by the
Trustee or the Holders of at least 30% in aggregate principal amount of the Notes then outstanding voting as a single class to
comply with Sections 4.10, 4.14 or 5.01;
(4) failure by the Issuer or any of its Restricted Subsidiaries for 60 days after notice to the Issuer by the
Trustee or the Holders of at least 30% in aggregate principal amount of the Notes then outstanding voting as a single class to
comply with any of the other agreements in this Indenture;
(5) default under any mortgage, indenture or instrument under which there may be issued or by which there
may be secured or evidenced any Indebtedness for money borrowed by the Issuer or any of its Significant Subsidiaries (or any
group of its Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) (or the payment of which is
guaranteed by the Issuer or any of its Significant Subsidiaries (or any group of its Restricted Subsidiaries that, taken together,
would constitute a Significant Subsidiary)), other than Indebtedness owed to the Issuer or a Restricted Subsidiary, whether such
Indebtedness or Guarantee now exists, or is created after the Issue Date, if that default:
(i) is caused by a failure to pay principal of, or interest or premium, if any, on, such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a “Payment Default”); or
(ii) results in the acceleration of such Indebtedness prior to its express maturity,
and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $50.0
million or more;
(6) failure by the Issuer, any Significant Subsidiary of the Issuer or any group of its Restricted Subsidiaries
that, taken together, would constitute a Significant Subsidiary to pay final and non-appealable judgments entered by a court or
courts of competent jurisdiction aggregating in excess of $50.0 million (net of any amounts covered by insurance or pursuant to
which the Issuer is indemnified to the extent that the third party under such agreement
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acknowledges its obligations thereunder), which judgments are not paid, discharged or stayed for a period of 60 days and, in the
event such judgment is covered by insurance, an enforcement proceeding has been commenced by any creditor upon such
judgment or decree that is not promptly stayed;
(7) the Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted
Subsidiaries of the Issuer that, taken together, would constitute a Significant Subsidiary pursuant to or within the meaning of
Bankruptcy Law (in each case, with respect to the commencement of such action, but not any actions taken in furtherance of the
proceedings so commenced):
of arrangement, moratorium, liquidation, administration, or receivership or other proceeding,
(i) commences a voluntary case, application, petition, compromise, voluntary arrangement, scheme
other proceeding,
(ii) consents to the entry of an order for relief against it in an involuntary case, application, petition or
administrator or liquidator of it or for all or substantially all of its property,
(iii) consents to the appointment of a custodian, receiver, receiver-manager, administrative receiver,
(iv) makes a general assignment for the benefit of its creditors, begins negotiations with any creditor
for the rescheduling or restructuring of any of its debts, a moratorium is declared or instituted, or any step is taken with a view to
a moratorium or composition or similar arrangement with its creditors,
(v) generally is not paying its debts as they become due; or is unable or admits in writing its inability,
to pay its debts as such debts become due or is otherwise insolvent or by reason of actual or anticipated financial difficulties,
suspends making payments on any of its debts, or announces an intention to do so, or its shareholders, directors or other officers
request the appointment of, or give notice of their intention to appoint, a receiver, receiver-manager, administrative receiver,
administrator, liquidator or other officer having similar powers over its property, or
is insolvent.
(vi) is deemed for the purposes of any applicable law to be unable to pay its debts as they fall due, or
with respect to the commencement of such action, but not any actions taken in furtherance of the proceedings so commenced):
(8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (in each case,
or any group of Restricted Subsidiaries of the Issuer that, taken together, would constitute a Significant Subsidiary in an
involuntary case, application, petition or other proceeding;
(i) is for relief against the Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary
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(ii) appoints a custodian, receiver, receiver-manager, administrative receiver, administrator,
liquidator, or other similar officer of the Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group
of Restricted Subsidiaries of the Issuer that, taken together, would constitute a Significant Subsidiary or for all or substantially all
of the property of the Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted
Subsidiaries of the Issuer that, taken together, would constitute a Significant Subsidiary; or
Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries of the Issuer that, taken together, would
constitute a Significant Subsidiary; and
(iii) orders the liquidation, administration or receivership of the Issuer or any of its Restricted
consecutive days; or
(iv) in the case of (i), (ii) or (iii), the order or decree remains unstayed and in effect for 60
(9) except as permitted by this Indenture, any Note Guarantee of any Significant Subsidiary (or any group of
its Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) is held in any judicial proceeding to be
unenforceable or invalid or ceases for any reason to be in full force and effect (other than subsequent to the initiation of certain
events of bankruptcy or insolvency described in Section 6.01(7) and (8) above), or any Guarantor that is a Significant Subsidiary
(or any group of its Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary), or any Person acting
on behalf of any such Guarantor, denies or disaffirms its obligations under its Note Guarantee.
Section 6.02 Acceleration. In the case of an Event of Default specified in clause (7) or (8) of Section 6.01, with respect
to the Issuer, any Restricted Subsidiary of the Issuer that is a Significant Subsidiary or any group of Restricted Subsidiaries of the
Issuer that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable
immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of
at least 30% in aggregate principal amount of the then outstanding Notes may declare all the Notes to be due and payable
immediately.
Upon any such declaration, the Notes shall become due and payable immediately.
Section 6.03 Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available
remedy to collect the payment of principal and premium if any, and interest on the Notes or to enforce the performance of any
provision of this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in
the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an
Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
Section 6.04 Waiver of Past Defaults. Holders of not less than a majority in aggregate principal amount of the then
outstanding Notes by written notice to the Trustee may on behalf of
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the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing
Default or Event of Default in the payment of the principal of and premium if any, or interest on, the Notes (including in
connection with an offer to purchase); provided, however, that the Holders of a majority in aggregate principal amount of the
then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted
from such acceleration. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
Section 6.05 Control by Majority. Holders of a majority in aggregate principal amount of the then outstanding Notes
may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject
to the occurrence and continuation of an Event of Default, or exercising any trust or power conferred on it. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial
to the rights of other Holders of Notes or that may subject the Trustee to personal liability or expense. Notwithstanding the
foregoing, the Trustee shall have the right to select and retain counsel of its choosing to represent of in any such proceedings.
Section 6.06 Limitation on Suits. A Holder may pursue a remedy with respect to this Indenture or the Notes only if:
(1) such Holder gives to the Trustee written notice that an Event of Default has occurred and is continuing;
request to the Trustee to pursue the remedy;
(2) Holders of at least 30% in aggregate principal amount of the then outstanding Notes make a written
to the Trustee against any loss, liability or expense;
(3) such Holder or Holders offer and, if requested, provide to the Trustee security or indemnity satisfactory
security or indemnity; and
(4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of
Notes do not give the Trustee a direction inconsistent with such request.
(5) during such 60-day period, Holders of a majority in aggregate principal amount of the then outstanding
A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference
or priority over another Holder of a Note.
Section 6.07 Rights of Holders of Notes to Receive Payment. Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal and premium, if any, and interest on the Note, on or after the
respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such
Holder.
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Section 6.08 Collection Suit by Trustee. If an Event of Default specified in Section 6.01(1) or (2) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Issuer and
Guarantors for the whole amount of principal of and premium, if any, and interest remaining unpaid on, the Notes and interest on
overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses
of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and
counsel.
Section 6.09 Trustee May File Proofs of Claim. The Trustee is authorized to file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed
in any judicial proceedings relative to the Issuer or the Issuer (or any other obligor upon the Notes), its creditors or its property
and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any
such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the
Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be
secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the
Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement
or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any
Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.
Section 6.10 Priorities. If the Trustee collects any money or property pursuant to this Article 6, it shall pay out the
money or property in the following order:
First: to the Trustee, its agents and attorneys for amounts due under this Indenture, including payment of all
compensation, expenses and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of
collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes for principal and premium, if any, and
interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for
principal and premium, if any and interest, respectively; and
Third: to the Issuer or to such party as a court of competent jurisdiction shall direct.
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The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10.
Section 6.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in
any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys’ fees, against any party litigant in the suit, having due regard to the merits and good faith of
the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07, or a suit by Holders of more than 10% in aggregate principal amount of the then outstanding
Notes.
ARTICLE 7
TRUSTEE
Section 7.01 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee will exercise such of the rights and powers
vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use
under the circumstances in the conduct of such person’s own affairs.
(b) Except during the continuance of an Event of Default:
(1) the duties of the Trustee will be determined solely by the express provisions of this Indenture and the
Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the
form required by this Indenture. However, the Trustee will examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture. Delivery of reports, information and documents to the Trustee is for informational
purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Issuer’s compliance with any of its covenants hereunder (as to
which the Trustee is entitled to rely exclusively on Officer’s Certificates).
(c) The Trustee may not be relieved from liabilities for its own grossly negligent action, its own grossly negligent
failure to act, or its own willful misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of this Section 7.01;
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unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and
(2) the Trustee will not be liable for any error of judgment made in good faith by a Responsible Officer,
accordance with a direction received by it pursuant to Section 6.05.
(3) the Trustee will not be liable with respect to any action it takes or omits to take in good faith in
(d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), and (c) of this Section 7.01.
(e) No provision of this Indenture will require the Trustee to expend or risk its own funds or incur any liability. The
Trustee will be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders,
unless such Holder has offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense.
(f) The Trustee will not be liable for interest on any money received by it except as the Trustee may agree in writing
with the Issuer. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.
Section 7.02 Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or
presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee takes, suffers or omits to take any action hereunder, it may require an Officer’s Certificate or
an Opinion of Counsel or both. The Trustee will not be liable for any action it takes or omits to take in good faith in reliance on
such Officer’s Certificate or Opinion of Counsel. The Trustee may consult with counsel of its selection and the advice of such
counsel or any Opinion of Counsel will be full and complete authorization and protection from liability in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and will not be responsible for the misconduct or
negligence of any agent or attorney appointed with due care.
(d) The Trustee will not be liable for any action it takes or omits to take in good faith that it believes to be authorized
or within the rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Issuer
will be sufficient if signed by an Officer of the Issuer.
(f) The Trustee will be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the
request or direction of any of the Holders unless such Holders
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have offered to the Trustee indemnity or security satisfactory to the Trustee against the losses, liabilities and expenses that might
be incurred by it in compliance with such request or direction.
(g) The Trustee is not required to take notice or deemed to have notice of any Default or Event of Default
hereunder with respect to a series of Notes (other than an Event of Default described in subsections (1) or (2) of Section 6.01 with
respect to such Notes during any period the Trustee is also serving as a Paying Agent for such Notes), unless a Responsible
Officer has received notice in writing of such Event of Default from the Issuer or from the Holders of at least 30% in aggregate
principal amount of the outstanding Notes so affected, and in absence of any such notice, the Trustee may conclusively assume
that no Default or Event of Default exists.
exercise of its powers under this Indenture.
(h) The Trustee is not required to give any bond or surety with respect to the performance of its duties or the
(i) The Trustee’s rights, powers, indemnities, immunities and protections from liability and its rights to
compensation and indemnification in connection with the performance of its duties under this Indenture shall extend to (1) the
Trustee, whether serving in any other capacity hereunder, including without limitation, in the capacity of Registrar or Paying
Agent, and (2) the Trustee’s officers, directors, agents and employees. Such immunities and protections and rights to
indemnification, together with the Trustee’s right to compensation, shall survive the Trustee’s resignation or removal, the
discharge of this Indenture and final payment of the Notes.
(j) The Trustee shall have no responsibility for any information in any offering document or other disclosure
material distributed with respect to any series of Notes, and the Trustee shall have no responsibility for compliance with any state
or federal securities laws in connection with the Notes, other than the filing of any documents required to be filed by an indenture
trustee pursuant to the Trust Indenture Act.
(k) Notwithstanding anything else herein contained, whenever any provision of this Indenture indicates that
any confirmation of a condition or event is qualified by the words “to the knowledge of” or “known to” the Trustee or other
words of similar meaning, said words shall mean and refer to the current awareness of one or more Responsible Officers who are
located at the Corporate Trust Office of the Trustee.
(l) The Trustee shall have no responsibility for any registration, filing, recording, reregistration, refiling or
rerecording of this Indenture or any other document or instrument executed in connection with this Indenture and the issuance
and sale of the Notes, including without limitation, any financing statements or continuation statements with respect thereto.
(m) The Trustee shall not be under any obligation to effect or maintain insurance or to renew any policies of
insurance or to inquire as to the sufficiency of any policies of insurance carried by the Issuer or any other party, or to report, or
make or file claims or proof of loss for, any loss or damage insured against or which may occur, or to keep itself informed or
advised as to the payment of any taxes or assessments, or to require any such payment to be made.
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(n) The Trustee shall not be personally liable for any debts, contractual obligations or other claims by or on
behalf of any Person (including, without limitation, any damages to Persons or property or salaries or other employee benefits)
arising from the conduct or management of any assets of the Issuer or any of its Subsidiaries.
(o) The Trustee shall have no responsibility or obligation to any Participant or Indirect Participant or to the
Persons for whom they act as nominees with respect to the Notes, or to any Beneficial Owner of Notes in respect of the accuracy
of any records maintained by the Depositary or its nominee or any Participant or Indirect Participant, the payment by the
Depositary, or any Participant or Indirect Participant of any amount in respect of the principal or redemption price of or interest
on the Notes, any notice which is permitted or required to be given under this Indenture, the selection by the Depositary or any
Participant or Indirect Participant of any Person to receive payment in the event of a partial redemption of the Notes, or any
consent given or other action taken by the Depositary or its nominee as Holder.
Section 7.03 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Issuer or any Affiliate of the Issuer with the same rights it would have if it
were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the SEC for permission to continue as trustee (if this Indenture has been qualified under the TIA) or resign. Any
Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.06.
Section 7.04 Trustee’s Disclaimer. The Trustee will not be responsible for and makes no representation as to the validity
or adequacy of this Indenture or the Notes, or the value, condition or sufficiency or any assets pledged or assigned as security for
the Notes, the right, title or interest of the Issuer, the Guarantor or any other Person therein, or any security provided thereby or
by this Indenture. The Trustee shall not be accountable for the Issuer’s use of the proceeds from the Notes or any money paid to
the Issuer or upon the Issuer’s direction under any provision of this Indenture, it will not be responsible for the use or application
of any money received by any Paying Agent other than the Trustee, and it will not be responsible for any statement or recital
herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture
other than its certificate of authentication.
Section 7.05 Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is actually known to a
Responsible Officer of the Trustee, the Trustee will send to Holders of Notes a notice of the Default or Event of Default within 90
days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on,
any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines
that withholding the notice is in the interests of the Holders of the Notes.
Section 7.06 Preferential Collection of Claims Against the Issuer. The Trustee is subject to TIA § 311(a), excluding any
creditor relationship listed in TIA § 311(b). A Trustee who has resigned or been removed shall be subject to TIA § 311(a) to the
extent indicated therein.
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Section 7.07 Compensation and Indemnity.
(a) The Issuer will pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture
and services hereunder. The Trustee’s compensation will not be limited by any law on compensation of a trustee of an express
trust. The Issuer will reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses
incurred or made by it in addition to the compensation for its services in accordance with and subject to the Trustee’s standard
billing practices. Such expenses will include the reasonable compensation, disbursements and expenses of the Trustee’s agents
and counsel.
(b) The Issuer and the Guarantors will indemnify, defend and hold the Trustee and its officers, directors, employees
and agents harmless against any and all losses, liabilities, claims or expenses incurred by it arising out of or in connection with
the acceptance or administration of its duties, or the exercise or failure to exercise any of its rights or remedies, under this
Indenture, including the costs and expenses of enforcing this Indenture against the Issuer and the Guarantors (including this
Section 7.07) and defending itself against any claim (whether asserted by the Issuer, the Guarantors, any Holder or any other
Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder (or its failure to do
so), except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee will
notify the Issuer promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Issuer will not
relieve the Issuer or any of the Guarantors of its/their obligations hereunder. The Issuer or such Guarantor will defend the claim
and the Trustee will cooperate in the defense. The Trustee may have separate counsel and the Issuer will pay the reasonable fees
and expenses of such counsel. Neither the Issuer nor any Guarantor need pay for any settlement made without its consent, which
consent will not be unreasonably withheld.
(c) The obligations of the Issuer and the Guarantors under this Section 7.07 will survive the satisfaction and
discharge of this Indenture.
(d) To secure the Issuer’s and the Guarantors’ payment obligations in this Section 7.07, the Trustee will have a Lien
prior to the Lien (if any) securing the Notes on all money or property held or collected by the Trustee under this Indenture or
otherwise, except that held in trust to pay principal and interest on particular Notes. Such Lien will survive the satisfaction and
discharge of this Indenture and the resignation or removal of the Trustee.
(e) When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(7) or
(8) occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are
intended to constitute expenses of administration under any Bankruptcy Law.
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Section 7.08 Replacement of Trustee.
(a) A resignation or removal of the Trustee and appointment of a successor Trustee will become effective only upon
the successor Trustee’s acceptance of appointment as provided in this Section 7.08.
(b) The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the
Issuer. The Holders of a majority in aggregate principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Issuer in writing. The Issuer may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
Trustee under any Bankruptcy Law;
(2) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the
(3) a custodian or public officer takes charge of the Trustee or its property; or
(4) the Trustee becomes incapable of acting.
(c) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Issuer will
promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in
aggregate principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee
appointed by the Issuer.
(d) If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the
retiring Trustee, the Issuer, or the Holders of at least 10% in aggregate principal amount of the then outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor Trustee.
(e) If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply
with Section 7.10, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
(f) A successor Trustee will deliver a written acceptance of its appointment to the retiring Trustee and to the Issuer.
Thereupon, the resignation or removal of the retiring Trustee will become effective, and the successor Trustee will have all the
rights, powers and duties of the Trustee under this Indenture. The successor Trustee will mail a notice of its succession to
Holders. The retiring Trustee will promptly transfer all property held by it as Trustee to the successor Trustee; provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07. Notwithstanding replacement
of the Trustee pursuant to this Section 7.08, the Issuer’s obligations under Section 7.07 will continue for the benefit of the retiring
Trustee.
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Section 7.09 Successor Trustee by Merger, etc. If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the successor corporation without any further act will be
the successor Trustee.
Section 7.10 Eligibility; Disqualification. There will at all times be a Trustee hereunder that is a corporation organized
and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to
exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a
combined capital and surplus of at least $50.0 million as set forth in its most recent filed annual or quarterly report of condition.
This Indenture will always have a Trustee who satisfies the requirements of TIA § 310(a)(1), (2) and (5). The Trustee is
subject to TIA § 310(b).
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance. The Issuer may at any time, at the option of
its Board of Directors evidenced by a resolution set forth in an Officer’s Certificate, elect to have either Section 8.02 or 8.03 be
applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8.
Section 8.02 Legal Defeasance and Discharge. Upon the Issuer’s exercise under Section 8.01 of the option applicable to
this Section 8.02, the Issuer and each of the Guarantors will, subject to the satisfaction of the conditions set forth in Section 8.04,
be deemed to have been discharged from its/their obligations with respect to all outstanding Notes (including the Note
Guarantees) on the date the conditions set forth below are satisfied (hereinafter, “Legal Defeasance”). For this purpose, Legal
Defeasance means that the Issuer and the Guarantors will be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Notes (including the Note Guarantees), which will thereafter be deemed to be “outstanding” only
for the purposes of Section 8.05 and the other Sections of this Indenture referred to in clauses (1) and (2) below, and to have
satisfied all its/their other obligations under such Notes, the Note Guarantees and this Indenture (and the Trustee, on demand of
and at the expense of the Issuer, shall execute proper instruments acknowledging the same) and any Liens securing the Notes or
the Note Guarantees shall be released, except for the following provisions of this Indenture which will survive until otherwise
terminated or discharged hereunder:
premium, if any, on, such Notes when such payments are due from the trust referred to in Section 8.04;
(1) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, or interest or
(2) the Issuer’s obligations with respect to such Notes under Article 2 and Section 4.02;
Guarantors’ obligations in connection therewith; and
(3) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Issuer’s and the
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(4) this Article 8.
Subject to compliance with this Article 8, the Issuer may exercise its option under this Section 8.02 notwithstanding the
prior exercise of its option under Section 8.03.
Section 8.03 Covenant Defeasance. Upon the Issuer’s exercise under Section 8.01 of the option applicable to this
Section 8.03, the Issuer and each of the Guarantors will, subject to the satisfaction of the conditions set forth in Section 8.04, be
released from each of their/its obligations under the covenants contained in Sections 4.03, 4.04, 4.05, 4.07, 4.08, 4.09, 4.10, 4.11,
4.12, 4.14, 4.15, 4.16 and 4.17 and clause (4) of the first paragraph of Section 5.01 with respect to the outstanding Notes on and
after the date the conditions set forth in Section 8.04 are satisfied (hereinafter, “Covenant Defeasance”), and the Notes will
thereafter be deemed not “outstanding” for the purposes of any direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but will continue to be deemed “outstanding” for all other
purposes hereunder (it being understood that such Notes will not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that any Liens securing the Notes or the Note Guarantees will be released and with respect
to the outstanding Notes and Note Guarantees, the Issuer and the Guarantors may omit to comply with and will have no liability
in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein
or in any other document and such omission to comply will not constitute a Default or an Event of Default under Section 6.01,
but, except as specified above, the remainder of this Indenture and such Notes and Note Guarantees will be unaffected thereby. In
addition, upon the Issuer’s exercise under Section 8.01 of the option applicable to this Section 8.03, subject to the satisfaction of
the conditions set forth in Section 8.04, Sections 6.01(3) through 6.01(6) and Section 6.01(9) will not constitute Events of
Default.
Section 8.04 Conditions to Legal or Covenant Defeasance. In order to exercise either Legal Defeasance or Covenant
Defeasance under either Section 8.02 or 8.03:
(1) the Issuer must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in U.S.
dollars, non-callable Government Obligations, or a combination of cash in U.S. dollars and non-callable Government
Obligations, in amounts as will be sufficient, in the opinion of a nationally recognized investment bank, appraisal firm or firm of
independent public accountants, to pay the principal of, or interest and premium, if any, on the outstanding Notes on the stated
date for payment thereof or on the applicable redemption date, as the case may be, and the Issuer must specify whether the Notes
are being defeased to such stated date for payment or to a particular redemption date;
(2) in the case of an election under Section 8.02, the Issuer must deliver to the Trustee an Opinion of Counsel
confirming that:
ruling; or
(i) the Issuer has received from, or there has been published by, the Internal Revenue Service a
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(ii) since the Issue Date, there has been a change in the applicable federal income tax law,
in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such
Legal Defeasance had not occurred;
(3) in the case of an election under Section 8.03, the Issuer must deliver to the Trustee an Opinion of Counsel
reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default has occurred and is continuing on the date of such deposit (other than a
Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) and the deposit will not result in
a breach or violation of, or constitute a default under, any other instrument to which the Issuer or any Guarantor is a party or by
which the Issuer or any Guarantor is bound;
(5) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a
default under, any material agreement or instrument (other than this Indenture) to which the Issuer or any of its Subsidiaries is a
party or by which the Issuer or any of its Subsidiaries is bound;
(6) the Issuer must deliver to the Trustee an Officer’s Certificate stating that the deposit was not made by the
Issuer with the intent of preferring the Holders of Notes over the other creditors of the Issuer with the intent of defeating,
hindering, delaying or defrauding any creditors of the Issuer or others; and
all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with.
(7) the Issuer must deliver to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that
Section 8.05 Deposited Money and Government Obligations to Be Held in Trust; Other Miscellaneous Provisions.
Subject to Section 8.06, all money and non-callable Government Obligations (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the “Trustee”) pursuant to Section 8.04 in
respect of the outstanding Notes will be held in trust and applied by the Trustee, in accordance with the provisions of such Notes
and this Indenture, to the payment, either directly or through any Paying Agent (including the Issuer acting as Paying Agent) as
the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal and
premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law.
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The Issuer will pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash
or non-callable Government Obligations deposited pursuant to Section 8.04 or the principal and interest received in respect
thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes.
Notwithstanding anything in this Article 8 to the contrary, the Trustee will deliver or pay to the Issuer from time to time
upon the request of the Issuer any money or non-callable Government Obligations held by it as provided in Section 8.04 which,
in the opinion of a nationally recognized investment bank, appraisal firm or firm of independent public accountants expressed in
a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(1)), are in excess
of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 8.06 Repayment to Issuer. Subject to applicable law, any money deposited with the Trustee or any Paying
Agent, or then held by the Issuer, in trust for the payment of the principal of and premium, if any, or interest on, any Note and
remaining unclaimed for two years after such principal and premium, if any, or interest has become due and payable shall be paid
to the Issuer on its request or (if then held by the Issuer) will be discharged from such trust; and the Holder of such Note will
thereafter be permitted to look only to the Issuer for payment thereof, and all liability and other obligations of the Trustee or such
Paying Agent with respect to such trust money, and all liability of the Issuer as trustee thereof, will thereupon cease.
Section 8.07 Reinstatement. If the Trustee or Paying Agent is unable to apply any U.S. dollars or non-callable
Government Obligations in accordance with Section 8.02 or 8.03, as the case may be, by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Issuer’s and the
Guarantors’ obligations under this Indenture and the Notes and the Note Guarantees will be revived and reinstated as though no
deposit had occurred pursuant to Section 8.02 or 8.03 until such time as the Trustee or Paying Agent is permitted to apply all such
money in accordance with Section 8.02 or 8.03, as the case may be; provided, however, that, if the Issuer makes any payment of
principal of and premium, if any, or interest on, any Note following the reinstatement of its obligations, the Issuer will be
subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying
Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01 Without Consent of Holders of Notes. Notwithstanding Section 9.02 of this Indenture, the Issuer, the
Guarantors and the Trustee may amend or supplement this Indenture, the Notes or the Note Guarantees without the consent of
any Holder of Note:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or in place of certificated Notes;
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(3) to provide for the assumption of the Issuer’s or a Guarantor’s obligations to the Holders of the Notes and
Note Guarantees in the case of a merger or consolidation or sale of all or substantially all of the Issuer’s or such Guarantor’s
assets, as applicable;
that does not adversely affect the legal rights hereunder of any Holder;
(4) to make any change that would provide any additional rights or benefits to the Holders of the Notes or
under the TIA (if the Issuer elects to qualify this Indenture under the TIA);
(5) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture
(6) to conform the text of this Indenture, the Notes or the Note Guarantees to any provision of the
“Description of Notes” section of the Offering Memorandum, to the extent that such provision in that “Description of Notes” was
intended to be a verbatim recitation of a provision of this Indenture, the Note Guarantees or the Notes, which intent shall be
evidenced by an Officer’s Certificate of the Issuer to that effect;
Indenture;
(7) to provide for the issuance of Additional Notes in accordance with the limitations set forth in this
(8) to include transfer provisions to comply with any applicable securities laws;
Notes or to provide for the release of a Guarantor in accordance with the terms of this Indenture; or
(9) to allow any Guarantor to execute a supplemental indenture and/or a Note Guarantee with respect to the
(10) to comply with the rules of the Depositary.
The consent of the Holders of Notes is not necessary to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
Upon the request of the Issuer accompanied by a resolution of its Board of Directors authorizing the execution of any
such amended or supplemental indenture, and upon receipt by the Trustee of the documents described in Section 7.02(b), the
Trustee will join with the Issuer and the Guarantors in the execution of any amended or supplemental indenture authorized or
permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein
contained, but the Trustee will not be obligated to enter into such amended or supplemental indenture that affects its own rights,
duties, privileges, protections, indemnities, liabilities or immunities under this Indenture or otherwise.
Section 9.02 With Consent of Holders of Notes. Except as provided below in this Section 9.02, the Issuer and the
Trustee may amend or supplement this Indenture (including, without limitation, Section 4.10 and Section 4.14) and the Notes and
the Note Guarantees with the consent of the Holders of at least a majority in aggregate principal amount of the then
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outstanding Notes (including, without limitation, Additional Notes, if any) voting as a single class (including, without limitation,
consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04
and 6.07, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of or
premium, if any, or interest on, the Notes, except a payment default resulting from an acceleration that has been rescinded) or
compliance with any provision of this Indenture, the Notes or the Note Guarantees may be waived with the consent of the
Holders of a majority in aggregate principal amount of the then outstanding Notes (including, without limitation, Additional
Notes, if any) voting as a single class (including, without limitation, consents obtained in connection with a tender offer or
exchange offer for, or purchase of, the Notes).
Upon the request of the Issuer accompanied by a resolution of its Board of Directors authorizing the execution of any
such amended or supplemental indenture or other amendments, and upon the filing with the Trustee of evidence satisfactory to
the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in
Section 7.02(b), the Trustee will join with the Issuer and the Guarantors in the execution of such amended or supplemental
indenture unless such amended or supplemental indenture directly affects the Trustee’s own rights, duties, privileges, protections,
indemnities, liabilities or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but will
not be obligated to, enter into such amended or supplemental Indenture.
It is not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any
proposed amendment, supplement or waiver, but it is sufficient if such consent approves the substance thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Issuer will mail to the Holders
of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Issuer to mail such
notice, or any defect therein, will not, however, in any way impair or affect the validity of any such amended or supplemental
indenture or waiver. Subject to Sections 6.04 and 6.07, the Holders of a majority in aggregate principal amount of the Notes then
outstanding voting as a single class may waive compliance in a particular instance by the Issuer with any provision of this
Indenture or the Notes or the Note Guarantees. However, without the consent of each Holder affected, an amendment,
supplement or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder):
waiver;
(1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or
redemption of the Notes (except as provided above with respect to Sections 4.10 and 4.14);
(2) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the
(3) reduce the rate of or change the time for payment of interest, including default interest, on any Note;
Notes (except a rescission of acceleration of the Notes by the
(4) waive a Default or Event of Default in the payment of principal of, or interest or premium, if any, on, the
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Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default
that resulted from such acceleration);
(5) make any Note payable in money other than that stated in the Notes;
Holders of Notes to receive payments of principal of, or interest or premium, if any, on the Notes;
(6) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of
4.14);
(7) waive a redemption payment with respect to any Note (other than a payment required by Section 4.10 or
(8) release any Guarantor from any of its obligations under its Note Guarantee or this Indenture, except with
the consent of the holders of at least a 75% in aggregate principal amount of the Notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes) or otherwise in
accordance with the terms of this Indenture; or
(9) make any change in the preceding amendment and waiver provisions.
Section 9.03 Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or
portion of a Note that evidences the same debt as the consenting Holder’s Note, even if notation of the consent is not made on
any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the
Trustee receives written notice of revocation before the date the amendment, supplement or waiver becomes effective. An
amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder.
Section 9.04 Notation on or Exchange of Notes. The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Issuer in exchange for all Notes may issue and the Trustee shall,
upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note will not affect the validity and effect of such amendment,
supplement or waiver.
Section 9.05 Trustee to Sign Amendments, etc. The Trustee will sign any amended or supplemental indenture or other
amendment authorized pursuant to this Article 9 if the amendment or supplement does not, in the opinion of the Trustee,
adversely affect the rights, duties, liabilities, privileges, protections, indemnities or immunities of the Trustee. The Issuer may not
sign an amended or supplemental indenture until the Board of Directors of the Issuer approves it. In executing any amended or
supplemental indenture, the Trustee will be entitled to receive and (subject to Section 7.01) will be fully protected in relying
upon, in addition to the documents required by Section 12.03, an Officer’s Certificate and an Opinion of Counsel stating that the
execution of such amended or supplemental indenture is authorized or permitted by this Indenture.
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ARTICLE 10
NOTE GUARANTEES
Section 10.01 Guarantee.
(a) Subject to this Article 10, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to
each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of
the validity and enforceability of this Indenture, the Notes or the obligations of the Issuer hereunder or thereunder, that:
(1) the principal of and premium, if any, and interest on, the Notes will be promptly paid in full when due,
whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes,
if any, if lawful, and all other obligations of the Issuer to the Holders or the Trustee hereunder or thereunder will be promptly paid
in full or performed, all in accordance with the terms hereof and thereof, and
(2) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that
same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the
Guarantors will be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of
payment and not a guarantee of collection.
(b) The Guarantors hereby agree that their obligations hereunder are unconditional, irrespective of the validity,
regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by
any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Issuer, any
action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense
of a Guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest, notice and all
demands whatsoever and covenant that this Note Guarantee will not be discharged except by complete performance of the
obligations contained in the Notes and this Indenture.
(c) If any Holder or the Trustee is required by any court or otherwise to return to the Issuer, the Guarantors or any
custodian, trustee, liquidator or other similar official acting in relation to either the Issuer or the Guarantors, any amount paid by
either to the Trustee or such Holder, this Note Guarantee, to the extent theretofore discharged, will be reinstated in full force and
effect.
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(d) Each Guarantor agrees that it will not be entitled to any right of subrogation in relation to the Holders in respect
of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees
that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (1) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 for the purposes of this Note Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed
hereby, and (2) in the event of any declaration of acceleration of such obligations as provided in Article 6, such obligations
(whether or not due and payable) will forthwith become due and payable by the Guarantors for the purpose of this Note
Guarantee.
(e) All Guarantors desire to allocate among themselves (collectively, the “Contributing Guarantors”), in a fair and
equitable manner, their obligations arising under this Indenture. Accordingly, in the event any payment or distribution is made on
any date by a Guarantor (a “Funding Guarantor”) under its Guarantee of the Notes such that its Aggregate Payments exceed its
Fair Share as of such date, such Funding Guarantor shall be entitled to a contribution from each of the other Contributing
Guarantors in an amount sufficient to cause each Contributing Guarantor’s Aggregate Payments to equal its Fair Share as of such
date. “Fair Share” means, with respect to a Contributing Guarantor as of any date of determination, an amount equal to (a) the
ratio of (i) the Fair Share Contribution Amount with respect to such Contributing Guarantor, to (ii) the aggregate of the Fair
Share Contribution Amounts with respect to all Contributing Guarantors, multiplied by (b) the aggregate amount paid or
distributed on or before such date by all Funding Guarantors under its Guarantee of the Notes in respect of the obligations
guaranteed. “Fair Share Contribution Amount” means, with respect to a Contributing Guarantor as of any date of determination,
the maximum aggregate amount of the obligations of such Contributing Guarantor under its Guarantee of the Notes that would
not render its obligations hereunder or thereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548
of the Bankruptcy Code or any comparable applicable provisions of state law; provided that solely for purposes of calculating the
Fair Share Contribution Amount with respect to any Contributing Guarantor for purposes of this Section 10.01, any assets or
liabilities of such Contributing Guarantor arising by virtue of any rights to subrogation, reimbursement or indemnification or any
rights to or obligations of contribution hereunder shall not be considered as assets or liabilities of such Contributing Guarantor.
“Aggregate Payments” means, with respect to a Contributing Guarantor as of any date of determination, an amount equal to
(1) the aggregate amount of all payments and distributions made on or before such date by such Contributing Guarantor in
respect of its Guarantee of the Notes (including in respect of this Section 10.01), minus (2) the aggregate amount of all payments
received on or before such date by such Contributing Guarantor from the other Contributing Guarantors as contributions under
this Section 10.01. The amounts payable as contributions hereunder shall be determined as of the date on which the related
payment or distribution is made by the applicable Funding Guarantor. Each Guarantor is a third party beneficiary to the
contribution agreement set forth in this Section 10.01.
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Section 10.02 Limitation on Guarantor Liability. Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Note Guarantee of such Guarantor not constitute a fraudulent transfer or
conveyance for purposes of applicable Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law to the extent applicable to any Note Guarantee. To effectuate the foregoing
intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor will be
limited to the maximum amount that will, after giving effect to such maximum amount and all other contingent and fixed
liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive
contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor
under this Article 10, result in the obligations of such Guarantor under its Note Guarantee not constituting a fraudulent transfer or
conveyance.
Section 10.03 Execution and Delivery of Note Guarantee. To evidence its Note Guarantee set forth in Section 10.01,
each Guarantor hereby agrees that a notation of such Note Guarantee substantially in the form attached as Exhibit E hereto will
be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture will
be executed on behalf of such Guarantor by one of its Officers (but the failure to execute such notation shall not affect the
validity of any Note Guarantee).
Each Guarantor hereby agrees that its Note Guarantee set forth in Section 10.01 will remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such Note Guarantee.
If an Officer whose signature is on this Indenture or on the Note Guarantee no longer holds that office at the time the
Trustee authenticates the Note on which a Note Guarantee is endorsed, the Note Guarantee will be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof hereunder, will be deemed to constitute due
delivery of the Note Guarantee set forth in this Indenture on behalf of the Guarantors.
Section 10.04 Guarantors May Consolidate, etc., on Certain Terms.
(a) No Guarantor (other than any Guarantor whose Note Guarantee is to be released in accordance with the terms of
Section 10.05 in connection with any transaction permitted by the provisions of Section 4.10) will, and the Issuer will not cause
or permit any Guarantor to, consolidate with or merge with or into any Person other than the Issuer or any other Guarantor,
unless:
(1) such entity (if other than a Guarantor) assumes by supplemental indenture or other documentation or
instruments, the performance of every covenant and obligation of the Guarantor on the Note Guarantee and this Indenture on the
part of such Guarantor to be performed or observed, and such entity (whether or not previously a Guarantor) shall cause such
amendments, supplements or other documents to be executed; and
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and be continuing.
(2) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred
(b) In case of any such consolidation, amalgamation, merger, sale or conveyance and upon the assumption by the
successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the
Note Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this
Indenture to be performed by the Guarantor, such successor Person will succeed to and be substituted for the Guarantor with the
same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of
the Note Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the
Issuer and delivered to the Trustee. All the Note Guarantees so issued will in all respects have the same legal rank and benefit
under this Indenture as the Note Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as
though all of such Note Guarantees had been issued at the date of the execution.
(c) Except as set forth in Articles 4 and 5, and notwithstanding Section 10.04(a) above, nothing contained in this
Indenture or in any of the Notes will prevent any consolidation, amalgamation or merger of a Guarantor with or into the Issuer or
another Guarantor, or will prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an
entirety to the Issuer or another Guarantor.
(d) To the extent a Guarantee that would have been imposed under this 10.04 could be immediately released
pursuant to Section 10.05, this Section 10.04 shall not require the imposition of such a Guarantee.
Section 10.05 Releases. The Note Guarantee of any Guarantor will be released:
(1) in connection with any sale or other disposition of all of the assets of that Guarantor (including by way of merger or
consolidation) to a Person that is not (either before or after giving effect to such transaction) the Issuer or a Guarantor if the sale
or other disposition does not violate Section 4.10;
(2) in connection with any sale or other disposition of Capital Stock of that Guarantor to a Person that is not (either
before or after giving effect to such transaction) the Issuer or Guarantor, if the sale or other disposition does not violate Section
4.10;
(3) if the Issuer designates any Restricted Subsidiary that is a Guarantor to be an Unrestricted Subsidiary or as having
“de minimis” value in accordance with the applicable provisions of this Indenture;
(4) upon Legal Defeasance or Covenant Defeasance in accordance with Article 8 or satisfaction and discharge of this
Indenture in accordance with Articles 8 and 11;
(5) to the extent that such Guarantor initially issued a Note Guarantee pursuant to the requirements under Section 4.16,
upon the release of the guarantee under such Indebtedness (including due to the permanent repayment and discharge of such
Indebtedness) which required
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or any Indebtedness which would require the issuance of such Note Guarantee pursuant to such requirements;
(6) if the Guarantor would not be required to issue a Note Guarantee pursuant to clause (x) or (y) of the last sentence of
Section 4.16; provided that in the case of a consolidation or merger of a Guarantor with or sale of all or substantially all of the
assets of a Guarantor to, a Foreign Subsidiary, in each case, pursuant to Section 10.04 of this Indenture, such Foreign Subsidiary
shall be required to issue a Note Guarantee if it remains a guarantor of the obligations of the Issuer under any Secured Facilities
after such consolidation, merger or sale of assets;
(7) if the Guarantor ceases to be a Wholly Owned Restricted Subsidiary of the Issuer or upon the liquidation or
dissolution of such Guarantor, as a result of an event or a transaction not otherwise prohibited by this Indenture; provided that in
the case of a consolidation or merger of a Guarantor with or sale of all or substantially all of the assets of a Guarantor to, a
Foreign Subsidiary, in each case, pursuant to Section 10.04 of this Indenture, such Foreign Subsidiary shall be required to issue a
Note Guarantee if it remains a guarantor under any Secured Facilities of the Issuer or a Guarantor after such consolidation,
merger or sale of assets; or
(8) with the consent of the holders of at least 75% in aggregate principal amount of the Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes).
Any Guarantor not released from its obligations under its Note Guarantee as provided in this Section 10.05 will remain
liable for the full amount of principal of and interest and premium, if any, on the Notes and for the other obligations of any
Guarantor under this Indenture as provided in this Article 10.
ARTICLE 11
SATISFACTION AND DISCHARGE
Section 11.01 Satisfaction and Discharge. This Indenture and Notes will be discharged and this Indenture will cease to
be of further effect as to all Notes issued hereunder, when:
(1) either:
replaced or paid, have been delivered to the Trustee for cancellation; or
(i) all Notes that have been authenticated, except lost, stolen or destroyed Notes that have been
(ii) all Notes that have not been delivered to the Trustee for cancellation have become due and
payable by reason of the provision of a notice of redemption (or irrevocable instructions by the Issuer to the Trustee to provide
such notice of redemption) or otherwise or will become due and payable within one year and the Issuer or any Guarantor has
irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash
in U.S. dollars, non-callable Government Obligations, or a combination of cash in U.S. dollars and non-callable Government
Obligations, in amounts as will be sufficient, without consideration of any reinvestment of interest, to pay and discharge the
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entire Indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and accrued interest to the
date of maturity or redemption;
(2) in the case of Section 11.01(1)(ii) above, no Default or Event of Default has occurred and is continuing
on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such
deposit) and the deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the
Issuer or any Guarantor is a party or by which the Issuer or any Guarantor is bound;
(3) the Issuer or any Guarantor has paid or caused to be paid all sums payable by it under this Indenture; and
(4) in the case of Section 11.01(1)(ii) above, the Issuer has delivered irrevocable instructions to the Trustee
under this Indenture to apply the deposited money toward the payment of the Notes at maturity or on the redemption date, as the
case may be.
In addition, the Issuer must deliver an Officer’s Certificate and an Opinion of Counsel to the Trustee stating that all
conditions precedent to satisfaction and discharge have been satisfied.
Notwithstanding the satisfaction and discharge of this Indenture, if money has been deposited with the Trustee pursuant to
subclause (ii) of clause (1) of this Section 11.01, the provisions of Sections 11.02 and 8.06 will survive. In addition, nothing in
this Section 11.01 will be deemed to discharge those provisions of Section 7.07, that, by their terms, survive the satisfaction and
discharge of this Indenture.
Section 11.02 Application of Trust Money. Subject to the provisions of Section 8.06, all money deposited with the
Trustee pursuant to Section 11.01 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent (including the Issuer acting as its own Paying Agent) as
the Trustee may determine, to the Persons entitled thereto, of the principal and premium, if any and interest for whose payment
such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent
required by law; provided that, if there is a tender offer by the Issuer (or any party on behalf of the Issuer) for outstanding Notes
that is in progress at the time of such deposit, such money deposited with the Trustee pursuant to Section 11.01 hereof may be
applied to pay any cash consideration for any Notes validly tendered into such tender offer and not validly withdrawn.
If the Trustee or Paying Agent is unable to apply any money or Government Obligations in accordance with Section 11.01
by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, the Issuer’s and any Guarantor’s obligations under this Indenture and the
Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 11.01, provided that if the Issuer has
made any payment of principal of and premium, if any, or interest on, any Notes because of the reinstatement of its obligations,
the Issuer shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government
Obligations held by the Trustee or Paying Agent.
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ARTICLE 12
MISCELLANEOUS
Section 12.01 Notices. Any notice or communication by the Issuer, any Guarantor or the Trustee to the others is duly
given if in writing and delivered in person or by first class mail (registered or certified, return receipt requested), facsimile
transmission or overnight courier guaranteeing next day delivery, to the others’ address:
If to the Issuer and/or any Guarantor:
c/o Resolute Forest Products Inc.
111 Robert-Bourassa Blvd., Suite 5000
Montreal, Qc H3C 2M1
Facsimile No.: (514) 875-2160
Attention: Chief Legal Officer
With a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019-6064
Facsimile No: 212-757-3990
Attention: Lawrence G. Wee, Esq.
If to the Trustee:
Wells Fargo Bank, National Association
CTSO Mail Operations
MAC N9300-070
600 South Fourth Street, Seventh Floor
Minneapolis, MN 55415
Attn: Corporate Trust Services – Raymond Delli Colli
With a copy to:
nd
Wells Fargo Bank, National Association
150 East 42 Street, 40yh Floor
New York, NY 10017
Attn: Corporate Trust Services – Administrator for Resolute Forest
Email: Raymond.dellicolli@wellsfargo.com
The Issuer, any Guarantor or the Trustee, by notice to the others, may designate additional or different addresses for
subsequent notices or communications.
All notices and communications (other than those sent to Holders) will be deemed to have been duly given: at the time
delivered by hand, if personally delivered; five Business Days
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after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if transmitted by facsimile; and the next
Business Day after timely delivery to the courier, if sent by overnight courier guaranteeing next day delivery.
Any notice or communication to a Holder will be delivered pursuant to the Applicable Procedures of the Depositary or,
with respect to Definitive Notes, mailed by first class mail, certified or registered, return receipt requested, or by overnight
courier guaranteeing next day delivery or by electronic means to its address shown on the register kept by the Registrar. Failure to
send a notice or communication to a Holder or any defect in it will not affect its sufficiency with respect to other Holders.
If a notice or communication is sent in the manner provided above within the time prescribed, it is duly given, whether or
not the addressee receives it.
If the Issuer sends a notice or communication to Holders, it will deliver a copy to the Trustee and each Agent at the same
time.
Section 12.02 U.S.A. Patriot Act and Force Majeure.
(a) The parties hereto acknowledge that in accordance with the Customer Identification Program (CIP) requirements
under the USA PATRIOT Act and its implementing regulations, the Trustee in order to help fight the funding of terrorism and
money laundering, is required to obtain, verify, and record information that identifies each person or legal entity that establishes a
relationship or opens an account with the Trustee. The parties hereby agree that they shall provide the Trustee with such
information as it may request including, but not limited to, each party’s name, physical address, tax identification number and
other information that will help the Trustee identify and verify each party’s identity such as organizational documents, certificate
of good standing, license to do business, or other pertinent identifying information.
(b) In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations
hereunder arising out of or caused by, directly or indirectly, forces beyond its control including, without limitation, any act or
provision of any present or future law or regulation or governmental authority, strikes, work stoppages, accidents, acts of war or
terrorism, civil or military disturbances, pandemics, epidemics, recognized public emergencies, quarantine restrictions, nuclear or
natural catastrophes or acts of God, interruptions, loss or malfunctions of utilities, communications or computer (software and
hardware) services, and hacking, cyber-attacks, or other use or infiltration of the Trustee’s technological infrastructure exceeding
authorized access; it being understood that the Trustee shall use reasonable efforts that are consistent with accepted practices in
the banking industry to resume performance as soon as practicable under the circumstances.
Section 12.03 Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Issuer to the
Trustee to take any action under this Indenture, the Issuer shall furnish to the Trustee:
the statements set forth in Section 12.04) stating that, in the
(1) an Officer’s Certificate in form and substance reasonably satisfactory to the Trustee (which must include
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opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed
action have been satisfied; and
(2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which must include
the statements set forth in Section 12.04) stating that, in the opinion of such counsel, all such conditions precedent and covenants
have been satisfied.
Section 12.04 Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture must include:
(1) a statement that the Person making such certificate or opinion has read such covenant or condition;
statements or opinions contained in such certificate or opinion are based;
(2) a brief statement as to the nature and scope of the examination or investigation upon which the
(3) a statement that, in the opinion of such Person, he or she has made such examination or investigation as
is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been
satisfied; and
satisfied.
(4) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been
Section 12.05 Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions.
Section 12.06 No Personal Liability of Directors, Officers, Employees and Stockholders. No director, officer, employee,
incorporator, stockholder manager or member of the Issuer or any Guarantor, as such, will have any liability for any obligations
of the Issuer or the Guarantors under the Notes, this Indenture and the Note Guarantees or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive
liabilities under the federal securities laws.
Section 12.07 Governing Law. THIS INDENTURE, THE NOTE, AND THE NOTE GUARANTEES AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO ITS CONFLICTS OF LAW PRINCIPLES INSOFAR AS SUCH PRINCIPLES WOULD DEFER TO
THE SUBSTANTIVE LAWS OF SOME OTHER JURISDICTION.
Section 12.08 No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Issuer or its Subsidiaries
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or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.
Section 12.09 Successors. All agreements of the Issuer in this Indenture and the Notes will bind its successors. All
agreements of the Trustee in this Indenture will bind its successors. All agreements of each Guarantor in this Indenture will bind
its successors, except as otherwise provided in Section 10.05.
Section 12.10 Severability. In case any provision in this Indenture or in the Notes is invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby.
Section 12.11 Counterpart Originals. The parties may sign any number of copies of this Indenture. Each signed copy
will be an original, but all of them together represent the same agreement. This Indenture shall be valid, binding, and enforceable
against a party when executed and delivered by an authorized individual on behalf of the party by means of (i) an original manual
signature; (ii) a faxed, scanned, or photocopied manual signature, or (iii) any other electronic signature permitted by the federal
Electronic Signatures in Global and National Commerce Act, state enactments of the Uniform Electronic Transactions Act,
and/or any other relevant electronic signatures law, including any relevant provisions of the Uniform Commercial Code/UCC
(collectively, “Signature Law”), in each case to the extent applicable. Each faxed, scanned, or photocopied manual signature, or
other electronic signature, shall for all purposes have the same validity, legal effect, and admissibility in evidence as an original
manual signature. Each party hereto shall be entitled to conclusively rely upon, and shall have no liability with respect to, any
faxed, scanned, or photocopied manual signature, or other electronic signature, of any other party and shall have no duty to
investigate, confirm or otherwise verify the validity or authenticity thereof. This Indenture may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such counterparts shall, together, constitute one and the same
instrument. For the avoidance of doubt, original manual signatures shall be used for execution or indorsement of writings when
required under the UCC or other Signature Law due to the character or intended character of the writings.
Section 12.12 Table of Contents, Headings, etc. The Table of Contents, Cross-Reference Table and headings of the
Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of
this Indenture and will in no way modify or restrict any of the terms or provisions hereof.
Section 12.13 Jurisdiction; Consent to Service of Process.
(a) Each party hereto irrevocably and unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any U.S. Federal or New York State court sitting in the Borough of Manhattan, New York, New York in any action
or proceeding arising out of or relating to this Indenture, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be
heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by
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suit on the judgment or in any other manner provided by law. Nothing in this Indenture shall affect any right that the Issuer, the
Trustee or any Holder of Notes may otherwise have to bring any action or proceeding relating to this Indenture against any party
hereto or its properties in the courts of any jurisdiction.
(b) Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and
effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Indenture in any court referred to in paragraph (a) of this Section 12.13. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.
[Signatures on following page]
121
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above.
RESOLUTE FOREST PRODUCTS INC.
By: /s/ Remi G. Lalonde
Name: Remi G. Lalonde
Title: Senior Vice President and Chief
Financial Officer
ATLAS SOUTHEAST PAPERS, INC.
ATLAS TISSUE HOLDINGS, INC.
BOWATER NUWAY MID-STATES INC.
CALHOUN NEWSPRINT COMPANY
DONOHUE CORP.
FIBREK RECYCLING U.S. INC.
FIBREK U.S. INC.
RESOLUTE EL DORADO INC.
RESOLUTE FP FLORIDA INC.
RESOLUTE FP US INC.
RESOLUTE US LUMBER INC.
By: /s/ Remi G. Lalonde
Name: Remi G. Lalonde
Title: Vice President and Chief Financial
Officer
[Signature Page to the Indenture]
RESOLUTE CADDO RIVER LLC
RESOLUTE CROSS CITY LLC
RESOLUTE CROSS CITY REAL ESTATE HOLDINGS LLC
RESOLUTE CROSS CITY TIMBER MANAGEMENT LLC
RESOLUTE GLENWOOD LLC
RESOLUTE NAVCOR LLC
By: Resolute US Lumber Inc., its Sole Member
By: /s/ Remi G. Lalonde
Name: Remi G. Lalonde
Title: Vice President and Chief Financial
Officer
RESOLUTE TISSUE LLC
By: Resolute Growth US LLC, its Sole Member
By: Resolute Forest Products Inc., its Sole Member
By: /s/ Remi G. Lalonde
Name: Remi G. Lalonde
Title: Senior Vice President and Chief
Financial Officer
[Signature Page to the Indenture]
RESOLUTE HAGERSTOWN LLC
By: Resolute FP US Inc., its Sole Member
By: /s/ Remi G. Lalonde
Name: Remi G. Lalonde
Title: Vice President and Chief Financial
Officer
ABIBOW RECYCLING LLC
ABITIBI CONSOLIDATED SALES LLC
RESOLUTE GROWTH US LLC
By: Resolute Forest Products Inc., its Sole Member
By: /s/ Remi G. Lalonde
Name: Remi G. Lalonde
Title: Senior Vice President and Chief
Financial Officer
RESOLUTE FP AUGUSTA LLC
By: Abitibi Consolidated Sales LLC, its Sole Member
By: Resolute Forest Products Inc., its Sole Member
By: /s/ Remi G. Lalonde
Title: Senior Vice President and Chief
Financial Officer
[Signature Page to the Indenture]
AUGUSTA NEWSPRINT HOLDING LLC
By: Abitibi Consolidated Sales LLC, its Sole Member
By: Resolute Forest Products Inc., its Sole Member
By: /s/ Remi G. Lalonde
Name: Remi G. Lalonde
Title: Senior Vice President and Chief
Financial Officer
BOWATER NEWSPRINT SOUTH LLC
FD POWERCO LLC
By: /s/ Remi G. Lalonde
Name: Remi G. Lalonde
Title: Manager
GLPC RESIDUAL MANAGEMENT, LLC
By: Fibrek Recycling U.S. Inc., its Sole Member
By: /s/ Remi G. Lalonde
Name: Remi G. Lalonde
Title: Vice President and Chief Financial Officer
[Signature Page to the Indenture]
ACCURATE PAPER HOLDINGS, LLC ATLAS PAPER MILLS, LLC
By: Atlas Tissue Holdings, Inc., its Sole Member
By: /s/ Remi G. Lalonde
Name: Remi G. Lalonde
Title: Vice President and Chief Financial
Officer
ACCURATE PAPER FLEET, LLC
By: Accurate Paper Holdings, LLC, its Sole Member
By: Atlas Tissue Holdings, Inc., its Sole Member
By: /s/ Remi G. Lalonde
Name: Remi G. Lalonde
Title: Vice President and Chief Financial
Officer
ATLAS PAPER MANAGEMENT, LLC
By: Atlas Paper Mills, LLC its Sole Member
By: Atlas Tissue Holdings, Inc., its Sole Member
By: /s/ Remi G. Lalonde
Name: Remi G. Lalonde
Title: Vice President and Chief Financial
Officer
[Signature Page to the Indenture]
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee
By: /s/ Stefan Victory
Name: Stefan Victory
Title: Vice President
[Signature Page to the Indenture]
FORM OF NOTE
[Face of Note]
EXHIBIT A-1
[Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture]
[Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture]
A-1
No.
$[ ]
4.875% Senior Note due 2026
CUSIP: [ ]
ISIN: [ ]
$[ ]
RESOLUTE FOREST PRODUCTS INC., a Delaware corporation, promises to pay to Cede & Co., or registered assigns, the
principal sum set forth on the Schedule of Increases or Decreases in Global Note attached hereto on March 1, 2026.
Interest Payment Dates: March 1 and September 1 of each year.
Record Dates: February 15 and August 15 of each year
Additional provisions of this Note are set forth on the other side of this Note.
A-2
IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed.
RESOLUTE FOREST PRODUCTS INC.
Dated: [ ]
By:
Name:
Title:
A-3
This is one of the Notes referred to in the within-mentioned Indenture:
Wells Fargo Bank, National Association, as
Trustee
By:
Authorized Signatory
Dated: [ ]
A-4
[Back of Note]
4.875% Senior Note Due 2026
Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless
otherwise indicated.
1. RESOLUTE FOREST PRODUCTS INC., a Delaware corporation (the “Issuer”), promises to pay interest on the
1
principal amount of this Note at 4.875% per annum from [ ] until maturity. The Issuer will pay interest, if any, semi-annually in
arrears on March 1 and September 1 of each year, commencing September 1, 2021, or if any such day is not a Business Day, on
the next succeeding Business Day (each, an “Interest Payment Date”). Interest on the Notes will accrue from the most recent date
to which interest has been paid or, if no interest has been paid, from the Issue Date. The Issuer will pay interest (including post-
petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is equal to the rate per annum then in effect to the extent lawful; it will pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace
periods), from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
2
2. METHOD OF PAYMENT. The Issuer will pay interest on the Notes (except defaulted interest) to the Persons who
are registered Holders of Notes at the close of business on the February 15 and August 15 (whether or not a Business Day), as the
case may be, next preceding the Interest Payment Date, even if such Notes are canceled after such Record Date and on or before
such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. Payments of
principal, premium, if any, and interest on the Notes will be payable at the office or agency of the Issuer maintained for such
purpose or, at the option of the Issuer, payment of interest may be made by check mailed to the Holders at their respective
addresses set forth in the register of Holders; provided that (1) all payments of principal, premium, if any, and interest with
respect to the Notes represented by one or more global notes registered in the name of or held by The Depository Trust Company
(“DTC”) or its nominee will be made by wire transfer of immediately available funds to the accounts specified by the registered
Holder or Holders thereof and (2) all payments of principal, premium, if any, and interest with respect to certificated notes will be
made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such holder elects
payment by wire transfer by giving written notice to the Trustee or the paying agent to such effect designating such account no
later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee or paying agent
may accept in its discretion). Until otherwise designated by the Issuer, the Issuer’s office or agency will be the corporate trust
office of the Trustee maintained for such purpose. If a payment date is to be made on a day that is not a business day, payment
will be made on the next succeeding day that is a business day and no interest will accrue for the intervening period. Such
payment shall be in such coin or currency of
1
The date of issuance.
2
The first Interest Payment Date may be different for Additional Notes.
A-5
the United States of America as at the time of payment is legal tender for payment of public and private debts.
For certain payments made in connection with these Notes, the Trustee may be required to make a “reportable payment”
or “withholdable payment” and in such cases the Trustee shall have the duty to act as a payor or withholding agent, respectively,
that is responsible for any tax withholding and reporting required under Chapters 3, 4, and 61 of the Code. The Trustee shall have
the sole right to make the determination as to which payments are “reportable payments” or “withholdable payments” with
respect to the Trustee. If reasonably requested by the Trustee, all parties to this transaction shall provide an executed IRS Form
W-9 or appropriate IRS Form W-8 (or, in each case, any successor form) to the Trustee prior to closing, and shall promptly
update any such form to the extent such form expires or becomes inaccurate in any respect because of a change in circumstances.
The Trustee shall have the right to request from any party or any other Person entitled to payment hereunder, any additional
forms, documentation or other information as may be reasonably necessary for the Trustee to satisfy its reporting and withholding
obligations under the Code. To the extent any such forms required to be delivered are not provided prior to or by the time the
related payment is required to be made or are determined by the Trustee to be incomplete and/or inaccurate in any respect, the
Trustee shall be entitled to withhold on any such payments hereunder to the extent withholding is required under Chapters 3, 4, or
61 of the Code, and shall have no obligation to gross up any such payment.
3. TRUSTEE; PAYING AGENT AND REGISTRAR. Wells Fargo Bank, National Association, the Trustee under the
Indenture, will act as Paying Agent and Registrar with respect to the Notes. The Issuer may change any Paying Agent or
Registrar without notice to any Holder. None of the Issuer or any of its Affiliates may act in any such capacity.
4. INDENTURE. The Issuer issued the Notes under an Indenture, dated as of February 2, 2021 (the “Indenture”),
among Resolute Forest Products Inc., the Guarantors party thereto and the Trustee. This Note is one of a duly authorized issue of
Notes of the Issuer. The terms of the Notes include those stated in the Indenture. The Notes are subject to all such terms, and
Holders are referred to the Indenture for a statement of such terms. To the extent any provision of this Note conflicts with the
express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Indenture does not limit
the aggregate principal amount of Notes that may be issued thereunder.
5. OPTIONAL REDEMPTION.
(a) The Notes are subject to redemption, at the option of the Issuer, in whole or in part, at any time on or after March 1,
2023 (the “First Call Date”) upon not less than 15 nor more than 60 days’ notice at the following Redemption Prices (expressed
as percentages of the principal amount to be redeemed) set forth below, plus accrued and unpaid interest, if any, to, but not
including, the redemption date (subject to the right of Holders of record on the relevant Record Date to receive interest due on an
Interest Payment Date that is on or prior to the redemption date), if redeemed during the 12-month period beginning on March 1
of each of the years indicated below:
A-6
2023
2024
2025 and thereafter
Year
Redemption Price
102.438%
101.219%
100.000%
(b) In addition, at any time prior to the First Call Date the Issuer may redeem the Notes, in whole or in part, at a
Redemption Price equal to the principal amount of the Notes plus the Applicable Premium plus accrued and unpaid interest, if
any, to but not including the date of redemption (subject to the right of Holders of record on the relevant Record Date to receive
interest due on the relevant Interest Payment Date that is on or prior to the redemption date).
(c) In addition to the optional redemption provisions in clauses (a) and (b) above, prior to the First Call Date, the Issuer
may, from time to time, with the net proceeds of one or more Qualified Equity Offerings, redeem up to an aggregate of 40% of
the aggregate principal amount of the outstanding Notes (including any Additional Notes), at a Redemption Price equal to
104.875% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to, but not including, the date of
redemption; provided that at least 60% of the principal amount of Notes (including any Additional Notes) that have been issued
under the Indenture remain outstanding immediately after the occurrence of any such redemption (excluding Notes held by the
Issuer or its Subsidiaries) and that any such redemption occurs within 90 days following the closing of any such Qualified Equity
Offering.
(d) Any notice of redemption may be given prior to the redemption of any Notes, and any such redemption or notice
may, at the Issuer’s discretion, in whole or in part, be subject to one or more conditions precedent, as provided in Section 3.05(b)
of the Indenture.
6. OFFERS TO REPURCHASE.
(a) Upon the occurrence of a Change of Control, each Holder shall have the right, subject to certain conditions specified
in the Indenture, to cause the Issuer to repurchase all or any part of such Holder’s Notes at a purchase price in cash equal to 101%
of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase (subject to the right of the
Holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date), as provided in, and
subject to the terms of, the Indenture.
(b) In accordance with Sections 4.10 and 4.14 of the Indenture, the Issuer will be required to offer to purchase Notes
upon the occurrence of certain events.
7. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in fully registered form only, without coupons, in
denominations of $2,000 and integral multiples of $1,000 in excess thereof. A Holder shall register the transfer or exchange of
Notes in accordance with the Indenture. The Registrar may require a holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture. The
A-7
Registrar need not register the transfer or exchange of any Notes during a period beginning 15 days before any applicable
redemption date described under Article 3 of the Indenture.
8. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes.
9. AMENDMENT, SUPPLEMENT AND WAIVER. The Indenture, the Note Guarantees or the Notes may be amended
or supplemented as provided in Article 9 of the Indenture, and Events of Default may be waived as provided in Article 6 of the
Indenture.
10. DEFAULTS AND REMEDIES. If an Event of Default occurs (other than an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of the Issuer) and is continuing, the Trustee or the Holders of at least 30% in
principal amount of the outstanding Notes, in each case, by notice to the Issuer, may declare the principal of, premium, if any, and
accrued but unpaid interest on all the Notes to be due and payable. If an Event of Default relating to certain events of bankruptcy,
insolvency or reorganization of the Issuer or certain Restricted Subsidiaries occurs, the principal of, premium, if any, and interest
on all the Notes shall become immediately due and payable without any declaration or other act on the part of the Trustee or any
Holders. Under certain circumstances, the Holders of a majority in principal amount of the outstanding Notes may rescind any
such acceleration with respect to the Notes and its consequences.
11. AUTHENTICATION. This Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for
any purpose until authenticated by the manual signature of the Trustee or an authenticating agent.
12. GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THE INDENTURE, THE NOTES AND THE NOTE GUARANTEES.
13. CUSIP AND ISIN NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security
Identification Procedures, the Issuer has caused CUSIP and ISIN numbers to be printed on the Notes and the Trustee may use
CUSIP and ISIN numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of
such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
14. REFERENCE TO INDENTURE AND OTHER RELATED DOCUMENTS. Reference is hereby made to the
Indenture (a copy of which is on file at the Corporate Trust Office of the Trustee) and all indentures and agreements supplemental
thereto for a description of the rights thereunder of the Holders of the Notes, the nature and extent of the security therefor, the
rights, duties, protections and immunities of the Trustee and the rights and obligations of the Issuer and the Note Guarantors
thereunder, to all the provisions of which the Holder, by acceptance hereof, assents and agrees.
A-8
The Issuer will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be
made to the Issuer at the following address:
Resolute Forest Products Inc.
111 Robert-Bourassa Blvd., Suite 5000
Montreal, Qc H3C 2M1
Facsimile No.: (514) 394-3644
Attention: Chief Financial Officer
A-9
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
ASSIGNMENT FORM
(Insert assignee’s legal name)
(Insert assignee’s Soc. Sec. or tax I.D. no.)
(Print or type assignee’s name, address and zip code)
and irrevocably appoint
to transfer this Note on the books of the Issuer. The agent may substitute another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee :
3
*
Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).
A-10
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuer pursuant to Section 4.10 or 4.14 of the Indenture, check the
appropriate box below:
☐ Section 4.10
☐ Section 4.14
If you want to elect to have only part of this Note purchased by the Issuer pursuant to Section 4.10 or Section 4.14 of the
Indenture, state the amount you elect to have purchased:
$
Your Signature:
(Sign exactly as your name appears
on the face of this Note)
Date:
Signature Guarantee :
4
*
Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).
A-11
5
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The initial outstanding principal amount of this Global Note is $ . The following exchanges of a part of this Global
Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global or Definitive Note
for an interest in this Global Note, have been made:
Date of Exchange
Amount of decrease in
Principal Amount of this
Global Note
Amount of increase in
Principal Amount of this
Global Note
Principal Amount of this
Global Note following
such decrease or
increase
Signature of authorized
officer of Trustee or
Custodian
*
This schedule should be included only if the Note is issued in global form.
A-12
FORM OF CERTIFICATE OF TRANSFER
EXHIBIT B
Resolute Forest Products Inc.
111 Robert-Bourassa Blvd., Suite 5000
Montreal, Qc H3C 2M1
Attention: Investor Relations
Wells Fargo Bank, National Association, as Trustee and Registrar
Attn: DAPS – Reorg
600 South 4th Street – 7th Floor
Minneapolis, MN 55415
Facsimile: (866) 969-1290
Phone: (800) 344-5128
Email: DAPSReorg@wellsfargo.com
Re: 4.875% Senior Notes due 2026
Reference is hereby made to the Indenture, dated as of February 2, 2021 (the “Indenture”), among Resolute Forest
Products Inc., as issuer (the “Issuer”), the Guarantors party thereto and Wells Fargo Bank, National Association, as trustee.
Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
(the “Transferor”) owns and proposes to transfer the Note[s] or interest in such Note[s] specified in
Annex A hereto, in the principal amount of $ in such Note[s] or interests (the “Transfer”), to (the “Transferee”),
as further specified in Annex A hereto. In connection with the transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. ☐ Check if Transferee will take delivery of a beneficial interest in the 144A Global Note or a Restricted Definitive
Note pursuant to Rule 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the Securities
Act of 1933, as amended (the “Securities Act”), and, accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor reasonably believes is purchasing the beneficial
interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole
investment discretion, and such Person and each such account is a “qualified institutional buyer” within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A, and such Transfer is in compliance with any applicable blue sky
securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of
the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the 144A Global Note and/or the Restricted Definitive Note and in the Indenture and the
Securities Act.
B-1
2. ☐ Check if Transferee will take delivery of a beneficial interest in the Regulation S Global Note or a Restricted
Definitive Note pursuant to Regulation S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904
under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a
Person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such
Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States
or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such
Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States,
(ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S
under the Securities Act and, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the
Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend
printed on the Regulation S Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities Act.
3. ☐ Check and complete if Transferee will take delivery of a beneficial interest in the IAI Global Note or a Restricted
Definitive Note pursuant to any provision of the Securities Act other than Rule 144A or Regulation S. The Transfer is being
effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted
Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any
state of the United States, and accordingly the Transferor hereby further certifies that (check one):
(a) ☐ such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act;
or
(b) ☐ such Transfer is being effected to the Issuer or a subsidiary thereof;
or
(c) ☐ such Transfer is being effected pursuant to an effective registration statement under the Securities Act and
in compliance with the prospectus delivery requirements of the Securities Act;
or
(d) ☐ such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from
the registration requirements of the Securities Act other than Rule 144A, Rule 144, Rule 903 or Rule 904, and the
Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D
under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a
Restricted Global Note or Restricted
B-2
Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate
executed by the Transferee in the form of Exhibit D to the Indenture and (2) if such Transfer is in respect of a principal
amount of Notes at the time of transfer of less than $250,000, an Opinion of Counsel provided by the Transferor or the
Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in
compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the IAI Global Note and/or the Restricted Definitive Notes and in the Indenture
and the Securities Act.
4. ☐ Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Note or of an Unrestricted
Definitive Note.
(a) ☐ Check if Transfer is pursuant to Rule 144. (i) The Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any
applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act.
Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.
(b) ☐ Check if Transfer is Pursuant to Regulation S. (i) The Transfer is being effected pursuant to and in
accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained
in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance
with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.
(c) ☐ Check if Transfer is Pursuant to Other Exemption. (i) The Transfer is being effected pursuant to and in
compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or
Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities
laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will
not be subject to the restrictions on transfer
B-3
enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in
the Indenture.
5. ☐ Check if Transferor is an Affiliate of Issuer.
6. ☐ Check if Transferor received the Note within the last year from either an Affiliate of Issuer or from a party who
checked box 5 or this box 6.
This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer.
Dated:
[Insert Name of Transferor]
By:
Name:
Title:
B-4
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) a beneficial interest in the:
(i) 144A Global Note (CUSIP ), or
(ii) Regulation S Global Note (CUSIP ), or
(iii) IAI Global Note (CUSIP ); or
(b) a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) a beneficial interest in the:
(i) 144A Global Note (CUSIP ), or
(ii) Regulation S Global Note (CUSIP ), or
(iii) IAI Global Note (CUSIP ); or
(iv) Unrestricted Global Note (CUSIP ); or
(b) a Restricted Definitive Note; or
(c) an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-5
FORM OF CERTIFICATE OF EXCHANGE
EXHIBIT C
Resolute Forest Products Inc.
111 Robert-Bourassa Blvd., Suite 5000
Montreal, Qc H3C 2M1
Attention: Investor Relations
Wells Fargo Bank, National Association, as Trustee and Registrar
Attn: DAPS – Reorg
600 South 4th Street – 7th Floor
Minneapolis, MN 55415
Facsimile: (866) 969-1290
Phone: (800) 344-5128
Email: DAPSReorg@wellsfargo.com
Re: 4.875% Senior Notes due 2026
(CUSIP )
Reference is hereby made to the Indenture, dated as of February 2, 2021 (the “Indenture”), among Resolute Forest
Products Inc., as issuer (the “Issuer”), the Guarantors party thereto and Wells Fargo Bank, National Association, as trustee.
Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
(the “Owner”) owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the
principal amount of $ in such Note[s] or interests (the “Exchange”). In connection with the Exchange, the Owner hereby
certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests in a Restricted Global Note for Unrestricted Definitive
Notes or Beneficial Interests in an Unrestricted Global Note
(a) Check if Exchange is from beneficial interest in a Restricted Global Note to beneficial interest in an Unrestricted
Global Note. In connection with the Exchange of the Owner’s beneficial interest in a Restricted Global Note for a beneficial
interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being
acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Global Notes and pursuant to and in accordance with the Securities Act of 1933, as amended (the
“Securities Act”), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being
acquired in compliance with any applicable blue sky securities laws of any state of the United States.
C-1
(b) Check if Exchange is from beneficial interest in a Restricted Global Note to Unrestricted Definitive Note. In
connection with the Exchange of the Owner’s beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note,
the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner’s own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to
and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the United States.
(c) Check if Exchange is from Restricted Definitive Note to beneficial interest in an Unrestricted Global Note. In
connection with the Owner’s Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note,
the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner’s own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to
and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired
in compliance with any applicable blue sky securities laws of any state of the United States.
(d) Check if Exchange is from Restricted Definitive Note to Unrestricted Definitive Note. In connection with the Owner’s
Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted
Definitive Note is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
2. Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes for Restricted Definitive
Notes or Beneficial Interests in Restricted Global Notes
(a) Check if Exchange is from beneficial interest in a Restricted Global Note to Restricted Definitive Note. In connection
with the Exchange of the Owner’s beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal
principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner’s own account
without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted
Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend
printed on the Restricted Definitive Note and in the Indenture and the Securities Act.
(b) Check if Exchange is from Restricted Definitive Note to beneficial interest in a Restricted Global Note. In connection
with the Exchange of the Owner’s Restricted Definitive Note for a beneficial interest in the [CHECK ONE] 144A Global Note,
Regulation S
C-2
Global Note, IAI Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being
acquired for the Owner’s own account without transfer and (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in
compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the
Securities Act.
This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer.
C-3
Dated:
[Insert Name of Transferor]
By:
Name:
Title:
C-4
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
EXHIBIT D
Resolute Forest Products Inc.
111 Robert-Bourassa Blvd., Suite 5000
Montreal, Qc H3C 2M1
Facsimile No.: [( ) ]
Attention: Investor Relations
Wells Fargo Bank, National Association, as Trustee and Registrar
Attn: DAPS – Reorg
600 South 4th Street – 7th Floor
Minneapolis, MN 55415
Facsimile: (866) 969-1290
Phone: (800) 344-5128
Email: DAPSReorg@wellsfargo.com
Re: 4.875% Senior Notes due 2026
Reference is hereby made to the Indenture, dated as of February 2, 2021 (the “Indenture”), among Resolute Forest
Products Inc., as issuer (the “Issuer”), the Guarantors party thereto and Wells Fargo Bank, National Association, as trustee.
Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $ aggregate principal amount of:
(a) a beneficial interest in a Global Note, or
(b) a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and
conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the
Notes or any interest therein except in compliance with, such restrictions and conditions and the Securities Act of 1933, as
amended (the “Securities Act”).
2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes
and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf
and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest
therein, we will do so only (A) to the Issuer or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act
to a “qualified institutional buyer” (as defined therein), (C) to an institutional “accredited investor” (as defined below) that, prior
to such transfer,
D-1
furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Issuer a signed letter substantially in the form
of this letter and, if such transfer is in respect of a principal amount of Notes, at the time of transfer of less than $250,000, an
Opinion of Counsel in form reasonably acceptable to the Issuer to the effect that such transfer is in compliance with the Securities
Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the
provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any Person purchasing the Definitive Note or beneficial interest in a Global Note from us in a
transaction meeting the requirements of
clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated
herein.
3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to
you and the Issuer such certifications, legal opinions and other information as you and the Issuer may reasonably require to
confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us
will bear a legend to the foregoing effect.
4. We are an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the
merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
5. We are acquiring the Notes or beneficial interest therein purchased by us for our own account or for one or more
accounts (each of which is an institutional “accredited investor”) as to each of which we exercise sole investment discretion.
You and the Issuer are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof
to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby.
Dated:
[Insert Name of Accredited Investor]
By:
Name:
Title:
D-2
FORM OF NOTATION OF NOTE GUARANTEE
EXHIBIT E
For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and
severally, unconditionally guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture dated
as of February 2, 2021 (the “Indenture”) among Resolute Forest Products Inc. (the “Issuer”), the Guarantors party thereto and
Wells Fargo Bank, National Association, as trustee (the “Trustee”), (a) the due and punctual payment of the principal of and
premium, if any, and interest on, the Notes, whether at maturity, by acceleration, redemption or otherwise, the due and punctual
payment of interest on overdue principal of and interest on the Notes, if any, if lawful, and the due and punctual performance of
all other obligations of the Issuer to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of
any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in
full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration
or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Note Guarantee and the
Indenture are expressly set forth in Article 10 of the Indenture and reference is hereby made to the Indenture for the precise terms
of the Note Guarantee.
Capitalized terms used but not defined herein have the meanings given to them in the Indenture.
[NAME OF GUARANTOR(S)]
By:
Name:
Title:
E-1
File: D158665 Company: E119933
LOAN OFFER
EXHIBIT 10.4
BY: INVESTISSEMENT QUÉBEC, a corporation duly constituted under the Act respecting Investissement Québec (CQLR, chapter I-16.0.1), having its
head office at 1195 avenue Lavigerie, suite 060, Québec, Quebec G1V 4N3 (“IQ”).
TO: RESOLUTE FP CANADA INC., a duly incorporated legal person having its principal place of business at 111 Robert-Bourassa boulevard, suite 5000,
Montréal, Quebec H3C 2M1 (the “Company”).
1.
LOAN
1.1
1.2
IQ is granting the Company a loan for a maximum amount of two hundred and nineteen million six hundred and fifty thousand dollars
$219,650,000 ) (the “Loan”), representing 75% of eligible and paid deposits by Resolute FP US Inc. (“RFP US”) in connection with the Tariffs,
upon the terms and conditions set forth herein.
The capitalized words and expressions used herein have the meaning given to them in Schedule A hereto, unless the context or a specific
provision requires another meaning.
2.
PROJECT
2.1
The Loan is offered solely for the project which aims to partially fund liquidities pursuant to part 2 of the Essor program, and in the context of
the countervailing and antidumping duties, hereinafter referred to as “Tariffs,” imposed by the United States on softwood lumber imports from
Quebec (the “Project”), as set out below:
Deposits for the Project
FINANCING
Description
Amount
Source of Funds
Amount
Estimated countervailing and
antidumping duties (2020-2022)
Countervailing and antidumping duties
(2017-2019)
Total Deposits
Eligible Deposits
$149,640,000
$149,640,000
IQ term loan (75% financing of
countervailing and antidumping duties)
$143,234,458
$143,234,458 RFP US working capital
Total:
2.2
$292,874,458
$292,874,458 Total:
The Company declares that the payment of Deposits in connection with the Project started on or about April 28, 2017 and that such Deposits
could continue until December 31, 2022 (the “ Completion Date of the Project”). If RFP US stops making payments of Deposits in
connection with the Project prior to this date, the Company shall notify IQ in writing of the actual end date of such payment and, for the
purposes of this Offer, the Completion Date of the Project shall be the latter date or, if the Company fails to notify IQ of the actual end date of
the payment of Deposits in connection with the Project, the date of the end of the period covered by the last independent auditors’ report
delivered to IQ. For greater certainty, Deposits on imports made after December 31, 2022 shall automatically be excluded from the Project.
3.
INTEREST RATE
3.1.
The Loan shall bear interest from each disbursement, at the 30-day banker’s acceptance rate plus 1.45 % calculated monthly. The 30-day
banker’s acceptance rate prior to being increased is currently, for reference purposes only, at 0.48%.
IQ initials
Page 1 of 9
$219,650,000
$73,224,458
$292,874,458
File: D158665 Company: E119933
4.
INTEREST PAYMENTS
LOAN OFFER
4.1
The Company shall pay interest calculated at the rate and in the manner provided in title 3 “INTEREST RATE” on the last day of each month
starting on the last day of the month following the first Loan disbursement.
5.
LOAN REPAYMENT
5.1
5.2
5.3
5.4
The Company shall benefit from a 24-month moratorium period on the repayment of the principal amount of the Loan as of the date of the first
disbursement of the Loan.
Following the moratorium period provided in the previous paragraph, the Company shall repay the principal amount of the Loan in 96
consecutive monthly instalments, payable on the last day of each month starting on the last day of the first month following the end of the
moratorium period as shown in the example below in the case of a disbursement of the maximum Loan amount:
Number of instalments
Amount
95
1
$2,290,000.00
$2,100,000.00
Subsequent to the final disbursement, should the total disbursements made under the Loan be less than the maximum amount of the Loan,
the monthly instalment amount shall be adjusted accordingly.
In the event of an agreement between the Canadian and American governments (or a unilateral decision by the American government) on
softwood lumber Tariffs, or a final decision of a court or an international organization having jurisdiction on this matter, the Company
undertakes, up to the amounts then owing, to repay IQ the entire amount received, directly or indirectly, from any competent authority as
reimbursement of Tariffs paid by RFP US on Quebec imports, as soon as possible, upon receipt of all such amounts.
The Company may, at its discretion, at any time, prepay the Loan in whole or in part, without penalty. Further to prepayment, under this
section 5.4, section 5.3 or otherwise, the monthly instalment amount shall be adjusted accordingly based on the number of instalments
remaining, if applicable.
6.
DISBURSEMENT
6.1
6.2
The Loan disbursements shall be made directly in the Company’s account.
The Loan disbursement shall be made in a maximum of 10 instalments, each corresponding to a maximum of 75% of the eligible deposits
paid by RFP US for which the Company requested the disbursement. Should the Company request a payment that is less than the authorized
limit of 75% of eligible deposits, it may use all or part of the balance of the 75% maximum of eligible deposits it did not use in the past for a
future disbursement request, but without going over 75% of the eligible deposits paid by RFP US up to the date of such subsequent
disbursement.
7.
COMMITMENTS TO BE FULFILLED BEFORE THE LOAN DISBURSEMENT
7.1
The first disbursement of the Loan shall be made only once IQ has obtained, to its satisfaction:
7.1.1
An external auditors’ report confirming the amount of Tariffs paid by RFP US for the period from January 1, 2017 to September 30,
2020 and imposed by the United States on softwood lumber imports from Quebec;
7.1.2
Putting in place, to IQ’s satisfaction, the security required under section 8 hereof;
7.1.3
One or more opinions from the Company’s and/or RFP US’ outside legal counsels must be obtained, at the Company’s expense, in
favour of IQ, confirming, among other things, i) the Company’s corporate status and its borrowing capacity, the validity and
enforceability on the Company of: x) this Offer (once accepted by the Company), y) the Canadian account control agreement; and z)
the hypothec on the Company’s Canadian accounts covered by this control agreement; ii) the validity and enforceability of RFP US’
intervention hereunder.
IQ initials
Page 2 of 9
File: D158665 Company: E119933
LOAN OFFER
7.1.4
A duly completed and signed copy of the form entitled “Automatic payment plan and disbursement authorization – Company”
together with, if applicable, an original personalized cheque specimen in the Company’s name or the form entitled “Confirmation of
bank account information for electronic disbursement.”
7.2
Prior to each Loan disbursement, the Company shall have submitted to IQ in a form satisfactory to IQ:
7.2.1
An external auditors’ report confirming the amount of Tariffs imposed by the United States and paid by RFP US on softwood lumber
imports from Quebec;
7.2.2
The most recent consolidated financial statements of Resolute Forest Products Inc. (“RFP Inc.”).
8.
SECURITY
8.1
In order to provide a specific continuing guarantee of the fulfillment of all of the obligations of the Company towards IQ pursuant hereto, the
Company must:
8.1.1
consent to granting IQ a first ranking principal hypothec of two hundred and nineteen million six hundred and fifty thousand dollars
($219,650,000), and an additional hypothec of forty-three million nine hundred and thirty thousand dollars ($43,930,000) pursuant to
Canadian laws on two bank accounts to be created by the Company (the “Dedicated Account”). The Dedicated Account must be targeted as
the recipient of all amounts received from RFP US in accordance with section 9.2.1 hereof.
8.1.2
enter into an account control agreement with respect to the hypothec mentioned in section 8.1.1 above on the Dedicated Account.
9.
SPECIAL UNDERTAKINGS OF THE COMPANY
9.1
In addition to the general undertakings stipulated hereunder, the Company undertakes, from the date of acceptance of this Offer and until
repayment of the Loan in full, to:
9.1.1 Provide the following financial statements:
Entity
Type
Frequency
Deadline (days)
(from the end of each fiscal
year)
Resolute Forest Products Inc.
Resolute Forest Products Inc.
Resolute Forest Products Inc.
Consolidated audited
Annually
Forecasted with working hypotheses
Annually
10Q Quarterly reports
Quarterly (Q1/Q2/Q3)
120
120
120
9.1.2 Use the funds disbursed from the Loan exclusively for expenses, operations and obligations relating to activities of Quebec plants and
Quebec activities of entities of the RFP Inc. group. For greater certainty, in no event shall the Company use the funds disbursed by IQ to pay
or repay Tariffs of RFP US;
9.1.3 The Company shall notify IQ, a) in advance if it intends to be liquidated or to wind-up, and b) within a reasonable timeframe of becoming
aware, (i) of any change of control of RFP Inc. or voluntary merger, liquidation or winding-up of RFP Inc.; or (ii) if RFP Inc. ceases to hold
direct or indirect control of the Company. In the event that IQ notifies the Company that these transactions are not in IQ’s interest, acting
reasonably, IQ can then, within sixty (60) days of the notice to the Company, claim from the Company full repayment of the principal amount
of this Loan plus any interest accrued. For purposes of this clause, “control” means the direct or indirect holding of a number of voting
shares carrying more than 50% of the voting rights of the relevant entity;
9.1.4 An undertaking from the Company not to use the funds disbursed to grant loans or advances to shareholders of RFP Inc., directors or
officers of the Company or of RFP Inc. or to associated or affiliated companies not controlled by RFP Inc., if applicable, except in the normal
course of business and in compliance with the terms of clause 9.1.2 hereinabove;
IQ initials
Page 3 of 9
File: D158665 Company: E119933
LOAN OFFER
9.2
RFP US intervenes herein and undertakes in favour of IQ, from the date of acceptance of this Offer and until repayment of the Loan in full, to:
9.2.1
transfer to the Company and deposit as soon as possible in the Company’s Dedicated Account any amount received from any competent
authority as reimbursement for Tariffs paid by RFP US on Quebec imports, up to the amounts then owing to IQ hereunder;
9.2.2 The Company undertakes in favour of IQ to apply, as soon as possible, any amount received from RFP US in accordance with section 9.2.1
hereof exclusively in reduction of the Loan.
10. EXAMINATION FEES
10.1
10.2
10.3
This Offer is subject to examination-related fees (“Examination Fees”) equal to 0.5% of the amount of the Loan, i.e., up to one million ninety-
eight thousand two hundred and fifty dollars ($1,098,250).
The examination fee instalments shall be made gradually at each Loan disbursement, in an amount equal to 0.5 % of the amount of each
disbursement. After the final disbursement, should the total disbursements made under the Loan be less than the maximum Loan amount, the
total Examination Fee amount provided in paragraph 10.1 shall be adjusted accordingly.
The fact that the Examination Fees have been cashed shall not confer any rights on the Company and shall not impose any obligations on IQ
to make any disbursement of the Loan; such rights and obligations shall only arise where the terms and conditions referred to herein have
been fulfilled.
11. OTHER PROVISIONS
11.1
11.2
Only the French version of this Offer shall be considered official and, in all cases, the French version shall prevail over any accompanying
translation.
The Company acknowledges that the provisions contained in this Offer and in its schedules have been freely discussed with IQ and that it
has received adequate explanations as to their nature and scope.
11.3
This Offer shall be deemed to have been executed by all parties in QUÉBEC.
IQ initials
Page 4 of 9
File: D158665 Company: E119933
INVESTISSEMENT QUÉBEC
LOAN OFFER
By:
/S/ Michel Tremblay
Date:
2020-11-03
Signature
Michel Tremblay
Senior Account Manager, Specialized Financing
Print the Name of the Authorized Signatory
By:
/S/ Luc Jacob
Date:
2020-11-03
Signature
Luc Jacob, CPA, CA, M. Sc.
Director, Specialized Financing - Québec
Print the Name of the Authorized Signatory
IQ initials
Page 5 of 9
File: D158665 Company: E119933
LOAN OFFER
After reading the terms and conditions set forth in this Offer and in the schedules thereto, we accept this Loan offer.
ACCEPTANCE BY THE COMPANY
RESOLUTE FP CANADA INC.
By:
By:
/S/ REMI G. LALONDE
Signature
Date:
2020-11-04
REMI G. LALONDE
Name of Authorized Signatory
/S/ MARIANNE LIMOGES
Signature
MARIANNE LIMOGES
Name of Authorized Signatory
Date:
2020-11-04
INTERVENTION OF RESOLUTE FP US INC.
RESOLUTE FP US INC. intervenes in this Offer and agrees to the terms of section 9.2.1 and undertakes to comply with them.
By:
By:
/S/ REMI G. LALONDE
Signature
Date:
2020-11-04
REMI G. LALONDE
Name of Authorized Signatory
/S/ MARIANNE LIMOGES
Signature
MARIANNE LIMOGES
Name of Authorized Signatory
Date:
2020-11-04
IQ initials
Page 6 of 9
Dossier : D158665 Entreprise : E119933
1.
DEFINITIONS
For the purposes of this Offer, the following terms have the meaning set forth hereinafter unless the context indicates otherwise:
“Event of Default” shall mean any of the defaults under section 5 “Events of Default”;
“Eligible Deposits” shall mean Deposits in connection with the Project to the extent they were incurred and paid by RFP US on Quebec imports;
2.
INTEREST
2.1. Any amount not paid when due hereunder shall bear interest from such date at the annual rate stipulated in section 3.1 hereunder calculated over a period of three hundred and sixty-five
(365) days every time it is referred to herein.
2.2. Any interest not paid when due shall bear interest itself from such date at the rate stipulated in this Offer without demand or notice.
3.
ELECTRONIC TRANSFERS
3.1
3.2
IQ may disburse the Loan directly into the Company’s bank account if IQ has obtained the original copy of the form entitled “Automatic payment plan and disbursement authorization –
Company” and, if applicable, an original personalized cheque specimen in the Company’s name or the form entitled “Confirmation of bank account information for electronic disbursement.”
However, IQ reserves the right to disburse the Loan by issuing a cheque where it deems that method of disbursement preferable in the circumstances.
The Company hereby authorizes IQ to use manual or electronic debits on its bank account to make any payment that the Company is required to make to IQ hereunder as well as any
subsequent amendments thereto. To this effect, the Company hereby authorizes the bank or the financial institution with which it deals to honour the debits made by IQ and undertakes to
complete and sign the form entitled “Automatic payment plan and disbursement authorization – Company.” In the event of prepayment, the automatic payment amounts will have to be
adjusted.
3.3
Every month, IQ shall send the Company, in advance, a debit note setting forth all the information regarding payments to be made by the Company.
3.4
3.5
The Company undertakes to renew the above authorization if it changes its bank or financial institution while any balance of the Loan is outstanding and to inform IQ of this change by
providing a new duly completed and signed schedule entitled “Automatic payment plan and disbursement authorization – Company”, together with a cheque specimen from its new bank or
financial institution marked “VOID” and containing all the necessary information.
The Company agrees that repayment of any amount owed hereunder as well as any subsequent amendments shall be made by cheque where IQ deems that method of payment preferable
in the circumstances.
4
GENERAL UNDERTAKINGS OF THE COMPANY
4.1
From the date of acceptance of this Offer and for as long as the Company is liable to IQ in any capacity hereunder, it undertakes to:
4.1.1
provide the financial statements mentioned in the Offer within the time limit prescribed therein;
4.1.2
comply with its disclosure requirements in accordance with the securities laws applicable to related party transactions;
4.1.3
not to move a substantial portion of its assets outside the Province of Quebec without first obtaining IQ's written authorization;
4.1.4
4.1.5
4.1.6
4.1.7
take out and maintain reasonable insurance policies, in particular all risk insurance, and, upon request, provide IQ with the certificate(s) of insurance confirming the policies taken out
and any renewals thereof;
not encumber the sums deposited in the Dedicated Account referred to in the Offer, or dispose in any way whatsoever of the sums deposited in the said Dedicated Account other
than in accordance with this Offer while any balance of the Loan is outstanding;
disclose in the quarterly reports given to IQ in accordance with section 9.1.1 of the Offer Letter, any material litigation or proceeding before any court of justice or tribunal, board or
government agency to which it is party in accordance with the applicable securities legislation;
comply at all times in all material respect, with the laws to which it is subject in Quebec and, more specifically, but without limiting the generality of the foregoing, the standards
relating to environmental protection, labour and employment, and human rights, except for any non-compliance that does not have a material adverse effect on the RFP Inc. group;
4.1.8 maintain at all times internal ethics policies;
4.1.9
provide, upon IQ’s request, the certificates or documents required pursuant to the laws of the Province of Quebec;
4.1.10 without limiting the scope of section 9.1.3 of the Offer Letter that only requires notice upon the occurrence of certain outlined changes, not to assign this Offer Letter without IQ’s prior
written consent, except to a Canadian entity controlled by RFP Inc. with operations in Quebec;
4.1.11 pay all expenses relating to the preparation and registration, if required, of the documents necessary to give legal effect to this Offer and any amendment thereto;
4.1.12 In the Event of Default, pay all reasonable costs incurred by IQ to exercise its rights pursuant to this Offer, including IQ’s right to obtain performance of all the Company’s obligations
to protect, enforce or preserve all security granted in guarantee of the Loan or to enable a valuation of the Company’s assets to be made, upon IQ’s request, including but not limited
to all legal costs, fees, charges or other legal expenses, agent’s fees, trustee’s fees or other fees or charges;
4.1.13 in the Event of Default, pay all reasonable costs that are billed by an external consultant, selected by IQ, to advise IQ on all questions related to the Loan; specifically, the mandate
assigned to the external consultant may extend to the preparation and financial and operational analyses of
IQ initials
Page 1 of 9
Dossier : D158665 Entreprise : E119933
the Company, the evaluation of the security offered and the elements of intellectual property related to the Project as well as any other matter related to the protection of IQ’s rights;
4.1.14 Upon at least 48 hours prior notice to the Company, allow IQ to enter the Company’s premises during normal business hours to conduct audits that are deemed necessary for the
Project and obtain a copy of any document required to this end. Before exercising this right, IQ shall request in advance a copy of the requested documents from the Company and
should the documents not be received within a period of 10 days after the request was received, IQ may exercise its right to enter, such right to be exercised in accordance with the
applicable laws and regulations;
4.1.15 Not grant other hypothecs or security interest, or for its own benefit, ranking prior to those granted to IQ on the Tariffs as security for the Loan; unless prior written consent of IQ has
been obtained.
5.
EVENTS OF DEFAULT
Notwithstanding any provision to the contrary in this Offer and even where the other conditions have been fulfilled, IQ reserves the right, at its discretion, to terminate the Loan or any undisbursed
portion thereof or to defer disbursement thereof, and the Company undertakes to repay, on demand, all or part of the sums disbursed on account of the Loan together with any interest accrued, in
the following cases unless this Event of Default is remedied within 45 days following a request to this effect by IQ to the Company :
5.1
5.2
5.3
5.4
if the Company makes an assignment of its property, is subject to a receiving order pursuant to the Bankruptcy and Insolvency Act, makes a proposal to its creditors or commits an act of
bankruptcy pursuant to the aforesaid Act, claims the benefit of the provisions of the Companies’ Creditors Arrangement Act or if it is subject to a winding-up order pursuant to the winding-up
rules provided in the Business Corporations Act or any other similar law, or if it fails to maintain a legal existence;
if the Company is in default under the terms of an agreement or a security instrument relating to its borrowings in a principal amount over $50,000,000 and such default has not been
remedied within the time prescribed;
in the event of misrepresentation, fraud or falsification of documents prepared by the Company and submitted to IQ in connection with the Project;
if the Company fails to fulfill a material covenant stipulated in the terms, conditions and clauses of this Offer.
6.
GENERAL PROVISIONS
6.1
6.2
6.3
This contract shall be governed by the laws of the Province of Quebec and, in the event of dispute, the courts of Quebec in the judicial district of Quebec alone shall have jurisdiction. In
addition, this Offer is subject to the terms and conditions set forth in the Act respecting Investissement Québec.
By accepting this Offer, the Company declares that all information of a technical, financial or economic nature that it has prepared and provided to IQ on a historical basis is true, to the best
of its knowledge.
For the purposes of this Offer, all notices shall be in writing and sent by certified or registered mail or delivered by hand or by fax. Notices from IQ shall be sent to the Company’s head
office, to the attention of the authorized representative who shall execute the acceptance of this Offer for and on behalf of the Company. All notices from the Company or its shareholders
shall be sent to Investissement Québec, at its place of business at 600, de La Gauchetière Ouest, Suite 1500, Montréal, Quebec, H3B 4L8, to the attention of the Secretary. All notices shall
be deemed to have been received on the day they are delivered, where hand-delivered, the day of transmittal, if sent by fax, and if such day is a business day, during normal office hours or
the following business day, or on the third business day after they are mailed by the sender, where sent by certified or registered mail.
7.
CANCELLATION
7.1
If the Company does not request the disbursement of any amount of the Loan which the Company is entitled to receive within 6 months following the Project Completion Date, IQ may
cancel all or part of the Loan.
8.
PUBLIC ANNOUNCEMENT
8.1
8.2
By accepting this Offer, the Company agrees that IQ can publicly disclose the principal parameters of the Loan granted to the Company including but not limited to the name of the
Company, its type of operations, its location, the nature and amount of the Loan provided hereunder as well as the number of employees working for the Company.
Except in the case of any disclosure required by law, the terms of any public announcement relating to the contractual relationship between IQ and the Company shall be determined by
mutual agreement of the parties, both with respect to the timing and the content. Neither party may use the name of the other party or refer to the business relationship arising hereunder in
any promotional material or advertising, without the prior written consent of the other party.
IQ initials
Page 2 of 9
EXHIBIT 10.45
RESOLUTE FOREST PRODUCTS 2019 EQUITY INCENTIVE PLAN
THIS PERFORMANCE STOCK UNIT AGREEMENT, dated as of November16, 2020, (the “Date of Grant”) is made by
and between Resolute Forest Products Inc., a Delaware corporation (the “Company”), and «FIRST» «LAST» (“Participant”).
STOCK SETTLED PERFORMANCE STOCK UNIT AGREEMENT
WHEREAS, the Company has adopted the Resolute Forest Products 2019 Equity Incentive Plan (the “Plan”), pursuant to
which performance stock units may be granted in respect of shares of the Company’s common stock, par value $0.001 per share
(“Stock”); and
WHEREAS, the Human Resources and Compensation and Nominating and Governance Committee of the Company (the
“Committee”) has determined that it is in the best interests of the Company and its stockholders to grant the performance stock
unit award provided for herein to Participant subject to the terms set forth herein.
NOW, THEREFORE, for and in consideration of the premises and the covenants of the parties contained in this
Agreement, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto, for
themselves, their successors and assigns, hereby agree as follows:
1.
Grant of Performance Stock Unit.
(a)
Grant. The Company hereby grants to Participant «PSUs» performance stock units (the “PSUs”), on the terms and
conditions set forth in this Agreement and as otherwise provided in the Plan (the “Initial Grant”). Each PSU represents the right
to receive one share of Stock as of the Settlement Date (defined in Section 2(c)), to the extent the Participant is vested in such
PSUs as of the Settlement Date, subject to the terms of this Agreement and the Plan.
(b)
Incorporation by Reference, Etc. The provisions of the Plan are hereby incorporated herein by reference. Except as
otherwise expressly set forth herein, this Agreement shall be construed in accordance with the provisions of the Plan and any
interpretations, amendments, rules and regulations promulgated by the Committee from time to time pursuant to the Plan. Any
capitalized terms not otherwise defined in this Agreement shall have the definitions set forth in the Plan. The Committee shall
have final authority to interpret and construe the Plan and this Agreement and to make any and all determinations under them,
and its decision shall be binding and conclusive upon Participant and his legal representative in respect of any questions arising
under the Plan or this Agreement.
(c)
Acceptance of Agreement. Unless Participant notifies the Company in writing within 14 days after the Date of
Grant that Participant does not wish to accept this Agreement, Participant will be deemed to have accepted this Agreement and
will be bound by the terms of the Agreement and the Plan. Any such notice may be given to the Corporate Compensation at the
Company’s principal executive office.
58409620v.3
1
2.
Terms and Conditions.
(a)
Calculation of Earned Performance Stock Units. The period over which the PSUs earned by the Participant will be
measured is the three calendar years beginning with the calendar year that immediately follows the Date of Grant (“Performance
Period”). If the Participant is otherwise vested as provided in Section 2(b), the Participant will receive a number of PSUs based
on actual achievement of performance measures during the Performance Period, as set forth on Exhibit 1 attached hereto.
(b)
Vesting. Subject to Section 3, a Participant will be 100% vested if he remains employed with the Company or any
Affiliate or Subsidiary on February 28, 2024 (the “Vesting Date”). For purposes of the Agreement, the “Vesting Period” is the
period beginning on December 1 following the Date of Grant through the Vesting Date. Notwithstanding the foregoing, a
Participant who meets the criteria to terminate employment due to Retirement (as provided in Section 3(a)) shall be 100% vested
as of the date the Participant meets such criteria (irrespective of whether the Participant terminates employment due to
Retirement).
(c)
Settlement. The obligation to make payments and distributions with respect to PSUs shall only be satisfied
through the issuance of one share of Stock for each earned and vested PSU (the “settlement”) and the settlement of the PSUs may
be subject to such conditions, restrictions and contingencies as the Committee shall determine. Subject to Section 4(c), the
Company undertakes and agrees not to exercise its right under the Plan to settle the PSUs in any other means other than shares of
Stock. PSUs shall be settled as soon as practicable after the Vesting Date. However, in the event (i) the Participant dies on or after
the Date of Grant and before the Performance Period, the PSUs shall be settled no later than March 15 of the calendar year
following the end of the first calendar year of the Performance Period, and (ii) the Participant dies during the Performance Period,
the PSUs shall be settled no later than March 15 of the calendar year following the calendar year in which the Participant dies.
For purposes of this Agreement, the date on which PSUs are settled pursuant to the preceding sentence shall be a “Settlement
Date.”
(d)
Dividend Equivalents. Participant will from time to time be credited with additional PSUs (rounded to the nearest
whole share), the number of which will be determined by dividing:
(i)The product obtained by multiplying the amount of each dividend (including extraordinary dividend if so
determined by the Company) declared and paid by the Company on the Stock on a per share basis during the Vesting Period by
the number of PSUs recorded in the Participant’s account on the record date for payment of any such dividend, by
(ii)The Fair Market Value (as defined in the Plan) of one (1) share of Stock on the dividend payment date for such
dividend.
Subject to continued employment with the Company or any Affiliate or Subsidiary or as otherwise provided in
Section 3, the additional PSUs shall vest and be settled at the same time and in the same proportion as the Initial Grant. No
additional PSUs shall be
58409620v.3
2
accrued for the benefit of Participant with respect to record dates occurring before, or with respect to record dates occurring on or
after the date, if any, on which Participant has forfeited the PSUs.
3.
Termination of Employment with the Company. For purposes of this Agreement and to the extent applicable to the
Participant, the term “termination of employment” shall mean “separation from service” as defined in Section 409A of the
Internal Revenue Code (“Section 409A”). To the extent payments are made during the periods permitted under Section 409A
(including any applicable periods before or after the specified payment dates set forth in Section 2(c)), the Company shall be
deemed to have satisfied its obligations under the Plan and shall be deemed not to be in breach of its payments obligations
hereunder.
(a)
Retirement. If the Participant’s employment with the Company, Affiliates and Subsidiaries terminates as a result of
“Retirement” at any time on or after six months from the Date of Grant, then the Participant shall be entitled to receive 100% of
the PSUs he would have earned had he remained employed with the Company, Affiliates and Subsidiaries for the entire Vesting
Period, based on actual performance as provided in and determined pursuant to Section 2(a). For purposes of the Agreement,
“Retirement” means the Participant terminates employment with the Company, all Affiliates and Subsidiaries under
circumstances that do not entitle the Participant to severance either pursuant to an agreement or policy, plan or program and such
termination occurs on or after: (i) attaining age 58, (ii) completing at least two years of service, and (iii) having a combined age
and years of service (counting partial years) equal to at least 62.5 points.
(b)
Involuntary Termination and Certain Voluntary Terminations. The Participant shall become vested in a prorata
number of PSUs and entitled to receive a number of PSUs based on actual performance, as provided in and determined pursuant
to Section 2(a), in the following circumstances: (1) the Participant’s employment with the Company or any Affiliate or Subsidiary
terminates as a result of Retirement within six months after the Date of Grant, (2) the Participant voluntarily terminates his
employment with the Company, Affiliates and Subsidiaries on or after age 55 and the termination does not constitute a
Retirement, or (3) the Participant is involuntarily terminated by the Company or any Affiliate or Subsidiary without Cause
(whether or not the Participant is eligible for Retirement, regardless of his age at termination and other than due to Disability or
death). For purposes of the preceding, the prorata number of the PSUs shall be equal to (A) the total number of granted PSUs
under Section 1(a) plus any dividend equivalents multiplied by (B) a fraction, the numerator of which shall be the number of full
calendar months elapsed from December 1 following the Date of Grant through the Participant’s retirement date or last day
worked (in the case of termination) and the denominator of which shall be 39 (the number of calendar months in the Vesting
Period, treating the month of December following the Date of Grant as the first calendar month).
(c)
Death. If the Participant’s employment with the Company or any Affiliate or Subsidiary terminates due to the
Participant’s death, the Participant shall become vested in a prorata number of PSUs and entitled to receive a number of PSUs
based on estimated actual
58409620v.3
3
performance as of December 31 of the calendar year that contains the Participant’s date of death, as approved by the Committee.
(i)Death During Performance Period. If the Participant’s death while employed occurs during the Performance
Period, the prorata number of the PSUs shall be equal to (A) the total number of granted PSUs under Section 1(a) plus any
dividend equivalents multiplied by (B) a fraction, the numerator of which shall be the number of full calendar months elapsed
from December 1 following the Date of Grant through the end of the calendar year that contains the Participant’s date of death
and the denominator of which shall be 39 (i.e., the number of calendar months in the Vesting Period, treating the month of
December following the Date of Grant as the first calendar month).
(ii)Death On/After Date of Grant and Before Performance Period. If the Participant’s death while employed occurs on
or after the Date of Grant, but before the Performance Period begins, the prorata number of the PSUs shall be equal to (A) the
total number of granted PSUs under Section 1(a) plus any dividend equivalents multiplied by (B) a fraction, the numerator of
which shall be the number of full calendar months elapsed from December 1 following the Date of Grant through the end of the
first calendar year of the Performance Period and the denominator of which shall be 39 (i.e., the number of calendar months in
the Vesting Period, treating the month of December following the Date of Grant as the first calendar month).
(d)
Disability. If the Participant becomes eligible for long-term disability benefits under a plan sponsored by the
Company, an Affiliate or a Subsidiary (“Disabled”), the Participant shall become vested in a prorata number of PSUs and entitled
to receive a number of PSUs based on actual performance as provided in and determined pursuant to Section 2(a).
(i)Disability During Performance Period. If the Participant becomes Disabled during the Performance Period, the
prorata number of the PSUs shall be equal to (A) the total number of granted PSUs under Section 1(a) plus any dividend
equivalents multiplied by (B) a fraction, the numerator of which shall be the number of full calendar months elapsed from
December 1 following the Date of Grant through the end of the calendar year during the Performance Period that includes the
date on which the Participant becomes Disabled plus the number of additional full calendar months, if any, elapsed from the date
of the Participant’s return to active employment with the Company through the end of the Vesting Period, and the denominator of
which shall be 39 (i.e., the number of calendar months in the Vesting Period, treating the month of December following the Date
of Grant as the first calendar month).
(ii)Disabled On/After Date of Grant and Before Performance Period. If the Participant becomes Disabled on or after
the Date of Grant, but before the Performance Period begins, the prorata number of the PSUs shall be equal to (A) the total
number of granted PSUs under Section 1(a) plus any dividend equivalents multiplied by (B) a fraction, the numerator of which
shall be the number of full calendar months elapsed from December 1 following the Date of Grant through the end of the first
calendar year of the Performance Period plus the number of additional full calendar months, if any, elapsed from the date of the
Participant’s return to active employment with the Company after the end of the first calendar year of the Performance Period
58409620v.3
4
through the end of the Vesting Period, and the denominator of which shall be 39 (i.e., the number of calendar months in the
Vesting Period, treating the month of December following the Date of Grant as the first calendar month).
(iii)Disabled On/After the End of the Performance Period. If the Participant becomes Disabled after the Performance
Period ends, but before the Vesting Date, the Participant shall be entitled to receive 100% of the PSUs he would have earned had
he remained in active employment with the Company, Affiliates and Subsidiaries for the entire Vesting Period, based on actual
performance as provided in and determined pursuant to Section 2(a).
(e)
Other Termination. If the Participant’s employment with the Company, all Affiliates and Subsidiaries terminates
(i) by the Company for Cause at any time or (ii) by resignation before attainment of age 55, then all outstanding PSUs, whether
vested but unsettled or unvested, shall immediately terminate.
In no event shall any PSUs be settled before the Vesting Date except as provided above in the event of death or as otherwise
determined by the Company.
Compliance with Legal Requirements. The granting and settlement of the PSUs, and any other obligations of the
4.
Company under this Agreement, shall be subject to all applicable federal, provincial, state, local and foreign laws, rules and
regulations and to such approvals by any regulatory or governmental agency as may be required.
(a)
Transferability. Unless otherwise provided by the Committee in writing, the PSUs shall not be assigned, alienated,
pledged, attached, sold or otherwise transferred or encumbered by a Participant by Participant other than by will or the laws of
descent and distribution. Any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be
void and unenforceable against the Company, an Affiliate or a Subsidiary; provided that the designation of a beneficiary shall not
constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.
(b)
No Rights as Stockholder. The Participant shall not be deemed for any purpose to be the owner of any shares of
Stock subject to PSUs and shall have no voting rights with respect to the PSUs.
(c)
Tax Withholding. All distributions under the Plan are subject to withholding of all applicable federal, state,
provincial, local and foreign income taxes and social contributions (the “Withholding Obligation”). The Company may satisfy
such Withholding Obligation by any means whatsoever, including withholding cash from any other payment or amounts due to
the Participant. Unless otherwise determined by the Committee, the Company will satisfy its Withholding Obligation by issuing,
upon the settlement of the PSUs, a net number of shares of Stock to the Participant equal to the number of shares of Stock that the
Participant would otherwise be entitled to receive on the Settlement Date minus such number of shares of Stock with a value
determined on that date equal to any amount required to satisfy the Withholding Obligation.
58409620v.3
5
Forfeiture and Recoupment. For the avoidance of doubt, the Plan’s provisions on forfeiture and recoupment in Section 15
5.
of the Plan apply to the PSUs awarded hereunder. The Company's Recoupment Policy, as may be amended from time to time,
shall apply to the PSUs, any shares of Stock delivered hereunder and any profits realized on the sale of such Shares to the extent
that the Participant is covered by such policy. If the Participant is covered by such policy, the policy may apply to recoup PSUs
awarded, any shares of Stock delivered hereunder or profits realized on the sale of such shares either before, on or after the date
on which the Participant becomes subject to such policy.
6.
Miscellaneous.
(a) Waiver. Any right of the Company contained in this Agreement may be waived in writing by the Committee. No
waiver of any right hereunder by any party shall operate as a waiver of any other right, or as a waiver of the same right with
respect to any subsequent occasion for its exercise, or as a waiver of any right to damages. No waiver by any party of any breach
of this Agreement shall be held to constitute a waiver of any other breach or a waiver of the continuation of the same breach.
(b)
Notices. Any written notices provided for in this Agreement or the Plan shall be in writing and shall be deemed
sufficiently given if either hand delivered or if sent by fax or overnight courier, or by postage paid first class mail. Notices sent by
mail shall be deemed received three business days after mailing but in no event later than the date of actual receipt. Notices shall
be directed, if to the Participant, at the Participant’s address indicated by the Company’s records, or if to the Company, to the
attention of the Director, Corporate Compensation at the Company’s principal executive office.
(c)
Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and
enforceable to the extent permitted by law.
(d)
No Rights to Employment. Nothing contained in this Agreement shall be construed as giving Participant any right
to be retained, in any position, as an employee, consultant or director of the Company or its Affiliates or shall interfere with or
restrict in any way the right of the Company or its Affiliates, which are hereby expressly reserved, to remove, terminate or
discharge Participant at any time for any reason whatsoever.
(e)
Beneficiary. The Participant other than a Participant residing in the Province of Québec, may file with the
Committee a written designation of a beneficiary on such form as may be prescribed by the Committee and may, from time to
time, amend or revoke such designation. Any notice should be made to the attention of the Corporate Secretary of the Company
at the Company’s principal executive office. If no designated beneficiary survives the Participant, the Participant’s estate shall be
deemed to be Participant’s beneficiary.
(f)
Québec Participant. The Participant residing in the Province of Québec may only designate a beneficiary by will.
Upon the death of the Participant residing in the Province of
58409620v.3
6
Québec, the Company shall settle the PSUs pursuant to Section 2(c) of this Agreement to the liquidator, administrator or executor
of the estate of the Participant.
(g)
Successors. The terms of this Agreement shall be binding upon and inure to the benefit of the Company and its
successors and assigns, and of the Participant and the beneficiaries, executors, administrators, heirs and successors of the
Participant.
(h)
Entire Agreement. This Agreement and the Plan contain the entire agreement and understanding of the parties
hereto with respect to the subject matter contained herein and supersede all prior communications, representations and
negotiations in respect thereto. No change, modification or waiver of any provision of this Agreement shall be valid unless the
same be in writing and signed by the parties hereto, except for any changes permitted without consent under Section 9 of the
Plan.
(i)
Governing Law. This Agreement shall be construed and interpreted in accordance with the laws of the State of
Delaware without regard to principles of conflicts of law thereof, or principles of conflicts of laws of any other jurisdiction which
could cause the application of the laws of any jurisdiction other than the State of Delaware.
(j)
Headings. The headings of the Sections hereof are provided for convenience only and are not to serve as a basis
for interpretation or construction, and shall not constitute a part, of this Agreement.
IN WITNESS WHEREOF, the Company has executed this Agreement as of the day first written above.
RESOLUTE FOREST PRODUCTS INC.
By:
Yves Laflamme
President and Chief Executive Officer
58409620v.3
7
Exhibit 1
Performance Measures
For the Performance Period that begins January 1, 2021 and ends December 31, 2023, there are two performance
measures, each with different weighting and possible payout levels.
Performance Weighting
The actual results of each performance measure, described below, will be adjusted to reflect each measure’s weighting.
Performance Measure
Total Shareholder Return
Return on Capital
Performance Measures
Total Shareholder Return (“TSR”)
Weighting
50%
50%
Subject to adjustments, for the TSR measure, the Participant will earn between 0% and 200% (share amounts being
straight-line interpolated) of the number of PSUs covered by the Initial Grant.
TSR vs. Peers During the
Performance Period
20 percentage points
below median
10 percentage points
below median
Payout
0%
50%
Median
100%
10 percentage points
above median
20 percentage points
above median
150%
200%
Notwithstanding anything in the Agreement to the contrary, payouts for the TSR measure that otherwise would have been
more than 100% of target will be capped at 100% of target if the Company’s TSR is negative over the Performance Period.
TSR shall be calculated as follows:
58409620v.3
8
Relative TSR shall be measured each calendar year in the Performance Period. For example, TSR for 2021 shall be
determined using January 1, 2022 as the end point and January 1, 2021 as the beginning point. Interim payout levels shall be
determined based on relative TSR for each calendar year. The payout levels for each calendar year shall be added and their sum
shall be divided by 3 to determine final payout of the TSR measure.
The peer group includes the following companies:
Canfor Corp
Clearwater Paper Corp
Western Forest Products Inc.*
Domtar Corp
Interfor Corp
Mercer International Inc.
Rayonier Advanced Materials
Verso Corp - A
West Fraser Timber Co. LTD
*Note that the peer group included Conifex Timber Inc. until December 31, 2019 and Western Forest Products Inc. since January 1, 2020.
The Committee may, in its sole discretion, make adjustments to the peer group as appropriate.
Return on Capital
Subject to adjustments, for the return on capital measure, the Participant will earn between 0% and 200% (payouts being
straight-line interpolated) of the number of PSUs covered by the Initial Grant.
Original internal rate of
return (“IRR”) vs. Actual IRR
< 80% of original IRR 90% of original IRR 100% of original IRR 110% of original IRR
> 120% of original
IRR
Payout
0%
50%
100%
150%
200%
For each capital project approved after January 1, 2018 and assessed during the Performance Period, the actual IRR will
be compared to the original IRR set forth in the project’s appropriation of funds request in accordance with Policy FP-500,
Capital Expenditures. Total payout will be calculated using a weighted average. Capital projects included for this performance
measure include all wood projects with an appropriation of funds greater than $500,000, pulp and paper projects with an
appropriation of funds greater than $1,000,000, and corporate projects with an appropriation of funds greater than $1,000,000
with an assigned IRR.
58409620v.3
9
EXHIBIT 10.49
111 Robert-Bourassa Blvd., Suite 5000
Montreal, Quebec, H3C 2M1 Canada
T 514-875-2160 resolutefp.com
February 8, 2021
Mr. Yves Laflamme
Re: Agreement between Yves Laflamme and Resolute Forest Products Inc.
Dear Mr. Laflamme:
This letter agreement confirms that your position as president and chief executive officer of Resolute Forest Products Inc. (Company) will
terminate, and you will resign from the board of directors and all other positions with the Company and its subsidiaries, effective February 28,
2021 at 11:59 p.m. The terms and conditions of your termination are described below.
Severance Payments
Upon your termination, you will be entitled to receive the severance payments and all other benefits pursuant to section 5.8(c) of your
Executive Employment Agreement with the Company, dated February 1, 2018 (Employment Agreement). In addition, you will be eligible to
receive a prorata payment under the 2021 Short Term Incentive Plan (STIP) representing your two months of employment in 2021. Any STIP
payments made for 2021 will be determined pursuant to the terms of the STIP and paid at the same time as other STIP participants.
Outstanding Equity Awards
Notwithstanding anything in the Executive Employment Agreement, this letter agreement and your performance stock unit and restricted
stock unit award agreements to the contrary, any performance stock unit (PSUs) and restricted stock unit (RSUs) awards that remain
outstanding as of your termination date will be fully vested on February 28, 2021 at 11:59 p.m. The PSUs to be earned will be determined
and settled pursuant to the terms of your respective award agreements. The RSUs will be settled as soon as practicable following February
28, 2021 at 11:59 p.m. and execution of any release agreement. This paragraph amends the following award agreements accordingly:
November 13, 2017; November 12, 2018; November 11, 2019; and November 16, 2020.
Indemnification
You will continue to be eligible for indemnification to the extent permitted under the Company’s certificate of incorporation, its by-laws,
applicable law and pursuant to the indemnification agreement entered into between you and the Company and on December 6, 2012 and
amended on April 11, 2017 and on February 28, 2018, and will receive director and officer liability insurance coverage with full post-
termination/post-board service tail coverage, as provided for in such governing documents and indemnification agreement.
Restrictive Covenants
In exchange for the right to the severance pay described above, you agree that you remain subject to the covenants set forth in article 6 of
your Employment Agreement.
Mtl#: 3458117.2
111 Robert-Bourassa Blvd., Suite 5000
Montreal, Quebec, H3C 2M1 Canada
T 514-875-2160 resolutefp.com
All other provisions in your Employment Agreement that survive the termination of your employment shall continue in effect in accordance
with section 5.10 of the Employment Agreement.
If you have any questions about this agreement, please let us know. I look forward to your formal acceptance of this agreement.
/s/ Alain Rhéaume
Alain Rhéaume,
Chair of the Human Resources, Compensation & Nominating and Governance Committee
of the Board of Directors
I have read the herein letter and hereby accept these terms and conditions.
/s/ Yves Laflamme
___________________________________ ___02/16/2021_________________
Yves Laflamme Date
Mtl#: 3458117.2
EXHIBIT 10.50
111 Robert-Bourassa Blvd., Suite 5000
Montreal, Quebec, H3C 2M1 Canada
T 514-875-2160 resolutefp.com
January 15, 2021
Sylvain A. Girard
Subject:
Terms and Conditions of Employment between Sylvain A. Girard and Resolute Forest Products Inc.
Dear Sylvain,
I am pleased to confirm our offer of employment regarding the position of Special Advisor reporting directly to me. This position is based in
Montreal and requires you to reside in the Montreal area. The terms and conditions of this offer are described below.
Effective Date
Your appointment to the position of Special Advisor will be effective on February 15, 2021. Effective
March 2, 2021, or such other earlier date as agreed with the Company, you will be appointed to the position of Senior Vice President and
Chief Financial Officer, reporting to Resolute’s president and chief executive officer. No terms of the enclosed offer will be modified once you
are appointed to the position of Senior Vice President and Chief Financial Officer.
Annual Base Salary
As of the effective date, your base salary will be at an annual rate of $500,000, less applicable deductions and payable semi-monthly by
direct deposit. Your base salary will be subject to the Company’s currency policy for executive pay. For 2021, 63.5% of your base salary will
be denominated in Canadian dollars and 36.5% will be denominated in US dollars.
Position Classification
The positions of Special Advisor and Senior Vice President and Chief Financial Officer are classified Grade 46 of our Job/Salary Structure.
Short Term Incentive Plan
As of the effective date, you will be eligible to participate to the short term incentive plan adopted by the Company from time to time.
For 2021, the target incentive for your salary grade will be 100 % of your annual base salary, subject to the currency policy of the Company.
The Company has not yet adopted a short term incentive plan for 2021, but I invite you to consult the 2020 Short Term Incentive Plan
enclosed as an indication. Please note that 100% of the total payout to the Executive Team members cannot exceed 5% of Resolute Forest
Products' generated free cash flow in the relevant performance year.
Long Term Incentive Plan
As of the effective date, you will be eligible to participate to the Company’s Long Term Incentive Plan applicable to key personnel. Grants are
generally approved in November. For 2021, you will be eligible to an annual grant equivalent to 125% of your annual base salary, subject to
the currency policy of the Company.
Under our Stock Ownership Guidelines, you will be required to hold the equivalent of 2.5 times your annual salary in shares or Restricted
Stock Units (“RSUs”) of the Company. Please refer to the attached document.
Parking
As of the effective date, you will be eligible to a monthly parking paid by the Company. The fee for the parking is a taxable benefit.
Health and Insurance Benefits
As of the effective date, you will be eligible to participate in the Company’s Health and Insurance Benefits program applicable to permanent
employees of the Company. Please refer to the enclosed documentation.
Please note that you must be eligible and registered with the provincial health insurance plan to be eligible for the Company’s Health and
Insurance Benefits program.
Retirement Plan
As of the effective date, you will be eligible to participate in the Company’s Defined Contribution Pension Plan applicable to employees of the
Company and to the DC Make-Up program applicable to key personnel. Please refer to the enclosed documentations.
Vacation and Holidays
As of the effective date, you will be entitled to 3 floating holidays and 5 weeks of annual paid vacation, to be taken at times mutually
convenient to the Company and yourself in accordance with the vacation policy. Vacation is earned progressively and must be used during
the calendar year.
If your employment is terminated for any reason other than involuntary termination without cause (i.e. because you resigned, you are
dismissed or you retire), the Company will require reimbursement of any portion of vacation taken in advance, that is to say before it is
acquired under the policy in effect. By accepting this offer, you authorize the Company to recover overpayments in the form of vacation taken
in advance by making a deduction from your earnings.
Annual Medical Examination
You and your spouse will be eligible to an annual medical examination with Medisys Health Group Inc. This is considered a taxable benefit.
As a member of the Executive Team, you will benefit from MedisysOne, a 24-hour On Demand Healthcare service that combines
comprehensive annual health assessment, round-the-clock support and personalized, proactive healthcare management.
Annual Lump Sum
For 2021, you will be eligible to an annual lump sum of $12,000, which can be used for various expenses such as preparing your taxes, club
memberships, etc. This lump sum is a taxable benefit and is paid annually in April.
Severance Policy
As of the effective date, you will be subject to the Severance Policy for executive employees, unless you resign or we terminate your employment for
cause.
Indemnification
As of the effective date, you will benefit from an indemnification contract in the form attached hereto and be covered by the indemnification
policy for the executive officers and chief accounting officer of Resolute Forest Products Inc. in effect from time to time.
Others
By accepting this offer, you authorize the Company to recover any overpayment from the Company by making a deduction from your regular
pay, your vacation pay or any other amount that is owed to you. An overpayment is an amount to which you are not entitled under this
employment contract, the policies of the Company or employment laws.
If you have any questions about this offer, please contact Daniel Ouellet, Senior Vice President, Human Resources at 514 914-8941. We
look forward to your formal acceptance of this offer and ask that you sign and return a copy to confirm your acceptance by January 19, 2021.
Sincerely,
/s/ Rémi G. Lalonde
Rémi Lalonde
Senior Vice President and Chief Financial Officer
I have read the herein letter and hereby accept these terms and conditions.
I have read the herein letter and hereby refuse these terms and conditions.
/s/ Sylvain A. Girard
_____________________________________ __________January 16, 2021_______
Sylvain A. Girard Date
RESOLUTE FOREST PRODUCTS INC.
SUBSIDIARY LISTING
As of December 31, 2020
EXHIBIT 21.1
(1)
Quebec
Name Jurisdiction of Incorporation
9192-8515 Quebec Inc.
3284649 Nova Scotia Company Nova Scotia
9340939 Canada Inc. Canada
AbiBow Recycling LLC Delaware
Abitibi Consolidated Europe Belgium
Abitibi Consolidated Sales LLC Delaware
AbitibiBowater Canada Inc. Canada
Accurate Paper Fleet, LLC Delaware
Accurate Paper Holdings, LLC Delaware
Atlas Paper Management, LLC Delaware
Atlas Paper Mills, LLC Delaware
Atlas Southeast Papers, Inc. Delaware
Atlas Tissue Holdings, Inc. Delaware
Augusta Newsprint Holding LLC Delaware
Bowater Asia Pte. Ltd. Singapore
Bowater Canadian Holdings Incorporated Nova Scotia
Bowater Canadian Limited Canada
Bowater LaHave Corporation Nova Scotia
Bowater Newsprint South LLC Delaware
Bowater Nuway Mid-States Inc. Delaware
Bowater S. America Ltda. Brazil
Bowater South American Holdings Incorporated Delaware
Calhoun Newsprint Company Delaware
Calhoun Note Holdings AT LLC Delaware
Calhoun Note Holdings TI LLC Delaware
Donohue Corp. Delaware
FD Powerco LLC West Virginia
Fibrek General Partnership Quebec
Fibrek International Inc. Canada
Fibrek Recycling U.S. Inc. Delaware
Fibrek U.S. Inc. Delaware
Forest Products Mauricie L.P. (1) Quebec
GLPC Residual Management, LLC Delaware
Lake Superior Forest Products Inc. Delaware
Resolute Caddo River, LLC Delaware
Resolute Cross City LLC Delaware
Resolute Cross City Real Estate Holdings LLC Delaware
Resolute Cross City Timber Management LLC Delaware
Resolute El Dorado Inc. Delaware
Resolute FP Augusta LLC Delaware
Resolute FP Canada Inc. Canada
Resolute FP Florida Inc. Delaware
Resolute FP Sub 1 Inc. Delaware
Resolute FP US Inc. Delaware
Resolute Glenwood LLC Delaware
Resolute Growth US LLC Delaware
Resolute Hagerstown LLC Delaware
Resolute Navcor LLC Delaware
Resolute Tissue LLC Delaware
Resolute US Lumber Inc. Delaware
SFK Pulp Finco Inc. Canada
The International Bridge and Terminal Company Canada
Note: Except as otherwise indicated, each of the above entities is a wholly-owned direct or indirect subsidiary of Resolute Forest Products Inc. (“RFP”). The names of
certain other direct and indirect subsidiaries of RFP have been omitted from the list above because such unnamed subsidiaries in the aggregate as a single subsidiary would
not constitute a significant subsidiary.
(1)
93.2 percent owned.
RESOLUTE FOREST PRODUCTS INC.
GUARANTOR SUBSIDIAIRIES OF THE REGISTRANT
As of December 31, 2020
EXHIBIT 22
AbiBow Recycling LLC
Abitibi Consolidated Sales LLC
Accurate Paper Fleet, LLC
Accurate Paper Holdings, LLC
Atlas Paper Management, LLC
Atlas Paper Mills, LLC
Atlas Southeast Papers, Inc.
Atlas Tissue Holdings, Inc.
Augusta Newsprint Holding LLC
Bowater Newsprint South LLC
Bowater Nuway Mid-States Inc.
Calhoun Newsprint Company
Donohue Corp.
FD Powerco LLC
Fibrek Recycling U.S. Inc.
Fibrek U.S. Inc.
GLPC Residual Management, LLC
Resolute Caddo River LLC
Resolute Cross City Real Estate Holdings LLC
Resolute Cross City LLC
Resolute Cross City Timber Management LLC
Resolute El Dorado Inc.
Resolute FP Augusta LLC
Resolute FP Florida Inc.
Resolute FP US Inc.
Resolute Glenwood LLC
Resolute Growth US LLC
Resolute Hagerstown LLC
Resolute Navcor LLC
Resolute Tissue LLC
Resolute US Lumber Inc.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
EXHIBIT 23.1
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-171602, No. 333-173361 and No. 333-173362)
of Resolute Forest Products Inc. of our report dated March 1, 2021 relating to the consolidated financial statements and the effectiveness of internal control
over financial reporting, which appears in this Form 10‑K.
/s/ PricewaterhouseCoopers LLP
Montréal, Canada
March 1, 2021
POWER OF ATTORNEY
EXHIBIT 24.1
KNOW ALL MEN BY THESE PRESENTS
WHEREAS, RESOLUTE FOREST PRODUCTS INC., a Delaware corporation (the "Company"), proposes shortly to file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended (the "Act"), the Annual Report on
Form 10-K pursuant to Section 13 or 15(d) of the Act.
WHEREAS, each of the undersigned is a Director of the Company.
NOW, THEREFORE, each of the undersigned hereby constitutes and appoints Rémi G. Lalonde and Jacques P. Vachon and each of them,
as true and lawful attorneys-in-fact and agents, and each of them with full power to act without the others, for him or her and in his or her
name, place and stead, in any and all capacities, to sign said Annual Report and any and all amendments thereto, and any and all other
documents in connection therewith, with the Securities and Exchange Commission, hereby granting unto said attorneys-in-fact and agents,
and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his or her hand this 25 day of February 2021.
th
/s/ Jennifer C. Dolan
Jennifer C. Dolan
Director
/s/ Alain Rhéaume
Alain Rhéaume
Director
/s/ Michael S. Rousseau
Michael S. Rousseau
Director
/s/ Bradley P. Martin
Bradley P. Martin
Chairman of the Board
/s/ Randall C. Benson
Randall C. Benson
Director
/s/ Suzanne Blanchet
Suzanne Blanchet
Director
34122010v2
EXHIBIT 31.1
I, Remi G. Lalonde, certify that:
Certification
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K for the year ended December 31, 2020 of RESOLUTE FOREST PRODUCTS INC.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
i.
ii.
iii.
iv.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
i.
ii.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: March 1, 2021
/s/ Remi G. Lalonde
Remi G. Lalonde
President and Chief Executive Officer
EXHIBIT 31.2
I, Remi G. Lalonde, certify that:
Certification
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K for the year ended December 31, 2020 of RESOLUTE FOREST PRODUCTS INC.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
i.
ii.
iii.
iv.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
i.
ii.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: March 1, 2021
/s/ Remi G. Lalonde
Remi G. Lalonde
Chief Financial Officer
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of RESOLUTE FOREST
PRODUCTS INC. (the “Company”), hereby certifies, to such officer’s knowledge, that the Company’s annual report on Form 10‑K for the year ended
December 31, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934,
and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Certification
EXHIBIT 32.1
Date: March 1, 2021
/s/ Remi G. Lalonde
Name: Remi G. Lalonde
Title: President and Chief Executive Officer
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature
that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Resolute Forest Products
Inc. and will be retained by Resolute Forest Products Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
and is not being filed as part of the Report or as a separate disclosure document.
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of RESOLUTE FOREST
PRODUCTS INC. (the “Company”), hereby certifies, to such officer’s knowledge, that the Company’s annual report on Form 10‑K for the year ended
December 31, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934,
and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Certification
EXHIBIT 32.2
Date: March 1, 2021
/s/ Remi G. Lalonde
Name: Remi G. Lalonde
Title: Chief Financial Officer
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature
that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Resolute Forest Products
Inc. and will be retained by Resolute Forest Products Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
and is not being filed as part of the Report or as a separate disclosure document.