Document:

exv10w32

EXHIBIT 10.32

AGREEMENT CONCERNING THE

PULP AND PAPER OPERATIONS OF ABIBOW CANADA IN ONTARIO

	 	 	 

	BETWEEN:

	 	BOWATER CANADIAN FOREST PRODUCTS INC., a company duly constituted
under the laws of Nova Scotia and having its registered office in
Halifax, Nova Scotia, and ABITIBI-CONSOLIDATED COMPANY OF CANADA,
a company duly constituted under the laws of Quebec and having
its head office in Montreal, Quebec, on their own behalf and on
behalf of any Canadian successor thereof upon emergence from the
current restructuring process described herein
	 
	 	 
	 

	 	(hereinafter collectively called “AbiBow Canada”);
	 
	 	 
	AND:

	 	HER MAJESTY THE QUEEN IN RIGHT OF THE PROVINCE OF ONTARIO, as
represented by the Minister Of Northern Development, Mines And
Forestry
	 
	 	 
	 

	 	(hereinafter called the “Province”).

Recitals

Whereas AbiBow Canada and the group formed with its holding company AbitibiBowater Inc. (hereafter
referred to collectively as “AbiBow”), and the entire pulp and paper industry generally, have been
affected by a significant reduction in demand for newsprint and by the general economic climate;

Whereas the Canadian subsidiaries of AbiBow sought creditor protection under the Companies’
Creditors Arrangement Act (R.S.C. 1985, c. C-36) (hereinafter called the “CCAA”), on April 17,
2009;

Whereas AbiBow, in cooperation with its creditors, its stakeholders, the CCAA Monitor and its
financial advisors, has developed a 5-year business plan based on its current outlook, that
provides for improved profit margins and cash flow, and these improvements will be possible in part
because of the efforts of AbiBow and its employees to concentrate on the manufacturing operations
of highly competitive facilities;

Whereas AbiBow intends to combine Abitibi-Consolidated Company of Canada and Bowater Canadian
Forest Products Inc., AbiBow’s two primary operating companies in Canada, to form a new company
(AbiBow Canada) upon their emergence from the current restructuring process, and whereas these two
companies have significant solvency deficits in their Ontario-registered pension plans;

Whereas AbiBow Canada has initiated discussions and actively worked with the Province and other
competent authorities throughout its restructuring process, to further the interests of its
business and of all its stakeholders, including to (i) identify measures to protect its employees
and retirees, and (ii) promote its emergence from the restructuring process as a stronger and more
sustainable company, including so as to resume contributions to these plans;

Whereas a significant proportion of the Canadian activities of AbiBow are in Ontario;

Whereas pursuant to the business plan established by AbiBow, it intends to (i) keep all its Ontario
pulp and paper mills active, which mills have a production capacity of approximately 1,398,000
million metric tons, and (ii) make or take every reasonably required effort and measure to ensure
the viability of its Ontario pulp and paper mills, in the same way it does for mills of the AbiBow
group located outside Ontario having similar delivered costs for similar products;

Whereas in connection with its emergence from the restructuring process, AbiBow Canada has entered
into discussions with the Ontario Ministry of Finance with respect to relief measures for the
registered pension plans in Ontario for AbiBow Canada’s pulp and paper operations (“pension plans”)
to facilitate payment of pensions due to their retirees and beneficiaries and the Minister of
Finance has provided a letter to AbiBow Canada in respect thereof (the “Ontario Pension Letter”);

 

 

Whereas (i) the Iroquois Falls and Fort Frances mills (the “Mills”) of AbiBow Canada currently
purchase electricity from the IESO power grid and ACH Limited Partnership (“ACH”) at the Ontario
market clearing prices; (ii) as a result of the meter and delivery point configuration with respect
to the IESO power grid, the Mills do not pay certain regulatory charges on its purchased power from
ACH, including for example global adjustment, network and line connection charges; and (iii) in
keeping with the spirit of the existing arrangements, in connection with its proposed disposition
of AbiBow Canada’s interest in ACH and acknowledging that it does not own 100% of ACH, (A) AbiBow
Canada has informed potential buyers that they will have to continue the Mills’ current power cost
advantages and (B) it is a condition to any such proposed disposition that a new Power Purchase
Agreement (“PPA”) between ACH and AbiBow Canada, a draft form of which has already been provided to
potential buyers, be entered into, which PPA will stipulate specific measures to enforce the
preservation of the Mills’ power cost advantages, namely that power produced by ACH is to be
delivered to the Mills on a first priority basis, that there be no bypassing of the Mills or that
metered delivery points not be moved;

Whereas in order to ensure the completion of AbiBow Canada’s restructuring the Province’s support
in various forms is required;

CONSEQUENTLY, THE PARTIES AGREE TO THE FOLLOWING

	1	 	AbiBow Canada Covenants
	 
	1.1	 	Governance

AbiBow Canada agrees:

	1.1.1	 	not to declare or pay any dividends while the weighted average solvency ratio of its
Ontario-registered pension plans is below 80%;

	1.1.2	 	to abide by the AbiBow compensation plan with respect to salaries, bonuses and severance, a
description of which was filed with the Court and its creditors in the context of its
restructuring process in the materials listed in Schedule A hereto and separately
delivered to the Province;

	1.1.3	 	to present to the Province as soon as they are made public in accordance with applicable
securities laws the annual audited financial results of AbiBow for each fiscal year during the
term of this Agreement;

	1.1.4	 	to report annually to the Province on the implementation of AbiBow’s business plan, a
description of which was filed with the Court and its creditors in the context of its
restructuring process in the materials listed in Schedule B hereto and separately
delivered to the Province; and

	1.1.5	 	that Sections 1.3 and 1.4 of this Agreement shall be deemed also to apply to the pulp and
paper operations, if any, which AbiBow may hold from to time in Ontario otherwise than through
AbiBow Canada.

	1.2	 	Pension Plans

AbiBow Canada agrees:

	1.2.1	 	that it will not voluntarily terminate any of its Ontario-registered pension plans before it
emerges from Court protection under the CCAA; and

	1.2.2	 	that it shall comply with any arrangements made with the Ontario Ministry of Finance
including any obligations required to be performed by it as set forth in the Ontario Pension
Letter and any related regulations that come into force.

	1.3	 	Investments

AbiBow Canada agrees:

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	1.3.1	 	that at least 30% of its maintenance and value-creation investments with respect to its pulp
and paper operations shall be made in Ontario, such that, for example, investments of $60
million per year would result in a minimum investment of $90 million during a 5-year period
for Ontario; and

	1.3.2	 	that it shall invest a minimum amount of $50 million over a 2-3 year construction period at
its facility in Thunder Bay, Ontario for a new condensing turbine. The parties acknowledge
that the commitment of AbiBow Canada set forth in this Section 1.3.2 is subject to (i)
approval by the new board of directors of AbiBow upon emergence from the current restructuring
process, (ii) satisfactory resolution of labour issues at its Thunder Bay facility, AbiBow
Canada agreeing to use its ongoing commercially reasonable efforts to resolve such issues
promptly following the execution of this Agreement, (iii) the receipt of financial assistance
from the Province under its forest sector prosperity fund and loan guarantee programs and (iv)
the execution of a power purchase agreement with the Ontario Power Authority (“OPA”)
substantially on the terms and conditions set out in the term sheet dated September 8, 2009
and amended on July 16, 2010 provided by OPA to AbiBow Canada, with such further amendments as
AbiBow Canada and OPA may agree.

	1.4	 	Business Continuity

AbiBow Canada agrees:

	1.4.1	 	that if any of its pulp and paper mills is permanently shut down in Ontario, it shall work
constructively with the Province and any affected communities to develop economic recovery
opportunities which may include the sale of such facilities, in accordance with Section 1.4.2;

	1.4.2	 	that in the event of the sale of any of its pulp and paper assets, it shall offer favourable
conditions to enable potential buyers to purchase such assets located in Ontario at market
value, including where necessary, reasonable non-competition provisions in favour of AbiBow
Canada as determined on a case-by-case basis;

	1.4.3	 	that, having regard to its intent described in the recital to maintain the production
capacity of its Ontario pulp and paper mills, it shall pay to one or more of its pension
plans, as additional solvency special payments, $75 for every metric ton reduction in such
production capacity resulting from a definitive shutdown of at least one machine, including a
temporary shutdown for more than 6 consecutive months or 9 cumulative months over a period of
18 months, without any duplication in the production capacity levels of its pulp and paper
mills in Ontario or otherwise, such payments being payable over 4 years and only once for any
given circumstance; provided however that no payment shall be made in respect
of any pension plan having an excess surplus under applicable tax laws;

	1.4.4	 	that, where delivered costs are equivalent to those of its mills located outside Ontario,
not to transfer outside Ontario any pulp and paper production (or part thereof) located in its
Ontario mills as of the date this Agreement become effective;

	1.4.5	 	that it shall pay, as instructed by the Province, an aggregate amount of $5 million over a
period of five years (at the rate of $1 million per year with the first payment on January 14,
2011) to be used for such environmental remediation purposes as deemed necessary or desirable
by the Province in those locations in Ontario where AbiBow Canada or its affiliates has, or
has had, facilities, and for greater certainty any such instruction can be given and followed
in each case without prejudice to or admission by either party in respect of any pending or
future disputes between them;

	1.4.6	 	that, without admission of any liability or obligation, it shall maintain and renew the
$2,350,764.00 of financial assurances listed in Schedule C currently held by Ontario
in respect of the properties listed in Schedule C, until such financial assurances are
returned or released in accordance with the Environmental Protection Act (Ontario); and

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	1.4.7	 	that, in the event of a future disposition of AbiBow Canada’s interest in ACH and
acknowledging that it does not own 100% thereof, it is AbiBow Canada’s intent and objective to
work with the Province to ensure that the power cost advantage to the Mills are not otherwise
impacted.

	2	 	Term

	2.1	 	This Agreement will become effective as of the time of AbiBow Canada’s emergence from Court
protection under the CCAA and will expire 5 years after such emergence, except that Section
1.2.1 shall become effective upon execution of this Agreement.

	2.2	 	The parties agree to re-evaluate the covenants of this Agreement at the end of the initial
5-year term in light of AbiBow’s situation, the conditions affecting the pulp and paper
industry as a whole and the solvency of its pension plans.

	3	 	Assignment

	3.1	 	The rights and obligations provided herein shall not be assigned, in whole or in part,
without the written consent of the Province and of AbiBow Canada. This Agreement is binding
and enures to the benefit of any successor or permitted assign of any party thereto.
Notwithstanding the foregoing, upon any consolidation, amalgamation or merger, or any sale,
transfer, lease or other disposition of all or substantially all of the properties or assets
of AbiBow Canada, the successor formed by such consolidation or amalgamation or into or with
which AbiBow Canada is amalgamated or to which such sale, transfer, lease or other disposition
is made shall succeed to, and be substituted for AbiBow Canada (so that from and after the
date of such consolidation, amalgamation, merger, sale, transfer, lease or other disposition,
the provisions of this Agreement referring to “AbiBow Canada” shall refer instead to the
successor and not AbiBow Canada), and shall be subject to the obligations and may exercise the
rights of AbiBow Canada under this Agreement with the same effect as if such successor had
been named as AbiBow Canada herein, and AbiBow Canada shall thereupon be relieved from its
obligations hereunder.

	4	 	Notice

	4.1	 	Any notice and other communication given pursuant to this Agreement must be in writing and
sent to the parties to their respective addresses by registered or certified mail, by fax or
by messenger. Such notice and communication shall be deemed to have been received the same day
it was sent by fax or messenger, and if it was sent by mail, on the fifth business day
following. In all cases, the party giving notice must be able to evidence the sending of the
notice if required to do so by the other party, absent which the notice is deemed null and
void.

			
	To:	 	the Province

Her Majesty The Queen in Right of

The Province of Ontario

Ministry of Northern Development, Mines and Forestry

Suite 210, Roberta Bondar Pl.

70 Foster Drive

Sault Ste. Marie, ON P6A 6V5

Facsimile: (705) 945-5977

Attention:   Mr. Bill Thornton

           
       Assistant Deputy Minister, Forestry Division

			
	To:	 	AbiBow Canada

1155 Metcalfe Street, Suite 800

Montreal (Quebec) H3B 5H2 Canada

Fax :    (514) 394-3644

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	 	 	Attention: Senior Vice-President, Corporate Affairs and Chief Legal Officer

	5	 	General provisions

	5.1	 	This Agreement (except Schedules A and B) may only be modified by a written
amendment duly signed by the parties. The plans listed in Schedules A and B
herein may be modified or supplemented by AbiBow from time to time, provided that AbiBow
Canada shall notify the Province promptly of any material change, and shall promptly provide
any information with respect thereto that the Province reasonably requests. AbiBow Canada
shall report annually to the Province all changes made to the said plans. The recitals to this
Agreement do not confer rights or obligations in respect of either one of the parties.

	5.2	 	Time is of the essence of this Agreement.

	5.3	 	Each party to this Agreement represents and warrants to the other party (i) that it has the
required authorizations and full powers to sign this Agreement and execute all its obligations
contemplated herein, (ii) that by the signing and performance of this Agreement it is not
violating its constituting act, as applicable, nor any law or regulation, and (iii) that
following its signing this Agreement will create contractual obligations as described herein,
will have full effect and will be fully enforceable against it pursuant to its terms, subject,
except as otherwise provided, in the case of AbiBow Canada, to insolvency laws of general
application and to its emergence from the restructuring process under the CCAA, and any
required authorizations relating to that process.

	5.4	 	Any covenant or condition in favour of a party may only be waived by such party. If any
provision herein, or arrangement entered into in connection with this Agreement, is found to
be invalid by a Court for any reason whatsoever, the other provisions contained therein shall
continue to have their full effect between the parties and, if any invalidated provision has a
significant negative impact on either one of the parties, they will negotiate in good faith to
revise or replace such invalidated provision in order to compensate the affected party in an
equivalent manner.

	5.5	 	This Agreement shall be governed by and interpreted in accordance with the laws applicable in
Ontario.

	5.6	 	All references herein to dollars shall be understood as a reference to Canadian dollars.

	5.7	 	This Agreement may be signed in several counterparts, each one deemed to be an original
counterpart, but all the counterparts constitute one and the same agreement.

	5.8	 	The representatives and signatories for AbiBow Canada and the Province declare that they have
read this Agreement and its schedules and that they accept its terms, conditions and
modalities and sign it in good faith in the name of AbiBow Canada and the Province,
respectively. No party is authorized to bind the other party towards a third party without
first obtaining the other party’s written consent. The covenants contained herein only benefit
the parties and their respective subsidiaries. Nothing herein shall be construed as a
stipulation for another.

	5.9	 	The arrangements set forth in the Ontario Pension Letter are essential conditions to this
Agreement without which AbiBow Canada would not have entered into this Agreement.

	5.10	 	In the event of a disagreement or conflict resulting from or in connection with this
Agreement, including with its interpretation and application, the parties hereto will first
try to resolve it amicably through informal negotiations.

	5.11	 	If as a result of an event of force majeure (as defined hereunder) AbiBow Canada is unable to
perform an obligation under this Agreement or any arrangement related thereto:

	 	(a)	 	it shall promptly give notice to the Province of the occurrence of such event
indicating, as correctly as possible, the effect of such event on its obligations under
this Agreement and any arrangements relating thereto, including any foreseeable delays
resulting therefrom;

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	 	(b)	 	the parties will meet to review such affected obligations or arrangements and
shall negotiate in good faith to modify this Agreement or arrangements with respect to
such affected obligations to take any such event into account and to preserve, to the
fullest extent possible, any benefits to be provided to the Province in respect
thereof; and
	 
	 	(c)	 	subject to the foregoing (i) AbiBow Canada may suspend the performance of any
such affected obligations or arrangements until the effect of the event of force
majeure has been eliminated or sufficiently reduced to allow performance to continue
provided that AbiBow Canada shall act with ongoing reasonable diligence in
order to eliminate or correct, in the case where it is reasonably possible, the causes
and effects of the event of force majeure, it being understood however that except as
otherwise provided by applicable law, the resolution of any labour dispute will be left
to AbiBow Canada’s discretion, and (ii) the non-performance of any affected obligation
or arrangement in the circumstances and for the period described above shall not be
considered a default, and shall not lead to a right of action against AbiBow Canada.

	 	 	For the purposes of this Agreement, the expression “force majeure” means any event which is
unforeseeable, irresistible and beyond the control of AbiBow Canada and which delays,
interrupts or prevents complete or partial performance of its obligations pursuant to this
Agreement, including any one of the following events: war, embargo, insurrection, invasion,
riot, rebellion, social problems, epidemic, flood, fire, explosion, thunder, earthquake, ice
storm, storm, sabotage or labour dispute. However, the parties agree that an event shall not
be considered beyond AbiBow Canada’s control to the extent that a reasonable business person
applying due diligence in the same or similar circumstances under the same or similar
obligations as those contained in the Agreement would have put in place contingency plans to
either materially mitigate or negate the effects of such event.
	 
	5.12	 	Nothing in this Agreement shall be taken as a waiver or release of the rights preserved for
Ontario under section 31 of the Sanction Order. This Agreement, and any action taken under
this Agreement, is without prejudice to the positions of either AbiBow Canada or the Province
of Ontario (including, for greater certainty, the Minister of the Environment, the Ministry of
the Environment and any person exercising an environmental regulatory authority) in respect of
any pending or future dispute between them.

	5.13	 	The parties agree to make reasonable efforts to consult with each other, to the extent
possible, on the timing and content of any written press release or public announcement (a
“Public Statement”) made in connection with this Agreement or the provisions hereof.

	5.14	 	AbiBow Canada acknowledges that the Province is subject to the Freedom of Information and
Protection of Privacy Act (“FIPPA”) and is accountable to the Executive Council of the Ontario
Government, its committees, the Legislative Assembly and the general public of Ontario and the
commitments and agreements flowing from this Agreement and any related documents may form part
of the public record. Each of the parties will advise the other of any documents and
information supplied in connection with this Agreement which it considers to be sensitive
commercial or financial information or otherwise confidential (the “Confidential
Information”).
	 
	 	 	The parties agree to keep the Confidential Information confidential except as follows: (a)
each party may disclose Confidential Information on mutually agreed terms; (b) each party
may disclose Confidential Information to its attorneys, accountants, lenders or creditors
and other professional advisors (including those of AbiBow or its affiliates in the case of
AbiBow Canada) who are under a duty to preserve the confidentiality of such information; (c)
each party may disclose Confidential Information to a mediator, arbitrator or court to the
extent necessary in connection with the resolution of a dispute; (d) each party may disclose
Confidential Information where required by law, including without limitation, where required
by FIPPA, any securities law or any other applicable law or legal process requiring the
disclosure thereof or by the requirement of any government agency having the power to
require disclosure thereof; (e) AbiBow Canada may disclose the Confidential Information to
AbiBow and its other affiliates, provided they are under a duty to preserve the
confidentiality of such information and (f) the Province may disclose the Confidential
Information to persons within the Ontario Government, including without limitation, its

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	 	 	Ministries and agencies, the Executive Council, its committees and their respective staff,
the Legislative Assembly to the extent any such person is required to report thereto, and to
the general public to the extent any such report is required to be disclosed to the general
public under applicable law.

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of November 10, 2010.

	 	 	 	 	 
	 	BOWATER CANADIAN FOREST PRODUCTS INC.

ABITIBI-CONSOLIDATED COMPANY OF CANADA,

for themselves and on behalf of any Canadian

successor thereof upon emergence from their

current restructuring process

 	 
	 	Per:  	/s/David J. Paterson
 	 
	 	 	     David J. Paterson 	 
	 	 	     President 	 
	 
	 	HER MAGESTY THE QUEEN IN RIGHT OF THE PROVINCE OF
ONTARIO, AS REPRESENTED BY THE MINISTER OF
NORTHERN DEVELOPMENT, MINES AND FORESTRY

 	 
	 	Per:  	/s/Michael Gravelle
 	 
	 	 	     Michael Gravelle 	 
	 	 	     Minister of Northern Development, Mines
and Forestry 	 
	 

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SCHEDULE “A”

Compensation Plan

CCAA Notice of meeting and Information Circular dated August 2, 2010, at pages 11-116.

	–	 	Plan Supplement 6.8(a) dated September 3, 2010.
	 
	–	 	Plan Supplement 6.8(b) dated September 3, 2010.
	 
	–	 	Amended Plan Supplement 6.8(b) dated September 13, 2010.
	 
	–	 	Plan Supplement 6.8(d) dated September 3, 2010.
	 
	–	 	Plan Supplement 6.9(1) dated September 3, 2010.
	 
	–	 	Amended Plan Supplement 6.9(1) dated September 17, 2010.
	 
	–	 	Plan Supplement 6.9(2) dated September 3, 2010.
	 
	–	 	Amended Plan Supplement 6.9(1) dated September 17, 2010.

US Disclosure Statement dated August 2, 2010, at pages 1-12.

	–	 	[US] Plan Supplement 1 dated September 1, 2010.
	 
	–	 	[US] Plan Supplement 2 dated September 1, 2010.
	 
	–	 	[US] Plan Supplement 6A dated September 3, 2010.
	 
	–	 	[US] Amended Supplement 6A-4 dated September 10, 2010.
	 
	–	 	[US] Plan Supplement 6B dated September 3, 2010.
	 
	–	 	[US] Plan Supplement 7A dated September 3, 2010.
	 
	–	 	[US] Plan Supplement 7B dated September 3, 2010.
	 
	–	 	[US] Amended Plan Supplement 7A and 7B dated September 17, 2010.

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Schedule “B”

Business Plan

CCAA Notice of Meeting and Information Circular dated August 2, 2010, at pages G-1 — G-11. US
Disclosure Statement dated August 2, 2010, at pages 116-119.

10

 

Schedule “C”

	 	 	 	 	 	 	 	 	 
	 	 	Certificate of	 	 	 	 
	 	 	Approval	 	Form of	 	FA Dollar Amount
	 	 	Number	 	Financial Assurance	 	Held
	Margach Landfill
	 	A600606	 	Irrevocable Letter of Credit	 	$	1,796,511.00	 
	 
	Mud Lake Landfill
	 	A600605	 	Irrevocable Letter of Credit	 	$	258,748.00	 
	 
	Iroquois Falls
	 	A7045801	 	Irrevocable Letter of Credit	 	$	116,208.00	 
	 
	Georgetown Landfill
	 	A210207	 	Irrevocable Letter of Credit	 	$	179,297.00	 
	 
	 
	 	 	 	 	 	$	2,850,764.00	 

11exv10w33

EXHIBIT 10.33

ENGLISH TRANSLATION OF FRENCH LANGUAGE ORIGINAL

AGREEMENT CONCERNING THE

PULP AND PAPER OPERATIONS OF ABITIBIBOW CANADA IN QUEBEC

	 	 	 

	BETWEEN:

	 	BOWATER CANADIAN FOREST PRODUCTS INC., a legal person duly
constituted under the laws of Nova Scotia, having its registered
office in Halifax, Nova Scotia, and ABITIBI- CONSOLIDATED COMPANY
OF CANADA, a legal person duly constituted under the laws of
Quebec, having its head office in Montreal, Quebec, both acting
and duly represented for the purposes hereof by Mr David J.
Paterson, President, on their own behalf and on behalf of any
Canadian successor upon emergence from the current restructuring
process described herein
	 
	 	 
	 

	 	(hereinafter collectively called “AbiBow Canada”);
	 
	 	 
	AND:

	 	THE GOVERNMENT OF QUEBEC, acting and duly represented for the
purposes hereof by Mr. Clément Gignac, Minister of Economic
Development, Innovation and Export Trade

(hereinafter called the “Government”).

Recitals

Whereas the pulp and paper industry is experiencing a very difficult period;

Whereas AbiBow Canada, as well as the group formed with its holding company AbitibiBowater Inc.
(hereafter referred to as “AbiBow”), is affected as is the entire industry, notably as a result of
the significant reduction in the demand for newsprint and of the economic context;

Whereas the Canadian subsidiaries of AbiBow sought the protection of the Companies’ Creditors
Arrangement Act (R.S.C. 1985, c. C-36) (hereinafter called the “CCAA”), on April 17, 2009;

Whereas the Minister of Finance, the Minister of Economic Development, Innovation and Export Trade
and the Minister of Natural Resources and Wildlife announced, on April 17, 2009, an exceptional
intervention by authorizing Investissement Quebec to grant a guarantee of a loan for a maximum of
US$100 million to certain members of the AbiBow group, which loan has since been repaid;

Whereas AbiBow, in cooperation with its creditors, its stakeholders, the CCAA Monitor and its
financial advisors, has developed a 5-year business plan based on its current outlook that
provides for improved profit margins and cash flow, and these improvements will be possible in
part because of the efforts of AbiBow and its employees to concentrate on the manufacturing
operations of highly competitive facilities;

Whereas AbiBow currently has two primary operating companies in Canada, Abitibi-Consolidated
Company of Canada and Bowater Canadian Forest Products Inc., the combination of which to form
AbiBow Canada is planned upon emergence from the current restructuring process, and these two
companies have significant solvency deficits in their pension plans;

Whereas, since the start of its restructuring process AbiBow Canada has initiated discussions and
actively worked with the Government and competent authorities, in the interest of its business and
of all its stakeholders, including in order to (i) identify measures to protect its employees and
retirees, and (ii) promote its emergence from the restructuring process as a stronger and more
sustainable company, including so as to resume contributions to these plans;

Whereas a significant proportion of the Canadian activities of AbiBow are in Quebec;

 

 

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Whereas pursuant to the business plan established by AbiBow, AbiBow Canada intends to (i) keep all
its Quebec pulp and paper mills active, which mills have a theoretical capacity of approximately
two million metric tons, and (ii) make or take every reasonably required effort and measure to
ensure the viability of its Quebec pulp and paper mills, in the same way it does for mills of the
AbiBow group located outside Quebec having similar delivered costs for similar products;

Whereas in connection with its emergence from the restructuring process, AbiBow Canada has been
discussing with the competent authorities with respect to relief measures in order for the
registered pension plans in Quebec for its pulp and paper operations (“pension plans”) to continue
to pay 100% of the pensions to their retirees and beneficiaries;

Whereas in order to ensure the completion of AbiBow Canada’s restructuring the Government’s
support in various forms is required;

CONSEQUENTLY, THE PARTIES AGREE TO THE FOLLOWING:

	1.	 	AbiBow Canada Covenants
	 
	1.1.	 	Governance

AbiBow Canada agrees:

	1.1.1.	 	not to pay any dividend while the weighted average solvency ratio of its pension plans is less than 80%;

	1.1.2.	 	to abide by the AbiBow compensation plan with respect to salaries, bonuses and severance,
which description was filed with the Court and its creditors in the context of its
restructuring process is attached hereto as Schedule I;
	 
	1.1.3.	 	to present to the Government the annual financial results of AbiBow as soon as they are made
public; and
	 
	1.1.4.	 	to report annually to the Government on the implementation of its business plan, which
description was filed with the Court and its creditors in the context of its restructuring
process is attached hereto as Schedule II;
	 
	1.2.	 	Pension Plans

AbiBow Canada agrees, subject to the arrangements made with the competent authorities:

	1.2.1.	 	that it will not voluntarily terminate any of its pension plans in Quebec before it emerges
from the Court protection under the CCAA;

	1.2.2.	 	that it will continue its discussions with the Régie des rentes du Québec to examine
solutions in order to avoid termination of pension plans; and

	1.2.3.	 	that the undertakings set forth in this Section 1.2 will also be complied with by its
subsidiaries that participate in a supplemental pension plan governed by the Supplemental
Pension Plans Act (R.S.Q., c. R-15.1);

	1.3.	 	Investments

AbiBow Canada agrees:

	1.3.1.	 	in its pulp and paper operations, that at least 60% of its maintenance and value-creation
investments shall be made in Quebec, such that, for example, investments of $60 million per
year would result in a minimum investment of $180 million during a 5-year period for Quebec;

	1.3.2.	 	to make investments in strategic projects in Quebec in a minimum amount of $75 million over
a 5-year period, to which an amount of $10 million may be added in the event no amount becomes
payable in

 

 

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connection with the maintenance of AbiBow Canada production capacity in Quebec, as provided in Section 1.4.4.

	1.4.	 	Business Continuity

AbiBow Canada agrees:

	1.4.1.	 	that the head office of AbiBow and all its actual related functions shall remain in Quebec;
	 
	1.4.2.	 	that if a pulp and paper mill is permanently shut down in Quebec, it shall give the
Government and the affected communities the opportunity to find recovery alternatives;
	 
	1.4.3.	 	that it shall offer favourable conditions to enable potential buyers to purchase its pulp
and paper assets at market value, in the event of a sale of such assets located in Quebec,
such favourable conditions including the analysis on a case-by-case basis of the need to have
non-competition provisions;
	 
	1.4.4.	 	that, having regard to its intent described in the recital to maintain the production
capacity of the Quebec pulp and paper mills, it shall pay to one or more pension plans, as
additional solvency special payments, a total compensation of $75 for every metric ton
reduction in such production capacity resulting from a definitive shutdown of at least one
machine, including a temporary shutdown for more than 6 consecutive months or 9 cumulative
months over a period of 18 months, without any duplication in the capacity levels of pulp and
of paper or otherwise, such compensation being payable over 4 years and only once for any
given circumstance; it being understood that no payment shall be made in respect of any
pension plan having an excess surplus under applicable tax laws;
	 
	1.4.5.	 	that, where delivered costs are equivalent to those of its mills located outside Quebec, not
to transfer outside Quebec any pulp and paper production (or part thereof) located in its
mills located in Quebec at the time all of the terms of this letter become effective; and
	 
	1.4.6.	 	to create a diversification fund by contributing 2 million dollars per year for 5 years for
the benefit of the municipalities and the workers where the Company’s Quebec mills are
located.
	 
	2.	 	Term
	 
	2.1.	 	The present letter will become effective as of the time of AbiBow Canada’s emergence from
Court protection under the CCAA and will expire 5 years after such emergence, except Section
1.2.1 that becomes effective upon its signing.
	 
	2.2.	 	The parties agree to re-evaluate, after the 5 year term, the covenants of this letter, in
light of AbiBow Canada’s situation, the conditions affecting the pulp and paper industry as a
whole and the solvency of its pension plans.
	 
	3.	 	Assignment
	 
	3.1.	 	The rights and obligations provided herein shall not, under penalty of being null and void,
be assigned, in whole or in part, without consent of the Government and of AbiBow Canada.
	 
	4.	 	Notice
	 
	4.1.	 	A notice and other communication must be in writing and sent to the parties to their
respective addresses by recommended or certified mail, or by fax or messenger. Such notice and
communication is deemed to have been received the same day it was sent by fax or messenger,
and if it was sent by mail, on the fifth business day following.
	 
	 	 	In all cases, the party giving notice must be able to evidence the sending of the notice if
required to do so by the other party, absent which the notice is deemed null and void.

 

 

 4

			
	TO:	 	Government

Minister of Economic Development, Innovation and Export Trade

710 Place D’Youville, 9th floor

Québec (Québec) G1R 4Y4

Fax: 418 643-0221

Attention: Mr. Mario Bouchard

			
	TO:	 	AbiBow Canada

1155 Metcalfe Street, Suite 800

Montréal (Québec) H3B 5H2 Canada

Fax: 514 394-3644

Attention: Senior Vice-President, Corporate Affairs and Chief Legal Officer

	5.	 	General provisions
	 
	5.1.	 	The present letter (except the schedules) can only be modified by an amendment duly signed by
the parties. The plans described in the schedules herein may be modified by AbiBow from time
to time, AbiBow Canada agrees to notify the Government promptly of any important changes to
these, including for all information that the Government considers reasonably necessary on
this subject, and to report annually to the Government all the changes made to the said plans.
The recitals to the present letter do not confer rights or obligations in respect of either
one of the parties.
	 
	5.2.	 	Time is of the essence of this letter.
	 
	5.3.	 	Each party to this letter represents and warrants to the other party (i) that it has the
required authorizations and full powers to sign this letter and execute all its obligations
contemplated herein, (ii) that by the signing and performance of this letter it is not
violating its constituting act, as applicable, nor any law or regulation, and (iii) that
following its signing this letter will create contractual obligations as described herein,
will have full effect and will be fully enforceable against it pursuant to its terms, subject,
except as otherwise provided, in the case of AbiBow Canada, to the insolvency laws of general
application, to its emergence from the restructuring process under the CCAA, and any required
authorizations.
	 
	5.4.	 	Any covenant or condition in favour of a party may only be waived by this party. If one or
several provisions herein, or arrangements entered into in connection with this letter, were
found to be invalid by a Court for any reason whatsoever, the other provisions contained
therein would continue to have their full effect between the parties and, if an invalidated
provision had a significant negative impact on either one of the parties, they will negotiate
in good faith the relevant terms in order to compensate the affected party in an equivalent
manner.
	 
	5.5.	 	This letter is governed by and must be interpreted pursuant to the laws applicable in Quebec.
	 
	5.6.	 	No party is authorized to bind the other party towards a third party without first obtaining
the other party’s written consent. The covenants contained herein only benefit the parties and
their respective subsidiaries. Nothing herein shall be construed as a stipulation for another.
	 
	5.7.	 	Except as otherwise provided, all references herein to dollars must be understood as a
reference to Canadian dollars.
	 
	5.8.	 	This letter can be signed in several counterparts, each one deemed to be an original
counterpart, but all the counterparts constitute one and the same agreement.

 

 

 5

	5.9.	 	The representatives and signatories for AbiBow Canada and the Government declare that they
have read this letter and its schedules and that they accept its terms, conditions and
modalities and sign it in good faith in the name of AbiBow Canada and the Government,
respectively.
	 
	5.10.	 	The necessary arrangements in respect of AbiBow Canada’s pensions plans and their continued
existence are for AbiBow Canada essential conditions to this letter and related arrangements
taken in connection with it, without which AbiBow Canada would not have entered into them.
	 
	5.11.	 	In the event of a disagreement or conflict resulting from or in connection with this letter,
including with its interpretation and application, the parties will first try to resolve it
amicably through informal negotiations.
	 
	5.12.	 	If AbiBow Canada is subject to an event of force majeure (as defined hereunder):

	 	5.12.1.1.	 	it must promptly give notice to the Government and indicate, as correctly as
possible, the effect on its obligations under this letter and any arrangements
relating thereto, and any foreseeable delays resulting therefrom;
	 
	 	5.12.1.2.	 	the parties will review in good faith the terms of this letter and of the
arrangements relating thereto in order to take any such circumstance into account ;and
	 
	 	5.12.1.3.	 	(i) its obligations will be suspended as long as it acts with reasonable
diligence in order to eliminate or correct, in the case where it is reasonably
possible, the causes and effects of this force majeure, it being understood however
that the resolution of any labour dispute will be left to its entire discretion, and
(ii) the non-performance of an obligation is not considered a default, and does not
lead to a right of action of any nature whatsoever; as applicable, there is a deferral
of the delays resulting from a suspended obligation.

	 	 	For these purposes, the expression “force majeure” means any event which is unforeseeable,
irresistible and beyond the control of AbiBow Canada and delays, interrupts or prevents
complete or partial performance of its obligations pursuant to this letter, including any
one of the following events: war, embargo, insurrection, invasion, riot, rebellion, social
problems, epidemic, flood, fire, explosion, thunder, earthquake, ice storm, storm, sabotage
or labour dispute, as well as any act, omission or constraint by a government, court or
public authority.
	 
	5.13.	 	This letter, as well as any document, communication or other information relating directly
or indirectly to it, are confidential and may not be communicated to anybody, unless to the
extent it is required by any applicable law. If a party believes that it is held by law to
disclose information or receives a request to that effect, it must immediately notify the
other party so that it may have the opportunity to take all appropriate recourse and, in any
event, take all reasonable steps in order to maintain confidentiality. These obligations apply
to any information whether communicated in writing, verbally or by electronic means and
whether it was communicated prior or subsequent to the date of this letter. AbiBow Canada
confirms that this letter and the arrangements with the competent authorities are disclosed in
the context of its restructuring process and with the Court, creditor committees and competent
authorities in Quebec or otherwise.

 

 

IN WITNESS WHEREOF, the Parties have executed this letter as of September 13, 2010.

BOWATER CANADIAN FOREST PRODUCTS INC.

ABITIBI-CONSOLIDATED COMPANY OF CANADA

	 	 	 

	By :

	 	(Signed)
	 
	 	 
	Name :

	 	David J. Paterson
	 
	 	 
	Title :

	 	President
	 
	 	 
	THE GOVERNMENT OF QUEBEC
	 
	 	 
	By :

	 	(Signed)
	 
	 	 
	Name :

	 	Clément Gignac
	 
	 	 
	Title :

	 	Minister of Economic Development, Innovation and Export Trade

 

 

LETTER AGREEMENT CONCERNING THE

PULP AND PAPER OPERATIONS OF ABITIBIBOW CANADA IN QUEBEC

SCHEDULES

Schedule I Business Plan

	–	 	Notice of Meeting and Information Circular dated August 2, 2010, at pages G-1 — G-11.
	 
	–	 	Disclosure Statement dated August 2, 2010, at pages 116-119.

Schedule II Compensation Plan

	–	 	Notice of meeting and Information Circular dated August 2, 2010, at pages 11-116.
	 
	–	 	Disclosure Statement dated August 2, 2010, Exhibit B, at pages 1-12.

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