Exhibit 2.1
AMENDED AND RESTATED ARRANGEMENT AGREEMENT
made as of March 9, 0000
Xxxxxxx
XXXXXX INC.
and
BOWATER INCORPORATED
ARRANGEMENT AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT made as of the 9th day of March, 0000,
X X X X X X X:
AVENOR INC.,
a corporation existing under the laws of Canada,
(hereinafter called "Avenor"),
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 Avenor and Bowater wish to propose an arrangement involving Avenor
and Bowater and the shareholders of Avenor and Bowater;
AND WHEREAS the parties hereto intend to carry out the transactions
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 WITNESSETH 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 similar transactions
involving Avenor or Bowater or any Material Subsidiaries of Avenor or Bowater,
or a proposal to do so, excluding the Arrangement and the transactions permitted
pursuant to Section 5.2;
"Arrangement" means the arrangement involving Avenor 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 Avenor in
respect of the Arrangement required by the CBCA to be sent to the Director after
the Final Order is made;
"Avenor Common Shareholders" means the holders of Avenor Common Shares;
"Avenor Common Shares" means the common shares of Avenor;
"Avenor Convertible Debentures" means the 7.5% Convertible Unsecured
Subordinated Debentures due 2004 of Avenor;
"Avenor Exchangeable Shares" means the shares issued by Avenor (or, at the
election of Bowater in accordance with Section 7.2, a Subsidiary of Bowater the
common shares of which are held directly or indirectly by Bowater) in connection
with the Arrangement that are exchangeable for Bowater Common Shares;
"Avenor Meeting" means such meetings of Avenor Shareholders as are required
to be held in accordance with the Interim Order;
"Avenor Partially Owned Entity" means the Ponderay Newsprint Company;
"Bowater Common Shareholders" means the holders of Bowater Common Shares;
"Bowater Common Shares" means the shares of common stock, U.S.$1.00 par
value per share, of Bowater;
"Bowater Meeting" means such meetings of Bowater Common Shareholders as are
required to be held in accordance with this Agreement;
"Bowater Resolution" means the resolution to be voted on at the Bowater
Meeting by the Bowater Common Shareholders approving of the issuance of stock in
connection with the Arrangement and the transactions contemplated by this
Agreement including, if applicable, an amendment to Bowater's Restated
Certificate of Incorporation;
"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;
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"CBCA" means the Canada Business Corporations Act, R.S.C. 1985, c. C-44,
as amended;
"Confidentiality Agreement" means the Confidentiality Agreement dated as of
April 10, 1997 between Avenor and Bowater;
"Court" means the Ontario Court of Justice (General Division);
"Debt Ratio" has the meaning ascribed thereto in Schedule D hereto;
"Director" means the Director appointed pursuant to Section 260 of the
CBCA;
"Dissent Rights" means the rights of dissent of the holders of Avenor
Common Shares 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;
"Encumbrance" includes, without limitation, any mortgage, pledge,
assignment, charge, lien, security interest, adverse interest in property, 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;
"Environmental Approvals" means all permits, certificates, licences,
authorizations, 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 of the environment and employee and public
health and safety;
"Exchange Ratio" has the meaning ascribed thereto in the Plan of
Arrangement;
"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,
state, regional, municipal, local or other government, 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;
"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;
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"HSR Act" means the Xxxx-Xxxxx-Xxxxxx 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 Avenor under the CBCA with respect to the Arrangement;
"Joint Proxy Circular" means the information circular and proxy statement
prepared by Avenor and Bowater for the Avenor Meeting and the Bowater Meeting;
"Laws" means all laws, by-laws, rules, regulations, orders, ordinances,
protocols, codes, guidelines, policies, notices, directions and judgments or
other requirements of any Governmental Entity;
"material adverse change" or "material adverse effect" means, when used in
connection with Avenor 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 taken as a whole 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 Avenor Common Shares or
Bowater Common Shares, respectively, immediately following and reasonably
attributable to the announcement of this Agreement and the transactions
contemplated hereby, or (iii) the forest products industry in general (including
commodity prices), and not specifically relating to Avenor or Bowater or their
respective Subsidiaries, respectively;
"Material Subsidiary", in respect of a Party, means a Subsidiary of that
Party the total assets of which would have constituted more than 10% of the
consolidated assets of that Party or the total revenues of which would have
constituted more than 10% of the consolidated revenues of that Party, in each
case as set out in the financial statements for the year ended December 31,
1997, and for Avenor includes Avenor Maritimes Inc.;
"Parties" means Avenor 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
Section 7.1 hereof;
"SEC" means the United States Securities and Exchange Commission;
"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;
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provided, however, that, subject to Section 1.6, "Subsidiary" for purposes of
Avenor shall include the Avenor Partially Owned Entity;
"Tax Act" means the Income Tax Act (Canada);
"Tax Returns" means all returns, declarations, reports, information returns
and statements required to be filed with any taxing authority relating to Taxes;
and
"Taxes" has the meaning ascribed thereto in Section 15 of Schedule B.
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 Avenor Partially Owned Entity
Notwithstanding any other provisions hereof, the representations and
warranties given hereunder with respect to the Avenor Partially Owned Entity or
its Subsidiaries (by incorporation in the definition of Subsidiaries) included
in Schedule B, are given by Avenor to the best of its knowledge only, based on
inquiry of the management and employees of Avenor or its Subsidiaries (excluding
the Avenor Partially Owned Entity or its Subsidiaries) but without inquiry of
the management or employees of the Avenor Partially Owned Entity or its
Subsidiaries, except for the representations and warranties given respecting
Avenor's direct or indirect ownership of such Avenor
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Partially Owned Entity. Covenants given by Avenor which refer to any of the
Subsidiaries shall not extend to the Avenor Partially Owned Entity; provided,
however, that if an issue relating to the Avenor Partially Owned Entity arises,
which issue would be the subject matter of any of the covenants contained in
this Agreement but for the fact that the covenants do not extend to the Avenor
Partially Owned Entity, Avenor shall vote its voting interests in the Avenor
Partially Owned Entity in respect of such issue consistent with complying with
the relevant covenant as though such covenant did extend to the Avenor Partially
Owned Entity. Avenor shall also exercise any other influence in the Avenor
Partially Owned Entity in a manner consistent with complying with the relevant
covenant as though such covenant did extend to the Avenor Partially Owned
Entity, subject to any applicable fiduciary duties or contractual obligations,
other than hereunder. To the extent any representations, warranties, covenants
or agreements contained herein relate, directly or indirectly, to a Subsidiary
of any Party, other than the Avenor Partially Owned Entity, each such provision
shall be construed as a covenant by such Party 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, C and D annexed to this Agreement, being the Plan of
Arrangement (including the provisions attaching to the Avenor Exchangeable
Shares), and the representations and warranties of Avenor and Bowater and
certain definitions, 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 Avenor shall have the meanings attributable thereto under Canadian
generally accepted accounting principles and all determinations of an accounting
nature in respect of Avenor required to be made shall be made in a manner
consistent with Canadian generally accepted 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 United States generally accepted 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 taken as a whole or would
significantly impede the ability to complete the Arrangement in accordance with
this Agreement.
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1.11 Disclosure in Writing
The phrases "except as previously disclosed in writing" and "except as
disclosed in writing" and similar expressions used in this Agreement shall be
construed for all purposes of this Agreement as referring to a disclosure letter
prepared by each Party and delivered to the other contemporaneously with the
execution and delivery of this Agreement. Disclosure by a Party in any
particular schedule or exhibit of such disclosure letter will be deemed to be
disclosure of the information for purposes of this Agreement.
ARTICLE 2
THE ARRANGEMENT
2.1 Arrangement
(a) As soon as reasonably practicable, Avenor shall apply to the Court
pursuant to section 192 of the CBCA for an order approving the
Arrangement and, in connection with such application, Avenor 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 Avenor Meeting for the purpose of considering and,
if deemed advisable, approving the Arrangement, which meeting
shall be held on the same date and at the same time, if
practicable, or as near as may be, as the Bowater Meeting; 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, Avenor shall deliver Articles of Arrangement
to the Director and such other 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) the authorized share capital of Avenor or the Subsidiary of
Bowater, as the case may be, shall be increased or modified by
the creation of an unlimited number of Avenor Exchangeable Shares
having the rights, privileges, restrictions and conditions
described in the Plan of Arrangement;
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(ii) each shareholder of Avenor (other than shareholders who validly
exercise Dissent Rights and who are ultimately entitled to be
paid the fair value of the Avenor Common Shares held by them)
shall be entitled to receive $35 for each Avenor Common Share
held, which shall be payable in cash, Avenor Exchangeable Shares
or Bowater Common Shares, or a combination thereof, on the terms
and subject to the limitations and conditions set out in the Plan
of Arrangement; and
(iii) Bowater shall become the holder, directly or indirectly, of all
of the issued and outstanding Avenor Common Shares (other than
those Avenor Common Shares held by Avenor 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 Avenor Approval
(a) Avenor represents as of the date hereof that its directors have
determined unanimously that:
(i) the Arrangement is fair to its shareholders and is in the best
interests of Avenor; and
(ii) its Board of Directors will recommend that its shareholders vote
in favour of the Arrangement;
(b) Avenor represents as of the date hereof that its Board of Directors
has received an opinion from RBC Dominion Securities Inc., the
financial advisor to Avenor, that the Arrangement is fair from a
financial point of view to the Avenor Common Shareholders; and
(c) Avenor represents as of the date hereof that its directors have
advised it that they intend to vote the Avenor Common Shares held by
them in favour of the Arrangement and will, accordingly, so represent
in the Joint Proxy Circular.
2.4 Bowater Approval
(a) Bowater represents as of the date hereof that its directors have
determined unanimously that:
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(i) its Board of Directors will recommend that its shareholders vote
in favour of the Bowater Resolution at the Bowater Meeting; and
(ii) this Agreement is in the best interests of Bowater;
(b) Bowater represents as of the date hereof that its Board of Directors
has received opinions from TD Securities Inc. and Xxxxxxx, Sachs &
Co., the financial advisors to Bowater, that the transactions
contemplated by this Agreement are fair from a financial point of view
to Bowater; and
(c) Bowater represents as of the date hereof that its directors have
advised it that they intend to vote the Bowater Common Shares held by
them in favour of the Bowater Resolution and will, accordingly, so
represent in the Joint Proxy Circular.
2.5 Shareholder Rights Plan
Avenor covenants and represents that its Board of Directors has resolved to
take all action necessary in order to ensure that the Separation Time (as
defined in the Avenor Shareholder Rights Plan Agreement dated October 20, 1995)
does not occur in connection with this Agreement or the Arrangement, and to
recommend to the Avenor Common Shareholders that they approve such resolutions
and take such actions as may be necessary in order to waive the application of
the Avenor Shareholder Rights Plan Agreement to this Agreement and to the
Arrangement effective immediately prior to the Effective Date and covenants to
take all action necessary pursuant to the Avenor Shareholder Rights Plan
Agreement to seek such waiver.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF AVENOR
3.1 Representations
Avenor 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 Avenor pursuant to this
Agreement.
3.3 Survival of Representations and Warranties
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The representations and warranties of Avenor 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 Avenor the representations and warranties as set
forth in Schedule C to this Agreement and acknowledges that Avenor is relying
upon those representations and warranties in connection with entering into this
Agreement.
4.2 Investigation
Any investigation by Avenor 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.
5.2 Covenants of Avenor
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Avenor covenants and agrees that, except as contemplated in this Agreement
or the Arrangement, until the Effective Date or the day upon which this
Agreement is terminated, whichever is earlier:
(a) in a timely and expeditious manner, it will 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 Joint Proxy Circular earlier than as
required hereby;
(b) in a timely and expeditious manner it will:
(i) forthwith carry out such terms of the Interim Order as are
required under the terms thereof to be done by Avenor;
(ii) prepare, in consultation with Bowater, and file a Joint Proxy
Circular with respect to the Avenor Meeting and the Bowater
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 Avenor and not containing any
misrepresentation (as defined under applicable securities laws)
with respect thereto;
(iii) convene the Avenor Meeting on a date agreed to by the Parties
which shall be no later than September 30, 1998 and distribute
copies of this Agreement (or a written summary thereof prepared
by Avenor in form and substance reasonably satisfactory to
Bowater), in each case as ordered by the Interim Order;
(iv) provide notice to Bowater of the Avenor Meeting and allow
Bowater's representatives to attend the Avenor Meeting unless
such attendance is prohibited by the Interim Order; and
(v) conduct the Avenor Meeting in accordance with the Interim Order,
the by-laws of Avenor and any instrument governing such meeting,
as applicable, and as otherwise required by applicable Laws;
(c) in a timely and expeditious manner, it will prepare (in consultation
with Bowater) and file any mutually agreed (or otherwise required by
applicable Laws) amendments or supplements to the Joint Proxy Circular
with respect to the Avenor 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;
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(d) subject to the approval of the Arrangement at the Avenor Meeting in
accordance with the provisions of the Interim Order, it will forthwith
file, proceed with and diligently prosecute an application for the
Final Order;
(e) it will 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 Avenor and the
receipt of the written confirmation of Bowater that the conditions
precedent in favour of Bowater have been satisfied, 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 will
furnish promptly to Bowater a copy of each notice, report, schedule or
other document or communication delivered, filed or received by Avenor
in connection with the Arrangement or the Interim Order, the Avenor
Meeting or any other meeting of Avenor 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 in connection with, or in any way affecting,
the transactions contemplated herein;
(g) in a timely and expeditious manner, it will provide to Bowater all
information as may be reasonably requested by Bowater or as required
by the Interim Order or applicable Laws with respect to Avenor and its
Subsidiaries and their respective businesses and properties for
inclusion in the Joint Proxy Circular with respect to the Bowater
Meeting or in any amendments or supplements to such Joint Proxy
Circular complying in all material respects with all applicable legal
requirements on the date of mailing thereof and containing full, true
and plain disclosure of all material facts relating to Avenor and not
containing any misrepresentation (as defined under applicable
securities laws) with respect thereto;
(h) it will prepare and file with all applicable securities commissions or
similar securities regulatory authorities of Canada and the United
States 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 Avenor or the Subsidiary of Bowater, as the case may be, of
Avenor 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);
(i) except as previously disclosed in writing to Bowater, 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;
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(j) except as previously disclosed in writing to Bowater, 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 (I) the issue of
Avenor Common Shares on the exercise of Avenor Convertible
Debentures; or (II) 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 Material Subsidiaries;
(ii) amend or propose to amend its articles or by-laws or those of any
of its Material 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 (other than regular quarterly dividends in respect of its
common shares, in amounts consistent with past practice);
(iv) redeem, purchase or offer to purchase (or permit any of its
Material Subsidiaries to redeem, purchase or offer to purchase)
any shares or other securities of it or any of its Material
Subsidiaries, unless otherwise required by the terms of such
securities;
(v) reorganize, amalgamate or merge it or any of its Material
Subsidiaries with any other person, corporation, partnership or
other business organization whatsoever;
(vi) acquire or agree to acquire 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 claims
or liabilities, except such as have been reserved against in its
financial statements delivered to Bowater,
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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, xxxxxx or other similar financial
instruments;
(viii) except for the purpose of the renewal of or the replacement of
existing credit facilities, incur or commit to provide
guarantees, incur any indebtedness for borrowed money or issue
any amount of debt securities, which are, individually or in the
aggregate, material;
(ix) incur or commit to capital expenditures prior to the Effective
Date, individually or in the aggregate, exceeding $50 million;
(x) make any changes to its existing accounting practices or make any
material tax election;
(k) without the prior written consent of Bowater, which consent shall not
be unreasonably withheld, it shall not, and shall cause each of its
Subsidiaries to not:
(i) other than as previously disclosed in writing to Bowater or in
the usual, ordinary and regular course of business and consistent
with past practice or pursuant to existing employment, pension,
supplemental pension, termination, compensation arrangements or
policies, enter into or modify any employment, severance,
collective bargaining or similar agreements, policies or
arrangements with, or grant any bonuses, salary increases, stock
options, pension or supplemental pension benefits, profit
sharing, retirement allowances, deferred compensation, incentive
compensation, severance or termination pay to, or make any loan
to, any officers or directors of it; or
(ii) other than as previously disclosed in writing to Bowater or in
the usual, ordinary and regular course of business and consistent
with past practice or pursuant to existing employment, pension,
supplemental pension, termination, compensation arrangements or
policies, in the case of employees who are not officers or
directors, take any action with respect to the entering into or
modifying of any employment, severance, collective bargaining or
similar agreements, policies or arrangements or with respect to
the grant of any bonuses, salary increases, stock options,
pension or supplemental pension benefits, profit sharing,
retirement allowances, deferred compensation, incentive
compensation, severance or termination pay 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 Avenor from taking
such action that is 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, Avenor
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agrees to keep Bowater informed as to the arrangements which
Avenor believes are necessary to fulfill such condition in
Section 6.3(f) so that Bowater can participate in the decisions
made by Avenor;
(l) it shall use its reasonable commercial efforts (or cause each of its
Subsidiaries to use reasonable commercial efforts) to cause its
current insurance (or re-insurance) policies not 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 Avenor (including former directors and officers) if
requested by Bowater and on such terms as approved by Bowater;
(m) it shall:
(i) use its reasonable commercial efforts, and cause each of its
Subsidiaries to use its reasonable commercial efforts, to
preserve intact its business organizations and goodwill, to
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 transactions 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);
(n) it shall not and shall cause its Subsidiaries not to settle or
compromise any claim brought by any present, former or purported
holder of any of its securities in connection with the transactions
contemplated by this Agreement or the Arrangement prior to the
Effective Date without the prior written consent of Bowater, such
consent not to be unreasonably withheld;
15
(o) except in the usual, ordinary and regular course of business and
consistent with past practice, or except as previously disclosed in
writing to Bowater or as required by applicable Laws, 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 to an existing
contract or series of related existing contracts would be material to
Avenor or which would have a material adverse effect on Avenor;
(p) it shall use all 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
transactions 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
transactions contemplated by this Agreement, 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
transactions contemplated hereby or by 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;
(q) it shall not take any action, refrain from taking any action (subject
to its commercially reasonable efforts), or 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 Avenor is required to take any such
action or refrain from taking such action (subject to its commercially
reasonable efforts) as a result of this Agreement, Avenor shall
immediately notify Bowater in writing of such circumstances;
16
(r) it will, 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 with respect to the operation of its
business; 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 Avenor and Bowater are competitors;
(s) 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 transactions contemplated herein and take all
reasonable action necessary to be in compliance with such Laws;
(t) it shall use its reasonable commercial efforts to 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; and
(u) it will not allow the Debt Ratio to exceed 70% so that the condition
referred to in Section 6.3(e) can be fulfilled.
5.3 Covenants of Bowater
Bowater covenants and agrees that, except as contemplated by this
Agreement, the Arrangement and transactions (including financing transactions)
necessary to implement the Arrangement, until the Effective Date or the day upon
which this Agreement is terminated, whichever is earlier:
(a) except as previously disclosed in writing to Avenor, it shall, and
shall cause each of its Subsidiaries to, refrain from entering into
any transaction or making any other decision which would result in a
material adverse change in Bowater;
(b) 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 Bowater Common Shares, as are specified in the
Plan of Arrangement and the Final Order to be taken or done by
Bowater;
(c) except as previously disclosed in writing to Avenor or as required by
(f) below, it shall not amend or propose to amend its Restated
Certificate of Incorporation;
(d) except as previously disclosed in writing to Avenor, 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
17
amounts consistent with past practice, and dividends provided for
pursuant to the provisions of its preferred shares);
(e) it shall use all 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
transactions 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
transactions 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
transactions contemplated hereby or by the Arrangement;
(v) fulfill all conditions precedent to Avenor's obligations
hereunder and satisfy all provisions of this Agreement and the
Arrangement applicable to it; and
(vi) cooperate with Avenor in connection with the performance by it of
its obligations hereunder;
(f) it shall:
(i) create one share of special voting stock of Bowater (including if
necessary by filing amendments to its Restated Certificate of
Incorporation), which entitles the holder of record to a number
of votes at meetings of holders of Bowater Common Shares equal to
the number of Avenor 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 Avenor
Exchangeable Shares may be honoured;
18
(g) it shall not take any action, refrain from taking any action (subject
to its commercially reasonable efforts), or 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 Bowater is required to take any such
action or refrain from taking such action as a result of this
Agreement, Bowater shall immediately notify Avenor in writing of such
circumstances;
(h) 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 Bowater;
(ii) prepare, in consultation with Avenor, and file the Joint Proxy
Circular with respect to the Avenor Meeting and the Bowater
Meeting in all jurisdictions where the same is required to be
filed and mail the same 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 Bowater and not
containing any misrepresentation (as defined under such
applicable securities laws) with respect thereto;
(iii) convene the Bowater Meeting on a date agreed to by the Parties
which shall be no later than September 30, 1998, and distribute
copies of this Agreement (or a written summary thereof prepared
by Bowater in form and substance reasonably satisfactory to
Avenor);
(iv) provide notice to Avenor of the Bowater Meeting and allow
Avenor's representatives to attend the Bowater Meeting; and
(v) conduct the Bowater Meeting in accordance with the by-laws of
Bowater and any instrument governing such meeting, as applicable,
and as otherwise required by applicable Laws;
(i) in a timely and expeditious manner it shall, prepare (in consultation
with Avenor) and file any mutually agreed (or otherwise required by
applicable Laws) amendments or supplements to the Joint Proxy Circular
with respect to the Bowater 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 Laws on the date of mailing thereof;
(j) except for proxies and other non-substantive communications, it shall
furnish promptly to Avenor a copy of each notice, report, schedule or
other document or communication delivered, filed or received by
Bowater in connection with the Arrangement or the Interim Order, the
Bowater Meeting or any other meeting of
19
Bowater 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 in
connection with, or in any way affecting, the transactions
contemplated herein;
(k) in a timely and expeditious manner, it shall provide to Avenor all
information as may be reasonably requested by Avenor 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 Joint Proxy Circular with respect to the Avenor
Meeting or in any amendments or supplements to such Joint Proxy
Circular 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 Bowater and not
containing any misrepresentation (as defined under applicable
securities laws) with respect thereto;
(l) assist and cooperate in the preparation and filing with all applicable
securities commissions or similar securities regulatory authorities of
Canada and the United States 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 Avenor or the Subsidiary of Bowater, as
the case may be, of Avenor 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); and
(m) forthwith carry out such terms of the Final Order required under the
terms thereof to be done by Bowater.
5.4 Covenants Regarding Non-Solicitation
(a) Avenor shall not, directly or indirectly, through any officer,
director, employee, representative or agent of Avenor 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,
withdraw or modify in a manner adverse to Bowater the approval of the
Board of Directors of Avenor of the transactions contemplated hereby,
approve or recommend any Acquisition Proposal or cause Avenor to enter
into any agreement related to any Acquisition Proposal; 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 Avenor 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 Avenor
determines in good faith, after consultation with financial advisors
and after
20
receiving an opinion of outside counsel to the effect that the Board
of Directors of Avenor 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
Avenor's shareholders than the transaction contemplated by this
Agreement (any such Acquisition Proposal being referred to herein as a
"Superior Proposal");
(b) Bowater shall not, directly or indirectly, through any officer,
director, employee, representative or agent of Bowater 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; provided, however, that
notwithstanding any other provision of this Agreement, nothing shall
prevent the Board of Directors of Bowater from considering,
negotiating, approving, recommending to its shareholders or entering
into an agreement in respect of an unsolicited bona fide written
Acquisition Proposal if the Board of Directors of Bowater determines
in good faith, after consultation with financial advisors and after
receiving an opinion of outside counsel, that it is required to do so
in order to discharge properly its fiduciary duties;
(c) Each Party shall promptly notify the other Party of any current
Acquisition Proposals or of any future Acquisition Proposal of which
directors or senior officers become aware, or any amendments to the
foregoing, or any request for non-public information relating to such
Party or any Material Subsidiaries in connection with an Acquisition
Proposal or for access to the properties, books or records of such
Party or any Material Subsidiary by any person or entity that informs
such Party or such Material 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 the other
Party may reasonably request including the identity of the person
making such proposal, inquiry or contact;
(d) If Avenor receives a request for material non-public information from
a person who proposes a bona fide Acquisition Proposal in respect of
Avenor (the existence and content of which have been disclosed to
Bowater), and the Board of Directors of Avenor 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 Avenor 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 Avenor; provided, however,
that the person making the Acquisition Proposal shall not be precluded
thereunder from making the Acquisition Proposal, and provided further
that Avenor sends a copy of any such confidentiality agreement to
Bowater immediately upon its execution and Bowater is provided with a
list of or
21
copies of the information provided to such person and immediately
provided with access to similar information to which such person was
provided; and
(e) Each Party 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 its financial advisors or other advisors or
representatives.
5.5 Notice by Avenor of Superior Proposal Determination
Avenor 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 (i) it has
provided Bowater with a copy of the Acquisition Proposal document which the
Board of Directors of Avenor has determined would be a Superior Proposal, and
(ii) 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. Information
provided shall constitute confidential Information for purposes of Section
5.6(c).
During such five business day period, Avenor 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 Avenor 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 Avenor would result in the
Acquisition Proposal not being a Superior Proposal. If the Board of Directors of
Avenor so determines, it will enter into an amended agreement with Bowater
reflecting Bowater's amended proposal. If the Board of Directors of Avenor
determines that the Acquisition Proposal is nonetheless a Superior Proposal,
Avenor will pay to Bowater the break fee payable to Bowater under Section 8.2.
Avenor 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 (ii) of this Section 5.5 to initiate an
additional five business day notice period.
5.6 Access to Information
(a) Subject to Section 5.6(c) and applicable Laws, upon reasonable notice,
Avenor 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, and, during such period, Avenor shall (and shall
cause each of its Subsidiaries to) furnish promptly to Bowater all
information concerning Avenor's business, properties and personnel as
Bowater may reasonably request. Nothing in the foregoing shall require
22
Avenor 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.
(b) Subject to Section 5.6(c) and applicable Laws, upon reasonable notice,
Bowater shall afford Avenor's counsel and its financial advisors, RBC
Dominion Securities Inc., an opportunity to conduct due diligence on
Bowater and its Subsidiaries to enable RBC Dominion Securities Inc. 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 transactions 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 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; or (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
Effective Date or the termination of this Agreement, other than pursuant to this
Agreement (including without limitation Section 5.5), the Arrangement and the
transactions contemplated hereby and thereby, 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
23
may determine: (i) in any manner acquire, agree to acquire or make any proposal
or offer to acquire, directly or indirectly, any securities or property of the
other Party; (ii) propose or offer to enter into, directly or indirectly, any
merger or business combination involving the other Party or to purchase,
directly or indirectly, a material portion of the assets of the other Party;
(iii) directly or indirectly, "solicit", or participate or join with any person
in the "solicitation" of, any "proxies" (as such terms are defined in the
Securities Act (Ontario), as the same may be amended from time to time) to vote,
to seek to advise or to influence any person with respect to the voting of any
voting securities of the other Party (but for greater certainty Avenor
acknowledges that Bowater and its agents and advisors (including TD Securities
Inc. and Xxxxxxx Xxxxx & Co.) will be entitled to solicit proxies and otherwise
influence any person to vote in favour of the Arrangement at the Avenor Meeting
or Bowater Meeting and Bowater acknowledges that Avenor and its agents and
advisors (including RBC Dominion Securities) will be entitled to solicit proxies
and otherwise influence any person to vote in favour of the Arrangement at the
Avenor Meeting or Bowater Meeting); (iv) otherwise act alone or in concert with
others to seek to control or to influence the management, Board of Directors or
policies of the other Party; (v) make any public or private disclosure of any
consideration, intention, plan or arrangement inconsistent with any of the
foregoing; or (vi) advise, assist or encourage any of the foregoing or work in
concert with others in respect of the foregoing. For the purpose of this Section
5.7, a Party shall include Subsidiaries of such Party and their successors. The
termination of this Agreement shall also terminate any other agreements between
the Parties which have a similar effect as this Section 5.7 including but not
limited to any such standstill provisions contained in the Confidentiality
Agreement.
5.8 Employment Agreements and Related Matters
Bowater covenants and agrees, and after the Effective Time will cause
Avenor and any successor to Avenor to agree, to honour and comply with the terms
of those existing employment and severance agreements of Avenor which Avenor has
disclosed to Bowater in writing prior to the date hereof. Bowater also covenants
and agrees, and after the Effective Time it will cause Avenor and any successor
to Avenor to agree, that for a period of one year it will deal with any
employees of Avenor whose employment may be terminated after the Effective Date
in a fair and equitable manner consistent with the existing termination policies
of Avenor as disclosed to Bowater in writing.
5.9 Insurance
(a) Bowater shall ensure that the by-laws of Avenor or of any corporation
continuing following the amalgamation, merger, plan of arrangement,
consolidation or winding-up of Avenor with or into one or more other
persons (a "Surviving Corporation") shall contain the provisions with
respect to indemnification now set forth in section 5.02 of Avenor's
By-Law No. 1, as amended by Avenor's By-Law No. 2, (or as provided in
Article Eleventh of Bowater's Restated Certificate of Incorporation)
which provision shall not be amended, repealed or otherwise modified
for a period of six 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, officers,
employees or agents of Avenor, unless required by
24
Law, and Bowater shall ensure that the obligations of Avenor under any
indemnification agreements between Avenor and its directors and
certain officers 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 Avenor or
any Surviving Corporation to maintain Avenor'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 Avenor and providing no less coverage than Avenor's
existing directors' and officers' insurance, for all present and
former directors and officers of Avenor, covering claims made prior to
or within such period of time. At the election of Bowater and upon
reasonable notice to Avenor, Avenor will acquire the insurance through
a "discovery" endorsement referred to in Section 5.2(l) of this
Agreement prior to the Effective Date; and
(c) Avenor will not, and Avenor 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.
5.10 Ancillary Agreements
Bowater agrees to enter into the support agreement and voting and exchange
trust agreement contemplated by the provisions attaching to the Avenor
Exchangeable Shares set out on Exhibit 1 to Schedule A annexed hereto.
5.11 Merger of Covenants
The covenants set out in this Agreement (except for Sections 5.6(c), 5.8,
5.9, 5.10 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 Avenor and Bowater to complete the transactions
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:
25
(a) the Interim Order shall have been granted in form and substance
satisfactory to Avenor 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 Joint Proxy Circular shall have been
passed at the Avenor Meeting and at the Bowater Meeting, duly
approving the Arrangement, in accordance with the Interim Order, and
duly approving the Bowater Resolution;
(c) the Final Order shall have been granted in form and substance
satisfactory to Avenor and Bowater, acting reasonably, and shall not
have been set aside or modified in a manner unacceptable to such
Parties on appeal or otherwise;
(d) the Articles of Arrangement relating to the Arrangement shall be in
form and substance satisfactory to Avenor and Bowater, acting
reasonably;
(e) the Effective Date shall be on or before September 30, 1998, 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 transactions
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
transactions contemplated herein which is materially adverse;
(g) all consents, waivers, permits, orders and approvals of any
Governmental Entity (other than as contemplated in Section 6.1(h)and
(i)) 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 Avenor 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 Avenor and/or Bowater or reasonably satisfactory
evidence thereof shall have been delivered to each Party;
(h) the Arrangement shall have received the allowance or approval or
deemed allowance or approval by the responsible Minister under the
Investment Canada Act in respect of the Arrangement, to the extent
such allowance or approval is required, and such allowance or approval
shall be on terms and conditions satisfactory to the Parties, acting
reasonably;
(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
been earlier terminated and (i) the applicable waiting period under
section 123 of the Competition Act (Canada) shall
26
have expired without the Director of Investigation and Research (the
"Competition Director") appointed under the Competition Act having
given notice that he intends to make an application to the Competition
Tribunal for an order under section 92 or 100 of the Competition Act
in respect of the Arrangement or (ii) the Competition Director shall
have issued an advance ruling certificate under section 102 of the
Competition Act in respect of the Arrangement;
(j) the Avenor Exchangeable Shares and the Bowater Common Shares issuable
pursuant to the Arrangement shall have been conditionally approved for
listing on The Toronto Stock Exchange and the New York Stock Exchange,
respectively, subject to the filing of required documentation, any
required prospectus exemptions shall have been obtained or be
available and such securities shall not be subject to resale
restrictions in Canada and the United States other than in respect of
control persons and subject to the requirements of general
application; and
(k) this Agreement shall not have been terminated pursuant to Article 9.
The foregoing conditions are for the mutual benefit of Avenor and Bowater
and may be waived, in whole or in part, by Avenor and Bowater at any time. If
any of the said conditions precedent shall not be complied with or waived as
aforesaid on or before September 30, 1998 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 Avenor Conditions
The obligation of Avenor to complete the transactions 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 transactions 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 Bowater or materially
impede the completion of the Arrangement or the other transactions
contemplated hereby, it being understood that for the purposes 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
Avenor the certificate of two qualified officers of Bowater certifying
such accuracy on the Effective Date;
(b) Bowater shall have complied with its covenants herein, if the failure
to comply with such covenants would individually or in the aggregate
have a material adverse effect
27
on Bowater or materially impede the completion of the Arrangement or
the other transactions contemplated in this Agreement, and Bowater
shall have provided to Avenor the certificate of two qualified
officers of Bowater certifying that Bowater 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 Avenor has, or is reasonably likely to
have, a material adverse effect on Bowater; and
(d) the Board of Directors of Bowater shall have made and shall not have
modified or amended, in any material respect, prior to the Avenor
Meeting and the Bowater Meeting, an affirmative recommendation that
its shareholders approve the Bowater Resolution.
The foregoing conditions precedent are for the benefit of Avenor and may be
waived, in whole or in part, by Avenor in writing at any time. If any of the
said conditions shall not be complied with or waived by Avenor on or before
September 30, 1998 or, if earlier, the date required for their performance then
Avenor may rescind and terminate this Agreement by written notice to Bowater.
6.3 Bowater Conditions
The obligation of Bowater to complete the transactions 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 Avenor 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 transactions 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 Avenor 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 Avenor shall have provided to
Bowater the certificate of two qualified officers of Avenor certifying
such accuracy on the Effective Date;
(b) Avenor shall have complied with its covenants herein, if the failure
to comply with such covenants would individually or in the aggregate
have a material adverse effect on Avenor or materially impede the
completion of the Arrangement or the other transactions contemplated
in this Agreement, and Avenor shall have provided to Bowater the
certificate of two qualified officers of Avenor certifying that Avenor
has so complied with its covenants herein;
28
(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 Avenor;
(d) the Board of Directors of Avenor shall have made and shall not have
modified or amended, in any material respect, prior to the Avenor
Meeting, an affirmative recommendation that its shareholders approve
the Arrangement;
(e) the Debt Ratio shall be less than 70% at the Effective Date and the
Debt Ratio shall not have been in excess of 70% for a period of 20
consecutive days during the period from the date hereof to the
Effective Date;
(f) all stock options granted by Avenor shall have been exercised or
terminated prior to the effective time of the Arrangement; and
(g) the holders of not more than 5% of the issued and outstanding Avenor
Common Shares shall have exercised Dissent Rights in relation to the
Arrangement.
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, 1998 or, if earlier, the date required for the performance
thereof, then Bowater may rescind and terminate this Agreement by written notice
to Avenor.
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 in any material respect 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 transactions 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
29
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, 1998 and the expiration of a
period of 30 days from such notice. If such notice has been delivered prior to
the date of the Avenor Meeting and the Bowater Meeting, such meetings shall be
postponed until the expiry of such period.
6.5 Merger of Conditions
The conditions set out in Sections 6.1, 6.2 and 6.3 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 and certificate of amendment in respect thereof under the CBCA.
Avenor acknowledges and agrees that it shall have no right to file Articles of
Arrangement unless such conditions have been satisfied, fulfilled or waived.
ARTICLE 7
AMENDMENT
7.1 Amendment
This Agreement may, at any time and from time to time before or after the
holding of the Avenor Meeting and the Bowater Meeting, be amended by mutual
written agreement of the Parties hereto without further notice to or
authorization on the part of their respective 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.
30
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 Avenor, for Bowater and for Avenor 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. If Avenor effects any transaction before the Effective Date for
such purposes, Bowater will be responsible for any structuring and unwinding
costs if the Arrangement is not effected. Bowater has advised Avenor that
Bowater will propose the restructuring of the Arrangement so that the issuer of
Avenor Exchangeable Shares will be a separate Subsidiary of Bowater and that
Bowater understands that Avenor will, at or prior to the Effective Date,
consider the transfer of certain assets to separate corporations. These
proposals will be subject to continued good faith discussions between the
parties and Avenor has no objection to such proposals, provided that they result
in no prejudice to Avenor or its securityholders.
The Parties mutually agree that if a Party proposes any other 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 Avenor Break Fee Event
If the Bowater Common Shareholders do not approve the Bowater Resolution at
the Bowater Meeting (an "Avenor Break Fee Event"), then Bowater shall pay to
Avenor, on the business day following such vote, $70 million in immediately
available funds to an account designated by Avenor; provided, however, that (i)
the Avenor Common Shareholders have not disapproved the Arrangement and (ii)
this Agreement shall not have been duly terminated prior to the occurrence of
such Avenor Break Fee Event. Bowater shall not be obligated to make more than
one payment pursuant to this Section 8.1.
8.2 Bowater Break Fee Event
If (x) the Board of Directors of Avenor shall have withdrawn or modified in
a manner adverse to Bowater its approval or recommendation of the Arrangement,
or approved or recommended any Superior Proposal, or determined at the
conclusion of the process set out in Section 5.5 that any Acquisition Proposal
is a Superior Proposal, or resolved to take any of the foregoing actions, or (y)
an Acquisition Proposal shall have been made known to Avenor or made directly to
the Avenor Common Shareholders or any person has publicly announced an intention
to
31
make an Acquisition Proposal and after such Acquisition Proposal shall have been
made known, made or announced (A) the Avenor Common Shareholders do not approve
the Arrangement at the Avenor Meeting or (B) the Arrangement is not, prior to
September 30, 1998, submitted for their approval, (each of the events described
in clauses (x) and (y) being referred to as a "Bowater Break Fee Event"), then
Avenor shall pay to Bowater, in the case of clause (x), one business day after
taking any such action, and, in the case of clause (y) (A), on the business day
following such vote and, in the case of clause (y) (B), on November 1, 1998, $70
million in immediately available funds to an account designated by Bowater;
provided, however, that:
(i) in the case of clause (y), the Bowater Common Shareholders have not
disapproved the Bowater Resolution; and
(ii) in the case of clauses (x) and (y), this Agreement shall not have been
duly terminated prior to the occurrence of such Bowater Break Fee
Event.
Avenor shall not be obligated to make more than one payment pursuant to this
Section 8.2.
8.3 Effect of Break Fee Payments; Timing of Avenor Meeting and Bowater Meeting
For greater certainty, the Parties agree that the payment of the amount
pursuant to this Article 8 is the sole monetary remedy of the Party entitled to
such amount as a result of the occurrence of an Avenor Break Fee Event or
Bowater Break Fee Event, as the case may be.
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.
The Parties acknowledge and agree that the Avenor Meeting and the Bowater
Meeting shall be held contemporaneously on the same day.
ARTICLE 9
TERMINATION
9.1 Termination
This Agreement may be terminated at any time prior to the Effective Date:
(a) by mutual written consent of Avenor and Bowater;
(b) as provided in Sections 6.1, 6.2 and 6.3;
32
(c) by Avenor upon the occurrence of the Avenor Break Fee Event as
provided in Section 8.1; and
(d) by Bowater upon the occurrence of a Bowater Break Fee Event as
provided in Section 8.2; or
(e) by Avenor upon any determination by Avenor that an Acquisition
Proposal constitutes a Superior Proposal, subject to the payment of
the break fee payable to Bowater under Section 8.2.
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 transactions 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.
Avenor and Bowater represent and warrant to each other that, except for RBC
Dominion Securities Inc. in the case of Avenor and TD Securities Inc. and
Xxxxxxx, Xxxxx & 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 transactions 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 delivering same or sending same by facsimile
transmission or by 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, 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 delivery 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 Avenor:
33
Avenor Inc.
0000 Xxxx-Xxxxxxxx Xxxx. Xxxx
00xx Xxxxx
Xxxxxxxx, Xxxxxx X0X 0X0
Attention: Xxxx Xxxxxxx
Senior Vice President, General Counsel and Secretary
Fax: (000) 000-0000
with a copy to:
Xxxxxx, Xxxx & Xxxx
44th Floor
1 First Canadian Place
Toronto, Ontario
M5X 1B1
Attention: J-P. Bisnaire
Fax: (000) 000-0000
(b) if to Bowater:
Bowater Incorporated
00 Xxxx Xxxxxxxxxx Xxx
P.O. Box 1028
Greenville, South Carolina
29602
Attention: Xxxxxxx X. Xxxxxx
Senior Vice-President,
Corporate Affairs and General Counsel
Fax: (000) 000-0000
with a copy to:
Fraser & Xxxxxx
0 Xxxxx Xxxxxxxx Xxxxx
Xxxxx 0000, X.X. Xxx 000
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxxx Xxxxxx and Xxxxx Plant
Fax: (000) 000-0000
10.3 Time of the Essence
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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.
10.6 Governing Law
This Agreement shall be governed by, and be construed in accordance with,
the laws of the Province of Ontario 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 Ontario. Each Party hereby irrevocably attorns to the jurisdiction
of the Courts of the Province of Ontario 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.
35
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.
IN WITNESS WHEREOF the Parties hereto have executed this Agreement as of
the date first above written.
AVENOR INC.
Per: /s/ Xxxxxx X. Xxxxxxx
------------------------------
Xxxxxx X. Xxxxxxx
President and Chief Executive Officer
BOWATER INCORPORATED
Per: /s/ Xxxxxx X. Xxxxxxx
------------------------------
Xxxxxx X. Xxxxxxx
Chairman, President and
Chief Executive Officer
36
SCHEDULE A
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 March 9, 1998
between Avenor 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 Avenor Common Shares at the Avenor Shareholders' Meeting.
"Avenor" means Avenor Inc., a corporation subsisting under the Act.
"Avenor Common Shares" means the common shares in the capital of Avenor.
"Avenor Shareholders' Meeting" means the annual and special meeting of the
shareholders of Avenor (including any adjournment thereof) that is to be
convened as provided by the Interim Order to consider, and if deemed advisable,
approve the Arrangement.
"Average Trading Price of Bowater Common Shares" means the number that
equals the weighted average trading price, denominated in U.S. dollars, of
Bowater Common Shares as reported on the NYSE for the 20 days on which trading
took place on the NYSE ending on the Determination Date; provided, however, that
if such average trading price exceeds U.S.$55.6187, the Average Trading Price of
Bowater Common Shares shall be U.S.$55.6187, and if such average trading price
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is less than U.S.$45.5062, the Average Trading Price of Bowater Common Shares
shall be U.S.$45.5062.
"Bowater" means Bowater Incorporated, a corporation existing under the laws
of the State of Delaware.
"Bowater Canada" means Bowater Canada Inc., a corporation incorporated
under the Act and a subsidiary of Bowater Holdings.
"Bowater Common Share" means a share of common stock of Bowater, US$1.00
par value per share.
"Bowater Elected Share" means any Avenor 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 a
fraction of a Bowater Common Share or that is deemed to be a Bowater Elected
Share pursuant to Section 2.3(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 Elected Share" means any Avenor 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 $35
in cash or that is deemed to be a Cash Elected Share pursuant to Section 2.3(d).
"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 Ontario Court of Justice (General Division).
"Depositary" means the depositary appointed by Bowater for the purpose of,
among other things, exchanging certificates representing Avenor Common Shares
for cash, Exchangeable Shares or Bowater Common Shares, as the case may be.
"Determination Date" means the day which is the third Business Day prior to
the Effective Date.
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"Determination Date Foreign Exchange Rate" means the number (including any
decimal fraction) which is the value in Canadian dollars of one U.S. dollar at
the rate of exchange equal to the Bank of Canada's noon spot exchange rate for
such currencies on the Determination Date.
"Dissent Procedures" has the meaning set out in Section 3.1.
"Dissenting Shareholder" means a holder of Avenor 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.
"Exchange Ratio" means the number equal to C$35 divided by the product of
(i) the Average Trading Price of Bowater Common Shares and (ii) the
Determination Date Foreign Exchange Rate.
"Exchangeable Share" means a share in the class of non-voting exchangeable
shares in the capital of Bowater Canada.
"Exchangeable Share Elected Share" means any Avenor 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 a
fraction of an Exchangeable Share or that is deemed to be an Exchangeable Share
Elected Share pursuant to Section 2.1(d) or 2.3(b).
"Exchangeable Share Provisions" means the rights, privileges, restrictions
and conditions attaching to the Exchangeable Shares.
"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.
"Joint Proxy Statement" means the joint management information circular and
proxy statement of Avenor and Bowater to be prepared and sent to the
shareholders of Avenor in connection with the Avenor Shareholders' Meeting.
"Letter of Transmittal" means collectively a Letter of Transmittal and
Election Form in the forms accompanying the Joint Proxy Statement.
"Liquidation Call Right" has the meaning ascribed thereto in Section
5.1(a).
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"Liquidation Date" has the meaning ascribed thereto in the Exchangeable
Share Provisions.
"Meeting Date" means the date of the Avenor Shareholders' Meeting.
"NYSE" means the New York Stock Exchange, Inc.
"Outstanding Avenor Common Shares" means the number of Avenor 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 Section 5.2(a).
"Redemption Date" has the meaning ascribed thereto in the Exchangeable
Share Provisions.
"Share Elected Share" means a Cash Elected Share that, because of the
operation of the proration provisions set forth in Section 2.3(b), shall be
deemed to be an Exchangeable Share Elected Share; provided, however, that if the
holder thereof 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 have Cash Elected Shares
that are subject to the proration provisions set forth in Section 2.3(b) be
deemed to be Bowater Elected Shares, such Cash Elected Shares shall be deemed to
be Bowater Elected Shares.
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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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) subject to Section 2.3, each Bowater Elected Share will be transferred
by the holder thereof to Bowater Holdings in exchange for that number
of fully paid and non-assessable Bowater Common Shares equal to the
Exchange Ratio, and the name of each such holder will be removed from
the register of holders of Avenor 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 Avenor Common Shares
accordingly;
(b) Bowater Holdings will transfer to Bowater Canada all the Avenor 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 Avenor Common Shares and
Bowater Canada will be added to the register of holders of Avenor
Common Shares accordingly;
(c) subject to Section 2.3, each Cash Elected Share and Exchangeable Share
Elected Share will be transferred by the holder thereof to Bowater
Canada in exchange for (i) in the case of a Cash Elected Share, C$35
in cash, without interest thereon and (ii) in the case of an
Exchangeable Share Elected Share, that number of Exchangeable Shares
equal to the Exchange Ratio, and each holder who receives cash will be
removed from the register of holders of Avenor Common Shares and each
holder who receives Exchangeable Shares will be removed from the
register of holders of Avenor Common Shares and added to the register
of holders of Exchangeable Shares and Bowater Canada shall be recorded
as the registered holder of such Avenor Common Shares so exchanged;
provided, however, that where a holder receives both cash and
Exchangeable Shares, each Avenor Common Share transferred to Bowater
Canada by the holder thereof will be deemed to have been transferred
to Bowater Canada for a combination of cash and Exchangeable Shares,
with the cash portion of such consideration received by such holder
for such share being equal to the aggregate cash consideration
received by such holder divided by the number of Avenor Common Shares
so transferred; and
(d) subject to Section 2.3, each Avenor Common Share in respect of which
an effective election has not been made (other than Avenor Common
Shares held by Dissenting
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Shareholders who are ultimately entitled to be paid the fair value of
the Avenor Common Shares held by them) will be deemed to be an
Exchangeable Share Elected Share and will be transferred to Bowater
Canada in exchange for Exchangeable Shares in accordance with the
provisions described in paragraph (c) above, and each such holder will
be removed from the register of holders of Avenor Common Shares and
added to the register of holders of Exchangeable Shares and Bowater
Canada shall be recorded as the registered holder of such Avenor
Common Shares so exchanged.
2.2 Elections
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 Avenor
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. on the Business Day
immediately preceding the Meeting Date to receive cash, Exchangeable Shares or
Bowater Common Shares, or a combination thereof, in exchange for such holder's
Avenor 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 Avenor, including the form of the Letter of
Transmittal containing the elections and the procedures governing transmittal.
2.3 Proration
(a) Notwithstanding Section 2.1(c), the maximum aggregate amount of cash
that may be paid to holders of Avenor Common Shares pursuant to this
Article 2 (the "Cash Cap") shall be equal to (A) the product of (i)
C$35, (ii) the number of Outstanding Avenor Common Shares and (iii)
0.60 less (B) the lesser of (x) the product of (i) $21 and (ii) the
number of Avenor Common Shares in respect of which a notice of dissent
has been delivered by Dissenting Shareholders in accordance with the
Act and (y) $65,000,000.
(b) If the product (the "Requested Cash Amount") of (i) the aggregate
number of Cash Elected Shares and (ii) C$35, exceeds the Cash Cap,
then a cash proration factor (the "Cash Proration Factor") shall be
determined by dividing the Cash Cap by the Requested Cash Amount and
the number of Cash Elected Shares of each holder thereof shall be
reduced to the product of (x) the Cash Proration Factor and (y) the
number of Cash Elected Shares of such holder (the "Available Cash
Elected Shares"), and the difference between such holder's Cash
Elected Shares and such holder's Available Cash Elected Shares shall
be deemed to be Share Elected Shares of such holder.
(c) Notwithstanding Sections 2.1(a), (c) and (d), the maximum aggregate
number of Exchangeable Shares and Bowater Common Shares that may be
issued to or received
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by holders of Avenor Common Shares pursuant to this Article 2 (the
"Share Cap") shall be equal to the product of (x) the Exchange Ratio,
(y) the number of Outstanding Avenor Common Shares and (z) 0.50.
(d) If the product (the "Requested Share Amount") of (w) the difference
between (A) the number of Outstanding Avenor Common Shares (other than
Avenor Common Shares held by holders who have delivered a notice of
dissent in accordance with the Act) and (B) the aggregate number of
Cash Elected Shares (such difference, the "Deemed Share Elected
Shares") and (x) the Exchange Ratio, exceeds the Share Cap, then a
share proration factor (the "Share Proration Factor") shall be
determined by dividing the Share Cap by the Requested Share Amount and
the number of Deemed Share Elected Shares of each holder thereof shall
be reduced to the product of (x) the Share Proration Factor and (y)
the number of Deemed Share Elected Shares of such holder (the
"Available Share Elected Shares") and the difference between such
holder's Deemed Share Elected Shares and such holder's Available Share
Elected Shares shall be deemed to be Cash Elected Shares of such
holder. If the number of Deemed Share Elected Shares is reduced
pursuant to the provisions of this paragraph (d), such reduction will
be made pro rata as between the Exchangeable Share Elected Shares and
the Bowater Elected Shares of such holder.
ARTICLE 3
RIGHTS OF DISSENT
3.1 Rights of Dissent
Holders of Avenor 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 Avenor Common
Shares shall be deemed to have transferred such Avenor Common Shares
to Avenor for cancellation on the Effective Date; or
(b) are ultimately not entitled, for any reason, to be paid fair value for
their Avenor Common Shares shall be deemed to have participated in the
Arrangement on the same basis as a non-dissenting holder of Avenor
Common Shares and shall receive Exchangeable Shares on the basis
determined in accordance with Section 2.1(d),
but in no case shall Bowater, Bowater Holdings, Bowater Canada, Avenor or any
other Person be required to recognize such holders as holders of Avenor Common
Shares after the Effective Time,
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and the names of such holders of Avenor Common Shares shall be deleted from the
registers of holders of Avenor Common Shares at the Effective Time.
ARTICLE 4
CERTIFICATES AND FRACTIONAL 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 Avenor Common Shares who will
receive Exchangeable Shares in connection with the Arrangement, certificates
representing the Exchangeable Shares issued pursuant to Section 2.1 upon the
exchange of Avenor Common Shares. Upon surrender to the Depositary for
cancellation of a certificate which immediately prior to the Effective Time
represented one or more Avenor Common Shares that were exchanged for one or more
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 Avenor
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, 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 4.4 and
any cash in lieu of fractional Exchangeable Shares pursuant to Section 4.5 and
as a result of the operation of Section 2.3), and the certificate so surrendered
shall forthwith be cancelled. In the event of a transfer of ownership of Avenor
Common Shares that is not registered in the transfer records of Avenor, a
certificate representing the proper number of Exchangeable Shares may be issued
to the transferee if the certificate representing such Avenor 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
Avenor Common Shares that were exchanged for Exchangeable Shares shall be deemed
at any time after the Effective Time to represent only the right to receive upon
such surrender (i) 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 4.5 and a cash payment as a
result of the operation of Section 2.3, 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 4.4.
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 Avenor Common Shares who
will receive Bowater Common Shares in connection with the Arrangement,
certificates representing the Bowater Common Shares issued
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pursuant to Section 2.1 in exchange for outstanding Avenor Common Shares. Upon
surrender to the Depositary for cancellation of a certificate which immediately
prior to the Effective Time represented outstanding Avenor Common Shares that
were exchanged for 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 Avenor
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, 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 4.4
and any cash in lieu of fractional Bowater Common Shares pursuant to Section 4.3
and as a result of the operation of Section 2.3), and the certificate so
surrendered shall forthwith be cancelled. In the event of a transfer of
ownership of Avenor Common Shares which is not registered in the transfer
records of Avenor, a certificate representing the proper number of Bowater
Common Shares may be issued to the transferee if the certificate representing
such Avenor 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 one or more outstanding Avenor Common Shares that
were exchanged for 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 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 4.5 and as a result of the operation of Section 2.3
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 4.4.
4.3 Exchange of Certificates for Cash
At or promptly after the Effective Time, Bowater Canada shall deposit
sufficient cash with the Depositary for the benefit of the holders of Avenor
Common Shares who will receive cash in connection with the Arrangement. Upon
surrender to the Depositary for cancellation of a certificate which immediately
prior to the Effective Time represented outstanding Avenor Common Shares that
were exchanged for cash, 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 Avenor 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 cash
which such holder has the right to receive under the Arrangement. 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.
4.4 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
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be paid to the holder of any unsurrendered certificate which immediately prior
to the Effective Time represented outstanding Avenor 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 4.5, 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 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 4.5, (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.
4.5 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
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the Depositary, pro rata in relation to the respective fractions,
among the Persons otherwise entitled to receive fractional interests
in Bowater Common Shares.
4.6 Lost Certificates
In the event any certificate which immediately prior to the Effective Time
represented one or more outstanding Avenor 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 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/or one or more certificates
representing one or more Exchangeable Shares or Bowater Common Shares (and any
dividends or distributions with respect thereto and any cash pursuant to Section
4.5) deliverable in accordance with such holder's Letter of Transmittal and
subject to Section 2.3. 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.
4.7 Extinction of Rights
Any certificate which immediately prior to the Effective Time represented
outstanding Avenor 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.
4.8 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 Avenor 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
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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 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 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 the 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
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
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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 4.8 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 4.8 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 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.
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5.2 Bowater Holdings Redemption Call Right
In addition to Bowater Holdings' rights contained in the Exchangeable Share
Provisions, including, without limitation, the Retraction Call Right (as defined
in the Exchangeable Share Provisions), Bowater Holdings shall have the following
rights in respect of the Exchangeable Shares:
(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 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 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
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Call Purchase Price less any amounts withheld pursuant to Section 4.8
hereof. Provided that Bowater Holdings has complied with the
immediately 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 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 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 4.8 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
Avenor 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
Avenor Shareholders' Meeting, approved by the Court, and (iv) communicated to
holders of Avenor Common Shares if and as required by the Court.
Any amendment, modification or supplement to this Plan of Arrangement may
be proposed by Avenor at any time prior to the Avenor Shareholders' Meeting
(provided that Bowater shall have
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consented thereto) with or without any other prior notice or communication, and
if so proposed and accepted by the Persons voting at the Avenor 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 Avenor Shareholders' Meeting shall be
effective only if (i) it is consented to by each of Avenor and Bowater, and (ii)
if required by the Court, it is consented to by holders of the Avenor Common
Shares voting in the manner directed by the Court.
EXHIBIT 1
PROVISIONS ATTACHING TO THE
EXCHANGEABLE SHARES
The Exchangeable Shares shall have the following rights, privileges,
restrictions and conditions:
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.
Exhibit 1-2
"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,
(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 bid and asked
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
Exhibit 1-3
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, to which plan these share provisions are attached.
"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:
(a) 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 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
upon at least 60 days' prior written notice of any such acceleration to the
registered holders of the Exchangeable Shares; provided however, that the
accidental failure or omission to give any such notice of acceleration to less
than 10% of such holders of Exchangeable Shares shall not affect the validity of
such acceleration.; or
(b) Control of Bowater is acquired by any Person, in which case the
Redemption Date will be immediately prior to the event which causes the
acquisition of control.
"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.
Exhibit 1-4
"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.
"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 Secretary of Bowater 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 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
Exhibit 1-5
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
(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.
Exhibit 1-6
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,
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
Exhibit 1-7
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.
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 to date and paid on the Bowater Common
Shares shall have been declared on the Exchangeable Shares and paid in full.
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
Exhibit 1-8
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
(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
Exhibit 1-9
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 these share provisions, such holders shall not be
entitled to share in any further distribution of the assets of Bowater Canada.
Exhibit 1-10
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.
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
Exhibit 1-11
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
Exhibit 1-12
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 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
Exhibit 1-13
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
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 except in
the case of an acquisition of Control of Bowater, 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. In
the case of an acquisition of Control of Bowater, the notice of redemption by
Bowater Canada or the purchase by Bowater Holdings under the Redemption Call
Right will be sent on the Redemption Date. 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.
Exhibit 1-14
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 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.
Exhibit 1-15
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 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
Exhibit 1-16
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.
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:
Exhibit 1-17
(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 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
Exhibit 1-18
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 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
Exhibit 1-19
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 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.
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 $[ a number equal to
C$35 divided by the Exchange Ratio will be inserted prior to the filing of
articles of Bowater Canada providing for these share provisions].
SCHEDULE A
NOTICE OF RETRACTION
To Bowater Incorporated ("Bowater"), Bowater Canada Inc. ("Bowater Canada") and
Bowater Canadian Holdings Incorporated ("Bowater Holdings")
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.
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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 by 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)
A-3
City, Province and Postal Code
Signature Guaranteed by
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).
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF AVENOR INC.
1. Organization. Each of Avenor and its Material 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 Avenor
are, except as disclosed in writing, to Bowater or pursuant to restrictions
on transfer contained in constating documents, rights of first refusal and
similar rights restricting transfer contained in shareholders, partnership
or joint venture agreements for or pursuant to existing financing
arrangements involving Subsidiaries which are not wholly owned, 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.
Avenor has disclosed in writing to Bowater the names and jurisdictions of
incorporation of each of its Subsidiaries.
2. Capitalization. The authorized capital of Avenor consists of an unlimited
number of Avenor Common Shares. As of December 31, 1997 there were
65,534,625 Avenor Common Shares outstanding and 1,500,000 Avenor Common
Shares were reserved, in the aggregate, for issuance in respect of the Key
Employee Stock Incentive Plan of which 1,240,969 Avenor Common Shares are
subject to issuance under the Key Employee Stock Incentive Plan and
5,693,115 Avenor Common Shares are issuable on exercise of the outstanding
Avenor Convertible Debentures and no more than 400,000 Avenor Common Shares
are issuable under Avenor's Employee Share Purchase Plan. Except as
described in the immediately preceding sentence, and except for the rights
issued in connection with the Avenor Shareholder Rights Plan Agreement
dated October 20, 1995, there are no options, warrants, conversion
privileges or other rights, agreements, arrangements or commitments
obligating Avenor or any Subsidiary to issue or sell any shares of Avenor
or any of its Subsidiaries or securities or obligations of any kind
convertible into or exchangeable for any shares of Avenor, 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
Avenor or any Subsidiary. There have been no Avenor Common Shares issued
since December 31, 1997, other than pursuant to the exercise of stock
option entitlements and 4,487 Avenor Common Shares issued under Avenor's
Employee Share Purchase Plan. All outstanding Avenor 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 Avenor
or any Subsidiary having the right to vote
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(or, other than the Avenor Convertible Debentures, that are convertible for
or exercisable into securities having the right to vote) with the holders
of the Avenor Common Shares on any matter. There are no outstanding
contractual obligations of Avenor or any of its subsidiaries to repurchase,
redeem or otherwise acquire any of its outstanding securities or with
respect to the voting or disposition of any outstanding securities of any
of its Subsidiaries.
3. Authority. Avenor has the requisite corporate power and authority to enter
into this Agreement and to perform its obligations hereunder. The execution
and delivery of this Agreement by Avenor and the consummation by Avenor of
the transactions contemplated by this Agreement have been duly authorized
by the Board of Directors of Avenor and, subject to shareholder approval,
no other corporate proceedings on the part of Avenor are necessary to
authorize this Agreement or the transactions contemplated hereby other than
in connection with the approval by the Board of Directors of Avenor of the
Joint Proxy Circular, the issuance of Avenor Exchangeable Shares and other
matters relating to the implementation of the Arrangement. This Agreement
has been duly executed and delivered by Avenor and constitutes a valid and
binding obligation of Avenor, enforceable against Avenor 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 as disclosed in writing to Bowater on or prior to the date
hereof, the approval of the Arrangement Agreement and the consents,
approvals, orders, authorizations, declarations and filings referred to in
Section 6.1 of this Agreement, the execution and delivery by Avenor of this
Agreement and performance by it of its obligations hereunder and the
completion of the Arrangement and the transactions 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 Material Subsidiary's 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 Material Subsidiary;
(ii) any law, regulation, order, judgment or decree; or
(iii)any contract, agreement, license, franchise or permit to which
Avenor or any Material Subsidiary is bound or is subject or is the
beneficiary;
(b) give rise to any right of termination or acceleration of indebtedness,
or cause any third party indebtedness to come due before its stated maturity or
cause any available credit to cease to be available; or
B-3
(c) result in the imposition of any encumbrance, charge or lien upon any of
its assets or the assets of any Material Subsidiary, or restrict, hinder, impair
or limit the ability of Avenor or any Material Subsidiary to carry on the
business of Avenor or any Material 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
Avenor. Except as previously disclosed in writing to 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 Avenor and its
Subsidiaries in connection with the execution and delivery of this Agreement or
the consummation by Avenor of the transactions contemplated hereby other than
(i) any approvals required by the Interim Order, (ii) the Final Order, (iii)
filings with the Director under the CBCA and filings with and approvals required
by provincial securities authorities and stock exchanges, (iv) any other
consents, waivers, permits, orders or approvals referred to in Section 6.1 of
this Agreement and (v) any other consents, approvals, orders, authorizations,
declarations or filings which, if not obtained, would not in the aggregate have
a material adverse effect on Avenor.
4. Material Customers. There is no single customer of Avenor or its
Subsidiaries, the loss of which would have a material adverse effect
on Avenor.
5. No Defaults. Except as disclosed in writing to Bowater, neither Avenor
nor any of its Subsidiaries is in 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 which would, if terminated due to
such default, cause a material adverse effect with respect to Avenor.
6. Intellectual Property. Avenor 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 Avenor and its Subsidiaries taken as
a whole.
7. Absence of Changes. Since December 31, 1997, and except as has been
previously disclosed in writing to Bowater or has been publicly
disclosed prior to the date hereof in any document filed with the
Ontario Securities Commission (the "Securities Authorities") (i)
Avenor 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 Avenor have been incurred, (iii)
there has not been any material change (as defined under the
Securities Act (Ontario)) in the affairs of Avenor or in the financial
condition, results of operations or business of Avenor, (iv) as of the
date hereof, there are no material change reports filed with
B-4
the Securities Authorities which remain confidential, (v) Avenor has
not declared or paid any dividends or distributions on any of its
outstanding shares (other than regular quarterly dividends in respect
of the Avenor Common Shares consistent with past practice), (vi)
Avenor has not effected or passed any resolution to approve a split,
combination or reclassification of any of its outstanding shares,
(vii) Avenor has not granted any increase in the aggregate cash
compensation payable to any executive officer, except in the ordinary
course of business consistent with past practice, or granted to any
such officer of any increase in severance or termination pay, (viii)
Avenor has not effected any change in its accounting methods,
principles or practices, and (ix) Avenor has not adopted or materially
amended any collective bargaining agreement, bonus, pension, profit
sharing, stock purchase, stock option or other benefit plan. The last
filing by Avenor with Securities Authorities was the 1997 financial
statements and management's discussion and analysis relating thereto
filed with the Securities Authorities on or about March 4, 1998.
8. Employment Agreements
(a) Other than as disclosed in writing to Bowater on or prior to the date
hereof, or except as set forth in the proxy circular prepared in connection with
the Annual Meeting of Avenor held in 1997, Avenor is not a party to any written
or oral policy, agreement, obligation or understanding providing for severance
or termination payments to, or any employment agreement with, any senior
executive of Avenor.
(b) Other than as disclosed in writing to Bowater on or prior to the date
hereof, neither Avenor nor any Material Subsidiary is a party to any collective
bargaining agreement nor subject to any application for certification or
threatened or apparent union-organizing campaigns for employees not covered
under a collective bargaining agreement nor are there any current, pending or
threatened strikes or lockouts at either Avenor or any Material Subsidiary that
would individually or in the aggregate have a material adverse effect on Avenor.
(c) Other than as disclosed in writing to Bowater on or prior to the date
hereof, neither Avenor nor any Material Subsidiary is subject to any claim for
wrongful dismissal, constructive dismissal or any other tort claim, actual or
threatened, or any litigation, actual or threatened, relating to employment or
termination of employment of employees or independent contractors other than
those claims or such litigation as would individually or in the aggregate not
have a material adverse effect on Avenor.
(d) Other than as disclosed in writing to Bowater on or prior to the date
hereof or are not material, Avenor and all Material Subsidiaries have operated
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 and labour relations and there are no current, pending or threatened
proceedings before any board or tribunal with respect to any of the areas listed
herein other than where the failure to so
B-5
operate or such proceedings which, individually or in the aggregate, would not
have a material adverse effect on Avenor.
9. Disclosure. Avenor has publicly disclosed in documents filed with the
Securities Authorities or disclosed to Bowater in writing, on or prior
to the date hereof, any 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 Avenor.
10. Financial Statements. The audited consolidated statement of financial
position and related consolidated statements of income, changes in
financial position and contributed surplus and retained earnings of
Avenor for the fiscal year ending December 31, 1997, and the audited
consolidated statement of financial position and related consolidated
statements of income, changes in financial position and statements of
contributed surplus and retained earnings for the years ended December
31, 1995 and December 31, 1996, as contained in Avenor's 1995 and 1996
Annual Reports, were prepared in accordance with generally accepted
accounting principles in Canada consistently applied and fairly
present the consolidated financial condition of Avenor at the
respective dates indicated and the results of operations of Avenor (on
a consolidated basis) for the period covered.
11. Books and Records. The corporate records and minute books of Avenor
and the Material 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 set forth or specifically reflected in any
document filed with the Securities Authorities, or as disclosed in
writing to Bowater prior to the date hereof, there is no claim,
action, proceeding or investigation pending or, to the knowledge of
Avenor, threatened against or relating to Avenor or any Material
Subsidiary or affecting any of their properties or assets before any
court or governmental or regulatory authority or body that, if
adversely determined, is likely to have a material adverse effect on
Avenor and its Material Subsidiaries, taken as a whole, or prevent or
materially delay consummation of the transactions contemplated by this
Agreement or the Arrangement, nor is Avenor aware of any basis for any
such claim, action, proceeding or investigation. Neither Avenor nor
any Material Subsidiary is subject to any outstanding order, writ,
injunction or decree that has had or is reasonably likely to have a
material adverse effect on Avenor or prevent or materially delay
consummation of the transactions contemplated by this Agreement or the
Arrangement.
13. Environmental. All operations of Avenor and its Material 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
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adverse effect on Avenor. Except as Avenor has publicly disclosed in
documents filed with the Securities Authorities or as disclosed in
writing to Bowater prior to the date hereof, neither Avenor nor any
Material Subsidiary 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 Avenor or any Subsidiary, including, without limitation, any
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
Avenor.
14. Insurance. Policies of insurance in force as of the date hereof naming
Avenor as an insured adequately cover all risks reasonably and
prudently foreseeable in the operation and conduct of the business of
Avenor and the Material Subsidiaries for which, having regard to the
nature of such risk and the relative cost of obtaining insurance, it
is in the opinion of Avenor acting reasonably to seek such insurances
rather than provide for self insurance. 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 transactions contemplated
hereby or by the Arrangement other than such cancellations as would
not individually or in the aggregate have a material adverse effect on
Avenor.
15. Tax Matters. Avenor and each of its Subsidiaries have timely filed, or
caused to be filed, all Tax Returns required to be filed by them (all
of which returns were correct and complete in all material respects)
and have paid, or caused to be paid, all Taxes that are due and
payable, in each case except for any such Tax Returns or Taxes the
non-filing or non-payment of which have not had and would not be
reasonably likely to have a material adverse effect on Avenor, and
Avenor 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. 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.
Except as otherwise disclosed in writing to Bowater, neither Avenor nor any
Subsidiary has received any written notification that any material issues have
been raised (and are currently pending) by Revenue Canada, 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 no waivers of statutes of limitations have been given or
requested with respect to Avenor or any Subsidiary, in each case except for any
such written notices or waivers which have
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not had and would not be likely to have a material adverse effect on Avenor. To
the best of the knowledge of Avenor, 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 Avenor nor any
Avenor Subsidiary (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 Avenor or any Avenor Subsidiary has or could have any
liabilities in respect of Taxes. Avenor 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.
"Tax" and "Taxes" means, with respect to any entity, (A) 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, 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 insurance or compensation, stamp taxes, occupation
taxes, premium taxes, property taxes, windfall profits taxes, alternative or
add-on minimum taxes, goods and services tax, 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 (B) any
liability for the payment of any amount of the type described in the immediately
preceding clause (A) 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.
16. Pension and Employee Benefits
(a) Other than as disclosed in writing to Bowater on or prior to the date
hereof or in any document previously filed with the Securities Authorities,
Avenor has complied, in all material respects, with all the terms of, and all
applicable Laws in respect of, the pension and other employee compensation and
benefit obligations of Avenor and its Material Subsidiaries, including the terms
of any collective agreements, funding and investment contracts or obligations
applicable thereto, arising under or relating to each of the pension or
retirement income plans or other employee compensation or benefit plans,
agreements, policies, programs, arrangements or practices, whether written or
oral, which are maintained by or binding upon Avenor or any of its Material
Subsidiaries (collectively referred to as the "Avenor Plans") and all Avenor
Plans are fully funded and in good standing with such regulatory authorities as
may be applicable.
(b) 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 Avenor 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
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regulatory authority or being required to pay any material Taxes, fees,
penalties or levies under applicable Laws. There are no actions, suits, claims
(other than routine claims for payment of benefits in the ordinary course),
trials, demands, investigations, arbitrations or other proceedings which are
pending or threatened in respect of any of the Avenor Plans or their assets
which individually or in the aggregate would have a material adverse effect on
Avenor.
17. Property. Other than as disclosed in writing to Bowater on or prior to
the date hereof, Avenor and its Material Subsidiaries have good and
sufficient title to the real property interests including, without
limitation, fee simple estate of and in real property, leases,
easements, rights of way, permits or licences from land owners or
authorities permitting the use of land by Avenor and its Material
Subsidiaries, necessary to permit the operation of its businesses as
presently owned and conducted except as disclosed in writing to Avenor
and except for such failure of title that would individually or in the
aggregate not have a material adverse effect on Avenor.
18. Reports. Avenor 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, 1996 (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 "Avenor Documents"). The
Avenor 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. Avenor has not filed any confidential material
change report with any Securities Authorities which at the date hereof
remains confidential.
19. Compliance with Laws. Since December 31, 1997, and except as has been
publicly disclosed prior to the date hereof in any document filed with
the Securities Authorities, Avenor and its Material 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 Avenor.
20. Licenses, Etc. Except as disclosed in writing to Bowater on or prior
to the date hereof, Avenor and each of its Material 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 or as proposed to be 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 Avenor.
21. Certain Contracts. Except as disclosed in writing to Bowater on or
prior to the date hereof, neither Avenor nor any of its Material
Subsidiaries is a party to or bound by
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any non-competition agreement or any other agreement or obligation
which purports to limit the manner or the localities in which all or
any material portion of the business of Avenor or its Material
Subsidiaries is or would be conducted other than such contracts which
individually or in the aggregate would not have a material adverse
effect on the current business or operations of Avenor.
22. Insurance Matters. Avenor 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 Avenor (including former
directors and officers) would not be available for the six years
following the Effective Date as provided in Section 5.9, "Insurance",
of the Arrangement Agreement. There have not been any claims asserted
against Avenor with respect to any directors' or officers'
indemnification agreement referred to in Section 5.9. Avenor has not
taken any action, and Avenor is not aware that the insureds under the
policy referred to in Section 5.9 have taken any action, which would
impair the coverage under such insurance policy.
SCHEDULE C
REPRESENTATIONS AND WARRANTIES OF BOWATER
1. Organization. Each of Bowater and its Material 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
Bowater are, except as disclosed in writing, to Avenor or pursuant to
restrictions on transfer contained in constating documents, rights of first
refusal and similar rights restricting transfer contained in shareholders,
partnership or joint venture agreements for or pursuant to existing
financing arrangements involving Subsidiaries which are not wholly owned,
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 December 31, 1997 there
were 40,321,105 Bowater Common Shares outstanding and 264,318 8.40% Series
C Cumulative Preferred Stock outstanding. As of December 31, 1997 there
were reserved, in the aggregate, for issuance in respect of Bowater's Stock
Incentive Plans 2,549,000 Bowater Common Shares of which 642,000 have yet
to be granted and 1,907,000 were outstanding but unexercised as at December
31, 1997. In addition, Bowater has established the 1997-1999 Long Term
Incentive Plan, which could result in the issuance of up to an additional
991,878 Bowater Common Shares. Except as described in the immediately
preceding sentences, there are no options, warrants, conversion privileges
or other rights, agreements, arrangements or commitments obligating Bowater
or any Subsidiary to issue or sell any shares of Bowater or any of its
Subsidiaries or securities or obligations of any kind convertible into or
exchangeable for any shares of Bowater, any Subsidiary or any other person.
There have been no Bowater Common Shares issued since December 31, 1997,
other than pursuant to the exercise of stock option entitlements.
3. Authority. Bowater has the requisite corporate power and authority to enter
into this Agreement and to perform its obligations hereunder. The execution
and delivery of this Agreement by Bowater and the consummation by Bowater
of the transactions contemplated by this Agreement have been duly
authorized by the Board of Directors of Bowater and, subject to shareholder
approval, no other corporate proceedings on the part of Bowater are
necessary to authorize this Agreement or the transactions contemplated
hereby other than in connection with the approval by the Board of
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Directors of Bowater of the Joint Proxy Circular, 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 valid 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 as disclosed in
writing to Avenor on or prior to the date hereof, the approval of the
Bowater Resolution and the consents, approvals, orders, authorizations,
declarations and filings court and regulatory approvals 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 transactions 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 Material Subsidiary's 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 Material Subsidiary;
(ii) any law, regulation, order, judgment or decree; or
(iii) any contract, agreement, license, franchise or permit to which
Bowater or any Material Subsidiary is bound or is subject or is the
beneficiary;
(b) give rise to any right of termination or acceleration of indebtedness,
or cause any third party indebtedness to come due before its stated maturity or
cause any available credit 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 Material Subsidiary, or restrict, hinder, impair
or limit the ability of Bowater or any Material Subsidiary to carry on the
business of Bowater or any Material 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 Bowater. Except as disclosed in writing to Avenor, 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 and its
Subsidiaries in connection with the execution and delivery of this Agreement or
the consummation by Bowater of the transactions 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, state and provincial
securities authorities and stock exchanges, (iv) any other consents, waivers,
permits, orders or approvals
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referred to in Section 6.1 of this Agreement and (v) any other consents,
approvals, orders, authorizations, declarations or filings which, if not
obtained, would not in the aggregate have a material adverse effect on Bowater.
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.
Bowater has provided to Avenor the terms of such financing as set out
in commitment letters of The Chase Manhattan Bank both dated March 5,
1998 in favour of Bowater.
5. Absence of Changes. Since December 31, 1997, and except as has been
previously disclosed in writing to Avenor or has been publicly
disclosed prior to the date hereof in any document filed with the SEC,
(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, and
(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.
6. Employment Agreements. Other than as disclosed in writing to Avenor on
or prior to the date hereof, Bowater has disclosed all that it is
required by Law to publicly disclose with respect to any agreement,
obligation or understanding providing for severance or termination
payments to, or any employment agreement with, any senior executive
officer of Bowater.
7. Disclosure. Bowater has publicly disclosed in documents filed with the
SEC or disclosed to Avenor in writing, on or prior to the date hereof,
any 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.
8. 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, 1997, and such statements of
Bowater for the years ended December 31, 1995 and December 31, 1996,
as contained in Bowater's 1995 and 1996 Annual Reports, were prepared
in accordance with 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.
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9. Litigation, Etc. Except as set forth or specifically reflected in any
document filed with the SEC, or as disclosed in writing to Avenor
prior to the date hereof, there is no claim, action, proceeding or
investigation pending or, to the knowledge of Bowater, threatened
against or relating to Bowater or any Material Subsidiary or affecting
any of their properties or assets before any court or governmental or
regulatory authority or body that, if adversely determined, is likely
to have a material adverse effect on Bowater or prevent or materially
delay consummation of the transactions contemplated by this Agreement,
nor is Bowater aware of any basis for any such claim, action,
proceeding or investigation. Neither Bowater nor any Material
Subsidiary is subject to any outstanding order, writ, injunction or
decree that has had or is reasonably likely to have a material adverse
effect on Bowater or prevent or materially delay consummation of the
transactions contemplated by this Agreement.
10. Environmental. All operations of Bowater and its Material 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 Bowater. Except as
Bowater has publicly disclosed in documents filed with the SEC or has
disclosed in writing to Avenor prior to the date hereof, neither
Bowater nor any Material Subsidiary 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 Bowater or any Subsidiary, including, without limitation, any
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
Bowater.
11. Insurance. Policies of insurance in force as of the date hereof naming
Bowater as an insured adequately cover all risks reasonably and
prudently foreseeable in the operation and conduct of the business of
Bowater and the Material Subsidiaries for which, having regard to the
nature of such risk and the relative cost of obtaining insurance, it
is in the opinion of Bowater acting reasonably to seek such insurances
rather than provide for self insurance. 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 transactions contemplated
hereby or by the Arrangement other than such cancellations as would
not individually or in the aggregate have a material adverse effect on
Bowater.
12. Tax Matters. Except as disclosed in writing to Avenor, Bowater and
each of its Subsidiaries have filed on a timely basis (or within
permitted extensions), or caused
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to be filed, all Tax Returns required to be filed by them (all of
which returns were correct and complete in all material respects) and
have paid, or caused to be paid, all Taxes that are due and payable,
in each case except for any such Tax Returns or Taxes the non-filing
or non-payment of which have not had and would not be reasonably
likely to have a material adverse effect on Bowater, and Bowater 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. 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.
Except as otherwise disclosed in writing to Avenor, neither Bowater nor any
Subsidiary has received any written notification that any material issues have
been raised (and are currently pending) by Revenue Canada, 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 no waivers of statutes of limitations have been given or
requested with respect to Bowater or any Subsidiary, in each case except for any
such written notices or waivers which have not had and would not be likely to
have a material adverse effect on Bowater. To the best of the knowledge of
Bowater, 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 Bowater nor any Bowater Subsidiary (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 Bowater or any
Bowater Subsidiary has or could have any liabilities in respect of Taxes.
13. Pension and Employee Benefits
(a) Other than as disclosed in writing to Avenor on or prior to the date
hereof, Bowater has complied, in all material respects, with all the terms of
and all applicable Laws (including funding requirements) in respect of the
pension and other employee compensation and benefit obligations of Bowater and
its Material Subsidiaries.
(b) 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 Bowater 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. There are no actions, suits,
claims (other than routine claims for payment of benefits in the ordinary
course), trials, demands, investigations, arbitrations or other proceedings
which are pending or threatened in respect of any of the Bowater Plans or their
assets which individually or in the aggregate would have a material adverse
effect on Bowater.
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14. Property. Other than as disclosed in writing to Avenor on or prior to
the date hereof, Bowater and its Material Subsidiaries have good and sufficient
title to the real property interests including, without limitation, fee simple
estate of and in real property, leases, easements, rights of way, permits or
licences from land owners or authorities permitting the use of land by Bowater
and its Material Subsidiaries, necessary to permit the operation of its
businesses as presently owned and conducted except as disclosed in writing to
Bowater and except for such failure of title that would individually or in the
aggregate not have a material adverse effect on Bowater.
15. 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, 1996 (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
misrepresentation and (b) complied in all material respects with the
requirements of applicable securities legislation.
16. Compliance with Laws. Since December 31, 1997, and except as has been
publicly disclosed prior to the date hereof in any document filed with the SEC,
Bowater and its Material 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
Bowater.
17. Licenses, Etc. Except as has been publicly disclosed prior to the date
hereof in any document filed with SEC or disclosed in writing to Avenor, Bowater
and each of its Material Subsidiaries owns, possesses, or has obtained and is in
compliance with, all licenses, permits (including permits required under
Environmental Laws), certificates, costs, orders, grants and other
authorizations of or from any Governmental Entity necessary to conduct its
businesses as now conducted or as proposed to be 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 Bowater.
SCHEDULE D
"Capitalized Lease" shall mean any lease, the obligation for Rentals with
respect to which is required to be capitalized on a balance sheet of the lessee
in accordance with generally accepted Canadian accounting principles.
"Capitalized Rentals" shall mean as of the date of any determination the
amount at which the aggregate Rentals due and to become due under all
Capitalized Leases under which the Company or any Subsidiary is a lessee would
be reflected as a liability on a consolidated balance sheet of the Company and
its Subsidiaries.
"Company" means Avenor Inc.
"Consolidated Shareholders' Equity" shall mean, as of any date as of which
the amount thereof is to be determined, the amount of the stated capital
accounts plus (or minus in the case of a deficit) the surplus and retained
earnings of the Company and its Subsidiaries, all determined in accordance with
generally accepted Canadian accounting principles, on a consolidated basis
eliminating intercompany items.
"Consolidated Total Capitalization" shall mean, as of the date of any
determination thereof, the sum of (a) Consolidated Funded Debt and (b)
Consolidated Shareholders' Equity.
"Current Debt" shall mean, as of the date of any determination thereof, all
Indebtedness other than Funded Debt, including all payments that are required to
be made on Funded Debt within one year from the date of any determination of
Current Debt. "Consolidated" when used as a prefix to Current Debt shall mean
the aggregate amount of all such Current Debt of the Company and its
Subsidiaries on a consolidated basis eliminating intercompany items.
"Debt Ratio" shall mean, as of the date of any determination thereof, the
ratio between (a) the sum of (i) Consolidated Funded Debt and (ii) Consolidated
Current Debt, and (b) the sum of (i) Consolidated Total Capitalization and (ii)
Consolidated Current Debt.
"Funded Debt" of any Person shall mean (a) all Indebtedness having a final
maturity of one or more than one year from the date of origin thereof (or which
is renewable or extendible at the option of the obligor for a period or periods
more than one year from the date of origin), excluding all payments in respect
thereof that are required to be made within one year from the date of any
determination of Funded Debt, whether or not included in Current Debt, (b) all
Capitalized Rentals, and (c) all Guarantees of Funded Debt of others.
"Consolidated" when used as a prefix to any Funded Debt shall mean the aggregate
amount of all such Funded Debt of the Company and its Subsidiaries on a
consolidated basis eliminating intercompany items.
"Guarantees" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect, guaranteeing
any Indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, which in accordance
with generally accepted Canadian accounting principles shall be classified upon
a balance sheet of such Person as a liability of such Person. For the purposes
of all computations made under this Agreement, a Guaranty in respect of any
Indebtedness for borrowed money shall be deemed to be Indebtedness equal to the
principal amount of such Indebtedness for borrowed money which has been
guaranteed, and a Guaranty in respect of any other obligation or liability or
any dividend shall be deemed to be Indebtedness equal to the maximum aggregate
amount of such obligation, liability or dividend.
"Indebtedness" of any Person shall mean and include all obligations of such
Person which in accordance with generally accepted Canadian accounting
principles shall be classified upon a balance sheet of such Person as
liabilities for borrowed money of such Person. For the purpose of computing the
"Indebtedness" of any Person, there shall be excluded any particular
Indebtedness to the extent that, upon or prior to the maturity thereof, there
shall have been deposited with the proper depository in trust the necessary
funds (or evidences of such Indebtedness, if permitted by the instrument
creating such Indebtedness) for the payment, redemption or satisfaction of such
Indebtedness; and thereafter such funds and evidences of Indebtedness so
deposited shall not be included in any computation of the assets of such Person.
"Person" shall mean an individual, partnership, unincorporated association,
unincorporated syndicate, unincorporated organization, trust, trustee, executor,
administrator, or other legal representative.
"Rentals" shall mean and include all fixed rents (including as such all
payments which the lessee is obligated to make to the lessor on termination of
the lease or surrender of the property) payable by the Company or a Subsidiary,
as lessee or sublessee under a lease of real or personal property, but shall be
exclusive of any amounts required to be paid by the Company or a Subsidiary
(whether or not designated as rents or additional rents) on account of
maintenance, repairs, insurance, taxes and similar charges. Fixed rent under any
so-called "percentage rents" shall be computed solely on the basis of minimum
rents, if any, required to be paid by the lessee regardless of sales volume or
gross revenues.
"Subsidiary" shall mean, as to any particular parent corporation, any
corporation of which more than 50% (by number of votes) of the voting shares
shall be owned by such parent corporation and/or one or more corporations which
are themselves subsidiaries of such parent corporation.
