DEBENTURE SUPPORT AGREEMENT
MEMORANDUM OF AGREEMENT made as of the 24th day of July, 1998.
B E T W E E N:
AVENOR INC.,
a corporation subsisting under the laws
of Canada,
(hereinafter referred to as "Avenor"),
OF THE FIRST PART,
- and -
BOWATER CANADA INC.,
a corporation subsisting under the laws
of Canada
(hereinafter referred to as "Bowater Canada")
OF THE SECOND PART.
WHEREAS by way of a trust indenture dated as of February 8, 1994
(the "Principal Indenture"), between Avenor, at that time having the legal
name "Produits Forestiers Canadien Pacifique Limitee/Canadian Pacific
Forest Products Limited", and Montreal Trust Company (the "Trustee"), as
trustee, Avenor created and issued $125,400,000 aggregate principal amount
of 7.5% convertible unsecured subordinated debentures due February 8, 2004
(the "Debentures");
AND WHEREAS by a Certificate of Amendment dated March 21, 1994,
issued under the Canada Business Corporations Act, Avenor changed its legal
name to its now current legal name;
AND WHEREAS effective on the date hereof Avenor and Bowater
Incorporated ("Bowater") have completed a transaction by way of an
arrangement under the provisions of the Canada Business Corporations Act
(the "Transaction") pursuant to which, among other things, Bowater, through
Bowater Canadian Holdings Incorporated and Bowater Canada, has acquired all
of the outstanding common shares of Avenor (the "Common Shares").
AND WHEREAS the Transaction constitutes a "Capital
Reorganization" within the meaning of subsection 4.3.5 of the Principal
Indenture;
AND WHEREAS effective on the date hereof Avenor, Bowater Canada,
Bowater and the Trustee have entered into a supplemental indenture to the
Principal Indenture (the "Supplemental Indenture"), pursuant to section
4.3.5 and Article 13 of the Principal Indenture, for the purpose of,
amongst other things, evidencing the appropriate adjustments and
modifications, to be made as a result of the Capital Reorganization
resulting from the Transaction to the applicable provisions of Article 4 of
the Principal Indenture with respect to the rights and interests of the
holder of Debentures thereafter.
NOW THEREFORE in consideration of the respective covenants and
agreements provided in this agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto hereby covenant and agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1. Defined Terms. Each term denoted herein by initial capital
letters and not otherwise defined herein shall have the meaning ascribed
thereto in the Supplemental Indenture unless the context requires
otherwise.
1.2. Interpretation Not Affected by Headings. The division of
this agreement into articles, sections and paragraphs and the insertion of
headings are for convenience of reference only and shall not affect the
construction or interpretation of this agreement.
1.3. Number, Gender. Words importing the singular number only
shall include the plural and vice versa. Words importing the use of any
gender shall include all genders.
1.4. Date of any Action. If any date on which any action is
required to be taken under this agreement is not a Business Day, such
action shall be required to be taken on the next succeeding Business Day.
For the purposes of this agreement, a "Business Day" means a day other than
a Saturday, a Sunday or a statutory holiday in Toronto, Ontario, or
Montreal, Quebec.
ARTICLE 0
XXXXXXXXX XX XXXXXXX XXXXXX
2.1. Actions of Bowater Canada. So long as any Debentures (other
than Debentures owned by Bowater Canada or any of it affiliates) are
outstanding, Bowater Canada will:
(a) advise Avenor sufficiently in advance of any event involving
Bowater Canada and/or the Exchangeable Shares that would give
rise to an adjustment in the Conversion Price (as set forth in
the Principal Indenture and modified by the Supplemental
Indenture), including without limitation, an Exchangeable Share
Reorganization, Rights Offering, Special Distribution or Capital
Reorganization; and
(b) take all such actions and do all such things as are
reasonably necessary or desirable to enable and permit Avenor to
cause to be delivered Exchangeable Shares to the holders of
Debentures in accordance with the provisions of Article 4 of the
Principal Indenture as modified by the Supplemental Indenture.
2.2. Reservation of Exchangeable Shares. Bowater Canada hereby
represents and warrants to and covenants in favour of Avenor that it has
reserved for issuance and will, at all times while any Debentures (other
than Debentures owned by Bowater Canada or any of its affiliates) are
outstanding, maintain and keep available, free from pre-emptive and other
rights, out of its authorized and unissued capital stock such number of
Exchangeable Shares (or other shares or securities into which Exchangeable
Shares may be reclassified or changed) as are now and may hereafter be
required to enable and permit Avenor to meet its obligations under the
Principal Indenture as modified by the Supplemental Indenture to cause the
issue of Exchangeable Shares and the delivery thereof to holders of
Debentures who exercise their conversion rights attached to the Debentures.
2.3. Delivery of Exchangeable Shares to Avenor. In furtherance of
its obligations hereunder, upon any event that requires Avenor to cause to
be delivered Exchangeable Shares to any holder of Debentures, Bowater
Canada shall forthwith issue, and deliver to Avenor, the requisite number
of Exchangeable Shares to be received by, and delivered to or to the order
of, the former holder of the surrendered Debentures, as Avenor shall
direct. All such Exchangeable Shares shall be duly authorized and validly
issued as fully paid and non-assessable and shall be free and clear of any
lien, claim or encumbrance. In consideration of the issuance and delivery
of such Exchangeable Shares, Avenor shall issue to Bowater Canada, or as
Bowater Canada shall direct, common shares of Avenor having equivalent
value.
ARTICLE 3
GENERAL
3.1. Term. This agreement shall come into force and be effective
as of the date hereof and shall terminate and be of no further force and
effect at such time as no Debentures (other than Debentures owned by
Bowater Canada or any of its affiliates) are outstanding.
3.2. Changes in Capital of Bowater Canada. At all times after the
occurrence of any event contemplated pursuant to Article 4 of the
Supplemental Indenture or otherwise, as a result of which the Exchangeable
Shares are in any way changed, this agreement shall be deemed to be amended
and modified as necessary in order that it shall apply with full force and
effect, mutatis mutandis, to all new securities into which the Exchangeable
Shares are so changed and, if required by either party hereto, the parties
hereto shall execute and deliver an agreement in writing giving effect to
and evidencing such necessary amendments and modifications.
3.3. Severability. If any provision of this agreement is held to
be invalid, illegal or unenforceable the validity, legality or
enforceability of the remainder of this agreement shall not in any way be
affected or impaired thereby and this agreement shall be carried out as
nearly as possible in accordance with its or final terms and conditions.
3.4. Amendments, Modifications. Except as provided in Section
3.2, this agreement may not be amended or modified except by an agreement
in writing executed by Bowater Canada and Avenor.
3.5. Enurement. This agreement shall be binding upon and enure to
the benefit of the parties hereto and their respective successors and
assigns.
3.6. Notices to Parties. All notices and other communications
between the parties to this agreement shall be in writing and shall be
deemed to have been given if delivered personally or by confirmed telecopy
to the parties at the following addresses (or at such other address for any
such party as shall be specified in like notice):
(a) if to Avenor:
c/o Bowater Incorporated
00 Xxxx Xxxxxxxxxx Xxx
P.O. Box 1028
Greenville, South Carolina 28602
Attention: Office of Secretary
Fax: (000) 000-0000
(b) if to Bowater Canada:
c/o Bowater Incorporated
00 Xxxx Xxxxxxxxxx Xxx
P.O. Box 1028
Greenville, South Carolina 28602
Attention: Office of Secretary
Fax: (000) 000-0000
Any notice or other communication given personally shall be
deemed to have been given and received upon delivery thereof and if given
by telecopy shall be deemed to have been given and received on the date of
confirmed receipt thereof unless such day is not a Business Day in which
case it shall be deemed to have been given and received upon the
immediately following Business Day.
3.7. Counterparts. This agreement may be executed in
counterparts, each of which shall be deemed an original, and all of which
taken together shall continue one and the same instrument.
3.8. Jurisdiction. This agreement shall be construed and enforced
in accordance with the laws of the Province of Ontario and the laws of
Canada applicable therein.
3.9. Attornment. Each of Avenor and Bowater Canada agrees that
any action or proceeding arising out of or relating to this agreement may
be instituted in the courts of Ontario, waives any objection which it may
have now or hereafter to the venue of any such action or proceeding,
irrevocably submits to the jurisdiction of the said courts in any such
action or proceeding, agrees to be bound by any judgement of the said
courts and not to seek, and hereby waives, any review of the merits of any
such judgement by the courts of any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this agreement
to be duly executed as of the date first above written.
AVENOR INC.
By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: Vice President and Secretary
BOWATER CANADA INC.
By: /s/ Xxxxx X. Xxxxx
------------------------------
Name: Xxxxx X. Xxxxx
Title: Vice President and Secretary
