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ARRANGEMENT AGREEMENT
MADE AS OF APRIL 1, 2001
BETWEEN
ALLIANCE FOREST PRODUCTS INC.
AND
BOWATER INCORPORATED
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TABLE OF CONTENTS
ARTICLE 1.........................................................................................................1
1.1. Definitions............................................................................................1
1.2. Interpretation Not Affected by Heading.................................................................6
1.3. Article References.....................................................................................6
1.4. Number and Gender......................................................................................6
1.5. Date for Any Action....................................................................................6
1.6. Alliance Subsidiaries..................................................................................6
1.7. Currency...............................................................................................6
1.8. Schedules..............................................................................................6
1.9. Accounting Matters.....................................................................................7
1.10. Material...............................................................................................7
ARTICLE 2.........................................................................................................7
2.1. Arrangement............................................................................................7
2.2. Effective Date.........................................................................................8
2.3. Alliance Approval......................................................................................8
2.4. Bowater Approval.......................................................................................9
2.5. Shareholder Rights Plan................................................................................9
ARTICLE 3.........................................................................................................9
3.1. Representations........................................................................................9
3.2. Investigation..........................................................................................9
3.3. Survival of Representations and Warranties............................................................10
ARTICLE 4........................................................................................................10
4.1. Representations.......................................................................................10
4.2. Investigation.........................................................................................10
4.3. Survival of Representations and Warranties............................................................10
ARTICLE 5........................................................................................................10
5.1. Consultation..........................................................................................10
5.2. Covenants of Alliance.................................................................................11
5.3. Covenants of Bowater..................................................................................17
5.4. Covenants Regarding Non-Solicitation..................................................................20
5.5. Notice by Alliance of Superior Proposal Determination.................................................21
5.6. Access to Information.................................................................................22
5.7. Mutual Standstill.....................................................................................23
5.8. Insurance.............................................................................................24
5.9. Ancillary Agreements..................................................................................24
5.10. Merger of Covenants...................................................................................25
ARTICLE 6........................................................................................................25
6.1. Mutual Conditions.....................................................................................25
6.2. Alliance Conditions...................................................................................27
6.3. Bowater Conditions....................................................................................28
6.4. Notice and Cure Provisions............................................................................29
6.5. Merger of Conditions..................................................................................29
6.6. Proxy Circular Mailing................................................................................29
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ARTICLE 7........................................................................................................30
7.1. Amendment.............................................................................................30
7.2. Mutual Understanding Regarding Amendments.............................................................31
ARTICLE 8........................................................................................................31
8.1. Bowater Break Fee Event...............................................................................31
8.2. General Remedies......................................................................................32
ARTICLE 9........................................................................................................33
9.1. Termination...........................................................................................33
ARTICLE 10.......................................................................................................33
10.1. Expenses..............................................................................................33
10.2. Notices...............................................................................................34
10.3. Time of the Essence...................................................................................35
10.4. Entire Agreement......................................................................................35
10.5. Further Assurances....................................................................................35
10.6. Governing Law.........................................................................................36
10.7. Execution in Counterparts.............................................................................36
10.8. Waiver................................................................................................36
10.9. Enurement and Assignment..............................................................................36
10.10. English/French Language...............................................................................36
SCHEDULE A - Plan of Arrangement
SCHEDULE B - Representations and Warranties of Alliance
SCHEDULE C - Representations and Warranties of Bowater
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ARRANGEMENT AGREEMENT
THIS AGREEMENT made the 1st day of April, 2001,
B E T W E E N:
ALLIANCE FOREST PRODUCTS INC.,
a corporation existing under the laws of Canada,
(hereinafter called "ALLIANCE"),
OF THE FIRST PART,
-- and --
BOWATER INCORPORATED,
a corporation existing under the laws of the State of
Delaware,
(hereinafter called "BOWATER"),
OF THE SECOND PART.
WHEREAS Alliance and Bowater wish to propose an arrangement involving
Alliance and Bowater and the shareholders of Alliance;
AND WHEREAS the parties hereto intend to carry out the transaction
contemplated herein by way of an arrangement under the provisions of the Canada
Business Corporations Act;
AND WHEREAS the parties hereto have entered into this Agreement to
provide for the matters referred to in the foregoing recitals and for other
matters relating to such arrangement;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
covenants and agreements herein contained and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged by
each party), the parties hereto hereby covenant and agree as follows:
ARTICLE 1
INTERPRETATION
1.1. DEFINITIONS
In this Agreement, unless the context otherwise requires:
"ACQUISITION PROPOSAL" means any merger, amalgamation, take-over bid,
sale of material assets (or any lease, long-term supply agreement or
other arrangement having the same economic effect as a sale), any
material sale of shares or rights or interests therein or thereto or
any similar transaction involving Alliance or any Subsidiary of
Alliance, or a
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proposal to do so, excluding the Arrangement and the transaction
permitted pursuant to Section 5.2;
"ALLIANCE COMMON SHAREHOLDERS" means the holders of Alliance Common
Shares;
"ALLIANCE COMMON SHARES" means the common shares of Alliance;
"ALLIANCE DISCLOSURE LETTER" means the disclosure letter prepared by
Alliance dated the date hereof and delivered to Bowater
contemporaneously with the execution and delivery of this Agreement;
"ALLIANCE MEETING" means such meeting or meetings of Alliance Common
Shareholders as are required to be held in accordance with the Interim
Order;
"ALLIANCE PLANS" has the meaning set out in Section 16 of Schedule B;
"ARRANGEMENT" means the arrangement involving Alliance and its
shareholders under the provisions of Section 192 of the CBCA, on the
terms and conditions set forth in the Plan of Arrangement;
"ARTICLES OF ARRANGEMENT" means the articles of arrangement of Alliance
in respect of the Arrangement required by the CBCA to be sent to the
Director after the Final Order is made;
"BOWATER CANADA" means Bowater Canada Inc., a corporation incorporated
under the federal laws of Canada;
"BOWATER COMMON SHAREHOLDERS" means the holders of Bowater Common
Shares;
"BOWATER COMMON SHARES" means the shares of common stock, U.S.$1.00 per
share, of Bowater;
"BOWATER DISCLOSURE LETTER" means the disclosure letter prepared by
Bowater dated the date hereof and delivered to Alliance
contemporaneously with the execution and delivery of this Agreement;
"BUSINESS DAY" means any day, other than a Saturday, a Sunday and a
statutory holiday in Toronto, Ontario, Montreal, Quebec or New York
City, New York;
"CBCA" means the Canada Business Corporations Act, R.S.C. 1985, c.
C[ ]44, as amended;
"CANADIAN ALLIANCE PLANS" means those Alliance Plans which apply or in
any way relate to employees of Alliance or any Subsidiary who are
employed in Canada;
"CODE" means the United States Internal Revenue Code of 1986, as
amended;
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"CONFIDENTIALITY AGREEMENT" means the Confidentiality Agreement dated
as of March 29, 2001 between Alliance and Bowater;
"COURT" means the Superior Court of Quebec, District of Montreal;
"DIRECTOR" means the Director appointed pursuant to Section 260 of the
CBCA;
"DISSENT RIGHTS" means the rights of dissent of the Alliance Common
Shareholders in respect of the Arrangement described in SECTION 3.1 in
the Plan of Arrangement;
"EFFECTIVE DATE" means the date stamped upon the Articles of
Arrangement filed with the Director;
"EMPLOYEE COMPENSATION AND BENEFIT ARRANGEMENTS" means:
(a) salaries, wages, bonuses, vacation entitlements, commissions,
fees, severance or termination plans, stock option plans,
stock purchase plans, stock appreciation plans, incentive
plans, deferred compensation plans, profit-sharing plans,
equity or equity-based compensation plans and other similar
benefits, plans, arrangements or policies; and
(b) insurance, health, welfare, disability, pension, supplementary
pension, retirement, travel, hospitalization, medical, dental,
legal, counselling, eye care and other similar benefits, plans
or arrangements (including, without limitation, all "EMPLOYEE
BENEFIT PLANS", as defined in Section 3(3) of ERISA);
"ENCUMBRANCE" includes, without limitation, any mortgage, pledge,
assignment, charge, lien, security interest, easement, encroachment,
lease, pledge, hypothecation, title retention agreement, adverse
interest in property, or any other third party interest or encumbrance
of any kind, whether contingent or absolute, and any agreement, option,
right or privilege (whether by law, contract or otherwise) capable of
becoming any of the foregoing and any claim in this respect;
"ENVIRONMENTAL APPROVALS" means all permits, certificates, licences,
authorizations, approvals, consents, instructions, registrations,
directions or approvals issued or required by Governmental Entities
pursuant to Environmental Laws;
"ENVIRONMENTAL LAWS" means all applicable Laws, including applicable
common laws, relating to the protection and preservation of the
environment (including, without limitation, ambient air, surface water,
ground water, land surface and subsurface strata) and employee and
public health and safety;
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder or with
respect thereto;
"EXCHANGEABLE SHARES" means the shares to be issued by Bowater Canada
in connection with the Arrangement that are exchangeable for Bowater
Common Shares;
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"FINAL ORDER" means the order of the Court approving the Arrangement,
as such order may be amended at any time prior to the Effective Date
or, if appealed, then unless such appeal is withdrawn or denied, as
affirmed;
"GOVERNMENTAL ENTITY" means any (a) multinational, federal, provincial,
territorial, state, regional, municipal, local or other government,
governmental, quasi-governmental, or public department, central bank,
court, tribunal, arbitral body, commission, board, bureau or agency,
domestic or foreign, (b) any subdivision, agent, commission, board, or
authority of any of the foregoing or (c) any quasi-governmental or
private body exercising any regulatory, expropriation or taxing
authority under or for the account of any of the foregoing, and
includes any first nations to the extent that they have jurisdiction
and lawful authority under the law;
"HAZARDOUS SUBSTANCE" means any pollutant, contaminant, waste of any
nature, hazardous substance, hazardous material, toxic substance,
dangerous substance or dangerous good as defined, judicially
interpreted or identified in any Environmental Law or which when
released into the environment is likely to cause, at some immediate or
future time, harm or degradation to the environment or risk to human
health, including, without limitation, PCBs, asbestos and hydrocarbons;
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, of the United States of America;
"INTERIM ORDER" means the interim order of the Court, as the same may
be amended, pursuant to subsection 192(4) of the CBCA containing
declarations and directions in respect of Alliance and the Alliance
Meeting under the CBCA with respect to the Arrangement;
"IRS" means the Internal Revenue Service of the United States of
America;
"LAW(S)" means all statutes, laws, by-laws, rules, regulations, orders,
ordinances, decrees, directives, protocols, codes, standards,
guidelines, policies, notices, directions and judgments or other
requirements of any Governmental Entity;
"LEGAL PROCEEDING(S)" means any litigation, action, suit,
investigation, hearing, claim, complaint, grievance, arbitration
proceeding or other proceeding and includes any appeal or review and
any application for same;
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means, when used
in connection with Alliance or Bowater, any change, effect, event,
occurrence or state of facts that is, or would reasonably be expected
to be, material and adverse to the business, operations or financial
condition of such Party and its Subsidiaries other than any change,
effect, event or occurrence relating to (i) the Canadian or United
States economy or securities markets in general, (ii) any change in the
trading price of the Alliance Common Shares or Bowater Common Shares,
respectively, immediately following and reasonably attributable to the
announcement of this Agreement and the transaction contemplated hereby,
or (iii) the forest products industry in general (including commodity
prices), and
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not specifically relating to Alliance or Bowater or their respective
Subsidiaries, respectively;
"PARTIES" means Alliance and Bowater; and "PARTY" means either one of
them;
"PLAN OF ARRANGEMENT" means the plan of arrangement substantially in
the form and content of Schedule A annexed hereto and any amendment or
variation thereto made in accordance with Section 6.1 of the Plan of
Arrangement or Article 7 hereof;
"PROXY CIRCULAR" means the management proxy circular prepared by
Alliance for the Alliance Meeting;
"RIGHTS PLAN RESOLUTION" means the resolution of the Alliance Common
Shareholders approving the waiver of the application of the Alliance
Shareholder Rights Plan Agreement to the Arrangement;
"SEC" means the United States Securities and Exchange Commission;
"SECURITIES AUTHORITIES" means each securities commission and each
securities regulatory authority (including applicable stock exchanges)
in each of the Provinces of Canada and in the United States and in such
other jurisdictions in which securities filing or reporting
requirements are applicable to Alliance or Bowater, as the case may be;
"SUBSIDIARY" means, with respect to a specified body corporate, any
body corporate of which more than 50% of the outstanding shares
ordinarily entitled to elect a majority of the board of directors
thereof (whether or not shares of any other class or classes shall or
might be entitled to vote upon the happening of any event or
contingency) are at the time owned directly or indirectly by such
specified body corporate and shall include any body corporate,
partnership, joint venture or other entity over which it exercises
direction or control or which is in a like relation to a Subsidiary,
each Subsidiary of Alliance being disclosed in the Alliance Disclosure
Letter;
"SUPERIOR PROPOSAL" has the meaning ascribed to such term in Section
5.4(a);
"TAX RETURNS" means all returns, declarations, reports, elections,
forms, information returns, statements and other documents required to
be filed with any taxing authority relating to Tax and/or Taxes;
"TAX" and "TAXES" have the meaning ascribed thereto in Section 15 of
Schedule B; and
"US ALLIANCE PLANS" means those Alliance Plans which apply or in any
way relate to employees of Alliance or any Subsidiary who are employed
in the United States of America.
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1.2. INTERPRETATION NOT AFFECTED BY HEADING
The division of this Agreement into Articles, Sections, subsections and
paragraphs and the insertion of headings are for convenience of reference only
and shall not affect in any way the meaning or interpretation of this Agreement.
1.3. ARTICLE REFERENCES
Unless the contrary intention appears, references in this Agreement to
an Article, Section, subsection, paragraph or Schedule by number or letter or
both refer to the Article, Section, subsection, paragraph or Schedule,
respectively, bearing that designation in this Agreement.
1.4. NUMBER AND GENDER
In this Agreement, unless the contrary intention appears, words
importing the singular include the plural and vice versa; words importing gender
shall include all genders; and words importing persons shall include a natural
person, firm, trust, partnership, association, corporation, joint venture or
government (including any governmental agency, political subdivision or
instrumentality thereof).
1.5. DATE FOR ANY ACTION
If the date on which any action is required to be taken hereunder by
any Party is not a Business Day, such action shall be required to be taken on
the next succeeding day which is a Business Day in such place.
1.6. ALLIANCE SUBSIDIARIES
To the extent any representations, warranties, covenants or agreements
contained herein relate, directly or indirectly, to a Subsidiary of Alliance,
each such provision shall be construed as a covenant by Alliance to cause (to
the fullest extent to which it is legally capable) such Subsidiary to perform
the required action.
1.7. CURRENCY
Unless otherwise stated, all references in this Agreement to sums of
money are expressed in lawful money of Canada.
1.8. SCHEDULES
Schedules A, B and C annexed to this Agreement, being the Plan of
Arrangement (including the provisions attaching to the Exchangeable Shares), and
the representations and
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warranties of Alliance and Bowater, respectively, are incorporated by reference
into this Agreement and form part hereof.
1.9. ACCOUNTING MATTERS
Unless otherwise stated, all accounting terms used in this Agreement in
respect of Alliance shall have the meanings attributable thereto under Canadian
generally accepted accounting principles as approved from time to time by the
Canadian Institute of Chartered Accountants, or any successor entity, applicable
as at the date on which such principles are approved and all determinations of
an accounting nature in respect of Alliance required to be made shall be made in
a manner consistent with such accounting principles. Unless otherwise stated,
all accounting terms used in this Agreement in respect of Bowater shall have the
meanings attributable thereto under United States generally accepted accounting
principles and all determinations of an accounting nature required to be made in
respect of Bowater shall be made in a manner consistent with such accounting
principles.
1.10. MATERIAL
The terms "MATERIAL" and "MATERIALLY" shall, when used in this
Agreement, be construed, measured or assessed on the basis of whether the matter
would materially affect a Party and its Subsidiaries or would significantly
impede the ability to complete the Arrangement in accordance with this
Agreement.
ARTICLE 2
THE ARRANGEMENT
2.1. ARRANGEMENT
(a) As soon as reasonably practicable, Alliance shall apply to the
Court pursuant to section 192 of the CBCA for an order
approving the Arrangement and, in connection with such
application, Alliance shall:
(i) file, proceed with and diligently prosecute an
application for an Interim Order providing for, among
other things, the calling and holding of the Alliance
Meeting for the purpose of considering and, if deemed
advisable, approving the Arrangement; and
(ii) subject to obtaining the approvals as contemplated in
the Interim Order and as may be directed by the Court
in the Interim Order, take all steps necessary or
desirable to submit the Arrangement to the Court and
apply for the Final Order,
and, subject to the fulfilment or waiver of the conditions set
forth in Article 6, Alliance shall deliver Articles of
Arrangement to the Director and such other
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documents as may be required to give effect to the Arrangement
as soon as reasonably practicable.
(b) The Articles of Arrangement shall, with such other matters as
are necessary to effect the Arrangement, and all as subject to
the provisions of the Plan of Arrangement, provide as follows:
(i) each shareholder of Alliance (other than shareholders
who validly exercise Dissent Rights and who are
ultimately entitled to be paid the fair value of the
Alliance Common Shares held by them) shall be
entitled to receive for each Alliance Common Share
held (A) $13 cash and (B) 0.166 Exchangeable Shares
or Bowater Common Shares on the terms and subject to
the limitations and conditions set out in the Plan of
Arrangement; and
(ii) Bowater shall become the holder, indirectly through
one or more Subsidiaries of Bowater (including the
Subsidiary of Bowater issuing the Exchangeable
Shares), of all of the issued and outstanding
Alliance Common Shares (other than those Alliance
Common Shares held by Alliance Common Shareholders
who have exercised Dissent Rights).
2.2. EFFECTIVE DATE
The Arrangement shall become effective on the Effective Date and the
steps to be carried out pursuant to the Arrangement shall become effective on
the Effective Date in the order set out in the Plan of Arrangement.
2.3. ALLIANCE APPROVAL
(a) Alliance represents as of the date hereof that its directors
(other than those directors who are advisors or legal counsel
for Alliance and who abstain from voting) have determined
unanimously that:
(i) the Arrangement is fair to the Alliance Common
Shareholders and is in the best interests of
Alliance; and
(ii) Alliance's Board of Directors unanimously will
recommend (including without limitation in the Proxy
Circular) that the Alliance Common Shareholders vote
in favour of the Arrangement (subject to Section
5.4);
(b) Alliance represents as of the date hereof that its Board of
Directors has received opinions from each of BMO Nesbitt Burns
Inc. and Merrill Lynch & Co., the financial advisors to
Alliance, that the consideration to be received by the
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Alliance Common Shareholders under the Arrangement is fair,
from a financial point of view, to the Alliance Common
Shareholders; and
(c) Alliance represents as of the date hereof that each of its
directors has advised it that he intends to vote the Alliance
Common Shares held by them in favour of the Arrangement and
will, accordingly, so represent in the Proxy Circular.
2.4. BOWATER APPROVAL
Bowater represents as of the date hereof that its Board of Directors
has determined unanimously that this Agreement is in the best interests of
Bowater.
2.5. SHAREHOLDER RIGHTS PLAN
Alliance covenants and represents to Bowater that its Board of
Directors has resolved to take all action necessary in order to ensure that the
Separation Time (as defined in the Amended Alliance Shareholder Rights Plan
Agreement dated as of December 1, 1999, as amended as of April 18, 2000) does
not occur in connection with this Agreement or the Arrangement and, subject to
Section 5.4, to recommend to the Alliance Common Shareholders that they approve
such resolutions (which shall be considered at the Alliance Meeting and be
included in the Proxy Circular), including the Rights Plan Resolution, and take
such actions as may be necessary in order to waive, and permit the Board of
Directors to waive, the application of the Alliance Shareholder Rights Plan
Agreement to this Agreement and to the Arrangement and covenants to take all
action necessary pursuant to the Alliance Shareholder Rights Plan Agreement to
seek such waiver and the consent of the Alliance Common Shareholders to such
waiver.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ALLIANCE
3.1. REPRESENTATIONS
Alliance hereby makes to Bowater the representations and warranties as
set forth in Schedule B to this Agreement and acknowledges that Bowater is
relying upon those representations and warranties in connection with entering
into this Agreement.
3.2. INVESTIGATION
Any investigation by Bowater and its advisors shall not mitigate,
diminish or affect the representations and warranties of Alliance pursuant to
this Agreement.
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3.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of Alliance contained in this
Agreement shall not survive the completion of the Arrangement and shall expire
and be terminated and extinguished on the Effective Date.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BOWATER
4.1. REPRESENTATIONS
Bowater hereby makes to Alliance the representations and warranties as
set forth in Schedule C to this Agreement and acknowledges that Alliance is
relying upon those representations and warranties in connection with entering
into this Agreement.
4.2. INVESTIGATION
Any investigation by Alliance and its advisors shall not mitigate,
diminish or affect the representations and warranties of Bowater pursuant to
this Agreement.
4.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of Bowater contained in this
Agreement shall not survive the completion of the Arrangement and shall expire
and be terminated and extinguished on the Effective Date.
ARTICLE 5
COVENANTS
5.1. CONSULTATION
The Parties agree to consult with each other in issuing any press
releases or otherwise making public statements with respect to this Agreement or
the Arrangement and in making any filings with any federal, provincial or state
governmental or regulatory agency or with any securities exchange with respect
thereto. Each Party shall use its commercially reasonable efforts to enable the
other Party to review and comment on all such press releases and filings prior
to release thereof. The Parties agree to issue jointly a press release with
respect to this Agreement as soon as practicable, in a form acceptable to each
Party, and each Party agrees to file a copy of this Agreement with applicable
regulatory authorities.
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5.2. COVENANTS OF ALLIANCE
Subject to the terms and conditions of the Interim Order and to
applicable laws and regulations, Alliance covenants and agrees that until the
Effective Date or the day upon which this Agreement is terminated, whichever is
earlier:
(a) in a timely and expeditious manner, it shall file, proceed
with and diligently prosecute an application to the Court for
the Interim Order; provided, however, that notwithstanding the
foregoing the Parties agree to consult regarding, as soon as
possible, seeking the Interim Order and mailing the Proxy
Circular earlier than as required hereby;
(b) in a timely and expeditious manner it shall:
(i) forthwith carry out such terms of the Interim Order
as are required under the terms thereof to be done by
Alliance;
(ii) prepare, in consultation with Bowater, and file a
Proxy Circular with respect to the Alliance Meeting
in all jurisdictions where the same is required to be
filed and mail the same as ordered by the Interim
Order and in accordance with all applicable Laws, in
all jurisdictions where the same is required,
complying in all material respects with all
applicable Laws on the date of mailing thereof and
containing full, true and plain disclosure of all
material facts relating to the Arrangement and
Alliance and not containing any misrepresentation (as
defined under applicable securities Laws) with
respect thereto;
(iii) use its commercially reasonable efforts to solicit
from the Alliance Common Shareholders proxies in
favour of approval of the Arrangement and the Rights
Plan Resolution and take all other action that is
necessary or desirable to secure the approval of the
Arrangement and the Rights Plan Resolution by the
Alliance Common Shareholders at the Alliance Meeting;
(iv) use its commercially reasonable efforts to convene
the Alliance Meeting for the purpose of considering a
special resolution approving the Arrangement and the
Rights Plan Resolution by July 19, 2001, but in any
event no later than September 30, 2001, and
distribute copies of this Agreement (or a written
summary thereof prepared by Alliance in form and
substance reasonably satisfactory to Bowater), in
each case as ordered by the Interim Order;
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(v) provide notice to Bowater of the Alliance Meeting and
allow Bowater's representatives to attend the
Alliance Meeting unless such attendance is prohibited
by the Interim Order; and
(vi) conduct the Alliance Meeting in accordance with the
Interim Order, the by-laws of Alliance and any
instrument governing such meeting, as applicable, and
as otherwise required by applicable Laws;
(c) in a timely and expeditious manner, it shall prepare (in
consultation with Bowater) and file any mutually agreed (or
otherwise required by applicable Laws) amendments or
supplements to the Proxy Circular with respect to the Alliance
Meeting and mail the same as required by the Interim Order and
in accordance with all applicable Laws, in all jurisdictions
where the same is required, complying in all material respects
with all applicable legal requirements on the date of mailing
thereof;
(d) subject to the approval of the Arrangement at the Alliance
Meeting in accordance with the provisions of the Interim
Order, it shall forthwith file, proceed with and diligently
prosecute an application for the Final Order;
(e) it shall forthwith carry out the terms of the Interim Order
and the Final Order and, subject to the receipt of the Final
Order, the satisfaction of the conditions precedent in favour
of Alliance and the receipt of the written confirmation of
Bowater that the conditions precedent in favour of Bowater
have been satisfied or waived by Bowater, file Articles of
Arrangement and the Final Order with the Director in order for
the Arrangement to become effective;
(f) except for proxies and other non-substantive communications,
it shall furnish promptly to Bowater a copy of each notice,
report, schedule or other document or communication delivered,
filed or received by Alliance in connection with the
Arrangement or the Interim Order, the Alliance Meeting or any
other meeting of Alliance security holders or class of
security holders which all such holders, as the case may be,
are entitled to attend, any filings under applicable Laws and
any dealings with regulatory agencies (including, without
limitation, all Securities Authorities) in connection with, or
in any way affecting, the transaction contemplated herein;
(g) it shall assist and cooperate in the preparation and filing
with all applicable Securities Authorities of all necessary
applications to seek exemptions, if required, from the
prospectus, registration and other requirements of the
applicable securities laws of Canada and the United States for
the issue by Bowater Canada of the Exchangeable Shares and the
issue by Bowater of Bowater Common Shares pursuant to the
Arrangement and the resale of such shares (other than by
control persons and subject to requirements of general
application) in, respectively, Canada and the United States;
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(h) except as contemplated in this Agreement, it shall, and shall
cause each of its Subsidiaries to, conduct its and their
respective businesses only in, and not take any action except
in, the usual, ordinary and regular course of business and
consistent with past practice;
(i) except as contemplated in this Agreement, it shall not,
without the prior written consent of Bowater, which consent
shall not be unreasonably withheld, directly or indirectly do
or permit to occur any of the following:
(i) issue, sell, pledge, lease, dispose of, encumber or
agree to issue, sell, pledge, lease, dispose of or
encumber (or permit any of its Subsidiaries to issue,
sell, pledge, lease, dispose of, encumber or agree to
issue, sell, pledge, lease, dispose of or encumber):
A. any shares of, or any options, warrants,
calls, conversion privileges or rights of
any kind to acquire any shares of it or any
of its Subsidiaries, other than pursuant to
the exercise of stock options (whether
vested or unvested) currently outstanding or
under existing share issuance plans in
accordance with their current terms;
B. except in the usual, ordinary and regular
course of business and consistent with past
practice, any assets of it or any of its
Subsidiaries;
(ii) amend or propose to amend its articles or by-laws
or those of any of its Subsidiaries;
(iii) split, combine or reclassify any of its outstanding
shares, or declare, set aside or pay any dividend or
other distribution payable in cash, stock, property
or otherwise with respect to its shares;
(iv) redeem, purchase or offer to purchase (or permit any
of its Subsidiaries to redeem, purchase or offer to
purchase) any shares or other securities of it or any
of its Subsidiaries, unless otherwise required by the
terms of such securities;
(v) reorganize, amalgamate or merge it or any of its
Subsidiaries with any other person, corporation,
partnership or other business organization
whatsoever;
(vi) acquire or agree to acquire any interest in any
person, corporation, partnership, joint venture or
other business organization or division or acquire or
agree to acquire any assets, which, in each case are,
individually or in the aggregate, material;
(vii) except in the usual, ordinary and regular course of
business and consistent with past practice: (A)
satisfy or settle any Legal
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Proceeding or any matter which could give rise to a
Legal Proceeding or any liabilities, except such as
have been reserved against in its financial
statements delivered to Bowater, which are,
individually or in the aggregate, material; (B)
relinquish any contractual rights which are,
individually or in the aggregate, material; or (C)
enter into any interest rate, currency or commodity
swaps, hedges or other similar financial instruments;
(viii) except for the purpose of the renewal of or the
replacement of existing credit facilities on terms
that are substantially the same as the existing
credit facilities that are to be renewed or replaced,
incur or commit to provide guarantees, or issue any
amount of debt securities;
(ix) incur or commit to capital expenditures prior to the
Effective Date, individually or in the aggregate,
exceeding $15,000,000, unless such capital
expenditure is currently provided for in Alliance's
current capital expenditures program as disclosed in
the Alliance Disclosure Letter;
(x) make any changes to its existing accounting practices
or make any material tax election;
(j) without the prior written consent of Bowater, it shall not,
and shall not allow any of its Subsidiaries to:
(i) other than in the usual, ordinary and regular course
of business and consistent with past practice or
pursuant to existing Employee Compensation and
Benefit Arrangements enter into increase or modify
any Compensation and Benefit Arrangements, collective
bargaining agreements or similar agreements, plans,
policies or arrangements with, increase any benefits
payable to, or make any loan to, any officers,
directors or employees of it; or
(ii) other than in the usual, ordinary and regular course
of business and consistent with past practice or
pursuant to existing Employee Compensation and
Benefit Arrangements in the case of employees who are
not officers or directors, take any action with
respect to the entering into increasing or modifying
of any Employee Compensation and Benefit
Arrangements, collective bargaining agreement or
similar agreements, plans, policies or arrangements
or any other form of compensation or profit sharing
or with respect to any increase of benefits payable;
provided that the foregoing shall not prevent Alliance from
taking such actions as are reasonably necessary so that the
condition relating to the exercise or termination of stock
options referred to in Section 6.3(f) can be fulfilled. In
such regard, Alliance agrees to keep Bowater informed as to
the arrangements which
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Page 15
Alliance believes are necessary to fulfil such condition in
Section 6.3(f) so that Bowater can participate in the
decisions made by Alliance;
(k) it shall not allow (and shall cause each of its
Subsidiaries not to allow) its current insurance (or
re-insurance) policies to be cancelled or terminated or
any of the coverage thereunder to lapse, unless simultaneously
with such termination, cancellation or lapse, replacement
policies underwritten by insurance and re-insurance companies
of nationally recognized standing providing coverage equal to
or greater than the coverage under the cancelled, terminated
or lapsed policies for substantially similar premiums are in
full force and effect and, at or prior to the Effective Date,
to acquire insurance through a "discovery" endorsement which
protects directors and officers of Alliance (including former
directors and officers) if requested by Bowater and on such
terms as approved by Bowater;
(l) it shall:
(i) use its commercially reasonable efforts to preserve
intact its business organizations and goodwill,
maintain satisfactory relationships with suppliers,
agents, distributors, customers and others having
business relationships with it or its Subsidiaries;
(ii) not take any action, or permit any of its
Subsidiaries to take any action, that would interfere
with or be inconsistent with the completion of the
transaction contemplated hereunder or would render,
or that reasonably may be expected to render, any
representation or warranty made by it in this
Agreement untrue in any material respect at any time
prior to the Effective Date if then made; and
(iii) promptly notify Bowater of any material adverse
change, or any change which could reasonably be
expected to become a material adverse change, in
respect of its or any of its Subsidiaries' businesses
or in the operation of its or any of its
Subsidiaries' businesses or in the operation of its
or any of its Subsidiaries' properties, and of any
material Governmental Entity or third party
complaints, investigations or hearings (or
communications indicating that the same may be
contemplated);
(m) it shall not and shall cause its Subsidiaries not to settle or
compromise any Legal Proceeding or any matter which could give
rise to a Legal Proceeding brought by any present, former or
purported holder of any of its securities in connection with
the transaction contemplated by this Agreement or the
Arrangement prior to the Effective Date without the prior
written consent of Bowater;
(n) except in the usual, ordinary and regular course of business
and consistent with past practice or as contemplated herein,
it and its Subsidiaries shall not enter into or modify in any
material respect any contract, agreement, commitment or
arrangement which new contract or series of related new
contracts or modification
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to an existing contract or series of related existing
contracts would be material to Alliance or any of its
Subsidiaries or which would have a material adverse effect on
Alliance or any of its Subsidiaries;
(o) it shall use its commercially reasonable efforts to satisfy
(or cause the satisfaction of) the conditions precedent to its
obligations hereunder set forth in Article 6 to the extent the
same is within its control and to take, or cause to be taken,
all other action and to do, or cause to be done, all other
things necessary, proper or advisable under all applicable
Laws to complete the Arrangement and the transaction
contemplated by this Agreement, including using its
commercially reasonable efforts to:
(i) obtain all necessary waivers, consents and approvals
required to be obtained by it from other parties to
loan agreements, leases and other contracts;
(ii) obtain all necessary consents, approvals and
authorizations as are required to be obtained by it
under any applicable Law;
(iii) effect all necessary registrations and filings and
submissions of information requested by Governmental
Entities required to be effected by it in connection
with the Arrangement and the transaction contemplated
by this Agreement and participate and appear in any
proceedings of either Party before Governmental
Entities;
(iv) oppose, lift or rescind any injunction or restraining
order or other order or action seeking to stop, or
otherwise adversely affecting the ability of the
Parties to consummate, the transaction contemplated
hereby or the Arrangement;
(v) fulfill all conditions and satisfy all provisions of
this Agreement and the Arrangement; and
(vi) cooperate with Bowater in connection with the
performance by it of its obligations hereunder;
(p) it shall not take any action, refrain from taking any action
or (subject to its commercially reasonable efforts) permit any
action to be taken or not taken, inconsistent with this
Agreement or which would reasonably be expected to
significantly impede the consummation of the Arrangement,
provided that where Alliance is required to take any such
action or refrain from taking such action as a result of this
Agreement, Alliance shall immediately notify Bowater in
writing of such circumstances;
(q) it shall, in all material respects, conduct itself so as to
keep Bowater fully informed as to the material decisions or
actions required or required to be made
20
Page 17
with respect to the operation of its business and the
businesses of its Subsidiaries; provided that such disclosure
is not otherwise prohibited by reason of a confidentiality
obligation owed to a third party for which a waiver could not
be obtained or is in respect of customer-specific
competitively sensitive information relating to areas or
projects where Alliance and Bowater are competitors;
(r) it shall make, or cooperate as necessary in the making of, all
other necessary filings and applications under all applicable
Laws required in connection with the transaction contemplated
herein and take all reasonable action necessary to be in
compliance with such Laws;
(s) it shall conduct its affairs and shall cause its Subsidiaries
to conduct their affairs so that all of its representations
and warranties contained herein shall be true and correct in
all material respects on and as of the Effective Date as if
made on and as of such date;
(t) it shall not allow the indebtedness of Alliance and its
Subsidiaries for borrowed money (whether current or long term)
to exceed $500 Million;
(u) it shall co-operate with Bowater in a timely and expeditious
manner and shall use its commercially reasonable efforts to
facilitate an orderly merger on the Effective Date of
Alliance's business with Bowater's business including, without
limitation, ensuring Bowater has sufficient access to
information for its purpose in accordance with the provisions
of Section 5.6 hereof.
5.3. COVENANTS OF BOWATER
Bowater covenants and agrees that until the Effective Date or the day
upon which this Agreement is terminated, whichever is earlier:
(a) it shall take all such steps and do all such acts and things,
including without limitation, making or causing to be made
cash payments and issuing Exchangeable Shares and Bowater
Common Shares, as are specified in the Plan of Arrangement and
the Final Order to be taken or done by Bowater or any
Subsidiary of Bowater;
(b) it shall not split, combine or reclassify any of its
outstanding shares, or declare, set aside or pay any dividend
or other distribution payable in cash, stock, property or
otherwise with respect to its shares (other than regular
quarterly dividends in respect of its common shares, in
amounts consistent with past practice, and dividends provided
for pursuant to the provisions of its preferred shares);
(c) it shall use its commercially reasonable efforts to satisfy
(or cause the satisfaction of) the conditions precedent to its
obligations hereunder set forth in Article 6 to the extent the
same is within its control and to take, or cause to be taken,
all other action and to do, or cause to be done, all other
things necessary, proper or advisable under all applicable
Laws to complete the Arrangement and the
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Page 18
transaction contemplated by this Agreement, including using
its commercially reasonable efforts to:
(i) obtain all necessary waivers, consents and approvals
required to be obtained by it from other parties to
loan agreements, leases and other contracts;
(ii) obtain all necessary consents, approvals and
authorizations as are required to be obtained by it
under any applicable Law;
(iii) effect all necessary registrations and filings and
submissions of information requested by Governmental
Entities required to be effected by it in connection
with the Arrangement and the transaction contemplated
by this Agreement and participate, and appear in any
proceedings of, either Party before Governmental
Entities;
(iv) oppose, lift or rescind any injunction or restraining
order or other order or action seeking to stop, or
otherwise adversely affecting the ability of the
parties to consummate, the transaction contemplated
hereby or the Arrangement;
(v) fulfill all conditions precedent to Alliance's
obligations hereunder and satisfy all provisions of
this Agreement and the Arrangement applicable to it;
and
(vi) cooperate with Alliance in connection with the
performance by it of its obligations hereunder;
(d) it shall:
(i) ensure that its authorized and issued capital
includes one share of special voting stock of
Bowater, which entitles the holder of record to a
number of votes at meetings of holders of Bowater
Common Shares equal to the number of Exchangeable
Shares outstanding from time to time; and
(ii) authorize Bowater Common Shares to be issued in the
Arrangement and a sufficient number of Bowater Common
Shares so that the retraction and exchange rights
attached to the Exchangeable Shares may be honoured;
(e) in a timely and expeditious manner, it shall provide to
Alliance all information as may be reasonably requested by
Alliance or as required by the Interim Order or applicable
Laws with respect to Bowater and its Subsidiaries and their
respective businesses and properties for inclusion in the
Proxy Circular with respect to the Alliance Meeting or in any
amendments or supplements to such Proxy Circular complying in
all material respects with all applicable Laws on the date of
mailing
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thereof and containing full, true and plain disclosure of all
material facts relating to Bowater and not containing any
misrepresentation (as defined under applicable securities
laws) with respect thereto, Bowater agreeing to use its
commercially reasonable efforts to provide such information to
Alliance in a timely and expeditious manner;
(f) it shall prepare and file with all applicable Securities
Authorities all necessary applications to seek exemptions, if
required, from the prospectus, registration and other
requirements of the applicable securities laws of Canada and
the United States for the issue by a Subsidiary of Bowater of
Exchangeable Shares and the issue by Bowater of Bowater Common
Shares pursuant to the Arrangement and the resale of such
shares (other than by control persons and subject to
requirements of general application) in, respectively, Canada
and the United States;
(g) it shall use its commercially reasonable efforts to enable the
Exchangeable Shares to be issued under the Arrangement to be
conditionally approved for listing on The Toronto Stock
Exchange, subject to filing of required documentation and
subject to meeting the listing requirements of The Toronto
Stock Exchange;
(h) it shall:
(i) not take any action, or permit any of its
Subsidiaries to take any action, that would interfere
with or be inconsistent with the completion of the
transaction contemplated hereunder or would render,
or that reasonably may be expected to render, any
representation or warranty made by it in this
Agreement untrue in any material respect at any time
prior to the Effective Date if then made; and
(ii) promptly notify Alliance of any material adverse
change, or any change which could reasonably be
expected to become a material adverse change, in
respect of its or any of its Subsidiaries' businesses
or in the operation of its or any of its
Subsidiaries' businesses or in the operation of its
or any of its Subsidiaries' properties, and of any
material Governmental Entity or third party
complaints, investigations or hearings (or
communications indicating that the same may be
contemplated); and
(i) it shall conduct its affairs and shall cause its Subsidiaries
to conduct their affairs so that all of its representations
and warranties contained herein shall be true and correct in
all material respects on and as of the Effective Date as if
made on and as of such date.
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5.4. COVENANTS REGARDING NON-SOLICITATION
(a) Alliance shall not, directly or indirectly, through any
officer, director, employee, representative or agent of
Alliance or any of its Subsidiaries, solicit, initiate or
knowingly encourage (including by way of furnishing
information or entering into any form of agreement,
arrangement or understanding) the initiation of any inquiries
or proposals regarding an Acquisition Proposal, participate in
any discussions or negotiations regarding any Acquisition
Proposal, approve or recommend any Acquisition Proposal or
cause Alliance to enter into any agreement related to any
Acquisition Proposal, or withdraw or modify in a manner
adverse to Bowater the approval of the Board of Directors of
Alliance of the transaction contemplated hereby; provided,
however, that subject to Section 5.5 but notwithstanding the
preceding part of this Section 5.4(a) and any other provision
of this Agreement, nothing shall prevent the Board of
Directors of Alliance from considering, negotiating,
approving, recommending to its shareholders or entering into
an agreement in respect of an unsolicited bona fide written
Acquisition Proposal that the Board of Directors of Alliance
determines in good faith, after consultation with financial
advisors and after receiving an opinion of outside counsel to
the effect that the Board of Directors of Alliance is required
to take such action in order to discharge properly its
fiduciary duties, would, if consummated in accordance with its
terms, result in a transaction more favourable to Alliance's
shareholders than the transaction contemplated by this
Agreement (any such Acquisition Proposal being referred to
herein as a "SUPERIOR PROPOSAL");
(b) Alliance shall promptly notify Bowater of any current
Acquisition Proposals or of any future Acquisition Proposal of
which its directors or senior officers become aware, or any
amendments to the foregoing, or any request for non-public
information relating to Alliance or any of its Subsidiaries in
connection with an Acquisition Proposal or for access to the
properties, books or records of Alliance or any Subsidiary by
any person or entity that informs Alliance or such Subsidiary
that it is considering making, or has made, an Acquisition
Proposal. Such notice shall include a description of the
material terms and conditions of any proposal and provide such
details of the proposal, inquiry or contact as Bowater may
reasonably request including the identity of the person making
such proposal, inquiry or contact;
(c) If Alliance receives a request for material non-public
information from a person who proposes a bona fide Acquisition
Proposal in respect of Alliance (the existence and content of
which have been disclosed to Bowater), and the Board of
Directors of Alliance determines that such proposal would be a
Superior Proposal pursuant to Section 5.4(a) having received
the advice referred to therein, then, and only in such case,
the Board of Directors of Alliance may, subject to the
execution of a confidentiality agreement containing a
standstill provision substantially similar to that contained
in Section 5.7, provide such person with access to information
regarding Alliance; provided, however, that the person making
the
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Acquisition Proposal shall not be precluded thereunder from
making the Acquisition Proposal, and provided further that
Alliance sends a copy of any such confidentiality agreement to
Bowater immediately upon its execution and Bowater is provided
with a list of or copies of the information provided to such
person and is immediately provided with access to similar
information to which such person was provided, and provided
further that if the Confidentiality Agreement does not contain
a standstill provision which is substantially similar to that
contained in Section 5.7 and such provision is more favourable
to the other party thereto than that contained in Section 5.7
in respect of Bowater, the provisions of Section 5.7 as they
relate to Bowater and the corresponding provisions of the
Confidentiality Agreement shall be deemed to be amended to
include such more favourable terms; and
(d) Alliance shall ensure that its officers, directors and
employees and its Subsidiaries and any financial advisors or
other advisors or representatives retained by it are aware of
the provisions of this Section 5.4, and it shall be
responsible for any breach of this Section 5.4 by any of such
persons.
5.5. NOTICE BY ALLIANCE OF SUPERIOR PROPOSAL DETERMINATION
Alliance shall not accept, approve, recommend or enter into any
agreement in respect of an Acquisition Proposal (other than a confidentiality
agreement) on the basis that it would constitute a Superior Proposal unless (a)
it has provided Bowater with a copy of the Acquisition Proposal document which
the Board of Directors of Alliance has determined would be a Superior Proposal,
and (b) five Business Days shall have elapsed from the later of the date Bowater
received notice of the proposed determination to accept, approve, recommend or
enter into an agreement in respect of such Acquisition Proposal, and the date
Bowater received a copy of the Acquisition Proposal document. Such Acquisition
Proposal document shall constitute confidential Information for the purposes of
Section 5.6(c) and Evaluation Material for the purposes of the Confidentiality
Agreement.
During such five Business Day period, Alliance acknowledges that
Bowater shall have the opportunity, but not the obligation, to offer to amend
the terms of this Agreement and the Arrangement. The Board of Directors of
Alliance will review any offer by Bowater to amend the terms of this Agreement
in good faith in order to determine, in its discretion in the exercise of its
fiduciary duties, whether Bowater's offer upon acceptance by Alliance would
result in the Acquisition Proposal not being a Superior Proposal. If the Board
of Directors of Alliance so determines, it will enter into an amended agreement
with Bowater reflecting Bowater's amended proposal. If the Board of Directors of
Alliance determines that the Acquisition Proposal is nonetheless a Superior
Proposal Section 8.1 shall apply.
Alliance also acknowledges and agrees that each successive modification
of any Acquisition Proposal shall constitute a new Acquisition Proposal for
purposes of the requirement under clause (b) of this Section 5.5 to initiate an
additional five Business Day notice period.
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5.6. ACCESS TO INFORMATION
(a) Subject to Section 5.6(c) and applicable Laws, upon reasonable
notice, Alliance shall (and shall cause each of its
Subsidiaries to) afford Bowater's officers, employees,
counsel, accountants and other authorized representatives and
advisors ("REPRESENTATIVES") access, during normal business
hours from the date hereof and until the earlier of the
Effective Date or the termination of this Agreement, to its
properties, books, contracts and records as well as to its
management personnel, consultants, customers, suppliers and
such other persons as Bowater reasonably believes it has a
business purpose in contacting (with full opportunity to
discuss the Alliance business including its financial
condition, results of operation and prospects) and, during
such period, Alliance shall (and shall cause each of its
Subsidiaries to) furnish promptly to Bowater all information
(including photocopies thereof when requested by Bowater)
concerning Alliance's business, properties, personnel,
consultants, customers and suppliers as Bowater may reasonably
request. Nothing in the foregoing shall require Alliance to
disclose information subject to a written confidentiality
agreement with third parties, or customer-specific or
competitively sensitive information relating to areas or
projects where Bowater is a competitor. Bowater will use its
commercially reasonable efforts to consult with Alliance prior
to consultation with any third party with respect to whom
Bowater does not otherwise have a business relationship in the
ordinary course of business.
(b) Subject to Section 5.6(c) and applicable Laws, upon reasonable
notice, Bowater shall afford Alliance's counsel and its
financial advisors, BMO Nesbitt Burns Inc. and Merrill Lynch &
Co, an opportunity to conduct due diligence on Bowater and its
Subsidiaries to enable each of them to prepare and deliver its
written fairness opinion.
(c) The Parties acknowledge that certain information provided to
each other under Section 5.6(a) and Section 5.6(b) above will
be non-public and/or proprietary in nature (the
"INFORMATION"). Except as permitted below, each Party will
keep Information confidential and will not, without the prior
written consent of the other, disclose it, in any manner
whatsoever, in whole or in part, to any other person, and
neither Party will use it for any purpose other than to
evaluate the transaction contemplated by this Agreement. The
Parties will each make all reasonable, necessary and
appropriate efforts to safeguard the Information from
disclosure to anyone other than as permitted hereby and to
control the copies, extracts or reproductions made of the
Information. The Information may be provided to the
representatives of a Party who require access to the same to
assist it in proceeding in good faith with the transaction
contemplated by this Agreement, and whose assistance is
required for such purposes, provided that such Party has first
informed such representatives to whom Information is provided
that the representative has the same obligations, including as
to confidentiality, restricted use and otherwise, that such
Party has with respect to such Information. This provision
shall not apply as to such portions of the
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Information that: (a) are or become generally available to the
public other than as a result of disclosure by the receiving
Party or its representatives; (b) become available to a Party
on a non-confidential basis from a source other than, directly
or indirectly, the other Party or its representatives,
provided that such source is not to the knowledge of the
receiving Party, upon reasonable inquiry, bound by a
confidentiality agreement with the Party providing the
Information or otherwise prohibited from transmitting the
Information to the receiving Party by a contractual, legal or
fiduciary obligation; (c) were known to a Party or were in its
possession on a non-confidential basis prior to being
disclosed to it by the Party providing the Information or by
someone on its behalf; or (d) are required by applicable Laws
or court order to be disclosed. The provisions of this Section
5.6(c) shall survive the termination of this Agreement.
5.7. MUTUAL STANDSTILL
During the period commencing on the date hereof and continuing until
the later of: (a) September 30, 2001; and (b) the earlier of (i) the Effective
Date and (ii) the termination of this Agreement, other than pursuant to this
Agreement (including without limitation Section 5.5), the Arrangement and the
transaction contemplated hereby, each Party agrees that it will not, except in
connection with this Agreement or the Arrangement or with the prior approval of
the other Party, which approval may be given on such terms as the other Party
may determine: (A) acquire, agree to acquire or make any proposal to acquire, in
any manner, any securities or property of the other Party; (B) assist, advise or
encourage any other persons to acquire or agree to acquire, in any manner, any
security or property of the other Party; (C) solicit proxies of the shareholders
of the other Party or form, join in or in any way participate in a proxy group
with respect to the voting of any voting securities of the other Party (but for
greater certainty Alliance acknowledges that Bowater and its agents and advisors
(including Goldman, Sachs & Co.) will be entitled to solicit proxies and
otherwise influence any person to vote in favour of the Arrangement at the
Alliance Meeting and Bowater acknowledges that Alliance and its agents and
advisors (including BMO Nesbitt Burns Inc. and Merrill Lynch & Co) will be
entitled to solicit proxies and otherwise influence any person to vote in favour
of the Arrangement at the Alliance Meeting); (D) seek any modification to or
waiver of the agreements and obligations under the Confidentiality Agreement,
save and except to the extent provided for in Section 5.4(c), or (E) make any
public announcement with respect to the foregoing, except as may be required by
applicable law or regulatory authorities. For the purpose of this Section 5.7, a
Party shall include Subsidiaries of such Party and their successors. The
provisions of this Section 5.7 shall be of no force or effect against Bowater in
the event that:
(a) a third party in no way related to Bowater makes or enters
into an agreement to make a take-over bid to acquire directly
or indirectly more than 50% of the then outstanding Alliance
Common Shares or enters into an agreement with respect to an
amalgamation, plan of arrangement or similar regrouping
combination to the same effect involving Alliance; or that
(b) Bowater proposes to enter into a plan of arrangement, or such
other form of transaction in virtue of which Bowater proposes
to acquire directly or indirectly
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all of the then outstanding Alliance Common Shares at a price
equal to or higher than $26 per share payable in a combination
of up to 50% of the total purchase price in cash and the
balance in Bowater Common Shares or in shares of Bowater's
listed Canadian Subsidiary exchangeable into Bowater Common
Shares.
5.8. INSURANCE
(a) Bowater shall ensure that the by-laws of Alliance or of any
corporation continuing following any amalgamation, merger,
plan of arrangement, consolidation or winding-up of Alliance
with or into one or more other persons (a "SURVIVING
CORPORATION") shall contain the provisions with respect to
indemnification now set forth in Alliance's By-Laws (or as
provided in Article Eleventh of Bowater's Restated Certificate
of Incorporation), which provision shall, unless required by
Law, not be amended, repealed or otherwise modified for a
period of six (6) years from the Effective Date in any manner
that would adversely affect the rights thereunder of
individuals who, immediately prior to the Effective Date, were
directors or officers of Alliance; and Bowater shall, subject
to applicable Law, ensure that the obligations of Alliance
under any indemnification agreements between Alliance and its
directors and officers previously disclosed to Bowater in the
Alliance Disclosure Letter are assumed by the Surviving
Corporation.
(b) Bowater agrees that from the Effective Date until the sixth
anniversary of the Effective Date it will maintain or cause
Alliance or any Surviving Corporation to maintain Alliance's
current directors' and officers' insurance or another policy
or "DISCOVERY" endorsement, on terms and conditions which are
no less advantageous to the directors and officers of Alliance
and providing no less coverage than Alliance's existing
directors' and officers' insurance, for all present and former
directors and officers of Alliance, covering claims made prior
to or within such period of time. At the election of Bowater
and upon reasonable notice to Alliance, Alliance will acquire
the insurance through a "DISCOVERY" endorsement referred to in
Section 5.2(k) of this Agreement prior to the Effective Date;
and
(c) Alliance will not, and Alliance will use its commercially
reasonable efforts to cause the insured persons under such
directors' and officers' insurance policies not to, take any
actions which might impair the coverage thereunder or cause an
increase in the premiums therefor.
5.9. ANCILLARY AGREEMENTS
The Parties agree that the support agreement and the voting and
exchange trust agreement referenced in the provisions attaching to the
Exchangeable Shares set out on Exhibit 1 to Schedule A annexed hereto shall
apply to the Arrangement contemplated herein.
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5.10. MERGER OF COVENANTS
The covenants set out in this Agreement (except for Sections 5.6(c),
5.8, 5.9, 5.10, 8.1 and 10.1 which shall survive the completion of the
Arrangement) shall not survive the completion of the Arrangement, and shall
expire and be terminated without recourse between the Parties upon such
completion.
ARTICLE 6
CONDITIONS
6.1. MUTUAL CONDITIONS
The obligations of Alliance and Bowater to complete the transaction
contemplated hereby are subject to the fulfilment of the following conditions on
or before the Effective Date or such other time as is specified below:
(a) the Interim Order shall have been granted in form and
substance satisfactory to Alliance and Bowater, acting
reasonably, and shall not have been set aside or modified in a
manner unacceptable to such Parties, acting reasonably, on
appeal or otherwise;
(b) the resolutions set forth in the Proxy Circular shall have
been passed at the Alliance Meeting, duly approving the
Arrangement, in accordance with the Interim Order;
(c) the Final Order shall have been granted in form and substance
satisfactory to Alliance and Bowater, acting reasonably, and
shall not have been set aside or modified in a manner
unacceptable to such Parties, acting reasonably, on appeal or
otherwise;
(d) the Articles of Arrangement relating to the Arrangement shall
be in form and substance satisfactory to Alliance and Bowater,
acting reasonably;
(e) the Effective Date shall be on or before September 30, 2001,
subject to any extension available to a Party pursuant to
Section 6.4;
(f) there shall be no action taken under any Law or by any
Governmental Entity that:
(i) makes it illegal or otherwise directly or
indirectly restrains, enjoins or prohibits
the Arrangement or any other transaction
contemplated herein; or
(ii) results, or could reasonably be expected to
result, in a judgment or assessment of
damages, directly or indirectly, relating to
the
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transaction contemplated herein which is
materially adverse to either Alliance or
Bowater;
(g) all consents, waivers, permits, orders and approvals of any
Governmental Entity (other than as contemplated in Section
6.1(h), (i) and (j) which shall be subject to the specific
provisions thereof) or other person, and the expiry of any
waiting periods, in connection with, or required to permit,
the consummation of the Arrangement, the failure of which to
obtain or the non-expiry of which would be materially adverse
to Alliance or Bowater, as the case may be, or materially
impede the completion of the Arrangement, shall have been
obtained or received on terms that will not have a material
adverse effect on Alliance or Bowater or reasonably
satisfactory evidence thereof shall have been delivered to
each Party;
(h) Bowater shall have received evidence satisfactory to Bowater,
and on terms and conditions satisfactory to Bowater, that the
Minister designated under the Investment Canada Act has been
satisfied or has been deemed to have been satisfied that the
transaction contemplated by this Agreement and the Plan of
Arrangement is likely to be of net benefit to Canada;
(i) without limiting the scope of the condition in Section 6.1(g),
any applicable waiting periods under the HSR Act shall have
expired or shall have been earlier terminated;
(j) the applicable waiting period under section 123 of the
Competition Act (Canada) shall have expired and Bowater shall
have been advised in writing by the Commissioner of
Competition appointed under the Competition Act (Canada) that
he has determined not to make an application for an order
under section 92 or section 100 of the Competition Act
(Canada) in respect of the Arrangement, or an advance ruling
certificate shall have been issued under section 102 of the
Competition Act (Canada) in respect of the Arrangement;
(k) the Bowater Common Shares issuable pursuant to the Arrangement
shall have been conditionally approved for listing on the New
York Stock Exchange, subject to the filing of required
documentation and the issue of the Exchangeable Shares shall
have been conditionally approved by The Toronto Stock
Exchange, subject to meeting The Toronto Stock Exchange
listing requirements relating to numbers of holders of shares
and subject to the filing of required documentation. Any
required prospectus exemptions shall have been obtained or be
available with respect to the issuance of the Exchangeable
Shares and the Bowater Common Shares under the Arrangement and
such securities shall not be subject to resale restrictions
in, respectively, Canada and the United States other than in
respect of control persons and subject to the requirements of
general application; and
(l) this Agreement shall not have been terminated pursuant to
Article 9.
The foregoing conditions are for the mutual benefit of Alliance and
Bowater and may be waived, in whole or in part, by Alliance and Bowater at any
time. If any of the said conditions
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precedent shall not be complied with or waived as aforesaid on or before
September 30, 2001, or, if earlier, the date required for the performance
thereof, either Party may rescind and terminate this Agreement by written notice
to the other Party.
6.2. ALLIANCE CONDITIONS
The obligation of Alliance to complete the transaction contemplated
herein is subject to the fulfilment of the following conditions on or before the
Effective Date or such other time as specified below:
(a) the representations and warranties made by Bowater in this
Agreement shall be true and correct as of the Effective Date
as if made on and as of such date (except to the extent such
representations and warranties speak as of an earlier date, in
which event such representations and warranties shall be true
and correct as of such earlier date, or except as affected by
the transaction contemplated or permitted by this Agreement or
except for any failure or breach of representations and
warranties which individually or in the aggregate would not
have a material adverse effect on Bowater or materially impede
the completion of the Arrangement or the other transactions
contemplated hereby, it being understood that for the purpose
of this Section 6.2(a) any reference to materiality, material
adverse change or material adverse effect in such
representation or warranty shall be disregarded for this
purpose) and Bowater shall have provided to Alliance the
certificate of two qualified officers of Bowater certifying
such accuracy on the Effective Date; and
(b) Bowater shall have complied with its covenants herein, unless
the failure to comply with such covenants would not
individually or in the aggregate have a material adverse
effect on Bowater or materially impede the completion of the
Arrangement or the other transactions contemplated in this
Agreement, and Bowater shall have provided to Alliance the
certificate of two qualified officers of Bowater certifying
that Bowater has so complied with its covenants herein; and
(c) from the date hereof up to and including the Effective Date,
there shall have been no change, condition, event or
occurrence which, in the reasonable judgment of Alliance has,
or is reasonably likely to have, a material adverse effect on
Bowater.
The foregoing conditions precedent are for the benefit of Alliance and
may be waived, in whole or in part, by Alliance in writing at any time. If any
of the said conditions shall not be complied with or waived by Alliance on or
before September 30, 2001 or, if earlier, the date required for their
performance, then Alliance may rescind and terminate this Agreement by written
notice to Bowater.
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6.3. BOWATER CONDITIONS
The obligation of Bowater to complete the transaction contemplated
herein is subject to the fulfilment of the following conditions on or before the
Effective Date or such other time as specified below:
(a) the representations and warranties made by Alliance in this
Agreement shall be true and correct as of the Effective Date
as if made on and as of such date (except to the extent such
representations and warranties speak as of an earlier date, in
which event such representations and warranties shall be true
and correct as of such earlier date, or except as affected by
the transaction contemplated or permitted by this Agreement or
except for any failures or breaches of representations and
warranties which individually or in the aggregate would not
have a material adverse effect on Alliance or materially
impede the completion of the Arrangement or the other
transactions contemplated hereby, it being understood that for
purposes of this Section 6.3(a) any reference to materiality,
material adverse change or material adverse effect in such
representation or warranty shall be disregarded for this
purpose) and Alliance shall have provided to Bowater the
certificate of two qualified officers of Alliance certifying
such accuracy on the Effective Date;
(b) Alliance shall have complied with its covenants herein, unless
the failure to comply with such covenants would not
individually or in the aggregate have a material adverse
effect on Alliance or materially impede the completion of the
Arrangement or the other transactions contemplated in this
Agreement, and Alliance shall have provided to Bowater the
certificate of two qualified officers of Alliance certifying
that Alliance has so complied with its covenants herein;
(c) from the date hereof up to and including the Effective Date,
there shall have been no change, condition, event or
occurrence which, in the reasonable judgment of Bowater has,
or is reasonably likely to have, a material adverse effect on
Alliance;
(d) the Board of Directors of Alliance shall have made and shall
not have modified or amended, in any material respect, prior
to the Alliance Meeting, an affirmative recommendation that
its shareholders approve the Arrangement;
(e) the indebtedness of Alliance and its Subsidiaries for borrowed
money (whether current or long term) shall not have exceeded
$500 Million, as at the Effective Date;
(f) all stock options granted by Alliance shall have been
exercised or terminated and all stock purchase plans shall
have been terminated prior to the effective time of the
Arrangement; and
(g) the holders of not more than 5% of the issued and outstanding
Alliance Common Shares shall have exercised Dissent Rights in
relation to the Arrangement.
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The foregoing conditions precedent are for the benefit of Bowater and
may be waived, in whole or in part, by Bowater in writing at any time. If any of
the said conditions shall not be complied with or waived by Bowater on or before
September 30, 2001 or, if earlier, the date required for the performance
thereof, then Bowater may rescind and terminate this Agreement by written notice
to Alliance.
6.4. NOTICE AND CURE PROVISIONS
Each Party will give prompt notice to the other Party of the
occurrence, or failure to occur, at any time from the date hereof until the
Effective Date, of any event or state of facts which occurrence or failure
would, or would be likely to:
(a) cause any of the representations or warranties of either Party
contained herein to be untrue or inaccurate on the date hereof
or on the Effective Date; or
(b) result in the failure to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by
either Party hereunder prior to the Effective Date.
No Party may elect not to complete the transaction contemplated hereby
pursuant to the conditions precedent contained in Sections 6.1, 6.2 and 6.3 or
exercise any termination right arising therefrom, unless forthwith and in any
event prior to the filing of the Final Order for acceptance by the Director, the
Party intending to rely thereon has delivered a written notice to the other
Party specifying in reasonable detail all breaches of covenants, representations
and warranties or other matters which the Party delivering such notice is
asserting as the basis for the non-fulfilment of the applicable condition
precedent or termination right, as the case may be. If any such notice is
delivered, provided that a Party is proceeding diligently to cure such matter,
if such matter is susceptible to being cured, the other Party may not terminate
this Agreement until the later of September 30, 2001 and the expiration of a
period of 30 days from such notice. If such notice has been delivered prior to
the date of the Alliance Meeting, such meeting shall be postponed until the
expiry of such period.
6.5. MERGER OF CONDITIONS
The conditions set out in Sections 6.1, 6.2, 6.3 and 6.6 shall be
conclusively deemed to have been satisfied, waived or released upon the filing
of Articles of Arrangement as contemplated by this Agreement, and the issuance
of a certificate of arrangement in respect thereof under the CBCA. Alliance
acknowledges and agrees that it shall have no right to file Articles of
Arrangement unless such conditions have been satisfied, fulfilled or waived.
6.6. PROXY CIRCULAR MAILING
(a) It shall be a condition precedent to the obligation of Bowater
to complete the transaction contemplated hereby and to the
mailing of the Proxy Circular by
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Alliance that prior to mailing or otherwise delivering the
Proxy Circular to the Alliance Common Shareholders, Alliance
shall have obtained from Societe de developpement industriel
("SDI"), in form and substance acceptable to Bowater, a
written authorization of SDI to the change of control which
will arise as a result of the Arrangement and SDI shall have
provided its written confirmation, in form and substance
acceptable to Bowater (the written authorization and
confirmation of SDI being referred to collectively as the "SDI
CONSENT") that such change of control shall not constitute a
default under the Credit Agreement (the "SDI AGREEMENT")
between SDI and Alliance dated July 8, 1998, nor shall there
be, as a result of such change of control, any premium,
penalty or other payment owing by Alliance or its successors,
pursuant to the SDI Agreement; for certainty, Alliance will be
in the same position under the SDI Agreement after the change
of control provided by this Agreement as before such change.
(b) If any of the said conditions shall not be complied with or
waived by Bowater on or before June 18, 2001, Bowater shall be
permitted to rescind and terminate this Agreement by written
notice to Alliance. The foregoing conditions are for the sole
benefit of Bowater and may be waived by it in writing at any
time, in whole or in part, and on such terms as it may
prescribe. A termination of this Agreement as a result of the
failure of Alliance to obtain the SDI Consent shall not result
in the occurrence of a Bowater Break Fee Event pursuant to
Section 8.1 of this Agreement.
ARTICLE 7
AMENDMENT
7.1. AMENDMENT
This Agreement may, at any time and from time to time before or after
the holding of the Alliance Meeting, be amended by mutual written agreement of
the Parties hereto without further notice to or authorization on the part of the
Alliance Common Shareholders, and any such amendment may, without limitation:
(a) change the time for performance of any of the obligations or
acts of the Parties;
(b) waive any inaccuracies or modify any representation contained
herein or in any document delivered pursuant hereto;
(c) waive compliance with or modify any of the covenants herein
contained and waive or modify performance of any of the
obligations of the Parties; and
(d) waive compliance with or modify any conditions precedent
herein contained;
provided, however, that any such change, waiver or modification does not
invalidate any required security holder approval of the Arrangement.
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Notwithstanding any other provision of this Agreement, Bowater reserves
the right to utilize a Subsidiary other than Bowater Canada for the purpose of
issuing shares which are exchangeable for Bowater Common Stock in the place and
stead of Bowater Canada and in such instance, all references herein to
Exchangeable Shares shall be to the exchangeable shares of such Subsidiary and
all references to Bowater Canada shall be deemed to refer to such Subsidiary and
the representations and warranties with respect to Bowater Canada contained in
Schedule C hereof shall be amended in accordance with the terms hereof in order
to refer to such Subsidiary. Any such utilization of an alternate subsidiary
shall provide the Alliance Common Shareholders with the same rights and
privileges as those initially contemplated.
7.2. MUTUAL UNDERSTANDING REGARDING AMENDMENTS
The Parties will continue from and after the date hereof and through
and including the Effective Date, to use their respective best efforts to
maximize present and future financial and tax planning opportunities for the
shareholders of Alliance, for Bowater and its Subsidiaries, and for Alliance as
and to the extent that the same shall not prejudice any Party or its
securityholders. The Parties will ensure that such planning activities do not
impede the progress of the Arrangement in any material way. Any proposals made
in respect of the foregoing will be subject to continued good faith discussions
between the parties.
The Parties mutually agree that if a Party proposes any amendment or
amendments to this Agreement or to the Plan of Arrangement, the other Party will
act reasonably in considering such amendment and if the other Party and its
shareholders are not prejudiced by reason of any such amendment the other Party
will co-operate in a reasonable fashion with the Party proposing the amendment
so that such amendment can be effected subject to applicable Laws and the rights
of the securityholders.
ARTICLE 8
AGREEMENT AS TO DAMAGES AND OTHER ARRANGEMENTS
8.1. BOWATER BREAK FEE EVENT
If
(i) the Board of Directors of Alliance shall have (A) failed to
recommend or withdrawn or modified its approval or recommendation of
the Arrangement, (B) taken any action or failed to take any action with
the result that Alliance is in breach of clause (iii) of Section
5.2(b), (C) approved or recommended any Acquisition Proposal, (D)
determined at the conclusion of the process set out in Section 5.5 that
any Acquisition Proposal is a Superior Proposal, or (E) resolved to
take any of the foregoing actions whether or not permitted under the
terms hereof, or
(ii) an Acquisition Proposal shall have been made known to Alliance or
made directly to the Alliance Common Shareholders or any person has
publically announced an intention
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to make an Acquisition Proposal, and after such Acquisition Proposal
shall have been made known, made or announced, (A) the Alliance Common
Shareholders do not approve the Arrangement and the Rights Plan
Resolution, or (B) a meeting of the Alliance Common Shareholders to
consider the Arrangement and the Rights Plan Resolution has not been
held by September 30, 2001, or
(iii) (A) the Alliance Common Shareholders do not approve the
Arrangement and the Rights Plan Resolution, or (B) a meeting of the
Alliance Common Shareholders to consider the Arrangement and the Rights
Plan Resolution has not been held by September 30, 2001, and at any
time within three (3) months after the earlier to occur of the Alliance
Meeting and September 30, 2001, an Acquisition Proposal shall be made
known, made or announced as described in clause (ii) above, and any
transaction arising from such Acquisition Proposal (including a
competing transaction) is consummated either at such time or at any
time thereafter,
(each of the events described in clauses (i), (ii) and (iii) being referred to
as a "BOWATER BREAK FEE EVENT"), then provided that, with respect to the Bowater
Break Fee Events listed in subparagraphs (ii)(B) and (iii) above, Bowater is not
in material breach of its covenants under this Agreement and its representations
are true and correct (unless any breach or incorrectness individually or in the
aggregate did not have a materially adverse effect on Bowater or materially
impede the completion of the transactions contemplated hereby) Alliance shall
pay to Bowater, in the case of clause (i), one Business Day after taking any
such action, and, in the case of clause (ii) (A), on the Business Day following
such vote, and, in the case of clause (ii) (B), on October 1, 2001, and, in the
case of clause (iii) on the Business Day following the date of the consummation
of the transaction arising from the Acquisition Proposal, U.S.$20 million in
immediately available funds to an account designated by Bowater; provided,
however, that, in the case of a Bowater Break Fee Event under clause (i) or
(ii), this Agreement shall not have been duly terminated prior to the occurrence
of such Bowater Break Fee Event
Alliance shall not be obligated to make more than one payment pursuant
to this Section 8.1.
8.2. GENERAL REMEDIES
For greater certainty, the Parties agree that the terms of Section
9.1(b) apply in the event of a termination of this Agreement in conjunction with
a Bowater Break Fee Event, subject to the payment of the amount pursuant to this
Article 8 being the sole monetary remedy of Bowater as a result of the
occurrence of a Bowater Break Fee Event.
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ARTICLE 9
TERMINATION
9.1. TERMINATION
(a) This Agreement may be terminated at any time prior to the
Effective Date:
(i) by mutual written consent of Alliance and
Bowater;
(ii) as provided in Sections 6.1, 6.2, 6.3 and
6.6;
(iii) by Bowater upon the occurrence of a Bowater
Break Fee Event as provided in Section 8.1;
or
(iv) by Alliance upon any determination by
Alliance that an Acquisition Proposal
constitutes a Superior Proposal, subject to
the payment of the break fee payable to
Bowater under Section 8.1.
(b) If this Agreement is terminated in accordance with the provisions
of Section 9.1(a), no party shall have any further liability to perform its
obligations hereunder except as provided in Sections 8.1 and 8.2 and as
otherwise expressly contemplated hereby. Except as provided in Section 8.2 with
respect to Bowater's monetary remedy in the event of a Bowater Break Fee Event,
neither the termination of this Agreement nor anything contained in this Section
9.1(b) shall relieve any party from any liability for any breach by it of this
Agreement, including from any inaccuracy in its representations and warranties
and any non-performance by it of its covenants made herein, unless otherwise
expressly stipulated herein. Except as provided in Section 8.2 with respect to
Bowater's monetary remedy in the event of a Bowater Break Fee Event, nothing in
this Agreement shall preclude a Party from seeking damages incurred or suffered
by a Party as a result of any breach of this Agreement by the other Party,
seeking injunctive relief to restrain any breach or threatened breach of the
covenants or agreements set forth in this Agreement or the Confidentiality
Agreement or otherwise to obtain specific performance of any of such covenants
or agreements, without the necessity of posting bond or security in connection
therewith.
ARTICLE 10
GENERAL
10.1. EXPENSES
The Parties agree that all out-of-pocket third party transaction
expenses incurred in connection with this Agreement and the transaction
contemplated hereby, including legal fees, financial advisor fees, regulatory
filing fees, all disbursements by advisors and printing and mailing costs, shall
be paid by the Party incurring such expenses.
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Alliance and Bowater represent and warrant to each other that, except
for BMO Nesbitt Burns Inc. and Merrill Lynch & Co, in the case of Alliance, and
Goldman Sachs & Co. in the case of Bowater, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission, or to
the reimbursement of any of its expenses, in connection with the Arrangement and
the transaction contemplated hereby.
10.2. NOTICES
Any notice, consent, waiver, direction or other communication required
or permitted to be given under this Agreement by a Party to the other Party
shall be in writing and may be given by hand delivery of same or by sending same
by facsimile transmission or by express courier delivery addressed to the Party
to which the notice is to be given at its address for service herein. Any
notice, consent, waiver, direction or other communication aforesaid shall, if
delivered by hand or by express courier delivery, be deemed to have been given
and received on the date on which it was delivered to the address provided
herein (if a Business Day, if not, the next succeeding Business Day) and if sent
by facsimile transmission be deemed to have been given and received at the time
of receipt (if a Business Day, if not, the next succeeding Business Day) unless
actually received after 4:00 p.m. at the point of receipt in which case it shall
be deemed to have been given and received on the next Business Day.
The address for service of each of the Parties hereto shall be as
follows:
(a) if to Alliance:
Alliance Forest Products Inc.
1000 de La Gauchetiere Street West
Suite 2820
Montreal (Quebec) Canada
H3B 4W5
Attention: Martin Longpre, Secretary and Corporate Counsel
Fax: (514) 954-2167
with a copy to:
Lavery de Billy
1 Place Ville-Marie
Suite 4000
Montreal (Quebec) Canada
H3B 4M4
Attention: Andre Laurin
Fax: (514) 871-8977
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(b) if to Bowater:
Bowater Incorporated
55 East Camperdown Way
P.O. Box 1028
Greenville, South Carolina
29602
Attention: Anthony H. Barash
Senior Vice-President, Corporate Affairs and
General Counsel
Fax: (864) 282-9468
with a copy to:
Fraser Milner Casgrain LLP
1 First Canadian Place
Suite 4100, P.O. Box 100
Toronto, Ontario
M5X 1B2
Attention: Jeffery Barnes
Fax: (416) 863-4592
10.3. TIME OF THE ESSENCE
Time shall be of the essence in this Agreement.
10.4. ENTIRE AGREEMENT
This Agreement and the Confidentiality Agreement constitute the entire
agreement between the Parties hereto and cancel and supersede all prior
agreements and understandings between the Parties with respect to the subject
matter hereof.
10.5. FURTHER ASSURANCES
Each Party shall, from time to time, and at all times hereafter, at the
request of the other Party, but without further consideration, do all such
further acts and execute and deliver all such further documents and instruments
as shall be reasonably required in order to fully perform and carry out the
terms and intent hereof.
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10.6. GOVERNING LAW
This Agreement shall be governed by, and be construed in accordance
with, the laws of the Province of Quebec and the laws of Canada applicable
therein but the reference to such laws shall not, by conflict of laws rules or
otherwise, require the application of the law of any jurisdiction other than the
Province of Quebec. Each Party hereby irrevocably attorns to the jurisdiction of
the Courts of the Province of Quebec in respect of all matters arising under or
in relation to this Agreement.
10.7. EXECUTION IN COUNTERPARTS
This Agreement may be executed in identical counterparts, each of which
is and is hereby conclusively deemed to be an original and the counterparts
collectively are to be conclusively deemed to be one instrument.
10.8. WAIVER
No waiver by any Party shall be effective unless in writing and any
waiver shall affect only the matter, and the occurrence thereof, specifically
identified and shall not extend to any other matter or occurrence.
10.9. ENUREMENT AND ASSIGNMENT
This Agreement shall enure to the benefit of and be binding upon the
Parties hereto and their respective successors and permitted assigns. This
Agreement may not be assigned by either Party without the prior written consent
of the other Party.
10.10. ENGLISH/FRENCH LANGUAGE
The parties confirm that it is their wish that this Agreement as well
as any other documents relating hereto, including notices, have been and shall
be drawn up in English only. Les parties aux presents confirment leur volonte
que cette convention de meme tous les documents, y compris tous avis, s'y
rattachant, soient rediges en anglais seulement.
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IN WITNESS WHEREOF the Parties hereto have executed this Agreement as
of the date first above written.
ALLIANCE FOREST PRODUCTS INC.
Per:
-----------------------------------------
Pierre Monahan
President and Chief Executive Officer
Per:
-----------------------------------------
Robert Despres
Chairman of the Board
BOWATER INCORPORATED
Per:
-----------------------------------------
Arnold M. Nemirow
Chairman, President and Chief
Executive Officer
41
SCHEDULE A
PLAN OF ARRANGEMENT
UNDER SECTION 192
OF THE CANADA BUSINESS CORPORATIONS ACT
42
ALLIANCE FOREST PRODUCTS INC.
PLAN OF ARRANGEMENT
UNDER SECTION 192
OF THE CANADA BUSINESS CORPORATIONS ACT
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
In this Plan of Arrangement, unless there is something in the subject
matter or context inconsistent therewith, the following terms shall have the
respective meanings set out below and grammatical variations of such terms shall
have corresponding meanings:
"ACT" means the Canada Business Corporations Act, R.S.C. 1995, c. C-44.
"ARRANGEMENT" means the arrangement under section 192 of the Act on the
terms and subject to the conditions set out in this Plan of Arrangement, subject
to any amendments thereto made in accordance with section 7.1 of the Arrangement
Agreement or made at the direction of the Court in the Final Order.
"ARRANGEMENT AGREEMENT" means the agreement made as of April 1, 2001
between Alliance and Bowater, as amended, supplemented and/or restated in
accordance therewith prior to the Effective Date, providing for, among other
things, the Arrangement.
"ARRANGEMENT RESOLUTION" means the special resolution passed by the
holders of the Alliance Common Shares at the Alliance Shareholders' Meeting.
"ALLIANCE" means Alliance Forest Products Inc., a corporation
subsisting under the Act.
"ALLIANCE COMMON SHARES" means the common shares in the capital of
Alliance.
"ALLIANCE OPTIONS" means all stock options and similar rights providing
an option or right to acquire securities of Alliance, as well as stock
appreciation rights including, without limitation, any options or rights granted
under Alliance's Employee Stock Incentive Plans.
"ALLIANCE SHAREHOLDERS' MEETING" means the special meeting of the
shareholders of Alliance (including any adjournment thereof) convened as
provided by the Interim Order to consider, and if deemed advisable, approve the
Arrangement.
"BOWATER" means Bowater Incorporated, a corporation existing under the
laws of the State of Delaware.
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"BOWATER CANADA" means Bowater Canada Inc., a corporation incorporated
under the Act and a subsidiary of Bowater Holdings.
"BOWATER COMMON SHARES" means the shares of common stock of Bowater,
US$1.00 par value per share.
"BOWATER ELECTED SHARE" means any Alliance Common Share that the holder
shall have elected, in a duly completed Letter of Transmittal received by the
Depositary no later than 5:00 p.m. (Montreal time) on the Business Day
immediately preceding the Meeting Date, to exchange under the Arrangement for
the Cash Portion and 0.166 Bowater Common Shares or that is deemed to be a
Bowater Elected Share pursuant to Section 2.2(b).
"BOWATER HOLDINGS" means Bowater Canadian Holdings Incorporated, a
corporation incorporated under the Companies Act (Nova Scotia) and a subsidiary
of Bowater.
"BUSINESS DAY" means any day, other than a Saturday, a Sunday and a
statutory holiday in Toronto, Ontario, Montreal, Quebec or New York, New York.
"CASH PORTION" means $13 for each Alliance Common Share.
"CERTIFICATE" means the certificate of arrangement giving effect to the
Arrangement, issued pursuant to subsection 192(7) of the Act after the Articles
of Arrangement have been filed.
"COURT" means the Superior Court of Quebec, District of Montreal.
"DEPOSITARY" means the Montreal Trust Company of Canada (or such other
trust company) appointed by Bowater for the purpose of, among other things,
exchanging certificates representing Alliance Common Shares for cash and
Exchangeable Shares or Bowater Common Shares, as the case may be.
"DISSENT PROCEDURES" has the meaning set out in Section 3.1.
"DISSENTING SHAREHOLDER" means a holder of Alliance Common Shares who
dissents in respect of the Arrangement in strict compliance with the Dissent
Procedures.
"EFFECTIVE DATE" means the date shown on the Certificate.
"EFFECTIVE TIME" means 12:01 a.m. on the Effective Date.
"EXCHANGEABLE SHARES" means the non-voting exchangeable shares in the
capital of Bowater Canada.
"EXCHANGEABLE SHARE ELECTED SHARE" means any Alliance Common Share that
the holder shall have elected, in a duly completed Letter of Transmittal
received by the Depositary no later than 5:00 p.m. (Montreal time) on the
Business Day immediately preceding the Meeting Date to exchange under the
Arrangement for the Cash Portion and 0.166 Exchangeable Shares.
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Page 3
"EXCHANGEABLE SHARE PROVISIONS" means the rights, privileges,
restrictions and conditions attaching to the Exchangeable Shares, the text of
which (without Exhibit I thereto) is attached hereto as Exhibit 1.
"FINAL ORDER" means the final order of the Court approving the
Arrangement.
"INTERIM ORDER" means the interim order of the Court made in connection
with the process for obtaining shareholder approval of the Arrangement and
related matters.
"PROXY CIRCULAR" means the management proxy circular of Alliance to be
prepared and sent to the shareholders of Alliance in connection with the
Alliance Shareholders' Meeting.
"LETTER OF TRANSMITTAL" means collectively a Letter of Transmittal and
Election Form in the forms accompanying the Proxy Circular.
"LIQUIDATION CALL RIGHT" has the meaning ascribed thereto in the
Exchangeable Share Provisions.
"MEETING DATE" means the date of the Alliance Shareholders' Meeting.
"NYSE" means the New York Stock Exchange, Inc.
"OUTSTANDING ALLIANCE COMMON SHARES" means the Alliance Common Shares
outstanding immediately prior to the Effective Time.
"PERSON" includes any individual, firm, partnership, joint venture,
venture capital fund, association, trust, trustee, executor, administrator,
legal personal representative, estate, group, body corporate, corporation,
unincorporated association or organization, government body, syndicate or other
entity, whether or not having legal status.
"REDEMPTION CALL RIGHT" has the meaning ascribed thereto in the
Exchangeable Share Provisions.
1.2 SECTIONS AND HEADINGS
The division of this Plan of Arrangement into sections and the
insertion of headings are for reference purposes only and shall not affect the
interpretation of this Plan of Arrangement. Unless otherwise indicated, any
reference in this Plan of Arrangement to a section or an exhibit refers to the
specified section of or exhibit to this Plan of Arrangement.
1.3 NUMBER, GENDER AND PERSONS
In this Plan of Arrangement, unless the context otherwise requires,
words importing the singular number include the plural and vice versa, words
importing any gender include all genders and words importing persons include
individuals, corporations, partnerships, associations, trusts, unincorporated
organizations, governmental bodies and other legal or business entities of any
kind.
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1.4 CURRENCY
Unless otherwise stated, all references in this Plan of Arrangement to
sums of money are expressed in lawful money of Canada.
ARTICLE 2
ARRANGEMENT
2.1 ARRANGEMENT
Commencing at the Effective Time, the following shall occur and shall
be deemed to occur in the following order without any further act or formality:
(a) each Bowater Elected Share will be transferred by the
holder thereof to Bowater Holdings in exchange for
the Cash Portion and 0.166 Bowater Common Shares, and
the name of each such holder will be removed from the
register of holders of Alliance Common Shares and
added to the register of holders of Bowater Common
Shares and Bowater Holdings will be added to the
register of holders of Alliance Common Shares
accordingly;
(b) Bowater Holdings will transfer to Bowater Canada all
the Alliance Common Shares then owned by Bowater
Holdings and, as consideration therefor, Bowater
Canada will issue an equivalent number of common
shares of Bowater Canada to Bowater Holdings, and
Bowater Holdings will be removed from the register of
holders of Alliance Common Shares and Bowater Canada
will be added to the register of holders of Alliance
Common Shares accordingly;
(c) each Exchangeable Share Elected Share will be
transferred by the holder thereof to Bowater Canada
in exchange for the Cash Portion and 0.166
Exchangeable Shares, and the name of each such holder
will be removed from the register of holders of
Alliance Common Shares and added to the register of
holders of Exchangeable Shares and Bowater Canada
will be added to the register of holders of Alliance
Common Shares accordingly; and
(d) all outstanding Alliance Options shall be terminated.
2.2 ELECTIONS
(a) Each Person who, at or prior to 5:00 p.m. (Montreal
Time) on the Business Day immediately preceding the
Meeting Date, is a holder of record of Alliance
Common Shares, will be entitled, with respect to all
or a portion of such shares, to make an election at
or prior to 5:00 p.m. (Montreal
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Time) on the Business Day immediately preceding the
Meeting Date to receive (i) cash and Exchangeable
Shares or (ii) cash and Bowater Common Shares, or a
combination of (i) and (ii), in exchange for such
holder's Alliance Common Shares, on the basis set
forth herein and in accordance with such arrangements
and procedures as will be agreed upon in good faith
by Bowater, Bowater Holdings, Bowater Canada and
Alliance, including the form of the Letter of
Transmittal containing the elections and the
procedures governing transmittal.
(b) Each Alliance Common Share in respect of which an
effective election has not been made (other than
Alliance Common Shares held by Dissenting
Shareholders who are ultimately entitled to be paid
the fair value of the Alliance Common Shares held by
them) will be deemed to be a Bowater Elected Share
and will receive the Cash Portion and 0.166 Bowater
Common Shares on the basis set forth herein.
ARTICLE 3
RIGHTS OF DISSENT
3.1 RIGHTS OF DISSENT
Holders of Alliance Common Shares may exercise rights of dissent with
respect to such shares pursuant to and in the manner set forth in section 190 of
the Act and this section 3.1 (the "Dissent Procedures") in connection with the
Arrangement and holders who duly exercise such rights of dissent and who:
(a) are ultimately entitled to be paid fair value for
their Alliance Common Shares shall be deemed to have
transferred such Alliance Common Shares to Alliance
for cancellation on the Effective Date prior to any
of the steps described in Sections 2.1; or
(b) are ultimately not entitled, for any reason, to be
paid fair value for their Alliance Common Shares
shall be deemed to have participated in the
Arrangement on the same basis as a non-dissenting
holder of Alliance Common Shares and shall receive
cash and Bowater Common Shares on the basis set forth
herein,
but in no case shall Bowater, Bowater Holdings, Bowater Canada, Alliance or any
other Person be required to recognize such holders as holders of Alliance Common
Shares after the Effective Time, and the names of such holders of Alliance
Common Shares shall be deleted from the registers of holders of Alliance Common
Shares at the Effective Time.
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ARTICLE 4
CERTIFICATES AND FRACTION SHARES
4.1 ISSUANCE OF CERTIFICATES REPRESENTING EXCHANGEABLE SHARES
At or promptly after the Effective Time, Bowater Canada shall deposit
with the Depositary, for the benefit of the holders of Alliance Common Shares
who will receive cash and Exchangeable Shares in connection with the
Arrangement, sufficient cash and certificates representing the Exchangeable
Shares issued pursuant to Section 2.1 upon the exchange of Alliance Common
Shares. Upon surrender to the Depositary for cancellation of a certificate which
immediately prior to the Effective Time represented Alliance Common Shares that
were exchanged for the cash and Exchangeable Shares under the Arrangement,
together with such other documents and instruments as would have been required
to effect the transfer of the shares formerly represented by such certificate
under the Act and the by-laws of Alliance and such additional documents and
instruments as the Depositary may reasonably require, the holder of such
surrendered certificate shall be entitled to receive in exchange therefor, and
the Depositary shall deliver to such holder, the aggregate cash to which such
holder is entitled under the Arrangement and a certificate representing that
number (rounded down to the nearest whole number) of Exchangeable Shares which
such holder has the right to receive (together with any dividends or
distributions with respect thereto pursuant to Section 4.3 and any cash in lieu
of fractional Exchangeable Shares pursuant to Section 4.4), and the certificate
so surrendered shall forthwith be cancelled. In the event of a transfer of
ownership of Alliance Common Shares that is not registered in the transfer
records of Alliance, the relevant amount of cash may be paid to and a
certificate representing the proper number of Exchangeable Shares may be issued
to the transferee if the certificate representing such Alliance Common Shares is
presented to the Depositary, accompanied by all documents required to evidence
and effect such transfer. Until surrendered as contemplated by this Section 4.1,
each certificate which immediately prior to the Effective Time represented
Alliance Common Shares that were exchanged for the cash and Exchangeable Shares
shall be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender (i) the cash and the certificate representing
Exchangeable Shares as contemplated by this Section 4.1, (ii) a cash payment in
lieu of any fractional Exchangeable Shares as contemplated by Section 4.4, and
(iii) any dividends or distributions with a record date after the Effective Time
theretofore paid or payable with respect to Exchangeable Shares as contemplated
by Section 4.3. The cash deposited with the Depositary shall be held in an
interest bearing account, and any interest earned on such funds shall be for the
account of Bowater Canada.
4.2 EXCHANGE OF CERTIFICATES FOR BOWATER COMMON SHARES
At or promptly after the Effective Time, Bowater Holdings shall deposit
with the Depositary, for the benefit of the holders of Alliance Common Shares
who will receive cash and Bowater Common Shares in connection with the
Arrangement, sufficient cash and certificates representing the Bowater Common
Shares issued pursuant to Section 2.1 in exchange for outstanding Alliance
Common Shares. Upon surrender to the Depositary for cancellation of a
certificate which immediately prior to the Effective Time represented
outstanding Alliance
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Common Shares that were exchanged for cash and Bowater Common Shares, together
with such other documents and instruments as would have been required to effect
the transfer of the shares formerly represented by such certificate under the
Act and the by-laws of Alliance and such additional documents and instruments as
the Depositary may reasonably require, the holder of such surrendered
certificate shall be entitled to receive in exchange therefor, and the
Depositary shall deliver to such holder, the aggregate cash to which such holder
is entitled under the Arrangement and a certificate representing that number
(rounded down to the nearest whole number) of Bowater Common Shares which such
holder has the right to receive (together with any dividends or distributions
with respect thereto pursuant to Section 4.3 and any cash in lieu of fractional
Bowater Common Shares pursuant to Section 4.4), and the certificate so
surrendered shall forthwith be cancelled. In the event of a transfer of
ownership of Alliance Common Shares which is not registered in the transfer
records of Alliance, the relevant amount of cash may be paid to and a
certificate representing the proper number of Bowater Common Shares may be
issued to the transferee if the certificate representing such Alliance Common
Shares is presented to the Depositary, accompanied by all documents required to
evidence and effect such transfer. Until surrendered as contemplated by this
Section 4.2, each certificate which immediately prior to the Effective Time
represented Alliance Common Shares that were exchanged for cash and Bowater
Common Shares shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender (i) the cash and the certificate
representing Bowater Common Shares as contemplated by this Section 4.2, (ii) a
cash payment in lieu of any fractional Bowater Common Shares as contemplated by
Section 4.4 and (iii) any dividends or distributions with a record date after
the Effective Time theretofore paid or payable with respect to Bowater Common
Shares as contemplated by Section 4.3. The cash deposited with the Depositary
shall be held in an interest bearing account, and any interest earned on such
funds shall be for the account of Bowater Holdings.
4.3 DISTRIBUTIONS WITH RESPECT TO UNSURRENDERED CERTIFICATES
No dividends or other distributions declared or made after the
Effective Time with respect to Exchangeable Shares or Bowater Common Shares with
a record date after the Effective Time shall be paid to the holder of any
unsurrendered certificate which immediately prior to the Effective Time
represented outstanding Alliance Common Shares that were exchanged pursuant to
Section 2.1, and no cash payment in lieu of fractional shares shall be paid to
any such holder pursuant to Section 4.4, unless and until the holder of record
of such certificate shall surrender such certificate in accordance with Section
4.1 or 4.2. Subject to applicable law, at the time of such surrender of any such
certificate, there shall be paid to the record holder of the certificates
representing whole Alliance Common Shares, as the case may be, without interest
(i) the amount of any cash payable in lieu of a fractional Exchangeable Share or
Bowater Common Share to which such holder is entitled pursuant to Section 4.4,
(ii) the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole Exchangeable Share or
Bowater Common Share, as the case may be, and (iii) at the appropriate payment
date, the amount of dividends or other distributions with a record date after
the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole Exchangeable Share or Bowater
Common Share, as the case may be.
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4.4 NO FRACTIONAL SHARES
No certificates or scrip representing fractional Exchangeable Shares or
fractional Bowater Common Shares shall be issued upon the surrender for exchange
of certificates pursuant to Section 4.1 or 4.2 and no dividend, stock split or
other change in the capital structure of Bowater Canada or Bowater shall relate
to any such fractional security and such fractional interests shall not entitle
the owner thereof to vote or to exercise any rights as a security holder of
Bowater Canada or Bowater. In lieu of any such fractional securities:
(a) each Person otherwise entitled to a fractional
interest in an Exchangeable Share will receive a cash
payment equal to such Person's pro rata portion of
the net proceeds after expenses received by the
Depositary upon the sale of whole shares representing
an accumulation of all fractional interests in
Exchangeable Shares to which all such Persons would
otherwise be entitled. The Depositary will sell such
Exchangeable Shares by private sale (including by way
of sale through the facilities of any stock exchange
upon which the Exchangeable Shares are then listed)
as soon as reasonably practicable following the
Effective Date. The aggregate net proceeds after
expenses of such sale will be distributed by the
Depositary, pro rata in relation to the respective
fractions, among the Persons otherwise entitled to
receive fractional interests in Exchangeable Shares;
and
(b) each person otherwise entitled to a fractional
interest in a Bowater Common Share will receive a
cash payment equal to such Person's pro rata portion
of the net proceeds after expenses received by the
Depositary upon the sale of whole shares representing
an accumulation of all fractional interests in
Bowater Common Shares to which all such Persons would
otherwise be entitled. The Depositary will sell such
Bowater Common Shares on the NYSE as soon as
practicable following the Effective Date. The
aggregate net proceeds after expenses of such sale
will be distributed by the Depositary, pro rata in
relation to the respective fractions, among the
Persons otherwise entitled to receive fractional
interests in Bowater Common Shares.
Notwithstanding the foregoing, Bowater Canada or Bowater, respectively, shall be
entitled to deposit cash with the Depositary to enable the Depositary to make
cash payments provided for in paragraphs (a) and (b) above, in which case the
Exchangeable Shares or Bowater Common Shares, as the case may be, that would
otherwise be sold by the Depositary will be surrendered to Bowater Canada or
Bowater or no such shares will be issued.
4.5 LOST CERTIFICATES
In the event any certificate which immediately prior to the Effective
Time represented one or more outstanding Alliance Common Shares that were
exchanged pursuant to Section 2.1 shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the
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Person claiming such certificate to be lost, stolen or destroyed, the Depositary
will issue in exchange for such lost, stolen or destroyed certificate, cash and
certificates representing, as applicable, Exchangeable Shares or Bowater Common
Shares (and any dividends or distributions with respect thereto and any cash
pursuant to Section 4.3) deliverable in accordance with such holder's Letter of
Transmittal. When authorizing such payment in exchange for any lost, stolen or
destroyed certificate, the Person to whom certificates representing Exchangeable
Shares or Bowater Common Shares are to be issued shall, as a condition precedent
to the issuance thereof, give a bond satisfactory to Bowater Canada or Bowater,
as the case may be, in such sum as Bowater Canada or Bowater may, acting
reasonably, direct or otherwise indemnify Bowater Canada or Bowater in a manner
satisfactory to Bowater Canada or Bowater, acting reasonably, against any claim
that may be made against Bowater Canada or Bowater with respect to the
certificate alleged to have been lost, stolen or destroyed.
4.6 EXTINCTION OF RIGHTS
Any certificate which immediately prior to the Effective Time
represented outstanding Alliance Common Shares that were exchanged pursuant to
Section 2.1 and not deposited, with all other instruments required by Section
4.1 or 4.2, on or prior to the third anniversary of the Effective Date shall
cease to represent a claim or interest of any kind or nature as a shareholder of
Bowater Canada or Bowater. On such date, the Exchangeable Shares or Bowater
Common Shares to which the former registered holder of the certificate referred
to in the preceding sentence was ultimately entitled shall be deemed to have
been surrendered to Bowater Canada or Bowater, as the case may be, together with
all entitlements to dividends, distributions and interest thereon held for such
former registered holder.
4.7 WITHHOLDING RIGHTS
Bowater Holdings, Bowater Canada, Bowater and the Depositary shall be
entitled to deduct and withhold from any dividend or consideration otherwise
payable under this Plan of Arrangement to any holder of Alliance Common Shares,
Bowater Common Shares or Exchangeable Shares such amounts as Bowater Canada,
Bowater Holdings, Bowater or the Depositary is required or permitted to deduct
and withhold with respect to such payment under the Income Tax Act (Canada), the
United States Internal Revenue Code of 1986 or any provision of provincial,
state, local or foreign tax law, in each case as amended. To the extent that
amounts are so withheld, such withheld amounts shall be treated for all purposes
hereof as having been paid to the holder of the shares in respect of which such
deduction and withholding was made, provided that such withheld amounts are
actually remitted to the appropriate taxing authority. To the extent that the
amount so required or permitted to be deducted or withheld from any payment to a
holder exceeds the cash portion of the consideration otherwise payable to the
holder, Bowater Holdings, Bowater Canada, Bowater and the Depositary are hereby
authorized to sell or otherwise dispose of such portion of the consideration as
is necessary to provide sufficient funds to Bowater Holdings, Bowater
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Canada, Bowater or the Depositary, as the case may be, to enable it to comply
with such deduction or withholding requirement and Bowater Holdings, Bowater
Canada, Bowater or the Depositary shall notify the holder thereof and remit any
unapplied balance of the net proceeds of such sale.
ARTICLE 5
CERTAIN RIGHTS OF BOWATER HOLDINGS TO ACQUIRE EXCHANGEABLE SHARES
5.1 BOWATER HOLDINGS CALL RIGHTS
By virtue of the Arrangement and the Exchangeable Share Provisions,
each holder of Alliance Common Shares who receives Exchangeable Shares under the
Arrangement, and the assignees from time to time of such Exchangeable Shares,
shall be subject to the Liquidation Call Right and the Redemption Call Right of
Bowater Holdings as referred to in the Exchangeable Share Provisions and, for
the purposes of this Plan of Arrangement, set out verbatim in Sections 5.2 and
5.3. Capitalized terms used in Sections 5.2 and 5.3 and not otherwise defined in
this Plan of Arrangement shall have the meaning ascribed thereto in the
Exchangeable Share Provisions. In addition, such holders and their assignees as
aforesaid shall be subject to all other rights of Bowater Holdings contained in
the Exchangeable Share Provisions, including, without limitation, the Retraction
Call Right (as defined in the Exchangeable Share Provisions).
5.2 LIQUIDATION CALL RIGHT
(a) Bowater Holdings shall have the overriding right (the
"Liquidation Call Right"), in the event of and
notwithstanding the proposed liquidation, dissolution
or winding-up of Bowater Canada pursuant to Article 5
of the Exchangeable Share Provisions, to purchase
from all but not less than all of the holders of
Exchangeable Shares on the Liquidation Date all but
not less than all of the Exchangeable Shares held by
each such holder on payment by Bowater Holdings of an
amount per share equal to (a) the Current Market
Price (as defined in the Exchangeable Share
Provisions) of a Bowater Common Share on the last
Business Day prior to the Liquidation Date, which
shall be satisfied in full by causing to be delivered
to such holder one Bowater Common Share, plus (b) the
right to receive the full amount when paid of all
unpaid dividends on such Exchangeable Share for which
the record date has occurred prior to Liquidation
Date (collectively the "Liquidation Call Purchase
Price"). In the event of the exercise of the
Liquidation Call Right by Bowater Holdings, each
holder shall be obligated to sell all the
Exchangeable Shares held by the holder to Bowater
Holdings on the Liquidation Date on payment by
Bowater Holdings to the holder of the Liquidation
Call Purchase Price for each such share.
(b) To exercise the Liquidation Call Right, Bowater
Holdings must notify Bowater Canada's transfer agent
(the "Transfer Agent"), as agent for the holders of
Exchangeable Shares, and Bowater Canada of Bowater
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Holdings' intention to exercise such right at least
45 days before the Liquidation Date in the case of a
voluntary liquidation, dissolution or winding-up of
Bowater Canada and at least five Business Days before
the Liquidation Date in the case of an involuntary
liquidation, dissolution or winding-up of Bowater
Canada. The Transfer Agent will notify the holders of
Exchangeable Shares as to whether or not Bowater
Holdings has exercised the Liquidation Call Right
forthwith after the expiry of the period during which
the same may be exercised by Bowater Holdings. If
Bowater Holdings exercises the Liquidation Call
Right, then on the Liquidation Date Bowater Holdings
will purchase and the holders will sell all of the
Exchangeable Shares then outstanding for a price per
share equal to the Liquidation Call Purchase Price.
(c) For the purposes of completing the purchase of the
Exchangeable Shares pursuant to the Liquidation Call
Right, Bowater Holdings shall deposit with the
Transfer Agent, on or before the Liquidation Date,
certificates representing the aggregate number of
Bowater Common Shares deliverable by Bowater Holdings
in payment of the total Liquidation Call Purchase
Price and shall waive any rights to receive any
dividends which represent the amount of the remaining
portion, if any, of the total Liquidation Call
Purchase Price, less any amounts withheld pursuant to
Section 4.7 hereof. Provided that Bowater Holdings
has complied with the immediately preceding sentence,
on and after the Liquidation Date the rights of each
holder of Exchangeable Shares will be limited to
receiving such holder's proportionate part of the
total Liquidation Call Purchase Price payable by
Bowater Holdings (which in the case of unpaid
dividends, if any, shall be satisfied by the payment
thereof by Bowater Canada on the payment date for
such dividends) upon presentation and surrender by
the holder of certificates representing the
Exchangeable Shares held by such holder and the
holder shall on and after the Liquidation Date be
considered and deemed for all purposes to be the
holder of the Bowater Common Shares to which it is
entitled. Upon surrender to the Transfer Agent of a
certificate or certificates representing Exchangeable
Shares, together with such other documents and
instruments as may be required to effect a transfer
of Exchangeable Shares under the Act and the by-laws
of Bowater Canada and such additional documents and
instruments as the Transfer Agent may reasonably
require, the holder of such surrendered certificate
or certificates shall be entitled to receive in
exchange therefor, and the Transfer Agent on behalf
of Bowater Holdings shall deliver to such holder,
certificates representing the Bowater Common Shares
to which the holder is entitled and on the applicable
dividend payment date a cheque or cheques payable at
par at any branch of the bankers of Bowater Canada in
Canada in payment of the remaining portion, if any,
of the total Liquidation Call Purchase Price less any
amounts withheld pursuant to Section 4.7 hereof. If
Bowater Holdings does not exercise the Liquidation
Call Right in the manner described above, on the
Liquidation Date the holders of the Exchangeable
Shares
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will be entitled to receive in exchange therefor the
liquidation price otherwise payable by Bowater Canada
in connection with the liquidation, dissolution or
winding-up of Bowater Canada pursuant to Article 5 of
the Exchangeable Share Provisions.
5.3 REDEMPTION CALL RIGHT
(a) Bowater Holdings shall have the overriding right (the
"Redemption Call Right"), notwithstanding the
proposed redemption of the Exchangeable Shares by
Bowater Canada pursuant to Article 7 of the
Exchangeable Share Provisions, to purchase from all
but not less than all of the holders of Exchangeable
Shares on the Redemption Date all but not less than
all of the Exchangeable Shares held by each such
holder on payment by Bowater Holdings to the holder
of an amount per share equal to (a) the Current
Market Price (as defined in the Exchangeable Share
Provisions) of a Bowater Common Share on the last
Business Day prior to the Redemption Date, which
shall be satisfied in full by causing to be delivered
to such holder one Bowater Common Share plus (b) the
right to receive the full amount when paid of all
unpaid dividends on such Exchangeable Share for which
the record date has occurred prior to the Redemption
Date (collectively the "Redemption Call Purchase
Price"). In the event of the exercise of the
Redemption Call Right by Bowater Holdings, each
holder shall be obligated to sell all the
Exchangeable Shares held by the holder to Bowater
Holdings on the Redemption Date on payment by Bowater
Holdings to the holder of the Redemption Call
Purchase Price for each such share.
(b) To exercise the Redemption Call Right, Bowater
Holdings must notify the Transfer Agent, as agent for
the holders of Exchangeable Shares, and Bowater
Canada of Bowater Holdings' intention to exercise
such right at least 60 days before the Redemption
Date, except in the case of a redemption occurring as
a result of an acquisition of Control of Bowater (as
defined in the Exchangeable Share Provisions) in
which case Bowater Holdings shall notify the Transfer
Agent and Bowater Canada on or before the Redemption
Date. The Transfer Agent will notify the holders of
the Exchangeable Shares as to whether or not Bowater
Holdings has exercised the Redemption Call Right
forthwith after the expiry of the period during which
the same may be exercised by Bowater Holdings. If
Bowater Holdings exercises the Redemption Call Right,
on the Redemption Date Bowater Holdings will purchase
and the holders will sell all of the Exchangeable
Shares then outstanding for a price per share equal
to the Redemption Call Purchase Price.
(c) For the purposes of completing the purchase of the
Exchangeable Shares pursuant to the Redemption Call
Right, Bowater Holdings shall deposit with the
Transfer Agent, on or before the Redemption Date,
certificates representing the aggregate number of
Bowater Common Shares
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deliverable by Bowater Holdings in payment of the
total Redemption Call Purchase Price and shall waive
any rights to receive any dividends which represent
the amount of the remaining portion, if any, of the
total Redemption Call Purchase Price less any amounts
withheld pursuant to Section 4.7 hereof. Provided
that Bowater Holdings has complied with the immediate
preceding sentence, on and after the Redemption Date
the rights of each holder of Exchangeable Shares will
be limited to receiving such holder's proportionate
part of the total Redemption Call Purchase Price
payable by Bowater Holdings (which in case of unpaid
dividends, if any, shall be satisfied by the payment
thereof by Bowater Canada on the payment date for
such dividends) upon presentation and surrender by
the holder of certificates representing the
Exchangeable Shares held by such holder and the
holder shall on and after the Redemption Date be
considered and deemed for all purposes to be the
holder of the Bowater Common Shares to which it is
entitled. Upon surrender to the Transfer Agent of a
certificate or certificates representing Exchangeable
Shares, together with such other documents and
instruments as may be required to effect a transfer
of Exchangeable Shares under the Act and the by-laws
of Bowater Canada and such additional documents and
instruments as the Transfer Agent may reasonably
require, the holder of such surrendered certificate
or certificates shall be entitled to receive in
exchange therefor, and the Transfer Agent on behalf
of Bowater Holdings shall deliver to such holder,
certificates representing the Bowater Common Shares
to which the holder is entitled and on the applicable
dividend payment date a cheque or cheques payable at
par at any branch of the bankers of Bowater Canada in
Canada in payment of the remaining portion, if any,
of the total Redemption Call Purchase Price less any
amounts withheld pursuant to Section 4.7 hereof. If
Bowater Holdings does not exercise the Redemption
Call Right in the manner described above, on the
Redemption Date the holders of the Exchangeable
Shares will be entitled to receive in exchange
therefor the redemption price otherwise payable by
Bowater Canada in connection with the redemption of
the Exchangeable Shares pursuant to Article 7 of the
Exchangeable Share Provisions.
ARTICLE 6
AMENDMENTS
6.1 AMENDMENTS TO PLAN OF ARRANGEMENT
Alliance reserves the right to amend, modify and/or supplement this
Plan of Arrangement at any time and from time to time, provided that each such
amendment, modification and/or supplement must be (i) set out in writing, (ii)
approved by Bowater, (iii) filed with the Court and, if made following the
Alliance Shareholders' Meeting, approved by the Court, and (iv) communicated to
holders of Alliance Common Shares if and as required by the Court.
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Any amendment, modification or supplement to this Plan of Arrangement
may be proposed by Alliance at any time prior to the Alliance Shareholders'
Meeting (provided that Bowater shall have consented thereto) with or without any
other prior notice or communication, and, if so proposed and accepted by the
Persons voting at the Alliance Shareholders' Meeting (other than as may be
required under the Interim Order), shall become part of this Plan of Arrangement
for all purposes.
Any amendment, modification or supplement to this Plan of Arrangement
that is approved by the Court following the Alliance Shareholders' Meeting shall
be effective only if (i) it is consented to by each of Alliance and Bowater, and
(ii), if required by the Court, it is consented to by holders of the Alliance
Common Shares voting in the manner directed by the Court.
56
EXHIBIT 1
PROVISIONS ATTACHING TO THE NON-VOTING
EXCHANGEABLE SHARES OF BOWATER CANADA INC.
ARTICLE 1
INTERPRETATION
1.1 FOR THE PURPOSES OF THESE SHARE PROVISIONS:
"AFFILIATE" of any person means any other person directly or indirectly
controlling, controlled by, or under common control with, that person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlled by" and "under common control with"), as applied to any
person, means the possession by another person, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
first mentioned person, whether through the ownership of voting securities, by
contract or otherwise.
"BOARD OF DIRECTORS" means the board of directors of Bowater Canada.
"BOWATER" means Bowater Incorporated, a corporation existing under the
laws of the State of Delaware, and any successor corporation thereto.
"BOWATER CANADA" means Bowater Canada Inc., a corporation incorporated
under the Canada Business Corporations Act and a subsidiary of Bowater Holdings.
"BOWATER COMMON SHARES" mean the shares of common stock of Bowater,
US$1.00 par value per share, and any other securities into which such shares may
be changed.
"BOWATER DIVIDEND DECLARATION DATE" means the date on which the Board
of Directors of Bowater declares any dividend on the Bowater Common Shares.
"BOWATER HOLDINGS" means Bowater Canadian Holdings Incorporated, a
corporation incorporated under the Companies Act (Nova Scotia) and a subsidiary
of Bowater.
"BOWATER HOLDINGS CALL NOTICE" has the meaning ascribed thereto in
Section 6.3 of these share provisions.
"BUSINESS DAY" means any day, other than a Saturday, a Sunday and a
statutory holiday in Montreal, Quebec or New York, New York.
"CANADIAN DOLLAR EQUIVALENT" means in respect of an amount expressed in
a foreign currency (the "Foreign Currency Amount") at any date the product
obtained by multiplying:
(a) the Foreign Currency Amount by,
57
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(b) the noon spot exchange rate on such date for such
foreign currency expressed in Canadian dollars as
reported by the Bank of Canada or, in the event such
spot exchange rate is not available, such exchange
rate on such date for such foreign currency expressed
in Canadian dollars as may be deemed by the Board of
Directors to be appropriate for such purpose.
"COMMON SHARES" means the common shares in the capital of Bowater
Canada.
"CONTROL OF BOWATER" means the ownership by one Person or a Person and
its Affiliates of securities carrying a majority of the voting rights attaching
to all outstanding securities of Bowater.
"CURRENT MARKET PRICE" means, in respect of a Bowater Common Share on
any date, the Canadian Dollar Equivalent of the average of the closing prices of
Bowater Common Shares during a period of 20 consecutive trading days ending not
more than three trading days before such date on the New York Stock Exchange,
or, if the Bowater Common Shares are not then quoted on the New York Stock
Exchange, on such other stock exchange or automated quotation system on which
the Bowater Common Shares are listed or quoted, as the case may be, as may be
selected by the Board of Directors for such purpose; provided, however, that if
in the opinion of the Board of Directors the public distribution or trading
activity of Bowater Common Shares during such period does not create a market
which reflects the fair market value of a Bowater Common Share, then the Current
Market Price of a Bowater Common Share shall be determined by the Board of
Directors based upon the advice of such qualified independent financial advisors
as the Board of Directors may deem to be appropriate, and provided further that
any such selection, opinion or determination by the Board of Directors shall be
conclusive and binding.
"EXCHANGEABLE SHARES" mean the non-voting exchangeable shares in the
capital of Bowater Canada having the rights, privileges, restrictions and
conditions set forth herein.
"LIQUIDATION AMOUNT" has the meaning ascribed thereto in Section 5.1 of
these share provisions.
"LIQUIDATION CALL RIGHT" has the meaning ascribed thereto in the Plan
of Arrangement.
"LIQUIDATION DATE" has the meaning ascribed thereto in Section 5.1 of
these share provisions.
"PERSON" includes any individual, firm, partnership, joint venture,
venture capital fund, association, trust, trustee, executor, administrator,
legal personal representative, estate, group, body corporate, corporation,
unincorporated association or organization, government body, syndicate or other
entity, whether or not having legal status.
"PLAN OF ARRANGEMENT" means the plan of arrangement relating to the
arrangement of Avenor Inc. under section 192 of the Canada Business Corporations
Act, a copy of which is annexed hereto as Exhibit I.
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"PREFERRED SHARES" means the non-voting preferred shares in the capital
of Bowater Canada.
"PURCHASE PRICE" has the meaning ascribed thereto in Section 6.3 of
these share provisions.
"REDEMPTION CALL RIGHT" has the meaning ascribed thereto in the Plan of
Arrangement.
"REDEMPTION CALL PURCHASE PRICE" has the meaning ascribed thereto in
the Plan of Arrangement.
"REDEMPTION DATE" means the date, if any, established by the Board of
Directors for the redemption by Bowater Canada of Exchangeable Shares pursuant
to Article 7 of these share provisions, which date shall be no earlier than June
30, 2008, unless:
(c) there are fewer than 500,000 Exchangeable Shares
outstanding (other than Exchangeable Shares held by
Bowater and its Affiliates), as such number of shares
may be adjusted as deemed appropriate by the Board of
Directors to give effect to any subdivision or
consolidation of or stock dividend on the
Exchangeable Shares, any issue or distribution of
rights to acquire Exchangeable Shares or securities
exchangeable for or convertible into Exchangeable
Shares, any issue or distribution of other securities
or rights or evidences of indebtedness or assets, or
any other capital reorganization or other transaction
affecting the Exchangeable Shares; or
(d) a transaction is proposed that will result in Control
of Bowater being acquired by any Person, in which
case (in the event that the Board of Directors elects
to redeem the Exchangeable Shares) the Redemption
Date will be the date immediately prior to the date
the acquisition of Control of Bowater occurs pursuant
to such transaction.
"REDEMPTION PRICE" has the meaning ascribed thereto in Section 7.1 of
these share provisions.
"RETRACTED SHARES" has the meaning ascribed thereto in Section 6.1 of
these share provisions.
"RETRACTION CALL RIGHT" has the meaning ascribed thereto in Section 6.1
of these share provisions.
"RETRACTION DATE" has the meaning ascribed thereto in Section 6.1(b) of
these share provisions.
"RETRACTION PRICE" has the meaning ascribed thereto in Section 6.1 of
these share provisions.
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"RETRACTION REQUEST" has the meaning ascribed thereto in Section 6.1 of
these share provisions.
"SUPPORT AGREEMENT" means the Support Agreement to be entered into
between Bowater, Bowater Holdings and Bowater Canada.
"TRANSFER AGENT" means the Montreal Trust Company of Canada or such
other person as may from time to time be appointed by Bowater Canada as the
registrar and transfer agent for the Exchangeable Shares.
"TRUSTEE" means Montreal Trust Company of Canada, the trustee under the
Voting and Exchange Trust Agreement, a corporation organized and existing under
the laws of Canada and authorized to carry on the business of a trust company in
all the provinces of Canada, and any successor trustee appointed under the
Voting and Exchange Trust Agreement.
"VOTING AND EXCHANGE TRUST AGREEMENT" means the Voting and Exchange
Trust Agreement to be entered into between Bowater, Bowater Holdings, Bowater
Canada and the Trustee.
ARTICLE 2
RANKING OF EXCHANGEABLE SHARES
2.1 The Exchangeable Shares shall be entitled to a preference over
the Common Shares, the Preferred Shares and any other shares ranking junior to
the Exchangeable Shares with respect to the payment of dividends and the
distribution of assets in the event of the liquidation, dissolution or
winding-up of Bowater Canada, whether voluntary or involuntary, or any other
distribution of the assets of Bowater Canada among its shareholders for the
purpose of winding up its affairs.
ARTICLE 3
DIVIDENDS
3.1 A holder of an Exchangeable Share shall be entitled to receive
and the Board of Directors shall, subject to applicable law, on each Bowater
Dividend Declaration Date, declare a dividend on each Exchangeable Share:
(a) in the case of a cash dividend declared on the
Bowater Common Shares, in an amount in cash for each
Exchangeable Share in U.S. dollars or the Canadian
Dollar Equivalent thereof on the Bowater Dividend
Declaration Date of the cash dividend declared on
each Bowater Common Share;
(b) in the case of a stock dividend declared on the
Bowater Common Shares to be paid in Bowater Common
Shares, in such number of Exchangeable Shares for
each Exchangeable Share as is equal to the number of
Bowater Common Shares to be paid on each Bowater
Common Share; or
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(c) in the case of a dividend declared on the Bowater
Common Shares in property other than cash or Bowater
Common Shares, in such type and amount of property
for each Exchangeable Share as is the same as or
economically equivalent to (to be determined by the
Board of Directors as contemplated by Section 3.5
hereof) the type and amount of property declared as a
dividend on each Bowater Common Share.
Such dividends shall be paid out of money, assets or property of Bowater Canada
properly applicable to the payment of dividends, or out of authorized but
unissued shares of Bowater Canada, as applicable.
3.2 Cheques of Bowater Canada payable at par at any branch of the
bankers of Bowater Canada shall be issued in respect of any cash dividends
contemplated by Section 3.1(a) hereof and the sending of such a cheque to each
holder of an Exchangeable Share shall satisfy the cash dividend represented
thereby unless the cheque is not paid on presentation. Certificates registered
in the name of the registered holder of Exchangeable Shares shall be issued or
transferred in respect of any stock dividends contemplated by Section 3.1(b)
hereof and the sending of such a certificate to each holder of an Exchangeable
Share shall satisfy the stock dividend represented thereby. Such other type and
amount of property in respect of any dividends contemplated by Section 3.1(c)
hereof shall be issued, distributed or transferred by Bowater Canada in such
manner as it shall determine and the issuance, distribution or transfer thereof
by Bowater Canada to each holder of an Exchangeable Share shall satisfy the
dividend represented thereby. No holder of an Exchangeable Share shall be
entitled to recover by action or other legal process against Bowater Canada any
dividend that is represented by a cheque that has not been duly presented to
Bowater Canada's bankers for payment or that otherwise remains unclaimed for a
period of six years from the date on which such dividend was payable.
3.3 The record date for the determination of the holders of
Exchangeable Shares entitled to receive payment of, and the payment date for,
any dividend declared on the Exchangeable Shares under Section 3.1 hereof shall
be the same dates as the record date and payment date, respectively, for the
corresponding dividend declared on the Bowater Common Shares.
3.4 If on any payment date for any dividends declared on the
Exchangeable Shares under Section 3.1 hereof the dividends are not paid in full
on all of the Exchangeable Shares then outstanding, any such dividends that
remain unpaid shall be paid on a subsequent date or dates determined by the
Board of Directors on which Bowater Canada shall have sufficient moneys, assets
or property properly applicable to the payment of such dividends.
3.5 The Board of Directors shall determine, in good faith and in
its sole discretion (with the assistance of such reputable and qualified
independent financial advisors and/or other experts as the Board of Directors
may require), economic equivalence for the purposes of Section 3.1(c) hereof,
and each such determination shall be conclusive and binding on Bowater Canada
and its shareholders. In making each such determination, the following factors
shall,
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without excluding other factors determined by the Board of Directors to be
relevant, be considered by the Board of Directors:
(a) in the case of any stock dividend or other
distribution payable in Bowater Common Shares, the
number of such shares issued in proportion to the
number of Bowater Common Shares previously
outstanding;
(b) in the case of the issuance or distribution of any
rights, options or warrants to subscribe for or
purchase Bowater Common Shares (or securities
exchangeable for or convertible into or carrying
rights to acquire Bowater Common Shares), the
relationship between the exercise price of each such
right, option or warrant and the current market value
(as determined by the Board of Directors in the
manner above contemplated) of a Bowater Common Share;
(c) in the case of the issuance or distribution of any
other form of property (including without limitation
any shares or securities of Bowater of any class
other than Bowater Common Shares, any rights, options
or warrants other than those referred to in Section
3.5(b) above, any evidences of indebtedness of
Bowater or any assets of Bowater), the relationship
between the fair market value (as determined by the
Board of Directors in the manner above contemplated)
of such property to be issued or distributed with
respect to each outstanding Bowater Common Share and
the current market value (as determined by the Board
of Directors in the manner above contemplated) of a
Bowater Common Share; and
(d) in all such cases, the general taxation consequences
of the relevant event to holders of Exchangeable
Shares to the extent that such consequences may
differ from the taxation consequences to holders of
Bowater Common Shares as a result of differences
between taxation laws of Canada and the United States
(except for any differing consequences arising as a
result of differing marginal taxation rates and
without regard to the individual circumstances of
holders of Exchangeable Shares).
For purposes of the foregoing determinations, the current market value
of any security listed and traded or quoted on a securities exchange shall be
the weighted average of the daily trading prices of such security during a
period of not less than 20 consecutive trading days ending not more than five
trading days before the date of determination on the principal securities
exchange on which such securities are listed and traded or quoted; provided,
however, that if in the opinion of the Board of Directors the public
distribution or trading activity of such securities during such period does not
create a market which reflects the fair market value of such securities, then
the current market value thereof shall be determined by the Board of Directors,
in good faith and in its sole discretion (with the assistance of such reputable
and qualified independent financial advisors and/or other experts as the board
may require), and provided further that any such determination by the Board of
Directors shall be conclusive and binding on Bowater Canada and its
shareholders.
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ARTICLE 4
CERTAIN RESTRICTIONS
4.1 So long as any of the Exchangeable Shares are outstanding,
Bowater Canada shall not at any time without, but may at any time with, the
approval of the holders of the Exchangeable Shares given as specified in Section
10.2 of these share provisions:
(a) pay any dividends on the Common Shares, the Preferred
Shares or any other shares ranking junior to the
Exchangeable Shares, other than stock dividends
payable in Common Shares or any such other shares
ranking junior to the Exchangeable Shares, as the
case may be;
(b) redeem or purchase or make any capital distribution
in respect of Common Shares, Preferred Shares or any
other shares ranking junior to the Exchangeable
Shares;
(c) redeem or purchase any other shares of Bowater Canada
ranking equally with the Exchangeable Shares with
respect to the payment of dividends or on any
liquidation distribution; or
(d) issue any Exchangeable Shares or any other shares of
Bowater Canada ranking equally with, or superior to,
the Exchangeable Shares other than by way of stock
dividends to the holders of such Exchangeable Shares.
The restrictions in Sections 4.1(a), 4.1(b), 4.1(c) and 4.1(d) above
shall not apply if all dividends on the outstanding Exchangeable Shares
corresponding to dividends declared and paid to date on the Bowater Common
Shares shall have been declared and paid in full on the Exchangeable Shares.
ARTICLE 5
DISTRIBUTION ON LIQUIDATION
5.1 In the event of the liquidation, dissolution or winding-up of
Bowater Canada or any other distribution of the assets of Bowater Canada among
its shareholders for the purpose of winding up its affairs, a holder of
Exchangeable Shares shall be entitled, subject to applicable law, to receive
from the assets of Bowater Canada in respect of each Exchangeable Share held by
such holder on the effective date (the "Liquidation Date") of such liquidation,
dissolution or winding-up, before any distribution of any part of the assets of
Bowater Canada among the holders of the Common Shares, the Preferred Shares or
any other shares ranking junior to the Exchangeable Shares, an amount per share
(the "Liquidation Amount") equal to:
(a) the Current Market Price of a Bowater Common Share on
the last Business Day prior to the Liquidation Date,
which shall be satisfied in full by Bowater Canada
causing to be delivered to such holder one Bowater
Common Share; plus
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(b) the right to receive the full amount when paid of all
unpaid dividends on each such Exchangeable Share for
which the record date has occurred prior to the
Liquidation Date.
5.2 On or promptly after the Liquidation Date, and subject to the
exercise by Bowater Holdings of the Liquidation Call Right, Bowater Canada shall
cause to be delivered to the holders of the Exchangeable Shares the Liquidation
Amount for each such Exchangeable Share upon presentation and surrender of the
certificates representing such Exchangeable Shares, together with such other
documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the Canada Business Corporations Act and the by-laws
of Bowater Canada and such additional documents and instruments as the Transfer
Agent may reasonably require, at the registered office of Bowater Canada or at
any office of the Transfer Agent as may be specified by Bowater Canada by notice
to the holders of the Exchangeable Shares. Payment of the total Liquidation
Amount for such Exchangeable Shares shall be made by delivery to each holder, at
the address of the holder recorded in the securities register of Bowater Canada
for the Exchangeable Shares or by holding for pick-up by the holder at the
registered office of Bowater Canada or at any office of the Transfer Agent as
may be specified by Bowater Canada by notice to the holders of Exchangeable
Shares, on behalf of Bowater Canada of certificates representing Bowater Common
Shares (which shares shall be duly issued as fully paid and non-assessable and
shall be free and clear of any lien, claim or encumbrance) and on the applicable
dividend payment date a cheque of Bowater Canada payable at par at any branch of
the bankers of Bowater Canada in respect of the full amount of any unpaid
dividends comprising part of the total Liquidation Amount (in each case less any
amounts withheld on account of tax required to be deducted and withheld
therefrom by Bowater Canada). On and after the Liquidation Date, the holders of
the Exchangeable Shares shall cease to be holders of such Exchangeable Shares
and shall not be entitled to exercise any of the rights of holders in respect
thereof, other than the right to receive their proportionate part of the total
Liquidation Amount, unless payment of the total Liquidation Amount for such
Exchangeable Shares shall not be made upon presentation and surrender of share
certificates in accordance with the foregoing provisions, in which case the
rights of the holders shall remain unaffected until the total Liquidation Amount
has been paid in the manner hereinbefore provided. Bowater Canada shall have the
right at any time after the Liquidation Date to deposit or cause to be deposited
the total Liquidation Amount in respect of the Exchangeable Shares represented
by certificates that have not at the Liquidation Date been surrendered by the
holders thereof in a custodial account with any chartered bank or trust company
in Canada. Upon such deposit being made, the rights of the holders of
Exchangeable Shares after such deposit shall be limited to receiving their
proportionate part of the total Liquidation Amount (in each case less any
amounts withheld on account of tax required to be deducted and withheld
therefrom) for such Exchangeable Shares so deposited, against presentation and
surrender of the said certificates held by them, respectively, in accordance
with the foregoing provisions. Upon such payment or deposit of the total
Liquidation Amount, the holders of the Exchangeable Shares shall thereafter be
considered and deemed for all purposes to be holders of the Bowater Common
Shares delivered to them or the custodian on their behalf.
5.3 After Bowater Canada has satisfied its obligations to pay the
holders of the Exchangeable Shares the Liquidation Amount per Exchangeable Share
pursuant to Section 5.1 of
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these share provisions, such holders shall not be entitled to share in any
further distribution of the assets of Bowater Canada.
ARTICLE 6
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
6.1 A holder of Exchangeable Shares shall be entitled at any time,
subject to the exercise by Bowater Holdings of the Retraction Call Right and
otherwise upon compliance with the provisions of this Article 6, to require
Bowater Canada to redeem any or all of the Exchangeable Shares registered in the
name of such holder for an amount per share equal to (a) the Current Market
Price of a Bowater Common Share on the last Business Day prior to the Retraction
Date, which shall be satisfied in full by Bowater Canada causing to be delivered
to such holder one Bowater Common Share for each Exchangeable Share presented
and surrendered by the holder, plus (b) the right to receive the full amount
when paid of all unpaid dividends thereon for which the record date for such
dividends has occurred prior to the Retraction Date (collectively the
"Retraction Price"). To effect such redemption, the holder shall present and
surrender at the registered office of Bowater Canada or at any office of the
Transfer Agent as may be specified by Bowater Canada by notice to the holders of
Exchangeable Shares the certificate or certificates representing the
Exchangeable Shares which the holder desires to have Bowater Canada redeem,
together with such other documents and instruments as may be required to effect
a transfer of Exchangeable Shares under the Canada Business Corporations Act and
the by-laws of Bowater Canada and such additional documents and instruments as
the Transfer Agent may reasonably require, and together with a duly executed
statement (the "Retraction Request") in the form of Schedule A hereto or in such
other form as may be acceptable to Bowater Canada:
(a) specifying that the holder desires to have all or any
number specified therein of the Exchangeable Shares
represented by such certificate or certificates (the
"Retracted Shares") redeemed by Bowater Canada;
(b) stating the Business Day on which the holder desires
to have Bowater Canada redeem the Retracted Shares
(the "Retraction Date"), provided that the Retraction
Date shall be not less than 10 Business Days nor more
than 15 Business Days after the date on which the
Retraction Request is received by Bowater Canada and
further provided that, in the event that no such
Business Day is specified by the holder in the
Retraction Request, the Retraction Date shall be
deemed to be the fifteenth Business Day after the
date on which the Retraction Request is received by
Bowater Canada; and
(c) acknowledging the overriding right (the "Retraction
Call Right") of Bowater Holdings to purchase all but
not less than all the Retracted Shares directly from
the holder and that the Retraction Request shall be
deemed to be a revocable offer by the holder to sell
the Retracted Shares to Bowater Holdings in
accordance with the Retraction Call Right on the
terms and conditions set out in Section 6.3 below.
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6.2 Subject to the exercise by Bowater Holdings of the Retraction
Call Right, upon receipt by Bowater Canada or the Transfer Agent in the manner
specified in Section 6.1 hereof of a certificate or certificates representing
the number of Exchangeable Shares which the holder desires to have Bowater
Canada redeem, together with a Retraction Request, and provided that the
Retraction Request is not revoked by the holder in the manner specified in
Section 6.7, Bowater Canada shall redeem the Retracted Shares effective at the
close of business on the Retraction Date and shall cause to be delivered to such
holder the total Retraction Price with respect to such shares (provided that any
unpaid dividends forming part of the Retraction Price shall be paid on the
payment date for such dividends). If only a part of the Exchangeable Shares
represented by any certificate is redeemed (or purchased by Bowater Holdings
pursuant to the Retraction Call Right), a new certificate for the balance of
such Exchangeable Shares shall be issued to the holder at the expense of Bowater
Canada.
6.3 Upon receipt by Bowater Canada of a Retraction Request,
Bowater Canada shall immediately notify Bowater and Bowater Holdings thereof. In
order to exercise the Retraction Call Right, Bowater Holdings must notify
Bowater Canada of its determination to do so (the "Bowater Holdings Call
Notice") within five Business Days of notification to Bowater Holdings by
Bowater Canada of the receipt by Bowater Canada of the Retraction Request. If
Bowater Holdings delivers the Bowater Holdings Call Notice within such five
Business Day time period, and provided that the Retraction Request is not
revoked by the holder in the manner specified in Section 6.7, the Retraction
Request shall thereupon be considered only to be an offer by the holder to sell
the Retracted Shares to Bowater Holdings in accordance with the Retraction Call
Right. In such event, Bowater Canada shall not redeem the Retracted Shares and
Bowater Holdings shall purchase from such holder and such holder shall sell to
Bowater Holdings on the Retraction Date the Retracted Shares for a purchase
price (the "Purchase Price") per share equal to the Retraction Price per share.
For the purposes of completing a purchase pursuant to the Retraction Call Right,
Bowater Holdings shall deposit with the Transfer Agent, on or before the
Retraction Date, certificates representing Bowater Common Shares and shall waive
any rights to receive any dividends which represent the amount of the remaining
portion, if any, of the total Purchase Price (in each case less any amounts
withheld on account of tax required to be deducted and withheld therefrom by
Bowater Holdings). Provided that Bowater Holdings has complied with the
immediately preceding sentence, the closing of the purchase and sale of the
Retracted Shares pursuant to the Retraction Call Right shall be deemed to have
occurred as at the close of business on the Retraction Date and, for greater
certainty, no redemption by Bowater Canada of such Retracted Shares shall take
place on the Retraction Date. In the event that Bowater Holdings does not
deliver a Bowater Holdings Call Notice within such five Business Day period, and
provided that the Retraction Request is not revoked by the holder in the manner
specified in Section 6.7, Bowater Canada shall redeem the Retracted Shares on
the Retraction Date and in the manner otherwise contemplated in this Article 6.
6.4 Bowater Canada or Bowater Holdings, as the case may be, shall
deliver or cause the Transfer Agent to deliver to the relevant holder, at the
address of the holder recorded in the securities register of Bowater Canada for
the Exchangeable Shares or at the address specified in the holder's Retraction
Request or by holding for pick-up by the holder at the registered office of
Bowater Canada or at any office of the Transfer Agent as may be specified by
Bowater Canada by notice to the holders of Exchangeable Shares, certificates
representing the Bowater Common
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Shares (which shares shall be duly issued as fully paid and non-assessable and
shall be free and clear of any lien, claim or encumbrance) registered in the
name of the holder or in such other name as the holder may request in payment of
the total Retraction Price or the total Purchase Price, as the case may be, and
on the applicable dividend payment date a cheque payable at par at any branch of
the bankers of Bowater Canada in payment of the remaining portion, if any, of
the total Retraction Price or the total Purchase Price, as the case may be (in
each case less any amounts withheld on account of tax required to be deducted
and withheld therefrom), and such delivery of such certificates and cheque on
behalf of Bowater Canada or by Bowater Holdings, as the case may be, or by the
Transfer Agent shall be deemed to be payment of and shall satisfy and discharge
all liability for the total Retraction Price or total Purchase Price, as the
case may be, to the extent that the same is represented by such share
certificates and cheque (plus any tax deducted and withheld therefrom and
remitted to the proper tax authority), unless such cheque is not paid on due
presentation.
6.5 On and after the close of business on the Retraction Date, the
holder of the Retracted Shares shall cease to be a holder of such Retracted
Shares and shall not be entitled to exercise any of the rights of a holder in
respect thereof, other than the right to receive his proportionate part of the
total Retraction Price or total Purchase Price, as the case may be, unless upon
presentation and surrender of certificates in accordance with the foregoing
provisions, payment of the total Retraction Price or the total Purchase Price,
as the case may be, shall not be made as provided in Section 6.4, in which case
the rights of such holder shall remain unaffected until the total Retraction
Price or the total Purchase Price, as the case may be, has been paid in the
manner hereinbefore provided. On and after the close of business on the
Retraction Date, provided that presentation and surrender of certificates and
payment of the total Retraction Price or the total Purchase Price, as the case
may be, has been made in accordance with the foregoing provisions, the holder of
the Retracted Shares so redeemed by Bowater Canada or purchased by Bowater
Holdings shall thereafter be considered and deemed for all purposes to be a
holder of the Bowater Common Shares delivered to it.
6.6 Notwithstanding any other provision of this Article 6, Bowater
Canada shall not be obligated to redeem Retracted Shares specified by a holder
in a Retraction Request to the extent that such redemption of Retracted Shares
would be contrary to solvency requirements or other provisions of applicable
law. If Bowater Canada believes that on any Retraction Date it would not be
permitted by any of such provisions to redeem the Retracted Shares tendered for
redemption on such date, and provided that Bowater Holdings shall not have
exercised the Retraction Call Right with respect to the Retracted Shares,
Bowater Canada shall only be obligated to redeem Retracted Shares specified by a
holder in a Retraction Request to the extent of the maximum number that may be
so redeemed (rounded down to a whole number of shares) as would not be contrary
to such provisions and shall notify the holder at least two Business Days prior
to the Retraction Date as to the number of Retracted Shares which will not be
redeemed by Bowater Canada. In any case in which the redemption by Bowater
Canada of Retracted Shares would be contrary to solvency requirements or other
provisions of applicable law, Bowater Canada shall redeem Retracted Shares in
accordance with Section 6.2 of these share provisions on a pro rata basis and
shall issue to each holder of Retracted Shares a new certificate, at the expense
of Bowater Canada, representing the Retracted Shares not redeemed by Bowater
Canada pursuant to Section 6.2 hereof. Provided that the Retraction Request is
not
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revoked by the holder in the manner specified in Section 6.7, the holder of
any such Retracted Shares not redeemed by Bowater Canada pursuant to Section 6.2
of these share provisions as a result of solvency requirements of applicable law
shall be deemed by giving the Retraction Request to require Bowater to purchase
such Retracted Shares from such holder on the Retraction Date or as soon as
practicable thereafter on payment by Bowater to such holder of the Purchase
Price for each such Retracted Share, all as more specifically provided in the
Voting and Exchange Trust Agreement.
6.7 A holder of Retracted Shares may, by notice in writing given
by the holder to Bowater Canada before the close of business on the Business Day
immediately preceding the Retraction Date, withdraw its Retraction Request, in
which event such Retraction Request shall be null and void and, for greater
certainty, the revocable offer constituted by the Retraction Request to sell the
Retracted Shares to Bowater Holdings shall be deemed to have been revoked.
ARTICLE 7
REDEMPTION OF EXCHANGEABLE SHARES BY BOWATER CANADA
7.1 Subject to applicable law, and provided Bowater Holdings has
not exercised the Redemption Call Right, Bowater Canada shall on the Redemption
Date redeem the whole of the then outstanding Exchangeable Shares for an amount
per share equal to (a) the Current Market Price of a Bowater Common Share on the
last Business Day prior to the Redemption Date, which shall be satisfied in full
by Bowater Canada causing to be delivered to each holder of Exchangeable Shares
one Bowater Common Share for each Exchangeable Share held by such holder, plus
(b) the right to receive the full amount when paid of all unpaid dividends
thereon for which the record date has occurred prior to the Redemption Date
(collectively, the "Redemption Price").
7.2 In any case of a redemption of Exchangeable Shares under this
Article 7, Bowater Canada shall, at least 60 days before the Redemption Date,
send or cause to be sent to each holder of Exchangeable Shares a notice in
writing of the redemption by Bowater Canada or the purchase by Bowater Holdings
under the Redemption Call Right, as the case may be, of the Exchangeable Shares
held by such holder; provided, however, that in the event of a redemption of the
Exchangeable Shares at the election of the Board of Directors (or a purchase by
Bowater Holdings as a result thereof) upon a transaction being proposed that
would result in Control of Bowater being acquired by any Person, Bowater Canada
shall cause such notice to be sent at least the number of days prior to the
Redemption Date established by the Board of Directors as the Board of Directors
determines to be reasonably practicable under the circumstances; provided
further, however, that in each case the accidental failure or omission to give
such notice to fewer than 10% of the holders of the Exchangeable Shares shall
not affect the validity of such notice of redemption. In either case, such
notice shall set out the formula for determining the Redemption Price or the
Redemption Call Purchase Price, as the case may be, the Redemption Date and, if
applicable, particulars of the Redemption Call Right.
7.3 On or after the Redemption Date and subject to the exercise by
Bowater Holdings of the Redemption Call Right, Bowater Canada shall cause to be
delivered to the holders of the
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Exchangeable Shares to be redeemed the Redemption Price for each such
Exchangeable Share upon presentation and surrender at the registered office of
Bowater Canada or at any office of the Transfer Agent as may be specified by
Bowater Canada in such notice of the certificates representing such Exchangeable
Shares, together with such other documents and instruments as may be required to
effect a transfer of Exchangeable Shares under the Canada Business Corporations
Act and the by-laws of Bowater Canada and such additional documents and
instruments as the Transfer Agent may reasonably require. Payment of the total
Redemption Price for such Exchangeable Shares shall be made by delivery to each
holder, at the address of the holder recorded in the securities register of
Bowater Canada or by holding for pick-up by the holder at the registered office
of Bowater Canada or at any office of the Transfer Agent as may be specified by
Bowater Canada in such notice, on behalf of Bowater Canada of certificates
representing Bowater Common Shares (which shares shall be duly issued as fully
paid and non-assessable and shall be free and clear of any lien, claim or
encumbrance) and on the applicable dividend payment date a cheque of Bowater
Canada payable at par at any branch of the bankers of Bowater Canada in respect
of the full amount of any unpaid dividends comprising part of the total
Redemption Price (in each case less any amounts withheld on account of tax
required to be withheld and remitted therefrom by Bowater Canada). On and after
the Redemption Date, the holders of the Exchangeable Shares called for
redemption shall cease to be holders of such Exchangeable Shares and shall not
be entitled to exercise any of the rights of holders in respect thereof, other
than the right to receive their proportionate part of the total Redemption
Price, unless payment of the total Redemption Price for such Exchangeable Shares
shall not be made upon presentation and surrender of certificates in accordance
with the foregoing provisions, in which case the rights of the holders shall
remain unaffected until the total Redemption Price has been paid in the manner
hereinbefore provided. Bowater Canada shall have the right at any time after the
sending of notice of its intention to redeem the Exchangeable Shares as
aforesaid to deposit or cause to be deposited the total Redemption Price of the
Exchangeable Shares so called for redemption, or of such of the said
Exchangeable Shares represented by certificates that have not at the date of
such deposit been surrendered by the holders thereof in connection with such
redemption, in a custodial account with any chartered bank or trust company in
Canada named in such notice (less any amounts withheld on account of tax
required to be withheld and remitted therefrom by Bowater Canada). Upon the
later of such deposit being made and the Redemption Date, the Exchangeable
Shares in respect whereof such deposit shall have been made shall be redeemed
and the rights of the holders thereof after such deposit or Redemption Date, as
the case may be, shall be limited to receiving their proportionate part of the
total Redemption Price for such Exchangeable Shares so deposited, against
presentation and surrender of the said certificates held by them, respectively,
in accordance with the foregoing provisions. Upon such payment or deposit of the
total Redemption Price, the holders of the Exchangeable Shares shall thereafter
be considered and deemed for all purposes to be holders of the Bowater Common
Shares delivered to them or the custodian on their behalf.
ARTICLE 8
PURCHASE FOR CANCELLATION
8.1 Subject to applicable law and the articles of Bowater Canada,
Bowater Canada may at any time and from time to time purchase for cancellation
all or any part of the outstanding Exchangeable Shares at any price by tender to
all the holders of record of Exchangeable Shares
69
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then outstanding or through the facilities of any stock exchange on which the
Exchangeable Shares are listed or quoted at any price per share together with an
amount equal to all declared and unpaid dividends thereon for which the record
date has occurred prior to the date of purchase. If in response to an invitation
for tenders under the provisions of this Section 8.1, more Exchangeable Shares
are tendered at a price or prices acceptable to Bowater Canada than Bowater
Canada is prepared to purchase, the Exchangeable Shares to be purchased by
Bowater Canada shall be purchased as nearly as may be pro rata according to the
number of shares tendered by each holder who submits a tender to Bowater Canada,
provided that when shares are tendered at different prices, the pro rating shall
be effected (disregarding fractions) only with respect to the shares tendered at
the price at which more shares were tendered than Bowater Canada is prepared to
purchase after Bowater Canada has purchased all the shares tendered at lower
prices. If part only of the Exchangeable Shares represented by any certificate
shall be purchased, a new certificate for the balance of such shares shall be
issued at the expense of Bowater Canada.
ARTICLE 9
VOTING RIGHTS
9.1 Except as required by applicable law, the holders of the
Exchangeable Shares shall not be entitled as such to receive notice of or to
attend any meeting of the shareholders of Bowater Canada or to vote at any such
meeting.
ARTICLE 10
AMENDMENT AND APPROVAL
10.1 The rights, privileges, restrictions and conditions attaching
to the Exchangeable Shares may be added to, changed or removed but only with the
approval of the holders of the Exchangeable Shares given as hereinafter
specified.
10.2 Any approval given by the holders of the Exchangeable Shares
to add to, change or remove any right, privilege, restriction or condition
attaching to the Exchangeable Shares or any other matter requiring the approval
or consent of the holders of the Exchangeable Shares shall be deemed to have
been sufficiently given if it shall have been given in accordance with
applicable law subject to a minimum requirement that such approval be evidenced
by resolution passed by not less than two-thirds of the votes cast on such
resolution at a meeting of holders of Exchangeable Shares duly called and held
at which the holders of at least 25% of the outstanding Exchangeable Shares at
that time are present or represented by proxy; provided that if at any such
meeting the holders of at least 25% of the outstanding Exchangeable Shares at
that time are not present or represented by proxy within one-half hour after the
time appointed for such meeting then the meeting shall be adjourned to such date
not less than five days thereafter and to such time and place as may be
designated by the Chairman of such meeting. At such adjourned meeting the
holders of Exchangeable Shares present or represented by proxy thereat may
transact the business for which the meeting was originally called and a
resolution passed thereat by the affirmative vote of not less than two-thirds of
the votes cast on such resolution at such meeting shall constitute the approval
or consent of the holders of the Exchangeable Shares.
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ARTICLE 11
RECIPROCAL CHANGES, ETC. IN RESPECT OF BOWATER COMMON SHARES
11.1 Each holder of an Exchangeable Share acknowledges that the
Support Agreement provides, in part, that Bowater will not without the prior
approval of Bowater Canada and the prior approval of the holders of the
Exchangeable Shares given in accordance with Section 10.2 of these share
provisions:
(a) issue or distribute Bowater Common Shares (or
securities exchangeable for or convertible into or
carrying rights to acquire Bowater Common Shares) to
the holders of all or substantially all of the then
outstanding Bowater Common Shares by way of stock
dividend or other distribution, other than an issue
of Bowater Common Shares (or securities exchangeable
for or convertible into or carrying rights to acquire
Bowater Common Shares) to holders of Bowater Common
Shares who exercise an option to receive dividends in
Bowater Common Shares (or securities exchangeable for
or convertible into or carrying rights to acquire
Bowater Common Shares) in lieu of receiving cash
dividends;
(b) issue or distribute rights, options or warrants to
the holders of all or substantially all of the then
outstanding Bowater Common Shares entitling them to
subscribe for or to purchase Bowater Common Shares
(or securities exchangeable for or convertible into
or carrying rights to acquire Bowater Common Shares);
(c) issue or distribute to the holders of all or
substantially all of the then outstanding Bowater
Common Shares:
(i) shares or securities of Bowater of any class
other than Bowater Common Shares (other than
shares convertible into or exchangeable for
or carrying rights to acquire Bowater Common
Shares);
(ii) rights, options or warrants other than those
referred to in Section 11.1(b) above;
(iii) evidences of indebtedness of Bowater; or
(iv) assets of Bowater,
unless the economic equivalent on a per share basis of such rights, options,
securities, shares, evidences of indebtedness or other assets is issued or
distributed simultaneously to holders of the Exchangeable Shares.
11.2 Each holder of an Exchangeable Share acknowledges that the
Support Agreement further provides, in part, that Bowater will not without the
prior approval of Bowater Canada and
71
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the prior approval of the holders of the Exchangeable Shares given in accordance
with Section 10.2 of these share provisions:
(i) subdivide, redivide or change the then
outstanding Bowater Common Shares into a
greater number of Bowater Common Shares;
(ii) reduce, combine, consolidate or change the
then outstanding Bowater Common Shares into
a lesser number of Bowater Common Shares; or
(iii) reclassify or otherwise change the Bowater
Common Shares or effect an amalgamation,
merger, reorganization or other transaction
affecting the Bowater Common Shares,
unless the same or an economically equivalent change shall simultaneously be
made to, or in, the rights of the holders of the Exchangeable Shares. The
Support Agreement further provides, in part, that the aforesaid provisions of
the Support Agreement shall not be changed without the approval of the holders
of the Exchangeable Shares given in accordance with Section 10.2 of these share
provisions.
ARTICLE 12
ACTIONS BY BOWATER CANADA UNDER SUPPORT AGREEMENT
12.1 Bowater Canada will take all such actions and do all such
things as shall be necessary or advisable to perform and comply with and to
ensure performance and compliance by Bowater, Bowater Holdings and Bowater
Canada with all provisions of the Support Agreement applicable to Bowater,
Bowater Holdings and Bowater Canada, respectively, in accordance with the terms
thereof including, without limitation, taking all such actions and doing all
such things as shall be necessary or advisable to enforce to the fullest extent
possible for the direct benefit of Bowater Canada all rights and benefits in
favour of Bowater Canada under or pursuant to such agreement.
12.2 Bowater Canada shall not propose, agree to or otherwise give
effect to any amendment to, or waiver or forgiveness of its rights or
obligations under, the Support Agreement without the approval of the holders of
the Exchangeable Shares given in accordance with Section 10.2 of these share
provisions other than such amendments, waivers and/or forgiveness as may be
necessary or advisable for the purposes of:
(a) adding to the covenants of the other party or parties
to such agreement for the protection of Bowater
Canada or the holders of the Exchangeable Shares
thereunder;
(b) making such provisions or modifications not
inconsistent with such agreement as may be necessary
or desirable with respect to matters or questions
arising thereunder which, in the opinion of the Board
of
72
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Directors, it may be expedient to make, provided that
the Board of Directors shall be of the opinion, after
consultation with counsel, that such provisions and
modifications will not be prejudicial to the
interests of the holders of the Exchangeable Shares;
or
(c) making such changes in or corrections to such
agreement which, on the advice of counsel to Bowater
Canada, are required for the purpose of curing or
correcting any ambiguity or defect or inconsistent
provision or clerical omission or mistake or manifest
error contained therein, provided that the Board of
Directors shall be of the opinion, after consultation
with counsel, that such changes or corrections will
not be prejudicial to the interests of the holders of
the Exchangeable Shares.
ARTICLE 13
LEGEND
13.1 The certificates evidencing the Exchangeable Shares shall
contain or have affixed thereto a legend in form and on terms approved by the
Board of Directors, with respect to the Support Agreement, the provisions of the
Plan of Arrangement relating to the Liquidation Call Right and the Redemption
Call Right, and the Voting and Exchange Trust Agreement (including the
provisions with respect to the voting rights, exchange right and automatic
exchange thereunder).
ARTICLE 14
NOTICES
14.1 Any notice, request or other communication to be given to
Bowater Canada by a holder of Exchangeable Shares shall be in writing and shall
be valid and effective if given by mail (postage prepaid) or by telecopy or by
delivery to the Transfer Agent, with a copy addressed to the Secretary of
Bowater Canada and addressed to the attention of the President of Bowater
Canada. Any such notice, request or other communication, if given by mail,
telecopy or delivery, shall only be deemed to have been given and received upon
actual receipt thereof by the Transfer Agent and Bowater Canada.
14.2 Any presentation and surrender by a holder of Exchangeable
Shares to Bowater Canada or the Transfer Agent of certificates representing
Exchangeable Shares in connection with the liquidation, dissolution or
winding-up of Bowater Canada or the retraction or redemption of Exchangeable
Shares shall be made by registered mail (postage prepaid) or by delivery to the
registered office of Bowater Canada or to such office of the Transfer Agent as
may be specified by Bowater Canada, in each case addressed to the attention of
the President of Bowater Canada. Any such presentation and surrender of
certificates shall only be deemed to have been made and to be effective upon
actual receipt thereof by Bowater Canada or the Transfer Agent, as the case may
be. Any such presentation and surrender of certificates made by registered mail
shall be at the sole risk of the holder mailing the same.
73
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14.3 Any notice, request or other communication to be given to a
holder of Exchangeable Shares by or on behalf of Bowater Canada shall be in
writing and shall be valid and effective if given by mail (postage prepaid) or
by delivery to the address of the holder recorded in the securities register of
Bowater Canada or, in the event of the address of any such holder not being so
recorded, then at the last known address of such holder. Any such notice,
request or other communication, if given by mail, shall be deemed to have been
given and received on the third Business Day following the date of mailing and,
if given by delivery, shall be deemed to have been given and received on the
date of delivery. Accidental failure or omission to give any notice, request or
other communication to one or more holders of Exchangeable Shares shall not
invalidate or otherwise alter or affect any action or proceeding to be taken by
Bowater Canada pursuant thereto.
ARTICLE 15
SPECIFIED AMOUNT
15.1 For the purposes of subsection 191(4) of the Income Tax Act
(Canada), the specified amount in respect of an Exchangeable Share is C$72.6061.
74
SCHEDULE A
NOTICE OF RETRACTION
To Bowater Canada Inc. ("Bowater Canada") and Bowater Canadian Holdings
Incorporated ("Bowater Holdings") and Bowater Incorporated ("Bowater").
This notice is given pursuant to Article 6 of the provisions (the
"Share Provisions") attaching to the Exchangeable Share(s) of Bowater Canada
represented by this certificate and all capitalized words and expressions used
in this notice that are defined in the Share Provisions have the meanings
ascribed to such words and expressions in such Share Provisions.
The undersigned hereby notifies Bowater Canada that, subject to the
Retraction Call Right referred to below, the undersigned desires to have Bowater
Canada redeem in accordance with Article 6 of the Share Provisions:
[ ] all share(s) represented by this certificate; or
[ ] ________ share(s) only.
The undersigned hereby notifies Bowater Canada that the Retraction Date
shall be ____________.
NOTE: The Retraction Date must be a Business Day and must not be less than
10 Business Days nor more than 15 Business Days after the date upon
which this notice is received by Bowater Canada. In the event that no
such Business Day is specified above, the Retraction Date shall be
deemed to be the 15th Business Day after the date on which this notice
is received by Bowater Canada.
The undersigned acknowledges the Retraction Call Right of Bowater
Holdings to purchase all but not less than all the Retracted Shares from the
undersigned and that this notice shall be deemed to be a revocable offer by the
undersigned to sell the Retractable Shares to Bowater Holdings in accordance
with the Retraction Call Right on the Retraction Date for the Purchase Price and
on the other terms and conditions set out in Section 6.3 of the Share
Provisions. This notice of retraction, and the offer to sell the Retracted
Shares to Bowater Holdings, may be revoked and withdrawn by the undersigned only
by notice in writing given to Bowater Canada at any time before the close of
business on the Business Day immediately preceding the Retraction Date.
The undersigned acknowledges that if, as a result of solvency
provisions of applicable law, Bowater Canada is unable to redeem all Retracted
Shares, the undersigned will be deemed to have exercised the Exchange Right (as
defined in the Voting and Exchange Trust Agreement) so as to require Bowater to
purchase the unredeemed Retracted Shares.
75
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The undersigned hereby represents and warrants to Bowater, Bowater
Canada and Bowater Holdings that the undersigned:
[ ] is
(select one)
[ ] is not
a non-resident of Canada for purposes of the Income Tax Act (Canada). THE
UNDERSIGNED ACKNOWLEDGES THAT IN THE ABSENCE OF AN INDICATION THAT THE
UNDERSIGNED IS NOT A NON-RESIDENT OF CANADA, WITHHOLDING ON ACCOUNT OF CANADIAN
TAX WILL BE MADE FROM AMOUNTS PAYABLE TO THE UNDERSIGNED ON THE REDEMPTION OR
PURCHASE OF THE RETRACTED SHARES.
The undersigned hereby represents and warrants to Bowater, Bowater
Canada and Bowater Holdings that the undersigned has good title to, and owns,
the share(s) represented by this certificate to be acquired by Bowater, Bowater
Canada or Bowater Holdings, as the case may be, free and clear of all liens,
claims and encumbrances.
- ---------------- --------------------------- ---------------------------
(Date) (Signature of Shareholder) (Guarantee of Signature)
[ ] Please check box if the securities and any cheque(s) resulting from the
retraction or purchase of the Retracted Shares are to be held for pick-up
by the shareholder at the Transfer Agent, failing which the securities and
any cheque(s) will be mailed to the last address of the shareholder as it
appears on the register.
NOTE: This panel must be completed and this certificate, together with such
additional documents as the Transfer Agent may require, must be
deposited with the Transfer Agent. The securities and any cheque(s)
resulting from the retraction or purchase of the Retracted Shares will
be issued and registered in, and made payable to, respectively, the
name of the shareholder as it appears on the register of Bowater Canada
and the securities and any cheque(s) resulting from such retraction or
purchase will be delivered to such shareholder as indicated above,
unless the form appearing immediately below is duly completed.
Date:
- ---------------------------------------------- ----------------------
Name of Person in Whose Name Securities or
Cheque(s) are to be Registered, Issued or
Delivered (please print)
- ---------------------------------------------- ---------------------------
Street Address or P.O. Box Signature of Shareholder
- ---------------------------------------------- ---------------------------
City, Province and Postal Code Signature Guaranteed by
76
-3-
NOTE: If the notice of retraction is for less than all of the shares
represented by this certificate, a certificate representing the
remaining share(s) of Bowater Canada represented by this certificate
will be issued and registered in the name of the shareholder as it
appears on the register of Bowater Canada, unless the Share Transfer
Power on the share certificate is duly completed in respect of such
share(s).
77
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF ALLIANCE
1. Organization. Each of Alliance and its Subsidiaries has been duly
incorporated or formed under all applicable Laws, is validly subsisting and has
full corporate or legal power and authority to own its properties and conduct
its businesses as currently owned and conducted. All of the outstanding shares
of capital stock and other ownership interests of its Subsidiaries are validly
issued, fully paid and non-assessable and all such shares and other ownership
interests owned directly or indirectly by Alliance are, except as disclosed in
the Alliance Disclosure Letter, owned free and clear of all liens, claims or
encumbrances and there are no outstanding options, rights, entitlements,
understandings or commitments (contingent or otherwise) regarding the right to
acquire any such shares of capital stock or other ownership interests in any of
its Subsidiaries. The Alliance Disclosure Letter discloses the names and
jurisdictions of incorporation or formation, as applicable, of each of
Alliance's Subsidiaries.
2. Capitalization. The authorized capital of Alliance consists of an
unlimited number of Alliance Common Shares. As of March 31, 2001, there were
30,264,729 Alliance Common Shares outstanding and 3,000,000 Alliance Common
Shares were reserved, in the aggregate, for issuance in respect of the various
Employee Stock Incentive Plans of which 2,821,482 Alliance Common Shares are
under option. Furthermore, Alliance may be required to issue Alliance Common
Shares pursuant to the Alliance Employee Share Purchase Plan at a rate of
approximately 10,000 Alliance Common Shares per month in accordance with the
terms of such employee stock option plan. Except as described in the immediately
three (3) preceding sentences, and except for the rights issued in connection
with the Alliance Shareholder Rights Plan Agreement dated as of December 1,
1999, there are no options, warrants, conversion privileges or other rights,
agreements, arrangements or commitments obligating Alliance or any Subsidiary to
issue or sell any shares of Alliance or any of its Subsidiaries or securities or
obligations of any kind convertible into or exchangeable for any shares of
Alliance, any Subsidiary or any other person, nor is there outstanding any stock
appreciation rights, phantom equity or similar rights, agreements, arrangements
or commitments based upon the book value, income or any other attribute of
Alliance or any Subsidiary. There have been no Alliance Common Shares issued
since March 31, 2001, other than pursuant to the exercise of stock option
entitlements under the Employee Stock Incentive Plans described above and as
disclosed in the Alliance Disclosure Letter. All outstanding Alliance Common
Shares have been duly authorized and are validly issued and outstanding as fully
paid and non-assessable shares, free of pre-emptive rights. There are no
outstanding bonds, debentures or other evidences of indebtedness of Alliance or
any Subsidiary having the right to vote (or, that are convertible for or
exercisable into securities having the right to vote) with the holders of the
Alliance Common Shares on any matter. There are no outstanding contractual
obligations of Alliance or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any of their respective outstanding securities or with respect
to the voting or disposition of any outstanding securities of Alliance or any of
its Subsidiaries.
3. Authority. Alliance has the requisite corporate capacity, power and
authority to enter into this Agreement and to perform its obligations hereunder.
The execution, delivery and performance of this Agreement by Alliance and the
consummation by Alliance of the transaction
78
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF ALLIANCE
PAGE 2
contemplated by this Agreement have been duly authorized by the Board of
Directors of Alliance and, subject to the approval of the Alliance Common
Shareholders at the Alliance Meeting, no other corporate proceedings on the part
of Alliance are necessary to authorize this Agreement or the transaction
contemplated hereby other than in connection with the approval by the Board of
Directors of Alliance of the Proxy Circular, and other matters relating to the
implementation of the Arrangement. This Agreement has been duly executed and
delivered by Alliance and constitutes a legal, valid and binding obligation of
Alliance, enforceable against Alliance in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and
other applicable Laws relating to or affecting creditors' rights generally, to
general principles of equity and public policy. Except for the approval of the
Arrangement at the Alliance Meeting and the obtaining of and the consents,
approvals, orders, authorizations, declarations and filings referred to in
Section 6.1 of this Agreement, the execution and delivery by Alliance of this
Agreement and performance by it of its obligations hereunder and the completion
of the Arrangement and the transaction contemplated hereby, will not:
(a) result in a violation or breach of, require any consent to be
obtained under or give rise to any termination rights under any
provision of:
(i) its or any of its Subsidiaries' certificate of
incorporation, articles, by-laws or other charter documents,
including any unanimous shareholder agreement or any other
agreement or understanding with any party holding an ownership
interest in any of its Subsidiaries;
(ii) any law, regulation, order, judgment or decree; or
(iii) any contract, agreement, license, franchise or permit
to which Alliance or any of its Subsidiaries is bound or is
subject or is the beneficiary;
(b) give rise to any right of termination or acceleration of
indebtedness of Alliance or any of its Subsidiaries, or cause any third
party indebtedness of Alliance or any of its Subsidiaries to come due
before its stated maturity or cause any available credit of Alliance or
any of its Subsidiaries to cease to be available; or
(c) result in the imposition of any encumbrance, charge or lien
upon any of its assets or the assets of any of its Subsidiaries, or
restrict, hinder, impair or limit the ability of Alliance or any of its
Subsidiaries to carry on the business of Alliance or such Subsidiary as
and where it is now being carried on or as and where it may be carried
on in the future,
which would, individually or in the aggregate, have a material adverse effect on
Alliance or any of its Subsidiaries. No consent, approval, order or
authorization of, or declaration or filing with, any Governmental Entity or
other party is required to be obtained by Alliance and its Subsidiaries in
connection with the execution and delivery of this Agreement or the consummation
by Alliance of the transaction contemplated hereby other than (i) any approvals
79
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF ALLIANCE
PAGE 3
required by the Interim Order, (ii) the Final Order, (iii) filings with the
Director under the CBCA and filings with and approvals required by applicable
Securities Authorities, and (iv) any other consents, waivers, permits, orders or
approvals referred to in Section 6.1 of this Agreement. Alliance and each of its
Subsidiaries has all requisite power and authority to own, lease and operate and
to carry on their businesses as now being conducted. Alliance and each of its
Subsidiaries is, and has been at all times it was required to be, duly
registered, licensed or qualified and in good standing to transact business in
each jurisdiction in which the nature of its business or the assets owned,
leased or operated by it make such registration, licensing necessary, save and
except where the absence of any such registration, licence or qualification
would not be material.
4. Material Customers and Suppliers. Except as disclosed in the Alliance
Disclosure Letter, there is no single customer or supplier of Alliance or its
Subsidiaries, the loss of which would have a material adverse effect on
Alliance. Alliance has no knowledge of any intent by any of its fifteen (15)
largest customers or fifteen (15) largest suppliers to terminate its
arrangements with Alliance or any of its Subsidiaries, nor is there any
provision in any agreement with any of said customers or suppliers which would
cause or permit any such agreement to be terminated as a result of the
Arrangement.
5. No Defaults. Except as disclosed in the Alliance Disclosure Letter,
neither Alliance nor any of its Subsidiaries has had any notice of any default
under, and there exists no event, condition or occurrence which, after notice or
lapse of time or both, would constitute such a default under any material
contract or agreement to which it is a party.
6. Intellectual Property. To the best of its knowledge, Alliance and its
Subsidiaries own, or are validly licensed or otherwise have the right to use,
all patents, patent rights, trademarks, trade names, service marks, copyrights,
know how and other proprietary intellectual property rights that are material to
the conduct of the business of Alliance and its Subsidiaries taken as a whole.
7. Absence of Changes. Since December 31, 2000, and except with respect to
the transaction contemplated by this Agreement and as disclosed in the Alliance
Disclosure Letter (i) Alliance has conducted its business only in the ordinary
and regular course of business consistent with past practice, (ii) other than in
the ordinary and regular course of business consistent with past practice, no
liabilities or obligations of any nature (whether absolute, accrued, contingent
or otherwise) which would individually or in the aggregate be material to
Alliance or its Subsidiaries have been incurred, (iii) there has not been any
material change (as defined under the Securities Act (Ontario)) in the affairs
of Alliance or in the financial condition, results of operation, business or
prospects of Alliance, (iv) as of the date hereof, there are no material change
reports filed with the Securities Authorities which remain confidential, (v)
Alliance has not declared or paid any dividends or distributions on any of its
outstanding shares, (vi) Alliance has not effected or passed any resolution to
approve a split, combination or reclassification of any of its outstanding
shares, (vii) Alliance has not granted any increase in the aggregate cash
compensation payable to any employee, except in the ordinary course of business
consistent with past practice, or granted to any employee any increase in
severance or termination pay, (viii) Alliance has not effected any change in its
accounting methods, principles or practices, (ix)
80
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF ALLIANCE
PAGE 4
Alliance has not issued, granted, declared or agreed to issue, grant or declare
any option, warrant, conversion privilege or other right, in respect of the
issuance or sale of any shares of Alliance or any of its Subsidiaries or of any
securities of any kind convertible into or exchangeable for any shares of
Alliance or any of its Subsidiaries; and (x) Alliance has not adopted or
materially amended any collective bargaining agreement or any Employee
Compensation and Benefit Arrangements. The last material filings made by
Alliance with Securities Authorities were the Annual Report, Annual Financial
Statements, Management Discussion and Analysis and the Management Proxy Circular
filed with the Securities Authorities on or about March 19, 2001.
8. Employment Agreements
(a) Except as disclosed in the Alliance Disclosure Letter,
Alliance is not a party to any written or oral policy,
agreement, obligation or understanding providing for:
(i) severance or termination payments to, or any
employment agreement with, any senior executive of
Alliance; or
(ii) change of control payments to any employee of
Alliance.
(b) Except as disclosed in the Alliance Disclosure Letter, (i)
neither Alliance nor any of its Subsidiaries is a party to any
collective bargaining agreement; (ii) none of the employees of
Alliance or any Subsidiary (the "Employees") is represented in
his or her capacity as an employee of Alliance or any
Subsidiary, nor has Alliance nor any Subsidiary recognized any
labour organization or employee association nor has any labour
organization or employee association been elected as the
collective bargaining agent of any Employees; (iii) neither
Alliance nor any Subsidiary has received notice of any
application for certification, nor is there any union
organization activity involving any of the Employees in
progress, pending or, to the best of Alliance's knowledge,
threatened, nor has there ever been union representation
involving any of the Employees; (iv) there are not any
current, pending or, to the best of Alliance's knowledge,
threatened strikes or any current, pending or threatened
lockouts at either Alliance or any of its Subsidiaries.
(c) To the best of Alliance's knowledge and except as disclosed in
the Alliance Disclosure Letter, neither Alliance nor any of
its Subsidiaries is subject to or has received notice of any
claim for wrongful dismissal, constructive dismissal or any
other tort claim, actual or threatened, or any Legal
Proceedings, actual or threatened, relating to employment or
termination of employment of employees or independent
contractors.
(d) To the best of its knowledge and except as disclosed in the
Alliance Disclosure Letter, Alliance and all of its
Subsidiaries have operated in all material respects in
accordance with all applicable Laws with respect to employment
and labour, including, but not limited to, employment and
labour standards, occupational health and safety, employment
equity, pay equity, workers' compensation, human rights, civil
rights, discrimination, wages, hours, the Worker Adjustment
and
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REPRESENTATIONS AND WARRANTIES OF ALLIANCE
PAGE 5
Retraining Notification Act and any similar state or local
"MASS LAYOFF" or "PLANT CLOSING" Law, collective bargaining,
labour relations and the collection and payment of withholding
and/or social security Taxes and any similar Taxes and there
are no current, pending or, to the best of Alliance's
knowledge, threatened proceedings before any Governmental
Entity with respect to any of the areas listed herein.
9. Disclosure. Alliance has publicly disclosed in documents filed with the
Securities Authorities or has disclosed to Bowater in the Alliance Disclosure
Letter, all such information regarding any event, circumstance or action taken
or failed to be taken which could individually or in the aggregate have a
material adverse effect on Alliance or any of its Subsidiaries.
10. Financial Statements. The audited consolidated statements of earnings,
statements of retained earnings and contributed surplus, consolidated statements
of cash flows and consolidated balance sheets of Alliance for the fiscal years
ended December 31, 1998, December 31, 1999 and December 31, 2000, as contained
in Alliance's 1998, 1999 and 2000 Annual Reports, were prepared in accordance
with generally accepted accounting principles in Canada consistently applied and
fairly present the consolidated financial condition of Alliance at the
respective dates indicated and the results of operations of Alliance (on a
consolidated basis) for the period covered.
11. Books and Records. Except as disclosed in the Alliance Disclosure
Letter, the corporate records and minute books of Alliance and its Subsidiaries
have been maintained substantially in accordance with all applicable Laws and
are complete and accurate in all material respects.
12. Litigation, Etc. Except as disclosed in the Alliance Disclosure Letter,
there are no Legal Proceedings including, without limitation, product liability
claims, in progress, pending, affecting or, to the best of Alliance's knowledge,
threatened against or relating to Alliance or any of its Subsidiaries or
affecting any of their properties or assets, nor is Alliance aware of any basis
for any such Legal Proceeding; neither Alliance nor any of its Subsidiaries is
subject to any outstanding order, writ, injunction or decree that has had or is
reasonably likely to have a material adverse effect on Alliance or any of its
Subsidiaries or prevent or materially delay consummation of the transaction
contemplated by this Agreement or the Arrangement.
13. Environmental. Alliance, its Subsidiaries and all operations of
Alliance and its Subsidiaries have been, and are now, in compliance with all
Environmental Laws, except where the failure to be in compliance would not
individually or in the aggregate have a material adverse effect on Alliance, any
of its Subsidiaries or any of their respective operations. Neither Alliance nor
any of its Subsidiaries is aware of, or is subject to:
(a) any proceeding, application, order or directive which relates
to environmental health or safety matters, and which may
require any material work, repairs, construction or
expenditures; or
(b) any demand or notice with respect to the breach of any
Environmental Laws applicable to Alliance or any of its
Subsidiaries, including, without limitation, any
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SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF ALLIANCE
PAGE 6
regulations respecting the use, storage, treatment,
transportation, or disposition of Hazardous Substances,
which individually or in the aggregate would have a material adverse effect on
Alliance or any of its Subsidiaries.
14. Insurance. Policies of insurance including, without limitation, product
liability policies, in force as of the date hereof naming Alliance (or, as
applicable, any of its Subsidiaries) as an insured adequately cover all risks
reasonably and prudently foreseeable in the operation and conduct of the
business of Alliance and its Subsidiaries. All such policies of insurance shall
remain in full force and effect and shall not be cancelled or otherwise
terminated as a result of the transaction contemplated hereby or by the
Arrangement.
15. Tax Matters. Alliance and each of its Subsidiaries have timely filed,
or caused to be timely filed, all Tax Returns required to be filed by them (all
of which returns were true, correct and complete in all material respects) and
have paid, or caused to be paid, unless the same are currently being contested
by Alliance in good faith, all Taxes that are due and payable, and Alliance has
provided adequate accruals in accordance with generally accepted accounting
principles in its most recently published financial statements for any Taxes for
the period covered by such financial statements that have not been paid, whether
or not shown as being due on any Tax Returns, except where there would be no
material liability for the failure to file such Tax Returns. Since such
publication date, no material Tax liability not reflected in such statements or
otherwise provided for has been assessed, proposed to be assessed, incurred or
accrued other than in the ordinary course of business.
Alliance and each of its Subsidiaries has withheld from each payment
made by it the amount of all Taxes and other deductions required to be withheld
therefrom and has paid all such amounts and instalments of Taxes due and payable
within the time prescribed under any Tax legislation, except where there would
be no material liability for the failure to so withhold.
Except as disclosed in the Alliance Disclosure Letter, neither Alliance
nor any of its Subsidiaries has received any assessment, reassessment or any
other written notification that any material issues have been raised (and are
currently pending) by the Canada Customs and Revenue Agency, the United States
Internal Revenue Service or any other taxing authority, including, without
limitation, any sales tax authority, in connection with any of the Tax Returns
referred to above, and there are no Legal Proceedings in progress, pending or
threatened against Alliance or any of its Subsidiaries and no agreements,
waivers or other arrangements providing for an extension of time with respect to
the assessment or reassessment of any Taxes by, or levying of any governmental
charges have been given or requested with respect to Alliance or any of its
Subsidiaries. To the best of Alliance's knowledge, there are no material
proposed (but unassessed) additional Taxes and none have been asserted. No Tax
liens have been filed other than for Taxes not yet due and payable. Neither
Alliance nor any of its Subsidiaries (i) has made an election to be treated as a
"CONSENTING CORPORATION" under Section 341(f) of the Code or (ii) is a party to
any Tax sharing or other similar agreement or arrangement of any nature with any
other person pursuant to which Alliance or any Subsidiary has or could have any
liabilities in
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SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF ALLIANCE
PAGE 7
respect of Taxes. Alliance has not made an election under Section 897(i) of the
Code to be treated as a domestic corporation for purposes of Sections 897, 1445
and 6039C of the Code.
Neither Alliance nor any Subsidiary has ever been subject to the
application of Section 78, Section 79 or Sections 80 to 80.04 of the Tax Act,
where such application (either individually or when taken with other
applications of these provisions) would be material.
"TAX" and "TAXES" means, with respect to any entity, (i) all income
taxes (including any tax on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income, earnings or
profits) and all capital taxes, gross receipts taxes, environmental taxes, sales
taxes, goods and services tax, harmonized sales tax, use taxes, ad valorem
taxes, value added taxes, transfer taxes, franchise taxes, license taxes,
withholding taxes, payroll taxes, employment taxes, Canada or Quebec Pension
Plan premiums, excise, severance, social security, workers' compensation,
unemployment or disability insurance or compensation, employee health taxes,
stamp taxes, occupation taxes, premium taxes, property taxes, windfall profits
taxes, alternative or add-on minimum taxes, customs duties or other taxes, fees,
imports, assessments or charges of any kind whatsoever, together with any
interest and any penalties or additional amounts imposed by any taxing authority
(domestic or foreign) on such entity, and any interest, penalties, additional
taxes and additions to tax imposed with respect to the foregoing, and (ii) any
liability for the payment of any amount of the type described in the immediately
preceding clause (i) as a result of being a "TRANSFEREE" (within the meaning of
section 6901 of the Code or any other applicable law) of another entity or a
member of an affiliated or combined group.
Neither Alliance nor any of its Subsidiaries is a "PASSIVE FOREIGN
INVESTMENT COMPANY" as defined in Section 1297 of the Code. Alliance is not a
"CONTROLLED FOREIGN CORPORATION" as defined in Section 957 of the Code. Neither
Alliance nor any of its Subsidiaries has entered into any closing agreements
with the IRS with respect to any disputed or contested Tax. Neither Alliance nor
any of its Subsidiaries has made any change of accounting method which would
give rise to Tax liability pursuant to Section 481 of the Code nor have they
filed a Form 3115 with the IRS. Neither Alliance nor any of its Subsidiaries is
or has been a United States real property holding corporation within the meaning
of Section 897(c)(2) of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code.
16. Pensions and Employee Compensation and Benefits
(a) Except as set out in the Alliance Disclosure Letter, there are
no Employee Compensation and Benefit Arrangements (whether
written or unwritten) maintained or contributed to, or
provided by, Alliance or any Subsidiary for the benefit of any
of the current or former employees of Alliance or any of its
Subsidiaries or their respective dependants or beneficiaries
(the "ALLIANCE PLANS"). None of the Alliance Plans is a
multi-employer plan or a multiemployer plan, as defined in the
Income Tax Act (Canada) and in Section 3(37) of ERISA,
respectively, (both terms to be hereinafter referred to as
"MULTI-EMPLOYER PLAN"),
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SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF ALLIANCE
PAGE 8
nor has Alliance nor any Subsidiary ever been obligated to
contribute to a Multiemployer Plan.
(b) Alliance and each of its Subsidiaries have complied, in all
material respects, with all the terms of, and all applicable
Laws in respect of, the Employee Compensation and Benefit
Arrangements maintained, contributed to or provided by
Alliance and each of its Subsidiaries, including, without
limitation, the terms of any collective agreements, funding
and investment contracts or obligations arising under or
relating or applicable thereto.
(c) To the best of Alliance's knowledge and except as disclosed in
the Alliance Disclosure Letter, the Alliance Plans have been
maintained, administered, and invested in all material
respects, in accordance with their terms and with all
applicable Laws and, in respect of the U.S. Alliance Plans in
accordance with all applicable provisions of ERISA and the
Code and, in respect of the Canadian Alliance Plans, in
accordance with the Income Tax Act (Canada) and pension
legislation, where applicable. Except as disclosed in the
Alliance Disclosure Letter, all of the Alliance Plans are
fully funded on both a solvency and a wind-up basis and in
good standing with all required regulatory authorities.
(d) The Alliance Plans are intended to qualify under Section 401
of the Code or registered under the Income Tax Act (Canada),
where applicable, and the trusts maintained pursuant thereto
have been determined to be so qualified or so registered and
exempt from federal income taxation under Section 501 of the
Code or under the Income Tax Act (Canada), as applicable, and
nothing has occurred with respect to the operation of the
Alliance Plans which is reasonably likely to cause the loss of
such qualification, exemption or registration, as applicable,
or the imposition of any material liability, penalty or tax
under ERISA, the Code, the Income Tax Act (Canada) or
provincial pension legislation, as applicable, except where
there would be no material liability for failure to make such
qualifications.
(e) To the best of Alliance's knowledge, all contributions
(including all employer contributions and employee salary
reduction contributions) required to have been made under any
of the Alliance Plans or by law (without regard to any waivers
granted under Section 412 of the Code), to any funds or trusts
established thereunder or in connection therewith have been
made by the due date thereof (including any valid extension),
and all contributions for any period ending on or before the
Effective Date which are not yet due will have been paid on or
prior to the Effective Date. Except as disclosed in the
Alliance Disclosure Letter, no accumulated funding
deficiencies exist in any of the U.S. Alliance Plans subject
to Section 412 of the Code, or in any of the Canadian Alliance
Plans.
(f) There are no current pending or, to the best of Alliance's
knowledge, threatened Legal Proceedings which have been
asserted or instituted against any of the
85
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF ALLIANCE
PAGE 9
Alliance Plans, the assets of any of the trusts under such
plans or the plan sponsor or the plan administrator, or
against any fiduciary of the Company Plans with respect to the
operation of such plans (other than routine benefit claims
made in the ordinary course), nor does Alliance have knowledge
of facts which could form the basis for any such Legal
Proceeding.
(g) Except as disclosed in the Alliance Disclosure Letter, none of
the Alliance Plans provide for post-retirement or
post-employment life or health insurance, benefit or coverage
for any participant or any beneficiary of a participant,
except as may be required under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended.
(h) No step has been taken, no event has occurred and no condition
or circumstance exists that has resulted in or could
reasonably be expected to result in any Alliance Plan being
ordered or required to be terminated or wound up in whole or
in part or having its registration under applicable
legislation refused or revoked, or being placed under the
administration of any trustee or receiver or regulatory
authority or being required to pay any material Taxes, fees,
penalties or levies under applicable Laws.
(i) Neither Alliance nor its Subsidiaries are making any payments
to Employees or their dependents in respect of long term
disability, accidental death and dismemberment, or similar
benefits, other than benefits which are fully insured.
(j) No withdrawals of assets have been made from the assets of any
Alliance Plans, except withdrawals for the purposes of paying
or arranging the payment of benefits or proper expenses of
such plans in accordance with their terms and applicable Laws.
(k) Except as disclosed in the Alliance Disclosure Letter, neither
Alliance nor any of its Subsidiaries has taken any
contribution holidays in respect of the Alliance Plans, and
where contribution holidays have been taken, they were taken
in accordance with the applicable terms and conditions of the
Alliance Plans and upon independent advice confirming the
right of Alliance and its Subsidiaries to do so.
(l) Except as disclosed in the Alliance Disclosure Letter, no
representations have been made to Employees or former
employees of Alliance or its Subsidiaries, who may or who are
eligible to receive benefits from an Alliance Plan, to the
effect that the assets of any such plan (or any predecessor
plan whose assets and liabilities have been transferred to
such Alliance Plan) must be used exclusively for the provision
of benefits to Employees or former employees of Alliance or
its Subsidiaries, and cannot revert to Alliance or its
Subsidiaries, as applicable.
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REPRESENTATIONS AND WARRANTIES OF ALLIANCE
PAGE 10
(m) Except as disclosed in the Alliance Disclosure Letter, no
amendments or improvements to the Alliance Plans have been
promised and no amendments or improvements to the Alliance
Plans will have been promised before the Effective Date,
except as required by applicable Laws or by applicable
regulatory authorities.
17. Property. Except as disclosed in the Alliance Disclosure Letter,
Alliance and its Subsidiaries have good and marketable title to their respective
real property interests including, without limitation, fee simple estate or
equivalent of and in real property, leases, easements, rights of way, permits or
licences from land owners or authorities permitting the use of land by Alliance
and its Subsidiaries, necessary to permit the operation of their respective
businesses as presently owned and conducted save and except for any deficiency,
omission or breach having no materially adverse consequences.
18. Reports. Alliance has filed with the Securities Authorities true and
complete copies of all forms, reports, schedules, statements and other documents
required to be filed by it since January 1, 1998 (such forms, reports,
schedules, statements and other documents, including any financial statements or
other documents, including any schedules included therein, are referred to as
the "ALLIANCE DOCUMENTS"). The Alliance Documents, at the time filed, (a) did
not contain any misrepresentation (as defined in the Securities Act (Ontario))
and (b) complied in all material respects with the requirements of applicable
securities legislation. Alliance has not filed any confidential material change
report with any Securities Authorities which at the date hereof remains
confidential.
19. Compliance with Laws. Alliance and its Subsidiaries have complied with
and are not in violation of any applicable Laws other than non-compliance or
violations which would not individually or in the aggregate have a material
adverse effect on Alliance or any of its Subsidiaries.
20. Licenses, Etc. Alliance and each of its Subsidiaries owns, possesses,
or has obtained and is in compliance with, all licenses, permits (including
permits required under Environmental Laws), certificates, orders, grants and
other authorizations of or from any Governmental Entity necessary to conduct its
businesses as now conducted, the failure to own, possess, obtain or be in
compliance with which would not individually or in the aggregate have a material
adverse effect on Alliance or any of its Subsidiaries.
21. Contracts. The Alliance Disclosure Letter contains a list of all
contracts, leases, agreements, commitments, obligations and arrangements,
written or oral, of any nature or kind, which provide for ongoing obligations of
Alliance or any of its Subsidiaries (other than Non-Material Contracts) (in this
Section 21, the "Contracts"). There is not in progress, pending or, to the best
of Alliance's knowledge, threatened any cancellation of or default under the
Contracts except as disclosed in the Alliance Disclosure Letter. Except as
disclosed in the Alliance Disclosure Letter (A) each of the Contracts is in full
force and effect and is binding upon Alliance and/or its Subsidiaries, as the
case may be, in accordance with its terms, (B) neither
87
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF ALLIANCE
PAGE 11
Alliance, nor any of its Subsidiaries, as the case may be, nor the other
contracting parties to the Contracts are in breach of or in default (whether
with notice or lapse of time or both) under any such Contracts, (C) no such
Contract has been amended or modified (other than amendments or modifications to
Contracts in the ordinary course of business, copies of which have been provided
to Bowater by Alliance), and (D) no consent, approval, permit or acknowledgement
is required under any of the Contracts from any party thereto or any other
person in connection with the completion of the transaction herein contemplated.
The Term "Non-Material Contracts" means any Contract which: (i) is not with an
officer, director or employee of Alliance or any Subsidiary, nor with another
division or an affiliate of Alliance or any Subsidiary or other person not at
arms' length with Alliance or any Subsidiary; and (ii) involves payments,
receipts, commitments or obligations of less than $250,000 per annum, or is
terminable at the option of Alliance or any Subsidiary, as applicable, without
penalty upon not more than 30 days notice, provided that the aggregate of all
payments, receipts, commitments and obligations under all such Non-Material
Contracts will not be in excess of $1,000,000 per annum.
22. Non-Competition Agreements. Except as disclosed in the Alliance
Disclosure Letter, neither Alliance nor any of its Subsidiaries is a party to or
bound by any non-competition agreement or any other agreement or obligation
which purports to limit adversely the manner or the localities in which all or
any material portion of the business of Alliance or its Subsidiaries is or would
be conducted.
23. Insurance Matters. Alliance is not aware at the date of this Agreement
of any reason why insurance through a "DISCOVERY" endorsement which protects the
directors and officers of Alliance (including former directors and officers)
would not be available for the 3 (three) years following the Effective Date as
provided in Section 5.8 of the Arrangement Agreement. There have not been any
Legal Proceedings asserted against Alliance with respect to any directors' or
officers' indemnification agreement referred to in Section 5.8. Alliance has not
taken any action, and Alliance is not aware that the insureds under the policy
referred to in Section 5.8 have taken any action, which would impair the
coverage under such insurance policy.
24. Brokers, Agents, Etc. Brokers or Finders. No agent, broker, investment
banker, financial advisor or other firm or person is or will be entitled to any
broker's or finder's fee or any other similar commission or fee in connection
with any of the transactions contemplated by this Agreement, based upon
arrangements made by or on behalf of Alliance except for BMO Nesbitt Burns Inc.
and Merrill Lynch & Co, whose fees and expenses will be paid by Alliance in
accordance with the agreements with such firm, copies of which has been
previously provided to Bowater.
25. Opinion of Alliance's Financial Advisors. Alliance has received
opinions from BMO Nesbitt Burns Inc. and Merrill Lynch & Co dated the date of
this Agreement, to the effect that, as of such date, the consideration to be
received by the Alliance Common Shareholders under the Arrangement is fair, from
a financial point of view, to the Alliance Common Shareholders, a copy of which
opinion has been made available to Bowater.
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SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF ALLIANCE
PAGE 12
26. Native Land Claims. Except as disclosed in the Alliance Disclosure
Letter, neither Alliance nor its Subsidiaries has had any notice of any claim of
right, title or jurisdiction which is outstanding at the date hereof which has
been made or established to or over any lands owned or used by Alliance or any
of its Subsidiaries or any waters or products harvested therefrom by any person,
including any aboriginal peoples, and there is not in progress, pending or, to
the best of Alliance's knowledge, threatened any Legal Proceeding, which, if
successful, would adversely affect in any material respect the right of Alliance
or any of its Subsidiaries to use and enjoy such lands in the manner heretofore
used and enjoyed by Alliance and its Subsidiaries.
27. Timber Supply and Forest Management.
(a) The Alliance Disclosure Letter discloses to Bowater all of the
timber supply and forest management permits and licences made
pursuant to the Forest Act (Quebec) and the Crown Lands and
Forests Act (New Brunswick) to which any of the Alliance or
any of its Subsidiaries is a party in respect of their
respective businesses or the supply of wood from Crown lands
used in the operation of the such business, including without
limitation all Crown timber licences and Crown timber
sub-Licences under or pursuant to which wood from Crown lands
is used by such business (the "TIMBER TENURES").
(b) Alliance and each of its Subsidiaries has observed and
performed all covenants, agreements and obligations on its
part to be observed or performed under the provisions of each
of the Timber Tenures, the Forest Act (Quebec) and the Crown
Lands and Forests Act (New Brunswick) and the respective
regulations thereunder, and all other applicable forestry
legislation save and except for any deficiency, omission or
breach having no materially adverse consequences.
(c) Alliance and each of its Subsidiaries is not in breach of any
of the timber cutting rights or permits or industrial,
management or operating plans issued or filed pursuant to any
of the Timber Tenures save and except for any deficiency,
omission or breach having no materially adverse consequences.
(d) The Timber Tenures are in full force and effect and Alliance
and each of its Subsidiaries is in compliance with all forest
management agreements and other agreements to which Alliance
and each of its Subsidiaries is a party in connection with the
Timber Tenures and with all industrial, management and
operating plans relating to the Timber Tenures. All such plans
are up to date and have been duly approved by the appropriate
regulatory authorities.
28. Foreign Private Issuer. Alliance is a "FOREIGN PRIVATE ISSUER" as
defined in Rule 36-4 under the United States Securities Exchange Act of 1934.
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SCHEDULE C
REPRESENTATIONS AND WARRANTIES OF BOWATER
1. Organization. Bowater has been duly incorporated under the laws of the
State of Delaware and Bowater Canada has been duly incorporated under the
federal laws of Canada, and each of Bowater and Bowater Canada is validly
subsisting and has full corporate or legal power and authority to own its
properties and conduct its businesses as currently owned and conducted. All of
the outstanding shares of capital stock and other ownership interests of
Bowater's Subsidiaries (including, without limitation, Bowater Canada) are
validly issued, fully paid and non-assessable and all such shares and other
ownership interests owned directly or indirectly by Bowater are, except as
disclosed in the Bowater Disclosure Letter, owned free and clear of all material
liens, claims or encumbrances and there are no outstanding options, rights,
entitlements, understandings or commitments (contingent or otherwise) regarding
the right to acquire any such shares of capital stock or other ownership
interests in any of its Subsidiaries.
2. Capitalization. The authorized capital of Bowater consists of
110,000,000 shares consisting of 10,000,000 of Serial Preferred Stock, U.S.$1.00
par value and 100,000,000 Bowater Common Shares. As of March 15, 2001 there were
50,361,846 Bowater Common Shares outstanding and one share of Special Voting
Stock outstanding. As of March 22, 2001 there were reserved, in the aggregate,
for issuance in respect of Bowater's Stock Incentive Plans 3,472,250 Bowater
Common Shares of which 550,667 were yet to be granted and 2,921,583 were
outstanding but unexercised. Except as described in the immediately preceding
sentences or disclosed in the Bowater Disclosure Letter, there are no options,
warrants, conversion privileges or other rights, agreements, arrangements or
commitments obligating Bowater to issue or sell any shares of Bowater or
securities or obligations of any kind convertible into or exchangeable for any
shares of Bowater. There have been no Bowater Common Shares issued since March
15, 2001, other than pursuant to the exercise of stock option entitlements and
upon exchange of Exchangeable Shares. The authorized capital of Bowater Canada
consists of an unlimited number of common shares, an unlimited number of
non-voting exchangeable shares and 1,000 non-voting preferred shares. As of
December 31, 2000 there were 58,866,346 common shares, 5,138,672 non-voting
exchangeable shares (of which, as of March 15, 2001, 1,228,150 were held by
non-affiliates of Bowater) and 1,000 non-voting preferred shares outstanding.
There are no options, warrants, conversion privileges or other rights,
agreements, arrangements or commitments obligating Bowater Canada to issue or
sell any shares of Bowater Canada or securities or obligations of any kind
convertible into or exchangeable for any shares of Bowater Canada.
3. Authority. Bowater has the requisite corporate capacity, power and
authority to enter into this Agreement and to perform its obligations hereunder.
The execution, delivery and performance of this Agreement by Bowater and the
consummation by Bowater of the transaction contemplated by this Agreement have
been duly authorized by the Board of Directors of Bowater and no other corporate
proceedings on the part of Bowater are necessary to authorize this Agreement or
the transaction contemplated hereby other than in connection with the issuance
of Bowater Common Shares and other matters relating to the implementation of the
Arrangement. This Agreement has been duly executed and delivered by Bowater and
constitutes a legal, valid
90
SCHEDULE C
REPRESENTATIONS AND WARRANTIES OF BOWATER
PAGE 2
and binding obligation of Bowater, enforceable against Bowater in accordance
with its terms, subject to bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium, and other applicable Laws relating to or affecting
creditors' rights generally, to general principles of equity and public policy.
Except for obtaining the consents, approvals, orders, authorizations,
declarations and filings referred to in Section 6.1 of this Agreement, the
execution and delivery by Bowater of this Agreement and performance by it of its
obligations hereunder and the completion of the Arrangement and the transaction
contemplated thereby, will not:
(a) result in a violation or breach of, require any consent to be
obtained under or give rise to any termination rights under
any provision of:
(i) its or any of its Subsidiaries' certificate of
incorporation, articles, by-laws or other charter
documents, including any unanimous shareholder
agreement or any other agreement or understanding
with any party holding an ownership interest in any
of its Subsidiaries;
(ii) any law, regulation, order, judgment or decree; or
(iii) any contract, agreement, license, franchise or permit
to which Bowater or any of its Subsidiaries is bound
or is subject or is the beneficiary;
(b) give rise to any right of termination or acceleration of
indebtedness of Bowater or any of its Subsidiaries or cause
any third party indebtedness of Bowater or any of its
Subsidiaries to come due before its stated maturity or cause
any available credit of Bowater or any of its Subsidiaries to
cease to be available;
(c) result in the imposition of any encumbrance, charge or lien
upon any of its assets, or restrict, hinder, impair or limit
the ability of Bowater to carry on the business of Bowater as
and where it is now being carried on or as and where it may be
carried on in the future;
which would, individually or in the aggregate, have a material adverse effect on
Bowater. No consent, approval, order or authorization of, or declaration or
filing with, any Governmental Entity or other party is required to be obtained
by Bowater in connection with the execution and delivery of this Agreement or
the consummation by Bowater of the transaction contemplated hereby other than
(i) any approvals required by the Interim Order, (ii) the Final Order, (iii)
filings which may be required under the Delaware General Corporation Law and
filings with and approvals required by the SEC and Securities Authorities, (iv)
any other consents, waivers, permits, orders or approvals referred to in Section
6.1 of this Agreement.
Bowater and each of its Subsidiaries have all requisite power and authority to
own, lease and operate and to carry on their businesses as now being conducted.
Bowater and each of its Subsidiaries is, and has been at all times it was
required to be, duly registered, licensed or qualified and in good standing to
transact business in each jurisdiction in which the nature of its
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REPRESENTATIONS AND WARRANTIES OF BOWATER
PAGE 3
business or the assets owned, leased or operated by it make such registration,
licensing necessary, save and except where the absence of any such registration,
licence or qualification would not be material.
4. Funds Available. Bowater has sufficient funds or financing commitments
available to carry out its obligations under this Agreement and in respect of
the Arrangement and to pay all related fees and expenses.
5. Absence of Changes. Since December 31, 2000, and except with respect to
the present transaction contemplated by this Agreement and as disclosed in the
Bowater Disclosure Letter, (i) Bowater has conducted its business only in the
ordinary and regular course of business consistent with past practice, (ii)
other than in the ordinary and regular course of business consistent with past
practice, no liabilities or obligations of any nature (whether absolute,
accrued, contingent or otherwise) which would individually or in the aggregate
be material to Bowater have been incurred, (iii) there is no material fact that
exists on the date hereof that has not been disclosed in the disclosure
documents of Bowater filed with the SEC, which if publicly disclosed, would
reflect a material adverse change in the affairs of Bowater; (iv) Bowater has
not effected or passed any resolution to approve a split, combination or
reclassification of any of its outstanding shares, (v) Bowater has not effected
any change in its accounting methods, principles or practices, other than as
required by United States generally accepted accounting principles; and (vi)
Bowater has not issued, granted, declared or agreed to issue, grant or declare
any warrant, conversion privilege or other right, in respect of the issuance or
sale of any shares of Bowater or any of its Subsidiaries or of any securities of
any kind convertible into or exchangeable for any shares of Bowater or any of
its Subsidiaries.
6. Disclosure. Bowater has publicly disclosed in documents filed with the
SEC or has disclosed to Alliance in the Bowater Disclosure Letter all such
information regarding any event, circumstance or action taken or failed to be
taken which could individually or in the aggregate have a material adverse
effect on Bowater.
7. Financial Statements. The audited consolidated statement of operations,
consolidated balance sheet, consolidated statement of capital accounts and
consolidated statement of cash flows of Bowater for the fiscal year ending
December 31, 2000, and such statements of Bowater for the years ended December
31, 1998 and December 31, 1999, as contained in Bowater's 1998 and 1999 Annual
Reports, were prepared in accordance with United States generally accepted
accounting principles consistently applied and fairly present the consolidated
financial condition of Bowater at the respective dates indicated and the results
of operations of Bowater (on a consolidated basis) for the period covered.
8. Reports. Bowater has filed with the SEC true and complete copies of all
forms, reports, schedules, statements and other documents required to be filed
by it since January 1, 1998 (such forms, reports, schedules, statements and
other documents, including any financial statements or other documents,
including any schedules included therein, are referred to as the "BOWATER
DOCUMENTS"). The Bowater Documents, at the time filed, (a) did not contain any
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REPRESENTATIONS AND WARRANTIES OF BOWATER
PAGE 4
misrepresentation (as defined in relevant securities legislation) and (b)
complied in all material respects with the requirements of applicable securities
legislation.
9. Compliance with Laws. Bowater has complied with and is not in violation
of any applicable Laws other than non-compliance or violations which would not
individually or in the aggregate have a material adverse effect on Bowater.