Exhibit 10.1

EXECUTION COPY

IMPLEMENTATION AGREEMENT

This agreement is made as of September 3 , 2009

AMONG:

ABITIBI-CONSOLIDATED INC.

(Hereinafter referred to as "ACI");

 

AND:

ABITIBI-CONSOLIDATED COMPANY OF CANADA

(Hereinafter referred to as "ACCC");

 

AND:

ALCOA CANADA LTÉE

(Hereinafter referred to as "Alcoa Canada");

 

AND:

ALCOA LTD.

(Hereinafter referred to as "Alcoa Ltd." and collectively with Alcoa Canada and
Newco, as defined in Section 3.6 hereof, "Alcoa");

 

AND:

MANICOUAGAN POWER COMPANY

(Hereinafter referred to as "MPCo").

 

 

(ACI, ACCC, Alcoa and MPCo being hereinafter referred to as the "parties")

 

AND TO WHICH INTERVENES:

HQ ÉNERGIE INC., a wholly-owned direct subsidiary of HYDRO-QUÉBEC

(Hereinafter referred to as "HQ Énergie")

 

WHEREAS the common intent and objective of ACI, ACCC, Alcoa and HQ Énergie is to
implement certain transactions in respect of MPCo and the business currently
owned and operated by MPCo (the "Business"), the whole, substantially as
described in the Step Plan attached hereto as Exhibit A (the "Proposed
Transactions");

WHEREAS pursuant to the Proposed Transactions, ACCC will, directly or
indirectly, acquire Alcoa's 40% interest in MPCo, MPCo will be wound up into
ACCC, and ACCC will cause all of the assets of MPCo and the obligations and
liabilities related to the Business other than Excluded Liabilities (as defined
in the Intervention of HQ Énergie hereto) to be transferred to a newly-formed
Québec limited partnership (the "Partnership");

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WHEREAS it is also contemplated that, in connection with the Proposed
Transactions, HQ Énergie shall purchase a 60% interest in the Partnership and in
the general partner of the Partnership ("GP") (the "HQ Acquisition") from ACCC
and Alcoa shall, directly or indirectly, become the holder of the remaining 40%
interest in the Partnership and in GP in replacement of its interest in MPCo
(the "Alcoa Acquisition");

WHEREAS the parties acknowledge and agree that they wish and intend to cause the
implementation of the Proposed Transactions; and

WHEREAS the parties shall work together in good faith with their respective
legal and financial advisors retained for such purpose, with the objective of
implementing the Proposed Transactions, including the transfer of the Business
to the Partnership, the HQ Acquisition and the Alcoa Acquisition, and to comply
with the terms and conditions of this Agreement, it being understood that Alcoa
will work toward the objective of implementing the Proposed Transactions based
on their understanding of there being no tax or other cost, or liability
consequences, to MPCo, the Partnership or Alcoa (or any of their respective
Affiliates) related to such implementation, other than such which is fully
indemnified or reimbursed pursuant to Article 2.

NOW, THEREFORE , in consideration of the foregoing, the covenants and agreements
set forth in this Agreement, and other good and valuable consideration, the
adequacy and receipt of which are hereby acknowledged, the parties hereby agree
as follows:

ARTICLE 1
SCOPE OF AGREEMENT

1.1               Implementation of the Proposed Transactions.

                    Each of the parties declares and acknowledges to the other
parties and to HQ Énergie that the terms of the Proposed Transactions, including
the transfer of the Business to the Partnership, the Alcoa Acquisition and the
HQ Acquisition, and HQ Énergie declares and acknowledges to each of the parties
that the terms of the HQ Acquisition, shall be based on normal and reasonable
commercial terms to be set forth in definitive agreements to be negotiated and
entered into by and among the parties and HQ Énergie in connection therewith.
For clarity purposes, Alcoa further declares and acknowledges to ACCC and HQ
Énergie that Alcoa waives any right of first refusal on transfers of MPCo shares
owned by ACCC in connection with the Proposed Transactions (including the HQ
Acquisition), whether under the shareholders' agreement made as of December 20,
1996 between ACCC and Alcoa or otherwise, provided that the Proposed
Transactions are completed on or prior to December 31, 2009.

1.2               Reasonable Commercial Efforts.

                    Each of the parties agrees to use its reasonable commercial
efforts to take or cause to be taken all action, to do or cause to be done and
to assist and cooperate with the other parties in doing all things necessary,
proper or advisable under applicable laws to consummate and make effective, in
the most expeditious manner practicable, the implementation of the Proposed
Transactions (with such changes as may be agreed to by the parties) that involve
such party, including: (a) the

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satisfaction of any conditions precedent within its control to the obligations
of any party to any agreement which are necessary to implement the Proposed
Transactions; (b) the obtaining of applicable consents, waivers or approvals of
any third parties, judicial bodies and governmental authorities, provided same
are on reasonable terms; and (c) the execution and delivery of such agreements
and instruments, and the taking of such other actions as the other parties may
reasonably require in order to carry out the intent of this Agreement.

1.3               Conditions for the Benefit of Alcoa.

                    Notwithstanding the foregoing, the obligations of Alcoa to
proceed with the Proposed Transactions are subject to the following conditions,
each of which must be satisfied in the reasonable judgment of Alcoa or waived in
writing by them:

  (a) No action or proceeding shall be pending or threatened by any person in
any jurisdiction, to enjoin, restrict, annul or prohibit any of the Proposed
Transactions;         (b) Alcoa shall have reasonably determined that none of
them, or any of their Affiliates, or any of their respective officers and
directors, shall suffer or incur any negative tax consequences as a result of
the Proposed Transactions, unless the amount of such taxes is fully reimbursed
to them prior to or concurrently with the implementation of the Proposed
Transactions in accordance with, and subject to, Section 2.4;         (c) ACI,
ACCC and a new wholly-owned Unlimited Liability Company to be incorporated by
ACCC ("ULC") shall have complied with their respective undertakings under
Sections 2.1, 2.2, 2.4 and 2.5;         (d) If the condition in Section 1.4(b)
is waived by ACCC, Alcoa Inc. shall have received (i) a favourable opinion of
Ernst & Young (US), in form and substance satisfactory, to the effect that the
Proposed Transactions constitute a tax-free reorganization for US tax purposes
and (ii) copy of an opinion from Deloitte & Touche addressed to ACCC, in form
and substance satisfactory to Alcoa and ACCC, confirming their agreement with
the Ernst & Young opinion;         (e) Unless the Internal Revenue Service
issues a written ruling as part of the Private Letter Ruling referred to in
Section 1.4(b) on the US tax matter referred to in this Section 1.3(e), in which
case such opinion shall govern the tax consequences of said US tax matter, Alcoa
Inc. shall have received (i) a favourable opinion of Ernst & Young (US), in form
and substance satisfactory, to the effect that the Proposed Transactions will
not require any Alcoa Indemnified Person (as defined in Section 2.3.1) to
include in its income an amount as a deemed dividend under Section 367(b) and
Treas. Reg. Sec. 1.367(b)-4, and (ii) copy of an opinion from Deloitte & Touche
addressed to ACCC, in form and substance satisfactory to Alcoa and ACCC,
confirming their agreement with the Ernst & Young (US) opinion . Provided that
if no such favourable opinions can be obtained, and ACCC waives the condition in
Section 1.4(d), Section 2.4.1 shall apply and Alcoa shall be deemed to have
waived the condition in this Section 1.3(e);

 

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        (f) The court overseeing the restructuring (the "Restructuring") of ACCC
and its Affiliates which are petitioners (collectively, the "Petitioners") in
the current proceedings pursuant to the Companies' Creditors Arrangement Act
(Canada) (the "CCAA") shall have issued an order on terms and conditions
acceptable to Alcoa, acting reasonably, providing for a provisional order
notwithstanding appeal approving the Proposed Transactions to which the
Petitioners are parties and the Motion seeking such order shall have been duly
served upon all parties on the Petitioners' Service List and all of Petitioners'
secured creditors; and

        (g) Alcoa shall have received copies of valuations prepared by Deloitte
& Touche of (i) the V-Day value of the MPCo shares owned by Alcoa, (ii) the fair
market value of such shares at time of closing, and (iii) the fair market value
of the 40% partnership interest to be acquired by Alcoa under the Proposed
Transactions. Alcoa shall have received a copy of the computation of the safe
income attributable to the MPCo shares owned by Alcoa.

                     It is understood and agreed that the directors of MPCo
nominated by Alcoa shall resign immediately prior to the Proposed Transactions.

1.4               Conditions for the Benefit of ACCC

                    Notwithstanding the foregoing, the obligations of ACCC and
ACI to proceed with the Proposed Transactions are subject to the following
conditions, each of which must be satisfied in the reasonable judgment of ACCC
and ACI or waived in writing by each of them:

  (a) The payment to be made by ACI or ACCC pursuant to Section 2.4.1 shall not
exceed $60 million;         (b) ACCC shall have received a Private Letter Ruling
from the Internal Revenue Service to the effect that the Proposed Transactions
constitute a tax-free reorganization for Alcoa Inc., ACCC and their Affiliates
for US tax purposes, in form and substance satisfactory to ACCC acting
reasonably;         (c) If the condition in Section 1.4(b) is waived by ACCC,
the opinion referred to in Section 1.3(d) (ii) shall have been received by ACCC;
        (d) Unless such opinion is no longer required as per Section 1.3(e)(ii),
ACCC shall have received the opinion referred to in Section 1.3(e) (ii); and    
    (e) The approval of the transactions contemplated hereunder by the Board of
Directors of AbitibiBowater Inc.

1.5               Intercompany Payables.

                    The intercompany payables between (i) ACCC and Alcoa, (ii)
ACCC and MPCo, (iii) MPCo and HQ, and (iv) ACCC and HQ shall be settled at
closing of the Proposed Transactions as set forth in Exhibit B attached hereto
or as may otherwise be agreed between the parties and HQ, it being

 

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understood that the amounts set forth in Exhibit B are estimated as at September
30, 2009 and will be updated at closing with the agreement of the parties hereto
and HQ.

1.6               Timing.

                    Each of the parties agrees to use its reasonable commercial
efforts to finalise all of the legal documentation required to implement the
Proposed Transactions by September 30, 2009 and to close the Proposed
Transactions by October 15, 2009 . If the Proposed Transactions have not closed
by December 31, 2009, any party hereto may terminate any of its obligations to
complete the Proposed Transactions.

ARTICLE 2
COSTS AND INDEMNIFICATION

2.1               Transaction Costs.

                ACCC shall pay all reasonable costs relating to the formation
and qualification of the Partnership and the transfer of assets, obligations and
liabilities of the Business to the Partnership. Such costs shall include, but
not be limited to, reasonable fees and expenses of counsel and other advisors to
MPCo and the Partnership (and GP); transfer tax and non-recoverable GST/QST
incurred or assessed on MPCo and the Partnership (and GP) for such activities;
all costs to transfer permits, contracts or authorizations of MPCo to the
Partnership and/or GP or to issue, sign or obtain permits, contracts or
authorizations in replacement of existing ones or which become required under
applicable laws as a result of the transfer of the Business to the Partnership;
and all costs of any compliance obligations arising as a result of the transfer
of the Business to the Partnership or as a condition of the transfer of the
Business to the Partnership, including without limitation such costs associated
with (i) investigations (including as to the existence of acquired rights) as to
any requirement for permits, contracts or authorizations and applications for
the issuance of permits or authorizations, (ii) studies, surveys, contracts,
servitudes, filings, inquiries, reports required to effect the transfer of or as
a condition of transfer or new permits, contracts or authorizations or to
determine if a permit, contract or authorization is required, and (iii) measures
or works (including characterization, rehabilitation or monitoring work) to be
implemented as a condition of, or  pursuant to, transfer or new permits,
contracts or authorizations. For greater certainty, such costs shall not include
any costs attributable to the condition of the assets existing prior to the
transfer of the Business to the Partnership, where such condition is not in
compliance with Environmental Laws while not benefitting from acquired rights,
and any costs required to correct any existing defect in title to the immovable
property.  Such excluded costs will be paid by the Partnership. "Environmental
Laws" shall mean applicable laws and regulations pertaining to the environment
and its protection and ground water criteria in the Politique de protection des
sols et de réhabilitation des terrains contaminés (Quebec).

                            

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2.2               Reimbursement of Professional Fees Incurred by Alcoa .

  2.2.1 ACCC shall pay the professional fees and disbursements (including
attorneys' fees and actuaries' fees and extra-judicial fees and expenses)
incurred by Alcoa (or any fees of their Affiliates) in connection with the
Proposed Transactions (even if the Proposed Transactions are not consummated),
including fees for assessing liability exposure and fees for tax structuring and
for determining, validating and implementing permitting requirements (including
those described in Section 2.1). Such reimbursement is subject to the following
conditions:

            (a) Reasonable fees and disbursements shall be reimbursed only to
the extent that they are incurred in connection with the Proposed Transactions,
provided however that ACCC shall not reimburse Alcoa (or any of their
Affiliates) for fees and disbursements incurred in connection with the
agreements which shall be entered into between HQ Énergie and Alcoa in
connection with the HQ Acquisition, including the limited partnership agreement
of the Partnership and any shareholders agreement among the shareholders of GP;
            (b) Fees and disbursements shall be reimbursed up to a maximum
amount of $2 million (the "Cap"), exclusive of GST and QST, provided that if
Alcoa expects such fees and disbursements to exceed the Cap, Alcoa shall advise
ACCC which shall use its commercial reasonable efforts to obtain the required
approvals from the Monitor and, if applicable, the Court overseeing the
Restructuring, to pay such additional fees and disbursements. The Cap is
premised on the Proposed Transactions closing on or before December 31, 2009; if
the Proposed Transactions do not close by December 31, 2009 or if there is a
material change in the scope of the Proposed Transactions, then Alcoa may
reasonably reassess the appropriateness of the Cap and require a reasonable
increase thereof as a condition to proceeding with the Proposed Transactions;
and             (c) Copies of invoices are provided on a monthly basis to ACCC
(provided that Alcoa may redact from such invoices entries that they reasonably
consider to be subject to attorney-client privilege).           2.2.2 Fees and
disbursements that meet the above conditions shall be paid by ACCC in full
within 15 days of the presentation of the invoices therefor. Alcoa may present
the first such invoices at any time and from time to time after signature of
this Agreement.         2.3 Indemnification.           2.3.1 Without limitation
to rights available at law, effective at the closing of the Proposed
Transactions, ACCC and ACI hereby solidarily (ACCC and ACI hereby waiving the
benefit of division and discussion) agree to indemnify and save Alcoa Canada,
Alcoa Ltd., their Affiliates (including Alcoa Inc. and Newco) and their current
and former officers and directors (the "Alcoa Indemnified Persons"), and the
Partnership, GP, its current and former officers and directors, and the current
and former officers and

   

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    directors of MPCo (the "MPCo Indemnified Persons"), harmless from and
against any damages, expenses, costs, losses, interest and penalties suffered
by, imposed upon or asserted against any of the Alcoa Indemnified Persons or the
MPCo Indemnified Persons as a result of, in respect of, connected with, or
arising out of, under or pursuant to any of:

            (a) any liability of MPCo, the Partnership, GP and their current
officers and directors, whether actual or contingent, for any pension funding
obligation or pension deficit related to any pension plan sponsored by ACCC or
any of its Affiliates, including without limitation the Régime de retraite à
prestations déterminées des employés non syndiqués d'Abitibi-Consolidated Inc.
and the Régime complimentaire de retraite des employés non syndiqués de Donohue
Inc. or any predecessor pension plan thereto (such two named plans and any
predecessor to such two plans are referred to herein as the "Plans"), other than
any funding obligation which directly relates to persons that are or were
directly employed by MPCo in respect of the pensionable service of such
employees and former employees accrued while directly employed by MPCo prior to
the date of the closing of the Proposed Transactions (the "Contingent Pension
Liabilities") . For greater certainty, the definitive agreements to be entered
into to effect the Proposed Transactions may include provisions for the transfer
of assets and liabilities in respect of the employees and former employees of
MPCo from the ACCC Plan to a successor pension plan and any additional funding
to reduce or eliminate a deficit in connection with such a transfer shall be
borne proportionately by ACCC and Alcoa in proportion to their respective
interests in MPCo as at the date hereof in a manner to be agreed by ACCC and
Alcoa, acting reasonably;             (b) any claim by any person attacking the
validity of all or part of the Proposed Transactions including under the
Companies Act (Quebec) and under insolvency legislation (or insolvency or
creditors' rights related provisions within any other laws), including the CCAA,
the Bankruptcy and Insolvency Act, the Canada Business Corporations Act and the
Civil Code of Québec;             (c) the Proposed Transactions, other than as a
direct result of such indemnified person's gross or willful misconduct and then
only to the extent thereof;             (d) with respect to Alcoa Indemnified
Persons only (but for greater certainty, including the proportion attributable
to Alcoa by reason of its 40% ownership interest in MPCo and the Partnership
arising from claims against MPCo or MPCo Indemnified Persons), any claims,
claims for losses (including loss of profit), liabilities, costs and expenses
(including all reasonable legal and other professional fees and disbursements,
interest, penalties and amounts paid in settlement) that any Alcoa Indemnified
Person may incur or suffer in connection with (i) the failure of the Partnership
to obtain, whether by issuance or transfer, any required permit, contract or
authorization or (ii) the loss or revocation of any acquired rights, any permit,
contract or authorization held by MPCo or its ceasing to be in good standing; in
each case as a result of the transfer of the Business to the Partnership or as a
result of the Proposed Transactions; and

 

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    (e) all Canadian or US federal, provincial, state or local income tax,
capital tax, transfer tax, land transfer taxes and non-recoverable sales taxes
(including non-recoverable Goods and Services Taxes and non-recoverable Quebec
Sales Taxes) to any Alcoa Indemnified Person, GP or the Partnership as a direct
result of the Proposed Transactions (the "Taxes") (as computed based on the
principles set out in Section 2.4.1(e)). Any amount payable pursuant to this
Section 2.3.1(e) shall be grossed up to include tax, if any, payable by the
indemnified person as a result of such indemnification payment such that the net
after-tax amount received by such indemnified person is equal to the full amount
of the Taxes. T he amount payable under this Section 2.3.1(e) shall be further
computed based on the principles set out in Section 2.4.1(b) unless the payment
to be made under this Section  2.3.1(e) is as a result of an assessment
disallowing the deduction provided by the election referred to in
Section 2.4.1(b). An amount shall be payable under this Section 2.3.1(e) only if
it arises from an assessment duly issued by a tax authority that is not subject
to objection or appeal or a decision of a competent tribunal that is not subject
to appeal. Alcoa shall give written notice to ACCC promptly (and, in any event,
within 20 business days) after receipt by an Alcoa Indemnified Person of any
proposed tax assessment or tax adjustment, from any tax authority in respect of
a tax liability which may give rise to a claim under this Section 2.3.1(e) (a
"Tax Assessment"). Such notice must set out the information with respect to, and
include a copy of, the Tax Assessment that is then available to the Alcoa
Indemnified Person. ACCC or ACI shall have the right to undertake and control
any proceedings, objection or other defence (a "Tax Proceeding") of any Tax
Assessment and, in such case, ACCC or ACI shall pursue any such Tax Proceedings
in a timely manner and in good faith. Alcoa shall provide ACCC with such
information with respect to the tax liability as may become available to the
relevant Alcoa Indemnified Person and Alcoa shall cooperate with ACCC or ACI, as
the case may be, in the conduct of all Tax Proceedings relating to any Tax
Assessment and related inquiries or investigations. If an amount is payable
under applicable tax legislation as a result of a Tax Assessment notwithstanding
the contestation of such Tax Assessment, ACCC or ACI shall remit the amount so
payable to the relevant Alcoa Indemnified Person for remittance to the taxation
authorities. Following the final result of any Tax Proceeding, any refund of
Taxes, including an amount covered by the previous sentence, received by an
Alcoa Indemnified Person shall be refunded to ACCC or ACI, as the case may be,
within 30 days of receipt together with any interest received thereon.          
2.3.2 At closing of the Proposed Transactions, ULC shall solidarily guarantee
ACCC's and ACI's obligations under this Section 2.3 to the beneficiaries of such
obligations, and waive the benefit of division and discussion.         2.4
Payment on Account of Tax at Closing.           2.4.1 At closing of the Proposed
Transactions, ACCC or ACI shall pay through an irrevocable direction of payment
to HQ Énergie to make said payment from the proceeds otherwise payable to ACCC
pursuant to the HQ Acquisition to the appropriate Alcoa Indemnified Person an
amount equal to the Taxes calculated on

 

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    the basis described below . Any amount payable pursuant to this
Section 2.4.1 shall be grossed up to include tax payable, if any, by the
appropriate Alcoa Indemnified Person as a result of such indemnification payment
such that the net after-tax amount received by the appropriate Alcoa Indemnified
Person is equal to the full amount of the Taxes. Such Taxes shall be computed
based on, among other things,             (a) (i) the Private Letter Ruling
referred to in Section 1.4(b), or if no such ruling is obtained, the opinions as
to US tax matters referred to in Section 1.3(d), and (ii) the opinions as to US
tax matters referred to in Section 1.3(e), it being understood that, if the
Internal Revenue Service issues a negative ruling as part of the Private Letter
Ruling referred to in Section  1.4(b) on the US tax matter referred to in
Section  1.3(e), or if the conditions in Section 1.4(d) are waived by ACCC
because a favourable opinion cannot be obtained, the amount payable under this
Section 2.4 shall include the tax payable by the appropriate Alcoa Indemnified
Person on the deemed dividend referred to in Section 1.3(e);             (b) the
filing of an election under Subsection 12(2.2) ITA (and any provincial
equivalent), if relevant, to reduce the aggregate amount payable under this
Section 2.4.1;             (c) the computation by Deloitte & Touche of the safe
income attributable to the MPCo shares owned by Alcoa;             (d) the
valuations performed by Deloitte & Touche of the (i) V-Day value of the MPCo
shares owned by Alcoa, (ii) the fair market value of such shares at the time of
closing, and (ii) the fair market value of the 40% partnership interest to be
acquired by Alcoa under the Proposed Transactions;             (e) if the amount
of Taxes resulting from the Proposed Transactions is reduced as a consequence of
the utilisation by Alcoa Canada, Alcoa Ltd., their Affiliates (including Alcoa
Inc.) of tax attributes, including capital cost allowance, capital losses and
non-capital losses then, subject to the following, the amount payable under
Sections 2.4.1 and 2.3.1(e) shall be determined as if no tax attributes were so
utilized. Notwithstanding the foregoing, if the Proposed Transactions are
otherwise neutral or positive for Alcoa Ltd. with respect to the computation of
its deferred taxes under US GAAP (i.e. they will increase/not reduce Alcoa
Ltd.'s deferred tax asset position or they will reduce/ not increase Alcoa
Ltd.'s deferred tax liability position) then Alcoa Ltd. shall utilize its net
capital losses available at the end of its 2008 taxation year  to reduce the
amount of Taxes otherwise payable as a result of the Proposed Transactions and
the amount payable under Sections 2.4.1 and 2.3.1(e) shall be computed after
taking into account the use of such net capital losses of Alcoa Ltd. (subject to
any successful adjustment of such available losses by the tax authorities) and
without any compensation payable to any Alcoa Indemnified Person for the use of
such capital losses, provided however that the amounts payable under Sections
2.4.1 and 2.3.1(e) may only be reduced by an amount not to exceed the amount
attributable to such losses (subject to any successful adjustment of such
available losses by the tax authorities) and included

 

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      in the current deferred tax asset or liability position of Alcoa Ltd. and
which is replaced in the deferred tax asset or liability position of Alcoa Ltd.
by an increase of (i) tax depreciation indirectly available to Alcoa Ltd. with
respect to the assets transferred to the Partnership as a result of the Proposed
Transactions or (ii) tax basis in the Partnership interest to be held by Alcoa.
          2.4.2                 (a) If any of the items in Sections 2.4.1(c) and
2.4.1(d) above result in uncertainty as to the amount of Taxes payable under
Section 2.4.1, then such Taxes shall be computed based on a reasonable tax
treatment of such items as determined by ACCC and agreed to by Alcoa.          
  (b) The parties agree to file all relevant tax returns based on the amount of
Taxes determined under Section 2.4.1 and the items in Sections 2.4.1(a) to
2.4.1(d) including the treatment of the items in Sections 2.4.1(c) and 2.4.1(d)
as agreed to by the parties under Section 2.4.2(a) and based on the valuation of
MPCo's assets to be transferred as part of the Proposed Transactions. Copies of
such valuation shall be given to Alcoa as soon as practically possible.        
  2.4.3 The payment on account of taxes to be made pursuant to this Section 2.4
shall be without limitation to the indemnification obligation at
Section 2.3.1(e).         2.5 Asset Retention Undertaking.           2.5.1 At
closing of the Proposed Transactions, ACI and ACCC shall ensure in favour of the
Alcoa Indemnified Persons and the MPCo Indemnified Persons that ULC shall retain
and continue to hold and invest net assets in the form of Permitted Investments
(as defined in Section 2.5.3) having a value at least equal to:             (a)
$202.3 million; and             (b) an amount to secure the payment and
indemnification obligations under Sections 2.1, 2.2, 2.3.1(b), 2.3.1(c),
2.3.1(d) and 2.3.1(e) determined as follows: (i) $5 million, plus (ii) $75
million, plus (iii) if neither of a favourable written ruling from the Internal
Revenue Services referred to in Section 1.3(e) nor the opinions referred to in
Sections 1.3(e) (i) and (ii) are received by closing of the Proposed
Transactions, an additional amount of $1 million.           2.5.2 The retention
and holding of such assets shall be to secure the payment and indemnification
obligations of ACI, ACCC and ULC under this Agreement and under the definitive
agreements implementing the Proposed Transactions. ULC shall grant a first
ranking hypothec and general security agreement in favour of Alcoa for the
benefit of the Alcoa Indemnified Persons and the MPCo Indemnified Persons on the
assets retained under Section 2.5.1 to guarantee the performance of such
obligations, provided that in no event shall assets retained pursuant to
Section 2.5.1(a) be applied, in the event of a realization of such security,
other than to satisfy the Contingent Pension Liabilities, in whole or in part,
or to reimburse the        

 

 

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    Alcoa Indemnified Persons or the MPCo Indemnified Persons for any payment of
the same.         2.5.3 "Permitted Investments" shall mean any of the following:
(i) "DIP" loans made by ULC to ACI or ACCC on terms and conditions (including
security ranking) reasonably satisfactory to Alcoa ("ULC DIP Loans") (provided
that security ranking immediately after the Cdn. $140 million "ACI DIP charge"
as set forth in paragraph 89 of the Court Order dated May 6, 2009 (the "May 6
Order"), secured by the same assets as the "ACI DIP Charge" and with the same
guarantors and obligors then securing the "ACI DIP Charge", shall be deemed to
be satisfactory to Alcoa if the ULC DIP Loans are approved by an order of the
Court and such order contains provisions that protect the priority of the ULC
DIP Loans substantially similar to paragraphs 61.9 and 93 of the May 6 Order),
(ii) cash or cash equivalents, or (iii) such other assets as may be agreed to by
ACCC and Alcoa, acting reasonably.           2.5.4 ACI and ACCC undertake not to
cause the distribution of any assets from ULC or the continuation in another
jurisdiction, winding-up, dissolution, amalgamation or other combination of ULC
with any other person for so long as ULC holds assets pursuant hereto, provided
that ULC shall have the right to make distributions if such distributions would
not cause the value of the Permitted Investments retained by ULC to be less than
the amounts set forth in Sections 2.5.1(a) and 2.5.1(b), taking into account the
release of such amounts pursuant to this Agreement.         2.6 Duration of
Asset Retention Undertakings.           2.6.1 The undertakings in
Section 2.5.1(a) to retain net assets shall terminate as follows, unless agreed
otherwise in writing between ACI, ACCC and Alcoa, acting reasonably:            
(a) coincident with the "successful completion of the Restructuring", an amount
equal to the value on the date of such release of the net assets so retained
pursuant to Section 2.5.1(a), less the amounts, if any, determined pursuant to
Sections 2.6.1(b) (current service) and 2.6.1(c) (special payments) shall be
released by ULC, and following the "successful completion of the Restructuring"
amounts equal to the amounts paid in accordance with Section 2.6.1(d) and
2.6.1(e), if any, upon each such payment being made shall be released by ULC
until the net assets so retained pursuant to Section 2.5.1(a) have all been
released; and             (b) the amount, if any, in respect of current service
contributions due to the Plans by ACCC and Affiliates (other than ULC), shall be
equal to the excess, if any, of (i) the current service contributions due under
the Plans in respect of  pensionable employment by participants therein up to
the end of the month in which the Proposed Transactions close, over (ii) the
current service contributions actually remitted to the Plans in respect of 
pensionable employment by participants therein up to the end of the month in
which the Proposed Transactions close ; and

 

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    (c) the amount, if any, in respect of special payments due to the Plans by
ACCC and its Affiliates (other than ULC), shall be equal to the excess, if any,
of:                 (i) the special payments due under the Plans up to the end
of the month in which the Proposed Transactions close, over                 (ii)
such special payments actually remitted to the Plans,                 provided
that in the event that prior to, coincident with or following the "successful
completion of the Restructuring", the obligation to make any such special
payments is reduced or eliminated (and not imposed upon any Alcoa Indemnified
Persons or MPCo Indemnified Persons), then the amount in Section 2.6.1(c)(i)
shall be deemed to be reduced by an amount equal to such reduction of the
obligation, or eliminated if such obligation is entirely eliminated; and        
        (d) upon a payment following the "successful completion of the
Restructuring" by ACCC and its Affiliates (other than ULC) to the Plans of all
or a portion of the current service contributions, if any, remaining due to the
Plans in respect of pensionable employment by participants therein up to the
date on which the Proposed Transactions close, an amount equal to each such
payment shall be released by ULC; and               (e) upon a payment following
the "successful completion of the Restructuring" by ACCC and its Affiliates
(other than ULC) to the Plans of all or  a portion of the special payments, if
any, remaining due to the Plans up to the date on which the Proposed
Transactions close, an amount equal to each such payment shall be released by
ULC,               provided, however, that if any claims against any of ULC,
MPCo, Alcoa or the Partnership for Plan deficits have been made or threatened on
or prior to the date of any such release, then an amount equal to the lesser of
(i) the amounts retained on such date by ULC pursuant to Section 2.5.1(a)
against which no other claims are pending and (ii) the amount of such claims or
threatened claims shall continue to be retained by ULC until resolution of those
claims or threatened claims.             2.6.2 For the purposes of this Section,
the "successful completion of the Restructuring" means a plan of arrangement has
been accepted by the requisite majority of the creditors of ACCC and its
Affiliates under the CCAA and sanctioned by a court of competent jurisdiction
and (ii) an order has entered in the Chapter 15 Cases recognizing or enforcing
such CCAA plan in the Chapter 15 Cases, or the Chapter 15 Cases have otherwise
been closed or terminated, in such case in a manner that no person has a further
right of appeal, and which plan does not purport to compromise any person's
obligations under this Agreement or the definitive agreements implementing the
Proposed Transactions.

 

       

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  2.6.3 The undertaking in Section 2.5.1(a) shall terminate or be
proportionately reduced or increased upon (a) a final non-appealable
determination of the applicable regulatory authority, (b) the adoption of
legislation, or (c) the final determination by a judgment of a court of
competent jurisdiction (with all appeal rights to such judgment having expired)
of the quantum, if any, of the liabilities for which ACCC, MPCo and ULC, as
applicable, have agreed to indemnify the Alcoa Indemnified Persons and the MPCo
Indemnified Persons pursuant to Section 2.3.1(a). Such amount shall not be
reduced however below the amounts required to be kept pursuant to
Sections 2.6.1(b) and 2.6.1(c).             2.6.4 Assets having a value equal to
the amount set forth in:               (a) Section 2.5.1(b)(i) shall be released
on the later of the fourth anniversary of the last of the Proposed Transactions
(other than the dissolution of MPCo) to be effected and the date on which assets
are released under Section 2.6.4(b);               (b) Sections 2.5.1(b)(ii) and
(iii) shall be released 90 days after the expiration of the latest date on which
an assessment, reassessment or other form of recognized document assessing
liability for tax, interest or penalties under applicable tax legislation could
be issued under such tax legislation to Alcoa Inc. or Newco for the taxation
year of Alcoa Inc. or Newco during which the Proposed Transactions (other than
the dissolution of MPCo) occur, as such period may be extended by any consent or
waiver given in respect thereof (the "Tax Assessment Periods"). After the
implementation of the Proposed Transactions, the parties will determine if it is
advisable to request that the Canada Revenue Agency perform a "real time audit"
thereof. Provided that such a request would only be made if it results in an
acceleration of the termination of the undertaking under Section 2.5.1(b)(ii)
related to the indemnity provided for in Section 2.3.1(e);              
provided, however, that if any claim against any of the Alcoa Indemnified
Parties or the MPCo Indemnified Parties with respect to matters provided in
Sections 2.1, 2.2, 2.3.1(b), 2.3.1(c), 2.3.1(d) and 2.3.1(e) have been made or
threatened on or prior to the date of any such release, then an amount equal to
the lesser of (i) the amounts retained at such time by ULC pursuant to Section
2.5.1(b) against which no other claims are pending, and (ii) the amount of such
claims or threatened claims, shall be retained in the form of "Permitted
Investments" by ULC until resolution of those claims or threatened claims.      
      2.6.5 No release of net assets or the security provided thereon under this
Section 2.6 shall diminish or extinguish indemnification obligations of any
party to this Agreement, all of which indemnification obligations shall survive
for the longest periods permitted by law.      

  2.6.6 As long as ULC shall be subject to the asset retention undertaking in
Section 2.5.1, ULC's sole activities shall be restricted to holding "Permitted
Investments", as provided in this Agreement, and it shall have no other assets
or liabilities other than as provided in this Agreement.

        

        

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2.7 Reimbursement of Overpayment.

                  If at the latest of (i) the end of Tax Assessment Periods or
(ii) the time a Tax Proceeding, if any such proceeding commences before the time
referred to in (i), is finally determined and is not subject to appeal or
revision, the relevant Alcoa Indemnified Person determines, acting in good
faith, that the amount paid to such relevant Alcoa Indemnified Person pursuant
to Section 2.4.1 is greater than the total amount of Taxes, interest and
penalties paid by or ultimately assessed against such Alcoa Indemnified Persons
as a result of the Proposed Transactions or that would have been paid or
ultimately assessed against such Alcoa Indemnified Persons but for the use of
tax attributes (other than net capital losses of Alcoa Ltd. available at the end
of its 2008 taxation year) by it that were not credited pursuant to the first
sentence of Section 2.4.1(e), then the relevant Alcoa Indemnified Person shall
promptly reimburse ACI or ACCC, whichever makes the payment under Section 2.4.1
at closing (or any person designated by ACI or ACCC) the difference, less the
amounts, if any, required to satisfy the tax gross up rights of Alcoa, the whole
subject to the status of any outstanding claims among such parties at such time.

ARTICLE 3
MISCELLANEOUS

3.1               Confidentiality.

                    Each of the parties and HQ Énergie shall, and shall require
its respective officers, directors, employees, agents, authorized
representatives and Affiliates and their officers, directors, employees, agents
and authorized representatives (the "Representatives") to, keep confidential all
information obtained in connection with this Agreement and the Proposed
Transactions contemplated hereby. Such obligation of confidentiality shall
extend to all such information, whether exchanged orally or in written or
electronic form, and whether or not designated at the time exchanged as
confidential. Each of the parties shall be permitted to disclose confidential
information to its Representatives who need to know such information for the
purpose of implementing this Agreement, or the transactions contemplated in this
Agreement, and shall notify such Representatives of the confidential nature of
such information and shall be responsible for any unauthorized disclosure of
such information by such Representatives. Information shall not be deemed to be
confidential for the purpose of this Section 3.1 if it (i) was in the public
domain prior to the date hereof, (ii) becomes publicly available after the date
hereof other than as a result of the unauthorized disclosure thereof by the
party wishing to disclose such information or one of its Representatives, or
(iii) is required to be disclosed pursuant to applicable laws (including
applicable securities laws and the rules of the Toronto Stock Exchange and the
New York Stock Exchange) or pursuant to administrative or judicial process and
all reasonable attempts to obtain a protective or other order from the
applicable governmental authority prohibiting or limiting disclosure of all
confidential information has been unsuccessful. The party which is subject to a
request for disclosure under (iii) shall give prompt notice of such request to
the other parties. In addition, information may be disclosed by a party upon the
request of applicable taxation authorities in course of tax audits or pursuant
to or in connection with the Restructuring, including pursuant to the CCAA or
any order of the court overseeing the Restructuring.

 

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3.2               Court Approval.

                    The parties hereto acknowledge that ACCC is under the
protection of the CCAA and that the closing of the Proposed Transactions,
including the execution of this Agreement, shall require the approval of the
Monitor and the court overseeing the Restructuring.

3.3               Assignment; Binding Effect.

                    This Agreement and the rights hereunder are not assignable
unless such assignment is consented to in writing by each of the other parties.
Subject to the preceding sentence, this Agreement and all the provisions hereof
shall be binding upon and shall inure to the benefit of the parties and their
respective successors and permitted assigns. HQ Énergie may at any time assign
all of its rights and obligations hereunder to an Affiliate of HQ Énergie.

3.4               Governing Law s and Election of Jurisdiction.

                    This Agreement as well as the agreements implementing the
Proposed Transactions shall in all respects be governed by and construed in
accordance with the laws in force in the Province of Québec and the laws of
Canada applicable therein. The parties hereby irrevocably submit to the
exclusive jurisdiction of the courts in the judicial district of Montréal,
Québec for the purpose of any dispute, controversy or claim arising out of or in
connection with this Agreement and waive any and all objections to jurisdiction
that they may have under the laws of such jurisdiction or any other
jurisdiction.

3.5               Counterparts; Facsimile Signatures .

                    This Agreement may be executed in any number of
counterparts, each of which when executed, shall be deemed to be an original and
all of which together shall be deemed to be one and the same instrument binding
upon all of the parties notwithstanding the fact that all of the parties are not
signatory to the original or the same counterpart. For purposes of this
Agreement, facsimile signatures shall be deemed originals.

3.6               Transfer of MPCo Shares.

                    In the implementation of the Proposed Transactions, Alcoa
Canada shall transfer its shares of MPCo to Alcoa Ltd. on a tax-free basis, such
transfer to be followed by a transfer of such shares by Alcoa Ltd. to a newly
created wholly-owned subsidiary of Alcoa Ltd. ("Newco") whose only activity for
its 2009 taxation year will be to take part in the Proposed Transactions and
that will be wound-up into Alcoa Ltd. as soon as possible after the
implementation of the Proposed Transactions. In order to give effect to the
undertaking of Alcoa Ltd. in Section 2.4.1(e), provided the condition in
Section 2.4.1(e) is satisfied, the transfer of the MPCo shares to Newco shall be
made in such a way that Alcoa Ltd. will trigger a gain on the disposition of the
MPCo shares equal to the amount of its net capital losses referred to in
Section 2.4.1(e).

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3.7               Sole Liability.

                    The obligations of each of the parties under this Agreement
are sole, and are not joint or solidary with the obligations of any other party
to this Agreement unless expressly specified otherwise.

3.8               Without Prejudice.

                    The parties hereby recognize that this Agreement is made
without prejudice to their rights, remedies and recourses in respect of all
third party claims or claims against each other, and in no way constitutes an
admission of liability or an elimination or diminution of liability on their
part in respect thereto.

3.9               Affiliates.

                    For the purposes of this Agreement "Affiliates" has the
meaning ascribed thereto in the Canada Business Corporations Act, but shall be
interpreted to include entities that are not bodies corporate, including
partnerships.

3.10           Stipulations in Favour of Third Persons.

                    Stipulations in favour of the following persons, and only
those persons, who are not parties to this Agreement: HQ Énergie and its
Affiliates, ULC, Affiliates of Alcoa (including Alcoa Inc.), Alcoa Indemnified
Persons, Newco and MPCo Indemnified Persons, are hereby irrevocably acknowledged
by the parties who made such stipulations to have been accepted by such other
persons in accordance with Article 1446 of the Civil Code of Québec. Such
stipulations shall be deemed to be accepted by the Partnership, GP and Newco
immediately upon their respective formation and incorporation. However, nothing
herein shall prevent the parties from amending this Agreement without the
consent of the beneficiaries of such stipulations , provided, however, that any
amendment to this Agreement that has or may have a direct or indirect impact on
the HQ Acquisition shall be approved by HQ Énergie .

3.11           Defined Terms.

                   Capitalized terms used herein that are not otherwise defined
herein have the meaning set forth in the Proposed Transactions, unless the
context otherwise requires.

(Signature page follows)

 

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IN WITNESS WHEREOF , the parties have caused this Agreement to be executed the
day and year first above written.

 

   

ABITIBI-CONSOLIDATED INC.

 

   

By:

/a/ Allen Dea      

Name: Allen Dea

     

Title: Vice President and Secretary

         

   

ABITIBI-CONSOLIDATED COMPANY OF CANADA

 

    By: /s/ Allen Dea      

Name: Allen Dea

     

Title: Treasurer

         

   

ALCOA CANADA LTÉE

 

    By: /s/ Richard Lamarche      

Name: Richard Lamarche

     

Title:

     

 

 

   

ALCOA LTD.

 

    By:

/s/ Richard Lamarche

     

Name: Richard Lamarche

     

Title:

         

   

MANICOUAGAN POWER COMPANY

 

    By:

/s/ Allen Dea

      Name: Allen Dea       Title: Controller and Treasurer          

  By:

/s/ Richard Lamarche

      Name: Richard Lamarche       Title:  

 Implementation Agreement - Signature page

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INTERVENTION

HQ Énergie intervenes to this Implementation Agreement to declare having taken
cognizance of it and to agree to be bound by Sections 1.1 and 3.1 of this
Agreement provided, however, that the obligations of HQ Énergie to proceed with
the HQ Acquisition are subject to the following conditions, each of which must
be satisfied in the reasonable judgment of HQ Énergie or waived in writing by HQ
Énergie:

1. The Proposed Transactions shall have been completed in a manner satisfactory
to HQ Énergie, acting reasonably;     2. Without limiting the generality of the
f oregoing, the Partnership shall not, directly or indirectly, acquire or
otherwise assume any liability in respect of the following (the "Excluded
Liabilities"): (i) the Plans and any other liabilities unrelated to the
Business; (ii) any liabilities of MPCo for taxes, assessments and reassessments
together with any and all penalties, fines and interest relating thereto, and
(iii) liabilities which in the reasonable opinion of HQ Énergie should not be
transferred to the Partnership (provided that, for greater certainty, the
inclusion of amounts in the Excluded Liabilities in this Intervention shall not
imply agreement by Alcoa as to the share, responsibility or liability of Alcoa,
directly or indirectly, for such Excluded Liabilities, except as may appear from
the express provisions of the Implementation Agreement);     3. All monies owing
by ACCC and its Affiliates (including, for the avoidance of doubt, Abitibi
Bowater Inc. and its Affiliates) to HQ Énergie or any of its Affiliates or to
MPCo as at the closing of the HQ Acquisition, whether accrued prior to or
following any order issued with respect to the Restructuring (as defined below),
shall have been paid in full prior to or concurrently with such closing;     4.
All monies owing by MPCo to Hydro-Québec or any of its Affiliates shall have
been paid in full prior to or concurrently with the closing of the HQ
Acquisition;      5. HQ Énergie shall have received a direction of payment from
ACCC approving the payment contemplated in Section 2.4.1, in form and substance
satisfactory to HQ Énergie, in its sole discretion, and which shall have been
approved by the Monitor and the court overseeing the Restructuring;     6. An
order from the court overseeing the Restructuring shall have approved the
Proposed Transactions under terms and conditions acceptable to HQ Énergie and
the Motion seeking said order shall have been duly served upon all parties on
Petitioners' Service List and all of Petitioners' secured creditors;     7. HQ
Énergie and its Affiliates (other than the Partnership in connection with the
transfer of the Business to the Partnership) shall not assume any liability
whatsoever in connection with any aspect of the Proposed Transactions, except as
they may in writing specifically undertake and agree to assume in connection
with the HQ Acquisition; and

   

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    8. The parties, as applicable, and HQ Énergie shall have executed such
definitive agreements customarily used for transactions of this nature, and
satisfactory to each of the parties thereto, including representations and
warranties, covenants, terms and conditions (which would include those set forth
herein), and indemnifications for the benefit of HQ Énergie and its Affiliates
which are customary for transactions of this nature;     provided each and all
of the conditions mentioned above are satisfied in the reasonable judgment of HQ
Énergie or waived in writing by HQ Énergie, HQ Énergie agrees that the holdback
amount of $61.5 million (representing 10% of the agreed purchase price) agreed
between Hydro-Québec and ACCC shall be reduced to $30.75 million (representing
5% of the agreed purchase price).

 

   

HQ ÉNERGIE INC.

 

   

By:

/s/ Richard Cacchione      

Name: Richard Cacchione

     

Title:

 

 

 

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EXHIBIT  A - PROPOSED TRANSACTIONS

(See document attached entitled "Project Uranium - simplified step plan" dated
September 2, 2009)

 

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EXHIBIT B - INTERCOMPANY PAYABLES

(See document entitled "Estimated Intercompany payables as at September 3,
2009")

 

 

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