COMBINATION AGREEMENT AND AGREEMENT AND PLAN OF MERGER

Agreement and Plan of Merger

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AbitibiBowater Inc | ABITIBI-CONSOLIDATED INC | ALPHA-BRAVO HOLDINGS INC | ALPHA-BRAVO MERGER SUB INC | BOWATER CANADA INC

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Title: COMBINATION AGREEMENT AND AGREEMENT AND PLAN OF MERGER
Governing Law: New York Date: 1/29/2007
Industry: Paper and Paper Products Law Firm: Paul Weiss;Troutman Sanders Sector: Basic Materials

EXHIBIT 2.1

COMBINATION AGREEMENT AND

AGREEMENT AND PLAN OF MERGER

Dated as of January 29, 2007

Among

ALPHA-BRAVO HOLDINGS INC.,

ABITIBI-CONSOLIDATED INC.,

BOWATER INCORPORATED,

ALPHA-BRAVO MERGER SUB INC.,

and

BOWATER CANADA INC.

TABLE OF CONTENTS


		Page

ARTICLE I

DEFINITIONS

SECTION 1.01	Terms Defined in this Section		1
SECTION 1.02	Other Definitions		9
SECTION 1.03	Interpretation		11

ARTICLE II

THE ARRANGEMENT AND THE MERGER

SECTION 2.01	Formation of Parent; Merger Sub		12
SECTION 2.02	The Merger		12
SECTION 2.03	The Arrangement		13
SECTION 2.04	Certain Implementation Steps by ACI		13
SECTION 2.05	Certain Implementation Steps by Bowater and Parent		14
SECTION 2.06	Interim Order		14
SECTION 2.07	Closing		15
SECTION 2.08	Joint Proxy Statement; Meetings; Change in Recommendation		15
SECTION 2.09	Additional Securities Matters		17
SECTION 2.10	Cooperation in Filings		18
SECTION 2.11	Execution of Transaction Documents		19
SECTION 2.12	Issuance of Stock in the Arrangement		19

ARTICLE III

EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES

SECTION 3.01	Effect on Capital Stock		20
SECTION 3.02	Exchange of Certificates		21
SECTION 3.03	Bowater Stock Options and Other Stock-Based Awards		25

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BOWATER

SECTION 4.01	Organization, Standing and Corporate Power		27
SECTION 4.02	Subsidiaries		27
SECTION 4.03	Capital Structure		27
SECTION 4.04	Authority; Noncontravention		28
SECTION 4.05	Bowater Public Documents		30
SECTION 4.06	Information Supplied		32
SECTION 4.07	Undisclosed Liabilities		32


		Page
SECTION 4.08	Absence of Certain Changes or Events		32
SECTION 4.09	Litigation		33
SECTION 4.10	Bowater Material Contracts		33
SECTION 4.11	Compliance with Laws; Environmental Matters		35
SECTION 4.12	Labor Relations and Other Employment Matters		36
SECTION 4.13	Pension and Benefits Compliance		36
SECTION 4.14	Taxes		41
SECTION 4.15	Title to Properties		43
SECTION 4.16	Intellectual Property		43
SECTION 4.17	State Takeover Laws; Bowater Certificate Provisions; Rights Agreements		44
SECTION 4.18	Brokers and Other Advisors		44
SECTION 4.19	Opinion of Financial Advisors		44
SECTION 4.20	Insurance		44
SECTION 4.21	Vote Required		45
SECTION 4.22	CallCo and ExchangeCo Status		45
SECTION 4.23	Exchangeable Shares		45
SECTION 4.24	No Other Representations or Warranties		45

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF ACI

SECTION 5.01	Organization, Standing and Corporate Power		46
SECTION 5.02	Subsidiaries		46
SECTION 5.03	Capital Structure		47
SECTION 5.04	Authority; Noncontravention		47
SECTION 5.05	ACI Public Documents		49
SECTION 5.06	Information Supplied		51
SECTION 5.07	Undisclosed Liabilities		51
SECTION 5.08	Absence of Certain Changes or Events		51
SECTION 5.09	Litigation		51
SECTION 5.10	ACI Material Contracts		52
SECTION 5.11	Compliance with Laws; Environmental Matters		53
SECTION 5.12	Labor Relations and Other Employment Matters		54
SECTION 5.13	Pension and Benefits Compliance		55
SECTION 5.14	Taxes		59
SECTION 5.15	Title to Properties		61
SECTION 5.16	Intellectual Property		62
SECTION 5.17	Brokers and Other Advisors		62
SECTION 5.18	Opinion of Financial Advisors		63
SECTION 5.19	Insurance		63
SECTION 5.20	Vote Required		63
SECTION 5.21	No Other Representations or Warranties		63


		Page
ARTICLE VI

COVENANTS RELATING TO THE BUSINESS

SECTION 6.01	Conduct of Business by Bowater		63
SECTION 6.02	Conduct of Business by ACI		66
SECTION 6.03	Other Actions		69
SECTION 6.04	Notice of Changes		69
SECTION 6.05	No Solicitation		69
SECTION 6.06	Tax Covenants of Bowater		72
SECTION 6.07	Tax Covenants of ACI		73

ARTICLE VII

ADDITIONAL AGREEMENTS

SECTION 7.01	Confidentiality; Access to Information and Certain Tax Matters		74
SECTION 7.02	Commercially Reasonable Efforts		75
SECTION 7.03	Governmental Approvals		75
SECTION 7.04	Indemnification, Exculpation and Insurance		76
SECTION 7.05	Public Announcements		77
SECTION 7.06	Affiliates; Section 16 Matters		77
SECTION 7.07	Governance of Parent		77
SECTION 7.08	Indemnification of Holders of Exchangeable Shares		78
SECTION 7.09	Parent Common Stock		78
SECTION 7.10	Solvency of ExchangeCo		78
SECTION 7.11	Stockholder Litigation		78
SECTION 7.12	Takeover Laws		78
SECTION 7.13	Employee Matters		78
SECTION 7.14	Tax Matters		80
SECTION 7.15	Certain Information		81

ARTICLE VIII

CONDITIONS PRECEDENT

SECTION 8.01	Conditions to Each Party’s Obligation to Effect the Arrangement		81
SECTION 8.02	Additional Conditions to Obligations of ACI		83
SECTION 8.03	Additional Conditions to Obligations of Bowater		85

ARTICLE IX

TERMINATION, AMENDMENT AND WAIVER

SECTION 9.01	Termination		85
SECTION 9.02	Notice of Termination; Effect of Termination		87
SECTION 9.03	Fees and Expenses		87
SECTION 9.04	Amendment		90
SECTION 9.05	Extension; Waiver		90

iii


		Page
ARTICLE X

GENERAL PROVISIONS

SECTION 10.01	Nonsurvival of Representations and Warranties		90
SECTION 10.02	Notices		90
SECTION 10.03	Consents and Approvals		92
SECTION 10.04	Counterparts		92
SECTION 10.05	Entire Agreement; No Third-Party Beneficiaries		92
SECTION 10.06	Governing Law		92
SECTION 10.07	Assignment		92
SECTION 10.08	Specific Enforcement; Consent to Jurisdiction		93
SECTION 10.09	Waiver of Jury Trial		93
SECTION 10.10	Severability		94


Exhibits

Exhibit A		Form of Arrangement Resolution

Exhibit B		Form of Plan of Arrangement

Exhibit C		Exchangeable Share Support Agreement

Exhibit D		Voting and Exchange Trust Agreement

Exhibit E		Form of Parent Amended and Restated Certificate of Incorporation

Exhibit F		Form of Parent Amended and Restated Bylaws

Exhibit G		Form of ExchangeCo Articles of Amendment

Exhibit H		Form of Parent Certificate of Designation

COMBINATION AGREEMENT AND

AGREEMENT AND PLAN OF MERGER

COMBINATION AGREEMENT AND AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) dated as of January 29, 2007, among ALPHA-BRAVO HOLDINGS INC., a Delaware corporation (“ Parent ”), ABITIBI-CONSOLIDATED INC., a corporation amalgamated under the laws of Canada (“ ACI ”) BOWATER INCORPORATED, a Delaware corporation (“ Bowater ”), ALPHA-BRAVO MERGER SUB INC., a Delaware corporation (“ Merger Sub ”), and BOWATER CANADA INC., a corporation incorporated under the laws of Canada (“ ExchangeCo ”).

WHEREAS, the Board of Directors of each of Parent, ACI , Bowater and Merger Sub has deemed it advisable and in the best interests of such companies and their respective shareholders to effect the business combination and other transactions provided for herein, including the Arrangement pursuant to the Plan of Arrangement and the Merger, each as described herein;

WHEREAS, the parties hereto intend that the Arrangement will provide shareholders of ACI who are residents of Canada and not exempt from tax for purposes of the Canadian Tax Act with the opportunity to exchange their ACI Common Shares for Exchangeable Shares on a tax-deferred or “rollover” basis for Canadian income tax purposes; and

WHEREAS, for U.S. federal income tax purposes, it is intended that (i) the Merger shall qualify as a reorganization within the meaning of Section 368(a) of the Code and that this Agreement shall constitute a “plan of reorganization” for purposes of the Code and (ii) the Merger and the Arrangement, taken together, shall qualify as an exchange described in Section 351 of the Code.

WHEREAS, promptly following the execution hereof, the parties will cause the name of Parent to be changed to “AbitibiBowater Inc.”;

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, and subject to the conditions set forth herein, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01 Terms Defined in this Section . In addition to terms defined elsewhere in this Agreement, the following terms, when used in this Agreement, shall have the meanings set forth below:

“ 1933 Act ” means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated from time to time thereunder.

“ 1934 Act ” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated from time to time thereunder.

“ ACI Balance Sheet ” means the consolidated balance sheet of ACI, and the notes related thereto, set forth in ACI’s interim consolidated financial statements for the fiscal quarter ended September 30, 2006 filed with the Canadian Securities Regulatory Authorities.

“ ACI Balance Sheet Date ” means September 30, 2006.

“ ACI Exchange Ratio ” means 0.06261.

“ ACI Key Personnel ” means any director, officer or other employee of ACI or any Subsidiary of ACI with annual base compensation in excess of $200,000.

“ ACI Material Adverse Effect ” means any change, effect, event, occurrence or development which individually or in the aggregate (i) is or would reasonably be expected to be materially adverse to the business, assets, financial condition, liabilities or results of operations of ACI and its Subsidiaries, taken as a whole; provided that none of the following shall be deemed, either alone or in combination, to constitute, and none of the following shall be taken into account in determining whether something has had or would reasonably be expected to have an ACI Material Adverse Effect: (1) any change, effect, event, occurrence or development in the financial, securities or capital markets or the economy in general; (2) any change, effect, event, occurrence or development in the industries in which ACI or any of its Subsidiaries operates in general; (3) any change in the demand or pricing for paper or wood products; (4) the performance of obligations under this Agreement (other than any obligation to operate in the ordinary course of business), provided that the exception in this clause (4) shall not affect the representations and warranties of ACI in Section 5.04(c) or Section 5.04(d), or the conditions in Sections 8.01(e) through 8.01(h); (5) any change, effect, event, occurrence or development in the currency markets or currency fluctuations generally, including any change in the exchange rate between the Canadian and U.S. dollars; (6) any change, effect, event, occurrence or development resulting from or relating to any change in the market price of crude oil, natural gas or related hydrocarbons or other sources of energy or the market prices of other raw materials used by ACI or any of its Subsidiaries; (7) any change, effect, occurrence or development resulting from or relating to the announcement of the execution of this Agreement or the transactions contemplated by this Agreement, provided that the exception in this clause (7) shall not affect the representations and warranties of ACI in Section 5.04(c) or Section 5.04(d), or the conditions in Sections 8.01(e) through 8.01(h); or (8) any change in the trading prices of ACI’s equity securities, by itself, (it being understood that the foregoing shall not prevent a party from asserting that any change, event, occurrence, effect or development that may have contributed to or caused such change in trading prices independently constitutes an ACI Material Adverse Effect); provided , further , that, with respect to clauses (1) and (2), such change, effect, event, occurrence or development does not disproportionately impact ACI and its Subsidiaries compared to other similarly situated companies (by size or otherwise) operating in the principal industries and geographic areas in which ACI and its Subsidiaries operate; or (ii) is or would reasonably be expected to impair in any material respect the ability of ACI to consummate the Arrangement and the other transactions contemplated by this Agreement or to perform its obligations under this Agreement.

“ ACI Meeting ” means the meeting of holders of ACI Common Shares, including any adjournment or postponement thereof, to be called and held in accordance with the Interim Order to consider, or at which will be considered, the Arrangement and other matters related to this Agreement and the Arrangement.

“ ACI Personnel ” means any current or former employee, director, officer or consultant of ACI or any of its Subsidiaries.

“ ACI Specified Personnel ” means any director, officer or other employee of ACI or any Subsidiary of ACI who is party, as of the date hereof, to any change in control agreement, or similar agreement which provides for similar benefits in connection with certain terminations of employment following a change in control of ACI, with ACI or any of its Subsidiaries.

“ ACI Share-Based Award ” means a right of any kind, contingent or accrued, to receive ACI Common Shares or benefits measured by the value of a number of ACI Common Shares, and each award of any kind consisting of ACI Common Shares, granted under the ACI Stock Plans (including restricted stock, restricted stock units, deferred stock units and dividend equivalents), other than ACI Stock Options or ACI SARs.

“Affiliate” of any person means another person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person.

“ ARC ” means an advance ruling certificate issued by the Commissioner pursuant to Section 102 of the Competition Act in respect of the transactions contemplated by this Agreement.

“ Arrangement ” means an arrangement under Section 192 of the CBCA on the terms and subject to the conditions set out in the Plan of Arrangement, subject to any amendments or variations thereto made in accordance with Section 9.04 hereof or Article 6 of the Plan of Arrangement or made at the direction of the Court in the Final Order.

“ Arrangement Resolution ” means the special resolution of the holders of the ACI Common Shares to be considered at the ACI Meeting substantially in the form of, and with the content provided in, Exhibit A hereto.

“ Articles of Arrangement ” means the articles of arrangement of ACI in respect of the Arrangement that are required by the CBCA to be sent to the Director after the Final Order is made.

“ Bowater Balance Sheet ” means the consolidated balance sheet of Bowater, and the notes thereto, set forth in Bowater’s quarterly report on Form 10-Q for the fiscal quarter ended September 30, 2006.

“ Bowater Balance Sheet Date ” means September 30, 2006.

“ Bowater Exchange Ratio ” means 0.52000.

“ Bowater Key Personnel ” means any director, officer or other employee of Bowater or any Subsidiary of Bowater with annual base compensation in excess of $200,000.

“ Bowater Material Adverse Effect ” means any change, effect, event, occurrence or development which individually or in the aggregate (i) is or would reasonably be expected to be materially adverse to the business, assets, financial condition, liabilities or results of operations of Bowater and its Subsidiaries, taken as a whole; provided that none of the following shall be deemed, either alone or in combination, to constitute, and none of the following shall be taken into account in determining whether something has had or would reasonably be expected to have a Bowater Material Adverse Effect: (1) any change, effect, event, occurrence or development in the financial, securities or capital markets or the economy in general; (2) any change, effect, event, occurrence or development in the industries in which Bowater or any of its Subsidiaries operates in general; (3) any change in the demand or pricing for paper or wood products; (4) the performance of obligations under this Agreement (other than any obligation to operate in the ordinary course of business), provided that the exception in this clause (4) shall not affect the representations and warranties of Bowater in Section 4.04(c) or Section 4.04(d), or the conditions in Sections 8.01(e) through 8.01(h); (5) any change, effect, event, occurrence or development in the currency markets or currency fluctuations generally, including any change in the exchange rate between the Canadian and U.S. dollars; (6) any change, effect, event, occurrence or development resulting from or relating to any change in the market price of crude oil, natural gas or related hydrocarbons or other sources of energy or the market prices of other raw materials used by Bowater or any of its Subsidiaries; (7) any change, effect, occurrence or development resulting from or relating to the announcement of the execution of this Agreement or the transactions contemplated by this Agreement, provided that the exception in this clause (7) shall not affect the representations and warranties of Bowater in Section 4.04(c) or Section 4.04(d), or the conditions in Sections 8.01(e) through 8.01(h); or (8) any change in the trading prices of Bowater’s equity securities, by itself, (it being understood that the foregoing shall not prevent a party from asserting that any change, event, occurrence, effect or development that may have contributed to or caused such change in trading prices independently constitutes an Bowater Material Adverse Effect); provided , further , that, with respect to clauses (1) and (2), such change, effect, event, occurrence or development does not disproportionately impact Bowater and its Subsidiaries compared to other similarly situated companies (by size or otherwise) operating in the principal industries and geographic areas in which Bowater and its Subsidiaries operate; or (ii) is or would reasonably be expected to impair in any material respect the ability of Bowater or ExchangeCo to consummate the Arrangement and the other transactions contemplated by this Agreement or to perform its obligations under this Agreement.

“ Bowater Meeting ” means the meeting of holders of Bowater Common Stock, including any adjournment or postponement thereof, to be called to consider, or at which will be considered, the approval and adoption of this Agreement and the Merger.

“ Bowater Personnel ” means any current or former employee, director, officer or consultant of Bowater or any of its Subsidiaries.

“ Bowater Specified Personnel ” means any director, officer or other employee of Bowater or any Subsidiary of Bowater who is party, as of the date hereof, to any change in control agreement, or similar agreement which provides for similar benefits in connection with certain

terminations of employment following a change in control of Bowater, with Bowater or any of its Subsidiaries.

“Business Day ” means any day that is not a Saturday, Sunday or other day on which banking institutions are required or authorized by law to be closed in New York, New York or in Montreal, Quebec.

“ CallCo ” means Bowater Canadian Holdings Incorporated, a company incorporated under the laws of the Province of Nova Scotia and a Subsidiary of Bowater and referenced as “CallCo” in the Transaction Documents.

“ Canadian Securities Regulatory Authorities ” means each securities commission or similar securities regulatory authority in each of the provinces and territories of Canada.

“ Canadian Tax Act ” means the Income Tax Act (Canada) and the regulations adopted thereunder, in each case as now in effect and as the same may be amended from time to time.

“ CBCA ” means the Canada Business Corporations Act, as amended.

“ Code ” means the United States Internal Revenue Code of 1986, as amended.

“Commissioner” means the Commissioner of Competition under the Competition Act.

“Competition Act” means the Competition Act (Canada), as amended, and the rules and regulations enacted or promulgated thereunder from time to time.

“Competition Act Approval” means receipt of an ARC or, in the alternative to an ARC, the expiration or earlier termination or waiver of the waiting period under Part IX of the Competition Act and a letter from the Commissioner or a person authorized by the Commissioner (in form and substance acceptable to the parties) that the Commissioner has determined not to make an application for an order under Section 92 of the Competition Act in respect of the transactions contemplated by this Agreement and where such advice has not been rescinded.

“ Court ” means the Superior Court, District of Montreal, Province of Quebec.

“ C$ ” means dollars in the lawful currency of Canada.

“ Director ” means the Director appointed pursuant to Section 260 of the CBCA.

“ Dissent Rights ” means the rights of dissent in respect of the Arrangement described in Section 3.1 of the Plan of Arrangement.

“ dollar ” or “ $ ” means dollars in the lawful currency of the United States of America.

“ Effective Time ” means, with respect to the Merger, the effective time of the Merger as set forth in the Certificate of Merger and, in all other instances, has the meaning ascribed thereto in the Plan of Arrangement.

“ Environmental Laws ” means all federal, state, provincial and local Laws of any relevant country or jurisdiction (including the common law), Orders, notices, Permits or binding Contracts issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, employee health and safety, noise, odors or the presence, management, Release of, or exposure to, Hazardous Materials.

“ Exchangeable Share Provision Amendment ” means such amendment(s) to the Articles of ExchangeCo to be effected by the filing of Articles of Amendment by ExchangeCo substantially in the form of, and with the content provided in, Exhibit G hereto.

“ Exchangeable Share Support Agreement ” means the agreement made between Bowater, ExchangeCo and CallCo attached as Exhibit C hereto, with such changes thereto as the parties to the Exchangeable Share Support Agreement, acting reasonably, may agree in accordance with Section 2.05(b) of this Agreement.

“ ExchangeCo Meeting ” means the meeting of holders of Exchangeable Shares, including any adjournment or postponement thereof, to be called to consider the Exchangeable Share Provision Amendment.

“ Final Order ” means the final order of the Court approving the Arrangement, as such order may be amended or varied at any time prior to the Effective Time or, if appealed, then unless such appeal is withdrawn or denied, as affirmed or as amended on appeal.

“ Governmental Authority ” means any federal, state, provincial, territorial or local government of any relevant country or jurisdiction, any subdivision, agency, board, court, commission or authority thereof, or any quasi-governmental body, arbitral body with legal jurisdiction or any organized securities exchange or taxing authority.

“ Hazardous Materials ” means (1) petroleum, petroleum products and by-products, asbestos and asbestos-containing materials, urea formaldehyde foam insulation, electronic, medical or infectious wastes, animal wastes, ammonia, polychlorinated biphenyls, radon gas, radioactive substances, chlorofluorocarbons and all other ozone-depleting substances and (2) any other chemical, material, substance, waste, pollutant or contaminant that could result in liability under, or that is prohibited, defined, limited or regulated by or pursuant to, any Environmental Law.

“ ICA ” means the Investment Canada Act (Canada), as amended, and the rules and regulations enacted or promulgated thereunder from time to time.

“ICA Approval” means the determination or deemed approval by the responsible Minister under the ICA that the transactions contemplated hereby are of “net benefit to Canada” for purposes of the ICA.

“ Interim Order ” means the interim order of the Court, as the same may be amended, in respect of the Arrangement, as contemplated by Section 2.06.

“ Joint Proxy Statement ” means, collectively, (a) the notice of the Bowater Meeting to be sent to holders of Bowater Common Stock and the holders of Exchangeable Shares as of the record date fixed in respect of the Bowater Meeting, (b) the notice of the ACI Meeting to be sent to holders of ACI Common Shares as of the record date fixed in respect of the ACI Meeting, (c) the notice of the ExchangeCo Meeting to be sent to holders of Exchangeable Shares as of the record date fixed in respect of the ExchangeCo Meeting, and (d) the accompanying joint proxy statement/management information circular/prospectus in connection with the Bowater Meeting, the ACI Meeting and the ExchangeCo Meeting, in each case as amended, supplemented or otherwise modified; provided that if the parties mutually agree to prepare a separate proxy statement of Bowater, management information circular of ACI and management information circular of ExchangeCo, then references to the Joint Proxy Statement shall refer, collectively, to the proxy statement/prospectus of Bowater, in the case of Bowater, the management information circular of ACI, in the case of ACI, and the management information circular of ExchangeCo, in the case of ExchangeCo.

“ Knowledge ” means, the actual knowledge of (i) with respect to ACI, the individuals listed in Section 1.01 of the ACI Disclosure Schedule or (ii) with respect to Bowater, the individuals listed in Section 1.01 of the Bowater Disclosure Schedule.

“ Law ” means any statute, law, bylaw, ordinance, rule, regulation, Order or Permit (of any relevant country or jurisdiction) adopted, passed, issued, promulgated or entered into by any Governmental Authority.

“ NYSE ” means The New York Stock Exchange, Inc.

“ person ” means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity.

“ Plan of Arrangement ” means the plan of arrangement, substantially in the form of Exhibit B hereto and any amendments or variations thereto made in accordance with Section 9.04 hereof or Article 6 of the Plan of Arrangement or made at the direction of the Court in the Final Order.

“ Qualifying Amendment ” means an amendment or supplement to the Joint Proxy Statement (including by incorporation by reference) to the extent it contains (i) a Change in ACI Recommendation or a Change in Bowater Recommendation (as the case may be), (ii) a statement of the reasons of the Board of Directors of ACI or Bowater (as the case may be) for making such Change in ACI Recommendation or Change in Bowater Recommendation (as the case may be) and (iii) additional information reasonably related to the foregoing.

“Release ” means any actual or threatened spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, depositing, disposing or arranging for disposal or migrating into or through the environment.

“ Sarbanes-Oxley Act ” means the Sarbanes-Oxley Act of 2002 and the related rules and regulations promulgated under such Act or the 1934 Act.

“ Securities Act (Quebec) ” means the Securities Act (Quebec) and all rules, regulations and policies enacted thereunder, as now in effect and as it may be amended from time to time prior to the Effective Time.

“ Securities Act (Ontario) ” means the Securities Act (Ontario) and all rules and regulations enacted thereunder, as now in effect and as it may be amended from time to time prior to the Effective Time.

“ Securities Laws ” means the Securities Act (Quebec), the Securities Act (Ontario) and the equivalent legislation in the other provinces and territories of Canada (as well as all national policies, national instruments and multilateral instruments adopted by the Canadian Securities Regulatory Authorities), the 1933 Act, the 1934 Act, the Sarbanes-Oxley Act and state securities and “blue sky” Laws, all as now enacted or as the same may from time to time be amended, and the applicable rules and regulations promulgated thereunder.

“ Subsidiary ” of any person means another person, an amount of the voting securities, other voting rights or voting partnership interests of which is sufficient to elect at least a majority of the second person’s Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by the first person.

“ Taxes ” means (i) any and all federal, provincial, state or local (of any applicable country or jurisdiction) and other taxes, levies, fees, imposts, duties, and similar governmental charges (including any interest, fines, assessments, penalties or additions to tax imposed in connection therewith or with respect thereto) including (x) taxes imposed on, or measured by, income, franchise, profits or gross receipts, and (y) ad valorem, value added, capital gains, sales, goods and services, use, real or personal property, capital, license, branch, payroll, withholding, employment, social security (or similar), unemployment, compensation, utility, severance, production, excise, stamp, occupation, premium, windfall profits, transfer taxes, and customs duties, and (ii) any transferee liability in respect of any items described in the preceding clause (i).

“ Tax Returns ” means any and all reports, returns, declarations, claims for refund, elections, disclosures, estimates, information reports or returns or statements required to be supplied to a taxing authority in connection with Taxes, including any schedule or attachment thereto or amendment thereof.

“ Transaction Documents ” means the collective reference to the Exchangeable Share Support Agreement and the Voting and Exchange Trust Agreement.

“ Treasury Regulations ” means the Treasury regulations promulgated under the Code.

“ Trustee ” means Computershare Trust Company of Canada, acting as trustee under the Voting and Exchange Trust Agreement and any successor trustee appointed under the Voting and Exchange Trust Agreement.

“ TSX ” means The Toronto Stock Exchange.

“ Voting and Exchange Trust Agreement ” means the agreement made between Bowater, ExchangeCo and the Trustee, attached as Exhibit D hereto, with such changes thereto as the parties to the Voting and Exchange Trust Agreement, acting reasonably, may agree in accordance with Section 2.05(b) of this Agreement.

“ U.S. ” means the United States of America.

SECTION 1.02 Other Definitions . The following terms are defined in the Sections indicated:


Term		Section
ACI		Preamble
ACI Affiliate		Section 7.06(a)
ACI Articles		Section 5.01
ACI Benefit Plans		Section 5.13(a)
ACI Bylaws		Section 5.01
ACI Common Shares		Section 5.03
ACI Disclosure Schedule		ARTICLE V
ACI Intellectual Property		Section 5.16
ACI Leases		Section 5.15(a)
ACI Material Contract		Section 5.10(a)
ACI Pension Plan		Section 5.13(a)
ACI Preferred Shares		Section 5.03
ACI Public Documents		Section 5.05(a)
ACI Real Property		Section 5.15(a)
ACI SARs		Section 5.03
ACI Shareholder Approval		Section 2.06(b)
ACI Stock Options		Section 2.03
ACI Stock Plans		Section 5.03
ACI Structures		Section 5.15(b)
ACI Welfare Plan		Section 5.13(a)
Acquisition Proposal		Section 6.05(a)
Actions		Section 4.09
Agreement		Preamble
Alternative Form		Section 2.08(a)
Bowater		Preamble
Bowater Benefit Plans		Section 4.13(a)
Bowater Bylaws		Section 4.01
Bowater Certificate		Section 4.01
Bowater Common Stock		Section 3.01
Bowater Disclosure Schedule		ARTICLE IV
Bowater Exchange Fund		Section 3.02(a)
Bowater Intellectual Property		Section 4.16(a)
Bowater Leases		Section 4.15(a)
Bowater Material Contract		Section 4.10(a)
Bowater Merger Consideration		Section 3.01(c)


Term		Section
Bowater Pension Plan		Section 4.13(a)
Bowater Public Documents		Section 4.05(a)
Bowater Preferred Stock		Section 4.03
Bowater Real Property		Section 4.15(a)
Bowater SAR		Section 3.03(a)
Bowater Special Preferred Stock		Section 4.03
Bowater Stock-Based Award		Section 3.03(b)
Bowater Stock Option		Section 3.03(a)
Bowater Stock Plans		Section 3.03(a)
Bowater Stockholder Approval		Section 4.21
Bowater Structures		Section 4.15(b)
Bowater Welfare Plan		Section 4.13(a)
Canadian GAAP		Section 5.05(a)
Cautionary Disclosures		Section 4.08
Certificate		Section 3.01(c)
Certificate of Merger		Section 2.07
Change in ACI Recommendation		Section 2.08(b)
Change in Bowater Recommendation		Section 2.08(c)
Change in Recommendation		Section 2.08(c)
Closing Date		Section 2.07
Commonly Controlled ACI Entity		Section 5.13(a)
Commonly Controlled Bowater Entity		Section 4.13(a)
Confidentiality Agreements		Section 7.01(a)
Continuing Employees		Section 7.13(a)
Contract		Section 4.04(c)
DGCL		Section 2.02(a)
DOJ		Section 7.03(a)
ERISA		Section 4.13(a)
Excess Shares		Section 3.02(e)
Excess Shares Trust		Section 3.02(e)
Exchange Agent		Section 3.02(a)
Exchangeable Shares		Section 4.03
ExchangeCo		Preamble
Expenses		Section 9.03(d)
Filed ACI Public Documents		Section 5.08
Filed Bowater Public Documents		Section 4.08
Form S-3		Section 2.09(e)
Form S-4		Section 2.08(a)
Form S-8		Section 2.09(d)
FTC		Section 7.03(a)
GAAP		Section 4.05(a)
HSR Act		Section 4.04(d)
Indemnified Parties		Section 7.04
Infringe		Section 4.16(a)
Intellectual Property		Section 4.16(b)
IRD		Section 7.03(a)


Term		Section
IRS		Section 4.13(b)
Liens		Section 2.01(b)
Merger		Section 2.02(a)
Merger Sub		Preamble
Merger Sub Common Stock		Section 2.01(b)
Minister		Section 8.01(f)
NOLs		Section 4.14(m)
Order		Section 4.04(c)
Parent		Preamble
Parent Bylaws		Section 2.01(a)
Parent Certificate of Designation		Section 2.01(a)
Parent Charter		Section 2.01(a)
Parent Common Stock		Section 2.01(a)
Parent Stock Options		Section 2.03
Parent SARs		Section 2.09(d)
Parent Special Preferred Stock		Section 2.01(a)
Parent Stock-Based Award		Section 2.09(d)
Permits		Section 4.11(b)
Post-Signing Returns		Section 6.06(a)
Prior Plan		Section 7.13(d)
SEC		Section 4.05(a)
Subsequent Plan		Section 7.13(d)
Superior Proposal		Section 6.05(b)
Surviving Corporation		Section 2.02(a)
Takeover Statute		Section 7.12
Tax Sharing Agreements		Section 4.14(g)
Termination Date		Section 9.01(b)
Termination Fee		Section 9.03(d)
Third Party		Section 6.05(a)

SECTION 1.03 Interpretation . When a reference is made in this Agreement to an Article, a Section, Exhibit or Schedule, such reference shall be to an Article or a Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”. The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. References to “this Agreement” shall include the Bowater Disclosure Schedule and the ACI Disclosure Schedule. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any Law defined or referred to herein means such Law as from time to time amended, modified or supplemented (together with the rules and regulations promulgated thereunder), including by succession of successor Laws.

References to a person are also to its successors and permitted assigns. This Agreement is the product of negotiation by the parties having the assistance of counsel and other advisers. The language used in this Agreement shall be deemed to be the language chosen by the parties to express their mutual intent, and it is the intention of the parties that this Agreement not be construed more strictly with regard to one party than with regard to the others. Representations, warranties, covenants and agreements made herein with respect to Subsidiaries of a person shall be deemed to include all direct and indirect Subsidiaries of such person.

ARTICLE II

THE ARRANGEMENT AND THE MERGER

SECTION 2.01 Formation of Parent; Merger Sub .

(a) ACI and Bowater have caused Parent to be organized under the laws of the State of Delaware and each owns 50% of the capital stock of Parent. The authorized capital stock of Parent consists of 100 shares of common stock, par value $.01 per share (the “ Parent Common Stock ”), of which one share has been issued to ACI and one share has been issued to Bowater. ACI and Bowater shall take, and shall cause Parent to take, all requisite action to cause (i) the certificate of incorporation of Parent to be substantially in the form of, and with the content provided in, Exhibit E hereto (the “ Parent Charter ”), (ii) a certificate of designation with respect to the special voting preferred stock, par value $1.00 per share, of Parent (“ Parent Special Preferred Stock ”), substantially in the form of, and with the content provided in, Exhibit H hereto (the “ Parent Certificate of Designation ”), to be duly adopted and filed with the Secretary of State of the State of Delaware and (iii) the by-laws of the Parent to be substantially in the form of, and with the content provided in, Exhibit F hereto (the “ Parent Bylaws ”), and to provide any stockholder approvals required with respect to Parent or Merger Sub in connection with this Agreement and the transactions contemplated hereby, in each case, at or prior to the Effective Time (but to be effective as of the Effective Time). Each share of Parent Common Stock that is owned by Bowater or ACI immediately prior to the Effective Time shall, at the Effective Time, automatically be canceled and shall cease to exist, and no consideration shall be payable or delivered in exchange therefor.

(b) ACI and Bowater have caused Parent to organize, and Parent has organized, Merger Sub under the laws of the State of Delaware. The authorized capital stock of Merger Sub consists of 100 shares of common stock, par value $.01 per share (the “ Merger Sub Common Stock ”), all of which are validly issued, fully paid and nonassessable, and are owned by Parent free and clear of any pledges, liens, charges, encumbrances or security interests of any kind or nature whatsoever (other than statutory liens for current Taxes not yet due) (collectively, “ Liens ”).

SECTION 2.02 The Merger .

(a) At the Effective Time, upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the General Corporation Law of the State of Delaware (the “ DGCL ”), Merger Sub shall be merged with and into Bowater (the “ Merger ”). As a result of the Merger, the separate corporate existence of Merger Sub shall cease and Bowater

shall continue as the surviving corporation of the Merger (the “ Surviving Corporation ”). The Merger shall have all the effects provided by applicable Law, including the DGCL.

(b) The Restated Certificate of Incorporation of Bowater as in effect immediately prior to the Effective Time shall be the certificate of incorporation of the Surviving Corporation until thereafter changed or amended as provided therein and by applicable Law. The Bylaws of Merger Sub as in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable Law.

(c) The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. The officers of Bowater immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, each to hold office until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. Parent shall cause the Board of Directors of Merger Sub as of immediately prior to the Effective Time to consist of such individuals as are agreed by ACI and Bowater prior to the Effective Time.

SECTION 2.03 The Arrangement . The Articles of Arrangement, together with such other matters as are necessary to implement the Arrangement, shall implement the Plan of Arrangement. At the Effective Time, each ACI Common Share and option to purchase ACI Common Shares (an “ ACI Stock Option ”) outstanding immediately prior to the Effective Time will be exchanged for shares of Parent Common Stock or Exchangeable Shares and for options to purchase shares of Parent Common Stock (“ Parent Stock Options ”), respectively, as provided in the Plan of Arrangement, and the Arrangement will, from and after the Effective Time, have all of the effects provided by applicable Law, including the CBCA. Immediately prior to the Effective Time, the parties shall cause the Board of Directors of ACI to consist of such individuals as are agreed by ACI and Bowater prior to the Effective Time.

SECTION 2.04 Certain Implementation Steps by ACI . ACI shall:

(a) subject to the terms of this Agreement, as soon as reasonably practicable, apply in a manner reasonably acceptable to Bowater under Section 192 of the CBCA for an order approving the Arrangement and for the Interim Order, and thereafter proceed with and diligently seek to obtain the Interim Order;

(b) subject to the terms of this Agreement and in accordance with the Interim Order, as soon as reasonably practicable, convene and hold the ACI Meeting for the purpose of submitting to the holders of the ACI Common Shares the Arrangement Resolution for their consideration (and, with respect to an annual general meeting, if applicable, for any other purpose as may be set out in the notice for such meeting);

(c) subject to obtaining such approvals as are required by the Interim Order, proceed with and diligently pursue the application to the Court for the Final Order; and

(d) subject to obtaining the Final Order and the satisfaction or waiver of the other conditions herein contained in favor of each party, send to the Director, for endorsement

and filing by the Director, the Articles of Arrangement and such other documents as may be required in connection therewith under the CBCA to give effect to the Arrangement.

SECTION 2.05 Certain Implementation Steps by Bowater and Parent .

(a) Bowater shall, subject to the terms of this Agreement, as soon as reasonably practicable: (1) convene and hold the Bowater Meeting for the purpose of submitting to the holders of the Bowater Common Stock and the holders of Exchangeable Shares the approval and adoption of this Agreement and the Merger, for their consideration (and, with respect to an annual general meeting, if applicable, for any other purpose as may be set out in the notice for such meeting); (2) cause ExchangeCo to convene and hold the ExchangeCo Meeting for the purpose of submitting to the holders of Exchangeable Shares for their consideration the Exchangeable Share Provision Amendment and, in the event the holders of the Exchangeable Shares do not approve the Exchangeable Share Provision Amendment at the ExchangeCo Meeting by the requisite majority, (x) cause the directors of ExchangeCo to establish the Business Day immediately preceding the day on which the Effective Time occurs as the “Redemption Date” for the then issued and outstanding Exchangeable Shares (as the term “Redemption Date” is defined in the share provisions applicable to and governing the Exchangeable Shares) and to proceed with the redemption of all Exchangeable Shares that are issued and outstanding on such Redemption Date in accordance and compliance with the share provisions applicable to and governing the Exchangeable Shares; and (y) cause CallCo, in its capacity as sole shareholder of ExchangeCo, following the redemption of all then issued and outstanding Exchangeable Shares, to approve the Exchangeable Share Provision Amendment and cause ExchangeCo to file the Articles of Amendment giving effect to the Exchangeable Share Provision Amendment as soon as reasonably practicable and in any event prior to the Effective Time;

(b) Bowater shall, subject to obtaining the Final Order and the satisfaction or waiver of the other conditions herein contained in favor of each party, on or prior to, the Closing Date, cause the directors of ExchangeCo, CallCo and Bowater to amend or amend and restate the Exchangeable Share Support Agreement and the Voting Trust and Exchange Agreement in order to give effect to the Exchangeable Share Provision Amendment; and

(c) Parent shall, for the benefit of ACI and Bowater, subject to obtaining the Final Order and the satisfaction or waiver of the other conditions herein contained in favor of each party, on or prior to the Closing Date, will adopt and become a party to the amended and restated Exchangeable Share Support Agreement and Voting Trust and Exchange Agreement and will issue to the Trustee one share of Parent Special Preferred Stock in accordance therewith.

SECTION 2.06 Interim Order . The notice of motion for the application referred to in Section 2.04(a) shall request that the Interim Order provide:

(a) for the class of persons to whom notice is to be provided in respect of the Arrangement and the ACI Meeting and for the manner in which such notice is to be provided;

(b) that, subject to the approval of the Court, the requisite approval for the Arrangement Resolution shall be 66?% of the votes cast on the Arrangement Resolution by

holders of ACI Common Shares, present in person or by proxy at the ACI Meeting (such that each holder of ACI Common Shares is entitled to one vote for each ACI Common Share held) (such approvals described in this Section 2.06(b), the “ ACI Shareholder Approval ”);

(c) that, in all other respects, the terms, restrictions and conditions of the ACI Bylaws and ACI Articles, including quorum requirements and all other matters, shall apply in respect of the ACI Meeting;

(d) for the grant of the Dissent Rights; and

(e) for the notice requirements with respect to the presentation of the application to the Court for a Final Order.

SECTION 2.07 Closing . On the second Business Day after the satisfaction or waiver (subject to applicable Law) of the conditions (excluding conditions that, by their terms, cannot be satisfied until the Closing Date, but subject to the satisfaction or, where permitted, waiver of those conditions as of the Closing Date) set forth in ARTICLE VIII, and unless another time or date is agreed to in writing by the parties hereto (the “ Closing Date ”), (i) ACI shall cause the Articles of Arrangement to be filed with the Director, (ii) Bowater shall cause a certificate of merger (the “ Certificate of Merger ”), in such form as required by, and executed and acknowledged by the parties in accordance with, the relevant provisions of the DGCL, to be filed with the Secretary of State of the State of Delaware and shall cause to be made all other filings or recordings required under the DGCL in connection with the Merger, and (iii) ExchangeCo shall file Articles of Amendment giving effect to the Exchangeable Share Provision Amendment to be filed with the Director. The Merger, the Exchangeable Share Provision Amendment and the Arrangement shall become effective upon the Effective Time in the following order: (1) the Merger, (2) the Exchangeable Share Provision Amendment and (3) the Arrangement. The closing of the transactions contemplated hereby and by the Arrangement will take place at the offices of Paul, Weiss, Rifkind, Wharton & Garrison LLP, 1285 Avenue of the Americas, New York, New York 10019, on the Closing Date, unless another date or place is agreed to in writing by Bowater and ACI.

SECTION 2.08 Joint Proxy Statement; Meetings; Change in Recommendation .

(a) As promptly as reasonably practicable after the execution and delivery of this Agreement, ACI, Bowater and ExchangeCo shall complete the Joint Proxy Statement together with any other documents required by the Securities Laws or other applicable Law in connection with the ACI Meeting, the Bowater Meeting and the ExchangeCo Meeting. ACI and Bowater shall use their respective commercially reasonable efforts to have the Joint Proxy Statement cleared, if applicable, by the SEC and any other applicable Governmental Authority. As promptly as reasonably practicable after the execution and delivery of this Agreement, Parent shall prepare and file with the SEC a registration statement on Form S-4 (as amended, supplemented or otherwise modified, the “ Form S-4 ”), in which the Joint Proxy Statement will be included as a prospectus, in connection with the registration under the 1933 Act of the issuance of shares of Parent Common Stock in the Merger and the issuance of shares of Parent Common Stock and Exchangeable Shares in the Arrangement. Each of Parent, ACI and Bowater shall use its commercially reasonable efforts to have the Form S-4 declared effective under the

1933 Act as promptly as practicable after such filing, and, prior to the effective date of the Form S-4, Parent shall take all action reasonably required (other than qualifying to do business in any jurisdiction in which it is not now so qualified or filing a general consent to service of process) to be taken under any applicable state securities Laws in connection with the issuance of shares of Parent Common Stock in the Merger and the issuance of shares of Parent Common Stock and Exchangeable Shares in the Arrangement. As promptly as practicable after the execution and delivery of this Agreement or such clearance and effectiveness of the Form S-4, ACI and Bowater shall, unless otherwise agreed to by the parties, cause the Joint Proxy Statement and other documentation required in connection with the ACI Meeting, the Bowater Meeting and the ExchangeCo Meeting to be sent contemporaneously to (x) in the case of ACI, each holder of ACI Common Shares as of the record date fixed in respect of the ACI Meeting and filed as required by the Interim Order and applicable Law, (y) in the case of Bowater, each holder of Bowater Common Stock and each holder of Exchangeable Shares as of the record date fixed in respect of the Bowater Meeting, as required by applicable Law and (z) in the case of ExchangeCo, each holder of Exchangeable Shares as of the record date fixed in respect of the ExchangeCo Meeting, as required by applicable Law. Prior to the date of the initial filing of the Joint Proxy Statement the parties may mutually agree to file a separate proxy statement/prospectus of Bowater or management circular of ACI or ExchangeCo in lieu thereof. If the issuance of Exchangeable Shares in the Arrangement is eligible for an exemption from registration under the 1933 Act, or if such registration may be effected by means of an alternative form to the Form S-4 (an “ Alternative Form ”), and in either case such exemption or Alternative Form represents a more efficient method for effecting the issuance of the Exchangeable Shares, then the parties shall cooperate in good faith to permit such issuance to be made under such exemption from registration or under such Alternative Form. In each case described in the immediately preceding sentence, the parties shall cooperate with respect to such actions in a manner consistent with Section 2.10.

(b) Subject to Section 6.05, ACI and its Board of Directors shall (i) take all lawful action to solicit in favor of the ACI Shareholder Approval, (ii) recommend to all holders of ACI Common Shares that they vote in favor of this Agreement and the Arrangement and the other transactions contemplated hereby and thereby and (iii) not withhold, withdraw, modify or qualify (or publicly propose to or publicly state that it intends to withhold, withdraw, modify or qualify) in any manner adverse to Bowater such recommendation or take any other action or make any other public statement in connection with the ACI Meeting inconsistent with such recommendation (any of the actions in clause (iii), a “ Change in ACI Recommendation ”). Notwithstanding the foregoing, the Board of Directors of ACI may make a Change in ACI Recommendation in accordance with Section 6.05(b). In connection with a Change in ACI Recommendation, ACI may amend or supplement the Joint Proxy Statement, or separate management circular filed pursuant to Section 2.08(a) (including by incorporation by reference) pursuant to a Qualifying Amendment to effect such a Change in ACI Recommendation.

(c) Subject to Section 6.05, Bowater and its Board of Directors shall (i) take all lawful action to solicit in favor of the Bowater Stockholder Approval and in favor of the Exchangeable Share Provision Amendment by the holders of Exchangeable Shares at the ExchangeCo Meeting, (ii) recommend to holders of Bowater Common Stock and to holders of Exchangeable Shares that they vote in favor of the approval and adoption of this Agreement and the Merger, (iii) recommend to holders of Exchangeable Shares that they vote in favor of the

Exchangeable Share Provision Amendment, and (iv) not withhold, withdraw, modify or qualify (or publicly propose to or publicly state that it intends to withhold, withdraw, modify or qualify) in any manner adverse to ACI such recommendation or take any other action or make any other public statement in connection with the Bowater Meeting or the ExchangeCo Meeting inconsistent with such recommendation (any of the actions in clause (iii), a “ Change in Bowater Recommendation ” and, together with a Change in ACI Recommendation, a “ Change in Recommendation ”). Notwithstanding the foregoing, the Board of Directors of Bowater may make a Change in Bowater Recommendation in accordance with Section 6.05(b). In connection with a Change in Bowater Recommendation, Bowater may amend or supplement the Joint Proxy Statement, or separate proxy statement filed pursuant to Section 2.08(a) (including by incorporation by reference) pursuant to a Qualifying Amendment to effect such a Change in Bowater Recommendation.

(d) Any Change in Recommendation shall not be interpreted as rescinding the approval of this Agreement by the Boards of Directors of each of ACI and Bowater or any other approval of the Board of Directors of ACI or Bowater, including in any respect that would have the effect of causing any corporate takeover statute or other similar statute to be applicable to the transactions contemplated hereby.

(e) Subject to the terms of this Agreement, ACI and Bowater shall each use their respective commercially reasonable efforts to cause the ACI Meeting, the Bowater Meeting and the ExchangeCo Meeting to be held on the same date. Each of ACI and Bowater shall not adjourn, postpone or cancel (or propose for adjournment, postponement or cancellation) the ACI Meeting, the Bowater Meeting or the ExchangeCo Meeting, as applicable, without the other party’s prior written consent, in each case, except as may be required (i) by applicable Law or an Order, (ii) in order to solicit and obtain the requisite vote of its stockholders or shareholders, as the case may be, (iii) for quorum purposes or (iv) to enable ACI or Bowater, as applicable, to comply with its obligations under Section 6.05(b).

SECTION 2.09 Additional Securities Matters .

(a) Parent, Bowater and ExchangeCo shall each use its commercially reasonable efforts to obtain all Orders required from the applicable Governmental Authorities to permit (i) the issuance and first resale of the Exchangeable Shares and Parent Common Stock issued pursuant to the Arrangement, and (ii) the issuance and first resale of the Parent Common Stock to be issued from time to time upon exchange of the Exchangeable Shares and upon the exercise of the Parent Stock Options, in each case without further qualification with or approval of or the filing of any document including any registration statement, prospectus or similar document, or the taking of any proceeding with, or the obtaining of any further Order or consent from, any Governmental Authority under any Securities Laws or other Laws or pursuant to the rules and regulations of any regulatory authority administering such Laws, or the fulfillment of any other legal requirement in any applicable jurisdiction (other than, with respect to such first resales, any restrictions on transfer by reason of, among other things, such first resale constituting a “control distribution” or the holder effecting such first resale being an “affiliate” of ACI, Bowater or ExchangeCo for purposes of Securities Laws and other customary qualifications for such Orders).

(b) Parent, ACI and Bowater shall each use its commercially reasonable efforts to obtain the approval of the NYSE and the TSX for the listing of the Parent Common Stock to be issued in connection with the transactions contemplated by this Agreement or upon exercise of Parent Stock Options or exchange of the Exchangeable Shares, subject to notice of issuance, such listings to be effective prior to the Effective Time.

(c) Parent and ExchangeCo shall use their respective commercially reasonable efforts to obtain the approval of the TSX for the listing of the Exchangeable Shares to be issued to holders of ACI Common Shares in connection with the transactions contemplated by this Agreement, such listing to be effective prior to or as of the Effective Time.

(d) Parent shall file a registration statement on Form S-8 (or any successor form or, if Form S-8 is not available, other appropriate forms) (the “ Form S-8 ”) in order to register under the 1933 Act the Parent Common Stock to be issued from time to time after the Effective Time upon the exercise of Parent Stock Options, stock appreciation rights with respect to shares of Parent Common Stock (“ Parent SARs ”) and rights or awards with respect to shares of Parent Common Stock (“ Parent Stock-Based Awards ”), and shall use its commercially reasonable efforts to cause such registration statement to become effective as promptly as practicable, but in any event within five (5) days after the Effective Time, and to maintain the effectiveness of such registration statement or statements (and maintain the current status of the prospectus or prospectuses contained therein) for the period of time that the Parent Stock Options, Parent SARs and Parent Stock-Based Awards remain outstanding and may be exercised.

(e) Parent shall file a registration statement on Form S-3 (or any successor form or, if Form S-3 is not available, other appropriate forms) (the “ Form S-3 ”) in order to register under the 1933 Act the Parent Common Stock to be issued from time to time after the Effective Time upon exchange of Exchangeable Shares, and shall use its commercially reasonable efforts to cause such registration statement to become effective at or prior to the Effective Time and to maintain the effectiveness of such registration statement (and maintain the current status of the prospectus or prospectuses contained therein) for the period of time that such Exchangeable Shares remain outstanding.

SECTION 2.10 Cooperation in Filings .

(a) Each of Parent, Bowater and ACI shall cooperate in the preparation, filing and mailing of the Joint Proxy Statement and the Form S-4. Each of Bowater and ACI shall, as promptly as practicable after receipt thereof, provide the other party copies of any written comments and advise the other party of any oral comments with respect to the Joint Proxy Statement, the Form S-4, the Form S-3 and the Form S-8, received from the SEC, the Canadian Securities Regulatory Authorities or any other Governmental Authority. The parties shall cooperate and provide one another with a reasonable opportunity to review and comment on the Joint Proxy Statement, the Form S-4, the Form S-3, the Form S-8 and any amendments or supplements thereto prior to filing such with the SEC, the Canadian Securities Regulatory Authorities and/or each other applicable Governmental Authority, and will provide one another with a copy of all such filings made. Each party will advise the other party, promptly after it receives notice thereof, of the time when the Form S-4, the Form S-3 or the Form S-8 has

become effective, the issuance of any stop order, the suspension of the qualification of any of the Parent Common Stock or the Exchangeable Shares for offering or sale in any jurisdiction, or any request by the SEC, the Canadian Securities Regulatory Authorities or any other Governmental Authority for amendment of the Joint Proxy Statement or the Form S-4, the Form S-3 or the Form S-8.

(b) Each of Bowater and ACI shall furnish to the other and to Parent all such information concerning it and its stockholders or shareholders (or the holders of Exchangeable Shares) as may reasonably be required (and, in the case of its stockholders or shareholders or those of ExchangeCo, available to it) for the effectuation of the actions described in Section 2.08 and Section 2.09 and the foregoing provisions of this Section 2.10.

(c) Each of Bowater and ACI shall use its commercially reasonable efforts to ensure that the Joint Proxy Statement, the Form S-4, the Form S-3 and the Form S-8 complies as to form with all applicable Securities Laws.

(d) Bowater and ACI shall each promptly notify the other if, at any time before the Effective Time, it becomes aware that the Joint Proxy Statement or any other document described in Section 2.09 or any application for any Order described in Section 2.09 contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading in light of the circumstances in which they are made, or that otherwise requires an amendment or supplement to the Joint Proxy Statement or such other document or application. In any such event, each of Parent, Bowater and ACI shall cooperate in the preparation of a supplement or amendment to the Joint Proxy Statement or such other document or application, as required and as the case may be, and, if required, shall cause the same to be distributed to stockholders of Bowater or shareholders of ACI or ExchangeCo, respectively, and/or filed with the relevant Governmental Authorities.

(e) In the event the parties mutually agree to file a separate proxy statement of Bowater, management circular of ExchangeCo and management circular of ACI pursuant to Section 2.08(a), each of ACI and Bowater, except, in each case, for a Qualifying Amendment, (i) shall give to the other the reasonable opportunity to review and comment on the preliminary management circulars and separate proxy statement, as applicable, and all subsequent forms or versions of or amendments thereto and shall take into consideration and include all of the other party’s reasonable comments to each version of or amendment to such management circulars or proxy statement and (ii) shall not file or submit the preliminary or any subsequent forms or versions of or amendments to the management circulars or proxy statement, as applicable, without the prior consent of the other party (which consent shall not be unreasonably withheld), except as required by applicable Law.

SECTION 2.11 Execution of Transaction Documents . At the Effective Time, each of Parent, Bowater and ExchangeCo shall execute and deliver each of the Transaction Documents to which they are to be made a party at the Effective Time.

SECTION 2.12 Issuance of Stock in the Arrangement . Parent shall issue Parent Common Stock to the shareholders of ACI having elected to receive shares of Parent Common Stock in accordance with this Agreement and the Plan of Arrangement, and shall

reserve for issuance Parent Common Stock issuable upon the exchange of Exchangeable Shares, and such Parent Common Stock shall be duly and validly issued by Parent, fully paid and non-assessable. ExchangeCo shall issue Exchangeable Shares to the shareholders of ACI having elected to receive Exchangeable Shares in accordance with this Agreement and the Plan of Arrangement, and such Exchangeable Shares shall be duly and validly issued by ExchangeCo, fully paid and non-assessable. Except as provided in the Plan of Arrangement, all Parent Common Stock issued by Parent pursuant to the Plan of Arrangement, or issuable upon the exchange of Exchangeable Shares, and all Exchangeable Shares issued by ExchangeCo pursuant to the Plan of Arrangement shall be free of preemptive rights, Liens of any nature.

ARTICLE III

EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES

SECTION 3.01 Effect on Capital Stock . At the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of the common stock, par value $1.00 per share, of Bowater (“ Bowater Common Stock ”), or any shares of capital stock of Parent or Merger Sub:

(a) Capital Stock of Merger Sub . Each issued and outstanding share of capital stock of Merger Sub shall be converted into and become one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation.

(b) Cancellation of Treasury Stock, Parent-Owned Stock and ACI and Bowater Owned Stock . Each share of Bowater Common Stock that is owned by Parent, Bowater, ACI or any of their respective wholly owned Subsidiaries immediately prior to the Effective Time shall automatically be canceled and shall cease to exist, and no consideration shall be delivered in exchange therefor.

(c) Conversion of Bowater Common Stock . Subject to Section 3.02(e), each share of Bowater Common Stock issued and outstanding immediately prior to the Effective Time (excluding shares to be canceled in accordance with Section 3.01(b)) shall be converted into the right to receive the number of shares of validly issued, fully paid and nonassessable Parent Common Stock equal to the Bowater Exchange Ratio (the “ Bowater Merger Consideration ”). At the Effective Time, all shares of Bowater Common Stock converted into the right to receive the Bowater Merger Consideration pursuant to this Section 3.01(c) shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of a certificate which immediately prior to the Effective Time represented any such shares of Bowater Common Stock (each, a “ Certificate ”) shall cease to have any rights with respect thereto, except the right to receive the Bowater Merger Consideration, any dividends or other distributions payable pursuant to Section 3.02(c) and cash in lieu of any fractional shares payable pursuant to Section 3.02(e), in each case to be issued or paid in consideration therefor upon surrender of such Certificate in accordance with Section 3.02(b), without interest. Notwithstanding the foregoing, if between the date of this Agreement and the Effective Time, the outstanding Parent Common Stock, Bowater Common Stock, ACI Common Shares or Exchangeable Shares shall have been changed into a different number of shares or a different class, by reason of the occurrence or

record date of any stock dividend, subdivision, reclassification, recapitalization, split, combination, exchange of shares or similar transaction, then the Bowater Exchange Ratio shall be appropriately adjusted to reflect such action.

(d) Exchange of Bowater Special Preferred Stock . Pursuant to the amendment to the Voting and Exchange Trust Agreement contemplated in Section 2.05(b), the one issued and outstanding share of Bowater Special Preferred Stock shall be cancelled and replaced by one share of Parent Special Preferred Stock having the rights, privileges, restrictions and conditions set forth in the Parent Certificate of Designation.

SECTION 3.02 Exchange of Certificates .

(a) Exchange Agent . At the Effective Time, Parent shall deposit, or cause the Surviving Corporation to deposit with a bank or trust company designated by Parent and reasonably satisfactory to ACI and Bowater (the “ Exchange Agent ”), for the benefit of the holders of Certificates, certificates representing shares of Parent Common Stock in the aggregate amount equal to the number of shares into which shares of Bowater Common Stock have been converted. In addition, Parent shall deposit with the Exchange Agent, as necessary from time to time after the Effective Time, any dividends or other distributions payable pursuant to Section 3.02(c) and cash in lieu of any fractional shares payable pursuant to Section 3.02(e). All shares of Parent Common Stock, dividends and distributions deposited with the Exchange Agent pursuant to this Section 3.02(a) shall hereinafter be referred to as the “ Bowater Exchange Fund ”.

(b) Exchange Procedures . As soon as reasonably practicable after the Effective Time, Parent shall cause the Exchange Agent to mail to each holder of record of a Certificate whose shares of Bowater Common Stock were converted into the right to receive shares of Parent Common Stock, any dividends or other distributions payable pursuant to Section 3.02(c) and cash in lieu of any fractional shares payable pursuant to Section 3.02(e): (i) a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Exchange Agent and which shall be in customary form and contain customary provisions) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the certificates representing shares of Parent Common Stock, any dividends or other distributions payable pursuant to Section 3.02(c) and cash in lieu of any fractional shares payable pursuant to Section 3.02(e). Each holder of record of one or more Certificates shall, upon surrender to the Exchange Agent of such Certificate or Certificates, together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Exchange Agent, be entitled to receive in exchange therefor: (i) a certificate or certificates representing that number of whole shares of Parent Common Stock (after taking into account all Certificates surrendered by such holder) to which such holder is entitled pursuant to Section 3.01(c), (ii) any dividends or distributions payable pursuant to Section 3.02(c) and (iii) cash in lieu of any fractional shares payable pursuant to Section 3.02(e), and the Certificates so surrendered shall forthwith be canceled. In the event of a transfer of ownership of Bowater Common Stock which is not registered in the transfer records of Bowater, a certificate representing the proper number of shares of Parent Common Stock may be issued in accordance with this Section 3.02(b) to a person other than the person in whose name the Certificate so surrendered is registered if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the person requesting such

payment shall pay any transfer or other Taxes required by reason of the transfer or establish to the reasonable satisfaction of Parent that such Taxes have been paid or are not applicable. Until surrendered as contemplated by this Section 3.02(b), each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender shares of Parent Common Stock pursuant to Section 3.01(c), any dividends or other distributions payable pursuant to Section 3.02(c) and cash in lieu of any fractional shares payable pursuant to Section 3.02(e). No interest shall be paid or will accrue on any payment to holders of Certificates pursuant to the provisions of this ARTICLE III.

(c) Distributions with Respect to Unexchanged Shares . No dividends or other distributions with respect to shares of Parent Common Stock with a record date on or after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the shares of Parent Common Stock that the holder thereof has the right to receive upon the surrender thereof, and no cash payment in lieu of fractional shares of Parent Common Stock shall be paid to any such holder pursuant to Section 3.02(e), in each case until the holder of such Certificate shall have surrendered such Certificate in accordance with this ARTICLE III. Following the surrender of any Certificate, there shall be paid to the record holder of the certificate representing whole shares of Parent Common Stock issued in exchange therefor, without interest, (i) at the time of such surrender, the amount of dividends or other distributions with a record date on or after the Effective Time theretofore paid with respect to such whole shares of Parent Common Stock and the amount of any cash payable in lieu of a fractional Parent Share to which such holder is entitled pursuant to Section 3.02(e) and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date on or after the Effective Time but prior to such surrender and a payment date subsequent to such surrender payable with respect to such whole shares of Parent Common Stock.

(d) No Further Ownership Rights in Bowater Common Stock . The shares of Parent Common Stock issued upon conversion of the shares of Bowater Common Stock in accordance with the terms hereof and the payment of such dividends or other distributions as are payable pursuant to Section 3.02(c) and such cash in lieu of any fractional shares as is payable pursuant to Section 3.02(e) upon the surrender of Certificates in accordance with the terms of this ARTICLE III shall be deemed to have been in full satisfaction of all rights pertaining to the shares of Bowater Common Stock formerly represented by such Certificates, subject, however, to the Surviving Corporation’s obligation to pay any dividends or make any other distributions with a record date prior to the Effective Time which may have been declared or made by Bowater on the shares of Bowater Common Stock in accordance with the terms of this Agreement prior to the Effective Time. At the close of business on the day on which the Effective Time occurs, the share transfer books of Bowater shall be closed, and there shall be no further registration of transfers on the share transfer books of the Surviving Corporation of the shares of Bowater Common Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, any Certificate is presented to the Surviving Corporation for transfer, it shall be canceled against delivery of and exchanged as provided in this ARTICLE III.

(e) No Fractional Shares .

(i) No certificates or scrip representing fractional shares of Parent Common Stock shall be issued upon the surrender for exchange of Certificates, no dividends or other distributions of Parent shall relate to such fractional share interests and such fractional share interests shall not entitle the owner thereof to vote or to any rights of a stockholder of Parent.

(ii) As promptly as practicable following the Effective Time, the Exchange Agent shall determine the excess of (x) the number of full shares of Parent Common Stock delivered to the Exchange Agent by Parent pursuant to Section 3.02(a) over (y) the aggregate number of full shares of Parent Common Stock to be distributed to holders of Bowater Common Stock pursuant to Section 3.02(c) (such excess being herein called the “ Excess Shares ”). Following the Effective Time, the Exchange Agent, as agent for the holders of Bowater Common Stock, shall sell the Excess Shares at then prevailing prices on the NYSE, all in the manner provided in paragraph (iii) of this Section 3.02(e).

(iii) The sale of the Excess Shares by the Exchange Agent shall be executed on the NYSE through one or more member firms of the NYSE and shall be executed in round lots to the extent practicable. The Exchange Agent shall use all reasonable efforts to complete the sale of the Excess Shares as promptly following the Effective Time as, in the Exchange Agent’s reasonable judgment, is practicable consistent with obtaining the best execution of such sales in light of prevailing market conditions. Until the proceeds of such sale or sales have been distributed to the former holders of Bowater Common Stock, the Exchange Agent will hold such proceeds in trust for the holders of Bowater Common Stock (the “ Excess Shares Trust ”). Parent shall pay all commissions, transfer taxes and other out-of-pocket transaction costs, including the expenses and compensation, of the Exchange Agent incurred in connection with such sale of the Excess Shares. The Exchange Agent shall determine the portion of the Excess Shares Trust to which each holder of Bowater Common Stock shall be entitled, if any, by multiplying the amount of the aggregate proceeds comprising the Excess Shares Trust by a fraction the numerator of which is the amount of the fractional share interest to which such holder of Bowater Common Stock is entitled (after taking into account all shares of Bowater Common Stock held at the Effective Time by such holder) and the denominator of which is the aggregate amount of fractional share interests to which all holders of Bowater Common Stock are entitled.

(iv) Notwithstanding the provisions of the preceding clauses (ii) and (iii), Parent may elect, at its option, to pay to each holder of a Certificate an aggregate amount in cash equal to the product obtained by multiplying (A) the fractional share interest to which such holder (after taking into account all shares of Bowater Common Stock formerly represented by all Certificates surrendered by such holder) would otherwise be entitled by (B) the product of (x) the Bowater Exchange Ratio multiplied by (y) the per share closing price of shares of Bowater Common Stock on the last trading day immediately prior to the Closing Date, as such price is reported on the NYSE Composite Transaction Tape, as applicable, (as reported by Bloomberg Financial Markets or such other source as the parties shall agree in writing).

(v) Notwithstanding anything else in this Agreement to the contrary, no shares of Bowater Common Stock that are owned by a wholly-owned Subsidiary of Parent shall be entitled to receive cash pursuant to this Section 3.02(e) and no such shares will be taken into account in determining the amount of cash to which any other holder is entitled pursuant to this Section 3.02(e).

(f) Termination of the Bowater Exchange Fund . Any portion of the Bowater Exchange Fund that remains undistributed to the holders of the Certificates for six months after the Effective Time shall be delivered to Parent, upon demand, and any holders of the Certificates who have not theretofore complied with this ARTICLE III shall thereafter look only to Parent for, and Parent shall remain liable for, payment of their claim for shares of Parent Common Stock, any dividends or other distributions payable pursuant to Section 3.02(c) and cash in lieu of any fractional shares payable pursuant to Section 3.02(e) in accordance with this ARTICLE III.

(g) No Liability . None of Parent, Merger Sub, ACI, Bowater, the Surviving Corporation or the Exchange Agent shall be liable to any person in respect of any shares of Parent Common Stock, dividends or other distributions from the Bowater Exchange Fund properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. If any Certificate shall not have been surrendered prior to three years after the Effective Time (or immediately prior to such earlier date on which any shares of Parent Common Stock (and any dividends or other distributions payable with respect thereto pursuant to Section 3.02(c) and cash in lieu of any fractional shares payable with respect thereto pursuant to Section 3.02(e)) would otherwise escheat to or become the property of any Governmental Authority), any such shares (and any dividends or other distributions payable with respect thereto pursuant to Section 3.02(c) and cash in lieu of any fractional shares payable with respect thereto pursuant to Section 3.02(e)) shall, to the extent permitted by applicable Law, become the property of Parent, free and clear of all claims or interest of any person previously entitled thereto.

(h) Investment of Bowater Exchange Fund . The Exchange Agent shall invest the cash included in the Bowater Exchange Fund as directed by Parent. Any interest and other income resulting from such investments shall be paid to and be income of Parent. If for any reason (including losses on any investments) the cash in the Bowater Exchange Fund shall be insufficient to fully satisfy all of the payment obligations to be made in cash by the Exchange Agent hereunder, Parent shall promptly deposit cash into the Bowater Exchange Fund in an amount which is equal to the deficiency in the amount of cash required to fully satisfy such cash payment obligations.

(i) Lost Certificates . If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such person of a bond in such reasonable amount as Parent may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent shall deliver in exchange for such lost, stolen or destroyed Certificate shares of Parent Common Stock, any dividends or other distributions payable pursuant to Section 3.02(c) and cash in lieu of any fractional shares payable pursuant to Section 3.02(e), in each case pursuant to this ARTICLE III.

(j) Withholding Rights . Parent, the Surviving Corporation or the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement such amounts as Parent, the Surviving Corporation or the Exchange Agent are required to deduct and withhold with respect to the making of such payment under the Code or any provision of provincial or state or local or other Tax Law of any applicable country or jurisdiction. To the extent that amounts are so withheld and paid over to the appropriate Governmental Authority by Parent, the Surviving Corporation or the Exchange Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of Certificates in respect of which such deduction and withholding was made by Parent, the Surviving Corporation or the Exchange Agent.

SECTION 3.03 Bowater Stock Options and Other Stock-Based Awards .

(a) Each option to purchase shares of Bowater Common Stock (a “ Bowater Stock Option ”) and each stock appreciation right with respect to shares of Bowater Common Stock (a “ Bowater SAR ”) granted under the employee and director stock plans of Bowater (the “ Bowater Stock Plans ”), whether vested or unvested, that is outstanding immediately prior to the Effective Time shall cease to represent respectively a right to acquire shares of Bowater Common Stock or a stock appreciation right with respect to shares of Bowater Common Stock and shall be converted (except for those Bowater Stock Options and Bowater SARs that are required to be repurchased by Bowater in accordance with the applicable terms of the Bowater Stock Plans), at the Effective Time, into respectively a Parent Stock Option and a Parent SAR, on the same terms and conditions as were applicable under such Bowater Stock Option or Bowater SAR (but taking into account any changes thereto, including the acceleration thereof, provided for in Bowater Stock Plans, in any award agreement or in such Bowater Stock Option on Bowater SAR by reason of this Agreement or the transactions contemplated hereby). The number of shares of Parent Common Stock subject to each such Parent Stock Option or Parent SAR shall be the number of shares of Bowater Common Stock subject to each such Bowater Stock Option or Bowater SAR, respectively, multiplied by the Bowater Exchange Ratio (with the resulting product rounded to the nearest whole share), and such Parent Stock Option or Parent SAR shall have an exercise price (or base price) per share equal to the per share exercise price (or base price) specified in such Bowater Stock Option or Bowater SAR, respectively, divided by the Bowater Exchange Ratio (with the resulting quotient rounded to the nearest one-hundredth of a cent; provided , however , that in the case of any Parent Stock Option to which Section 421 of the Code as of the Effective Time applies by reason of its qualification under Section 422 of the Code, the exercise price, the number of shares of Parent Common Stock subject to such Parent Stock Option and the terms and conditions of exercise of such Parent Stock Option shall be determined in a manner consistent with the requirements of Section 424(a) of the Code).

(b) At the Effective Time, each right of any kind, contingent or accrued, to receive shares of Bowater Common Stock or benefits measured by the value of a number of shares of Bowater Common Stock, and each award of any kind consisting of shares of Bowater Common Stock, granted under Bowater Stock Plans (including restricted stock, restricted stock units, deferred stock units and dividend equivalents), other than Bowater Stock Options or Bowater SARs (each, a “ Bowater Stock-Based Award ”), whether vested or unvested, which is outstanding immediately prior to the Effective Time shall cease to represent a right or award with respect to shares of Bowater Common Stock and shall be converted (except for any

Bowater Stock-Based Award that is required to be repurchased by Bowater in accordance with the applicable terms of the Bowater Stock Plans), at the Effective Time, into a Parent Stock-Based Award, on the same terms and conditions as were applicable under Bowater Stock-Based Awards (but taking into account any changes thereto, including the acceleration thereof, provided for in Bowater Stock Plans, in any award agreement or in such Bowater Stock-Based Award by reason of this Agreement or the transactions contemplated hereby). The number of shares of Parent Common Stock subject to each such Parent Stock-Based Award shall be equal to the number of shares of Bowater Common Stock subject to Bowater Stock-Based Awards, multiplied by the Bowater Exchange Ratio (with the resulting product rounded to the nearest whole share). All dividend equivalents credited to the account of each holder of a Bowater Stock-Based Award as of the Effective Time shall remain credited to such holder’s account immediately following the Effective Time, subject to adjustment in accordance with the foregoing.

(c) As soon as practicable after the Effective Time, Parent shall deliver to the holders of Bowater Stock Options, Bowater SARs and Bowater Stock-Based Awards appropriate notices setting forth such holders’ rights pursuant to the respective Bowater Stock Plans and agreements evidencing the grants of such Bowater Stock Options, Bowater SARs and Bowater Stock-Based Awards, and stating that such Bowater Stock Options, Bowater SARs and Bowater Stock-Based Awards and agreements have been assumed by Parent and shall continue in effect on the same terms and conditions (subject to the adjustments required by this Section 3.03 after giving effect to the Merger and the terms of Bowater Stock Plans).

(d) Prior to the Effective Time, Bowater shall take all necessary action for the adjustment of Bowater Stock Options, Bowater SARs and Bowater Stock-Based Awards under this Section 3.03. Parent shall reserve for issuance a number of shares of Parent Common Stock at least equal to the number of shares of Parent Common Stock that will be subject to Parent Stock Options, Parent SARs and Parent Stock-Based Awards as a result of the actions contemplated by this Section 3.03.

(e) To the extent permitted by applicable Law, the same terms, conditions and methodology described in this Section 3.03 and used by Bowater to convert Bowater Stock Options, Bowater SARs and Bowater Stock-Based Awards into Parent Stock Options, Parent SARs and Parent Stock-Based Awards, respectively, shall be the same terms, conditions and methodology applicable to convert ACI Stock Options, ACI SARs and ACI Share-Based Awards described in the Plan of Arrangement.

(f) Notwithstanding any provision to the contrary in this Section 3.03, in no event shall a Bowater Stock Option, Bowater SAR or Bowater Stock-Based Award become subject to Code Section 409A because of the conversion described in this Section 3.03.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BOWATER

Except as set forth in the disclosure schedule delivered by Bowater to ACI prior to the execution of this Agreement (the “ Bowater Disclosure Schedule ”) (with specific reference

to the particular Section or subsection of this Agreement to which the information set forth in such disclosure schedule relates (and such items or matters disclosed in other sections of the Bowater Disclosure Schedule to the extent the relevance of such items or matters to the referenced Section or subsection of this Agreement is reasonably apparent on the face of such disclosure)) (it being understood and agreed by the parties that individual sections in this ARTICLE IV do not contain any references to such Bowater Disclosure Schedule), Bowater represents and warrants to ACI as follows:

SECTION 4.01 Organization, Standing and Corporate Power . Bowater and each of its Subsidiaries has been duly organized or amalgamated, as applicable, and is validly existing and in good standing (with respect to jurisdictions for which that concept is applicable) under the Laws of the jurisdiction of its incorporation, formation or amalgamation, as the case may be, and has all requisite corporate or similar power and authority to own, lease or otherwise hold and operate its properties and other assets and to carry on its activities as currently conducted, except where the failure to be so qualified individually or in the aggregate has not had and would not reasonably be expected to have a Bowater Material Adverse Effect. Bowater and each of its Subsidiaries is duly qualified or licensed to do business and is in good standing (with respect to jurisdictions for which that concept is applicable) in each jurisdiction in which the nature of its activities or the ownership, leasing or operation of its properties makes such qualification, licensing or good standing necessary, other than in such jurisdictions where the failure to be so qualified, licensed or in good standing individually or in the aggregate has not had and would not reasonably be expected to have a Bowater Material Adverse Effect. Bowater has made available to ACI, prior to the date of this Agreement, complete and accurate copies of the certificate of incorporation of Bowater, as currently in effect (the “ Bowater Certificate ”) and the bylaws of Bowater, as currently in effect (the “ Bowater Bylaws ”).

SECTION 4.02 Subsidiaries . Section 4.02 of the Bowater Disclosure Schedule lists, as of the date hereof, each material Subsidiary of Bowater. All of the outstanding capital stock of, or other equity interests in, each material Subsidiary of Bowater, is directly or indirectly owned by Bowater. All the issued and outstanding shares of capital stock of, or other equity interests in, each such material Subsidiary owned by Bowater have been validly issued and are fully paid and non-assessable and, except for the Exchangeable Shares, are owned directly or indirectly by Bowater free and clear of all Liens, and free of any restriction on the right to vote, sell or otherwise dispose of such capital stock or other equity interests (other than restrictions imposed by Securities Laws). Except for the Subsidiaries of Bowater, Bowater does not own, directly or indirectly, as of the date hereof, any capital stock of, or other voting securities or equity interests in, any material corporation, partnership, joint venture, association or other entity. There are no options, warrants, conversion privileges or other rights, agreements, arrangements or commitments obligating any material Subsidiary of Bowater to issue or sell any shares of any material Subsidiary of Bowater or securities or obligations of any kind convertible into or exchangeable for any shares of any material Subsidiary of Bowater.

SECTION 4.03 Capital Structure . As of the date hereof, the authorized capital stock of Bowater consists of 100,000,000 shares of Bowater Common Stock, 9,999,999 shares of serial preferred stock, par value $1.00 per share, of Bowater (“ Bowater Preferred Stock ”) and one share of special voting preferred stock, par value $1.00 per share of Bowater (“ Bowater Special Preferred Stock ”). At the close of business on December 31, 2006, (i) 57,408,218 shares

of Bowater Common Stock were issued and outstanding, (ii) no shares of Bowater Preferred Stock were issued and outstanding, (iii) one share of Bowater Special Preferred Stock was issued and outstanding, (iv) 5,653,226 shares of Bowater Common Stock were subject to outstanding Bowater Stock Options or Bowater’s obligation to issue shares of Bowater Common Stock granted under the Bowater Stock Plans and other employment arrangements and (v) 1,423,830 shares of Bowater Common Stock were reserved for issuance upon exercise of exchange rights under the Exchangeable Shares. Section 4.03 of the Bowater Disclosure Schedule sets forth a complete and accurate list, as of December 31, 2006, of all outstanding Bowater Stock Options, Bowater SARs and Bowater Stock-Based Awards, granted under Bowater Stock Plans or otherwise, the number of shares of Bowater Common Stock subject thereto, the grant dates, expiration dates, exercise or base prices (if applicable) and vesting schedules thereof and the names of the holders thereof. The authorized capital of ExchangeCo consists of an unlimited number of common shares, an unlimited number of non-voting exchangeable shares (“ Exchangeable Shares ”) and 1,000 non-voting preferred shares. As of December 31, 2006 there were 86,844,900 common shares of ExchangeCo outstanding, all of which are owned by CallCo, 1,423,830 Exchangeable Shares of ExchangeCo outstanding and no non-voting preferred shares of ExchangeCo outstanding. All outstanding Bowater Stock Options, Bowater SARs and Bowater Stock-Based Awards are evidenced by stock option agreements, restricted stock agreements or other award agreements in each case in the forms set forth in Section 4.03 of the Bowater Disclosure Schedule, and no stock option agreement, restricted stock agreement or other award agreement contains terms that are inconsistent with such forms. Each Bowater Stock Option intended to qualify as an “incentive stock option” under Section 422 of the Code so qualifies and the exercise price of each other Bowater Stock Option is no less than the fair market value of a share of Bowater Common Stock as determined on the date of grant of such Bowater Stock Option. Except as set forth above in this Section 4.03, as of December 31, 2006, there are not issued, reserved for issuance or outstanding (1) any shares of capital stock or other voting securities of Bowater, (2) any securities of Bowater convertible into or exchangeable or exercisable for shares of capital stock or voting securities of Bowater or (3) any warrants, calls, options or other rights to acquire from Bowater, or any obligation of Bowater to issue, any shares of capital stock, voting securities or securities convertible into or exchangeable or exercisable for capital stock or voting securities of Bowater. No bonds, debentures, notes or other indebtedness of Bowater having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which the stockholders of Bowater may vote are issued or outstanding.

SECTION 4.04 Authority; Noncontravention .

(a) Each of Bowater and ExchangeCo has all requisite corporate power and authority to execute and deliver this Agreement and, subject to receipt of the Bowater Stockholder Approval, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Bowater and ExchangeCo and the consummation by Bowater and ExchangeCo of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action on the part of Bowater and ExchangeCo and no other corporate proceedings on the part of Bowater and ExchangeCo are necessary to authorize this Agreement, to consummate the transactions contemplated by this Agreement (other than the obtaining of the Bowater Stockholder Approval). This Agreement has been duly executed and delivered by each of Bowater and ExchangeCo and, assuming the due authorization, execution and delivery by each of the other parties hereto, constitutes a legal, valid and binding obligation of Bowater and

ExchangeCo, enforceable against Bowater and ExchangeCo in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or similar Laws affecting the rights of creditors generally and the availability of equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law).

(b) At a meeting duly called and held, Bowater’s Board of Directors has unanimously: (1) determined that this Agreement and the transactions contemplated hereby (including the Merger and the Arrangement) are advisable and fair to and in the best interests of Bowater, the holders of Bowater Common Stock and the current holders of Exchangeable Shares; (2) authorized and approved this Agreement and the transactions contemplated hereby (including the Merger and the Arrangement); and (3) resolved to recommend approval and adoption of this Agreement and the Merger by its stockholders and by the holders of Exchangeable Shares at the Bowater Meeting.

(c) The execution and delivery of this Agreement by each of Bowater and ExchangeCo do not, and the consummation of the transactions contemplated by this Agreement and compliance by Bowater and ExchangeCo with the provisions of this Agreement will not, conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of, or result in, termination, modification, cancellation or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any Lien in or upon any of the properties or other assets of Bowater or any of its Subsidiaries under, (x) the Bowater Certificate or the Bowater Bylaws or the comparable organizational documents of any of its Subsidiaries, (y) any loan or credit agreement, bond, debenture, note, mortgage, indenture, lease, supply agreement, license agreement, development agreement or other contract, agreement, obligation, commitment or instrument (each, including all amendments thereto, a “ Contract ”), to which Bowater or any of its Subsidiaries is a party or any of their respective properties or other assets is subject (assuming no “Rating Decline”(as defined in the applicable notes, indentures and other agreements) occurs) or (z) subject to the obtaining of the Bowater Stockholder Approval and obtaining consents or approvals of any Governmental Authority or making the governmental filings and other matters referred to in Section 4.04(d), any (1) Law applicable to Bowater or any of its Subsidiaries or any of their respective properties or other assets or (2) order, writ, injunction, decree, decision, binding directive, judgment or stipulation issued, promulgated or entered into by or with any Governmental Authority (each, an “ Order ”) applicable to Bowater or any of its Subsidiaries or their respective properties or other assets, other than, in the case of clauses (y) and (z), any such conflicts, violations, breaches, defaults, rights of termination, modification, cancellation or acceleration, losses or Liens that individually or in the aggregate have not had and would not reasonably be expected to have a Bowater Material Adverse Effect.

(C) the receipt, termination or expiration, as applicable, of approvals or waiting periods required under any other applicable antitrust Law, (2) applicable requirements of the 1933 Act, the 1934 Act, and state securities and “blue sky” Laws, as may be required in connection with this Agreement and the transactions contemplated by this Agreement, (3) the filing of the Articles of Arrangement with the Director, (4) applicable requirements under the Canadian Securities Laws and of the Canadian Securities Regulatory Authorities, (5) any filings with and approvals of the NYSE, (6) any filings with and approvals of the TSX, (7) any applicable requirements under forestry legislation in jurisdictions in which Bowater or any of its Subsidiaries operate and the Permits issued or granted under such legislation, and (8) such other consents, approvals, orders, authorizations, actions, registrations, declarations and filings the failure of which to be obtained or made individually or in the aggregate has not had and would not reasonably be expected to have a Bowater Material Adverse Effect.

SECTION 4.05 Bowater Public Documents .

(a) Each of Bowater and ExchangeCo has timely filed all reports, schedules, forms, statements and other documents with the Securities and Exchange Commission (the “ SEC ”) and the Canadian Securities Regulatory Authorities required to be filed by Bowater and ExchangeCo since January 1, 2004 (such documents, the “ Bowater Public Documents ”). Each of the Bowater Public Documents, as amended prior to the date of this Agreement, complied as to form in all material respects with, to the extent in effect at the time of filing, the requirements of the 1933 Act, the 1934 Act and applicable Canadian Securities Laws applicable to such Bowater Public Documents, and none of the Bowater Public Documents when filed or, if amended prior to the date hereof, as of the date of such amendment, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Each of the financial statements (including the related notes) of Bowater included in the Bowater Public Documents (or incorporated therein by reference) complied at the time it was filed as to form in all material respects with the applicable accounting requirements and the published rules and regulations of the SEC and applicable Canadian Securities Laws with respect thereto in effect at the time of such filing, had been prepared in accordance with generally accepted accounting principles in the United States (“ GAAP ”) (except, in the case of unaudited statements, as permitted by the rules and regulations of the SEC and applicable Canadian Securities Laws) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly presented in all material respects the consolidated financial position of Bowater and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal recurring year-end audit adjustments). Neither Bowater nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar Contract or arrangement (including any Contract or arrangement relating to any transaction or relationship between or among Bowater and any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited purpose entity or person, on the other hand, or any “off-balance sheet arrangement” (as defined in Item 303(a) of Regulation S-K of the SEC)), where the result, purpose or intended effect of such Contract or arrangement is to avoid disclosure of any material transaction involving, or material liabilities of, Bowater or any of its Subsidiaries in Bowater’s or such Subsidiary’s published financial statements or other Bowater

Public Documents. None of the Subsidiaries of Bowater are, or have at any time since January 1, 2004 been, subject to the reporting requirements of Section 13(a) or 15(d) of the 1934 Act.

(b) Each of the principal executive officer of Bowater and the principal financial officer of Bowater (or each former principal executive officer of Bowater and each former principal financial officer of Bowater, as applicable) has made all certifications required by Rule 13a-14 or 15d-14 under the 1934 Act and Sections 302 and 906 of the Sarbanes-Oxley Act with respect to the Bowater Public Documents, and the statements contained in each such certification, at the time of filing or submission of such certification, were true and accurate. For purposes of this Agreement, “principal executive officer” and “principal financial officer” shall have the meanings given to such terms in the Sarbanes-Oxley Act. Neither Bowater nor any of its Subsidiaries has outstanding, or has arranged any outstanding, “extensions of credit” to directors or executive officers in violation of Section 402 of the Sarbanes-Oxley Act. As of the date hereof, Bowater has no reason to believe that its outside auditors and its principal executive officer and principal financial officer will not be able to give, without qualification, the certificates and attestations required pursuant to the Sarbanes-Oxley Act when next due.

(c) Bowater has (1) designed disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the 1934 Act) to ensure that material information relating to Bowater, including its consolidated subsidiaries, is made known to its principal executive officer and principal financial officer; (2) designed internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the 1934 Act) to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP; (3) evaluated the effectiveness of Bowater’s disclosure controls and procedures and, to the extent required by applicable Law, presented in any applicable Bowater Public Document that is a report on Form 10-K or Form 10-Q or any amendment thereto its conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by such report or amendment based on such evaluation; and (4) to the extent required by applicable Law, disclosed in such report or amendment any change in Bowater’s internal control over financial reporting that occurred during the period covered by such report or amendment that has materially affected, or is reasonably likely to materially affect, Bowater’s internal control over financial reporting.

(d) Bowater has disclosed, based on the most recent evaluation of internal control over financial reporting, to Bowater’s auditors and the audit committee of Bowater’s Board of Directors (1) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Bowater’s ability to record, process, summarize and report financial information, and (2) any fraud, whether or not material, that involves management or other employees who have a significant role in Bowater’s internal control over financial reporting.

(e) Since January 1, 2001, (i) neither Bowater nor any of its Subsidiaries, nor, to the Knowledge of Bowater, any director, officer, employee, auditor, accountant or representative of Bowater or any of its Subsidiaries has received or otherwise had or obtained Knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of Bowater or any of its Subsidiaries or their respective internal accounting controls, including any

material complaint, allegation, assertion or claim that Bowater or any of its Subsidiaries has engaged in questionable accounting or auditing practices, and (ii) no attorney representing Bowater or any of its Subsidiaries, whether or not employed by Bowater or any of its Subsidiaries, has reported evidence of a material violation of Securities Laws, breach of fiduciary duty or similar violation by Bowater or any of its Subsidiaries or their respective officers, directors, employees or agents to the Board of Directors of Bowater or any committee thereof or to any director or officer of Bowater.

SECTION 4.06 Information Supplied . None of the information supplied or to be supplied by or on behalf of Bowater specifically for inclusion or incorporation by reference in (i) the Form S-4, any Alternative Form or the Form S-3 will, at the time the Form S-4, such Alternative Form or the Form S-3, as applicable, is filed with the SEC and at the time it becomes effective under the 1933 Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading or (ii) the Joint Proxy Statement will, at the date it is first mailed to the stockholders of Bowater and to the holders of Exchangeable Shares and at the time of the Bowater Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation or warranty is made by Bowater with respect to statements made or incorporated by reference therein based on information supplied by or on behalf of ACI specifically for inclusion or incorporation by reference in the Form S-4, any Alternative Form or the Form S-3 or the Joint Proxy Statement. The Joint Proxy Statement will comply as to form in all material respects with the requirements of the 1934 Act.

SECTION 4.07 Undisclosed Liabilities . There are no liabilities or obligations of Bowater or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances that could reasonably be expected to result in such a liability or obligation, other than (a) liabilities or obligations disclosed and provided for in the Bowater Balance Sheet or disclosed in the notes thereto, (b) liabilities or obligations incurred in the ordinary course of business consistent with past practices since the Bowater Balance Sheet Date, (c) liabilities or obligations incurred directly pursuant to this Agreement or (d) other liabilities which individually or in the aggregate have not had and would not reasonably be expected to have a Bowater Material Adverse Effect.

SECTION 4.08 Absence of Certain Changes or Events . Since the Bowater Balance Sheet Date there has not been any Bowater Material Adverse Effect. Except as disclosed in the Bowater Public Documents filed prior to the date of this Agreement (such Bowater Public Documents, the “ Filed Bowater Public Documents ”) (excluding, in each case, any disclosures set forth in any risk factor section, in any section relating to forward-looking statements and any other disclosures included therein, in each case to the extent that they are cautionary, predictive or forward-looking in nature (such disclosures, collectively, the “ Cautionary Disclosures ”)) and for liabilities incurred in connection with this Agreement or, with respect to liabilities incurred after the date hereof, as expressly permitted pursuant to Section 6.01, since the Bowater Balance Sheet Date, (i) Bowater and its Subsidiaries have conducted their respective businesses only in the ordinary course consistent with past practice,

and (ii) there has not been any action taken or committed to be taken by Bowater or any Subsidiary of Bowater which, if taken following entry by Bowater into this Agreement, would have required the consent of ACI pursuant to Section 6.01 (excluding Section 6.01(i)).

SECTION 4.09 Litigation . There are no actions, suits, claims, hearings, proceedings, arbitrations, mediations, audits, inquiries or investigations (whether civil, criminal, administrative, for condemnation or otherwise) (“ Actions ”), including Actions under or relating to any Environmental Law, pending or, to the Knowledge of Bowater, threatened against Bowater or any of its Subsidiaries or any of their respective assets, rights or properties or any of the executive officers or directors of Bowater, except, in each case, for those that individually or in the aggregate have not had and would not reasonably be expected to have, a Bowater Material Adverse Effect or for those disclosed in the Filed Bowater Public Documents. Neither Bowater nor any of its Subsidiaries nor any of their respective properties or assets is or are subject to any Order, settlement or award, except for those that, individually or in the aggregate, have not had, and would not reasonably be expected to have, a Bowater Material Adverse Effect or for those disclosed in Item 3 (or other item number corresponding to “Legal Proceedings”) of the Filed Bowater Public Documents or in the notes to the most recent audited financial statements and most recent financial statements included in the Filed Bowater Public Documents. To the Knowledge of Bowater, there are no formal or informal inquiries, inspections or investigations by any Governmental Authority or internal investigations, in each case regarding accounting or disclosure practices of Bowater or any of its Subsidiaries, compliance by Bowater or any of its Subsidiaries with any Law or any malfeasance by any executive officer of Bowater or any of its Subsidiaries, except for those that individually or in the aggregate have not had and would not reasonably be expected to have a Bowater Material Adverse Effect.

SECTION 4.10 Bowater Material Contracts .

(a) For purposes of this Agreement, a “ Bowater Material Contract ” shall mean:

(i) any employment, severance, consulting, retention, indemnification, change-in-control, deferred compensation or other Contract with any Bowater Personnel which will require the payment of amounts by Bowater or any of its Subsidiaries, as applicable, after the date hereof in excess of $250,000 per annum;

(ii) any Contract containing covenants of Bowater or any of its Subsidiaries not to (or otherwise restrict or limit the ability of Bowater or any of its Subsidiaries to) compete in any line of business or geographic area;

(iii) any contract that contains a “most favored nation” provision binding Bowater or any of its Subsidiaries to provide a third party pricing or other terms at least as favorable as those received by other third parties who have contracted with Bowater or any of its Subsidiaries;

(iv) any Contract requiring aggregate future payments or expenditures in excess of $1,000,000 and relating to corrective, clean-up, abatement, remediation or similar actions in connection with environmental liabilities or obligations;

(v) any Contract pursuant to which Bowater or any of its Subsidiaries has entered into a material partnership or joint venture with any other person (other than Bowater or any of its Subsidiaries);

(vi) any indenture, mortgage or similar agreement, loan, guarantee or credit Contract under which Bowater or any of its Subsidiaries has outstanding indebtedness for borrowed money or any outstanding note, bond, indenture or other evidence of indebtedness for borrowed money or otherwise or any guaranteed indebtedness for money borrowed by others, in each case, for or guaranteeing an amount in excess of $5,000,000;

(vii) other than as disclosed pursuant to clause (vi) above, any pledges, mortgages, security agreements, sale/leaseback arrangements and equipment or other capitalized leases (other than leases for copy machines, postage machines, fax machines and computer equipment) entered into by Bowater or any of its Subsidiaries, in each case, relating to a current outstanding or pledged amount in excess of $5,000,000;

(viii) any Contract under which Bowater or any of its Subsidiaries is (1) a lessee or sublessee of real property, (2) a lessee or sublessee of, or holds or uses, any machinery, equipment, vehicle or other tangible personal property owned by a third person, (3) a lessor or sublessor of real property, or (4) a lessor or sublessor of any tangible personal property owned by Bowater or any of its Subsidiaries, in each case which requires annual payments in excess of $5,000,000;

(ix) any Contract (other than purchase or sale orders in the ordinary course of business that are terminable or cancelable without penalty on 90 days’ notice or less) under which Bowater or any of its Subsidiaries is a purchaser or supplier of goods and services which, pursuant to the terms thereof, requires payments by Bowater or any of its Subsidiaries in excess of $10,000,000 per annum and has a term longer than 12 months;

(x) any Contract which requires payments by Bowater or any Subsidiary of Bowater in excess of $1,000,000 per annum containing “change of control” or similar provisions;

(xi) any Contract to which Bowater, ExchangeCo or any of their respective Subsidiaries are parties governing the rights and obligations of holders of the Exchangeable Shares or of the Trustee with respect to the Exchangeable Shares; and

(xii) any Contract entered into on or after January 1, 2001 relating to the acquisition or disposition of any business (whether by merger, sale of stock or assets or otherwise), in an amount in excess of $25,000,000.

(b) Each such Bowater Material Contract is valid and in full force and effect and enforceable against Bowater or its applicable Subsidiary and to the Knowledge of Bowater the counterparty to such Bowater Material Contract in accordance with its respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other Laws relating to or affecting the rights and remedies of creditors generally and to general principles of equity (regardless of whether considered in a proceeding in equity or at law), except to the extent that (A) they have previously expired in accordance with their terms or (B) the failure to be in full

force and effect or be enforceable, individually or in the aggregate, has not had and would not reasonably be expected to have a Bowater Material Adverse Effect. Neither Bowater nor any of its Subsidiaries, nor, to the Knowledge of Bowater, any counterparty to any Bowater Material Contract, has violated or is alleged to have violated any provision of, or committed or failed to perform any act which, with or without notice, lapse of time or both, would constitute a default under the provisions of any Bowater Material Contract, except in each case for those violations and defaults which, individually or in the aggregate, has not had and would not reasonably be expected to have a Bowater Material Adverse Effect.

SECTION 4.11 Compliance with Laws; Environmental Matters . Except for those matters that individually or in the aggregate have not had and would not reasonably be expected to have a Bowater Material Adverse Effect and except as disclosed in the Filed Bowater Public Documents (other than the Cautionary Disclosures):

(a) each of Bowater and its Subsidiaries is and has been since January 1, 2002, in compliance with all Laws and Orders applicable to it, its properties or other assets or its business or operations,

(b) Bowater and each of its Subsidiaries has in effect all approvals, authorizations, certificates, filings, franchises, licenses, notices, registrations and permits of or with all Governmental Authorities (collectively, “ Permits ”), including Permits under Environmental Laws and including any Permits and licenses required in connection with timber supply and forest management, necessary for it to own, lease or operate its properties and other assets and to carry on its business and operations as currently conducted, and there has occurred no default under, or violation of, any such Permit;

(c) during the period of ownership or operation by Bowater or any of its Subsidiaries of any of its currently or formerly owned, leased or operated properties or facilities, there have been no Releases of Hazardous Materials in, on, under, from or affecting any properties or facilities which could reasonably be expected to require remediation under any Environmental Law or require any expenditure by Bowater or any of its Subsidiaries thereunder;

(d) prior to and after, as applicable, the period of ownership or operation by Bowater or any of its Subsidiaries of any of its currently or formerly owned, leased or operated properties or facilities, to the Knowledge of Bowater, there were no Releases of Hazardous Materials in, on, under, from or affecting any properties or facilities which could reasonably be expected to require remediation under any Environmental Law or require any expenditure by Bowater or any of its Subsidiaries thereunder;

(e) none of Bowater or its Subsidiaries has received any notice or demand alleging that it may be liable for any Release of Hazardous Materials at any other location which could reasonably be expected to require remediation under Environmental Law or require any expenditure by Bowater or any of its Subsidiaries thereunder;

(f) neither Bowater nor any of its Subsidiaries is subject to any indemnity obligation or other Contract with any person relating to obligations or liabilities under Environmental Laws; and

(g) to the Knowledge of Bowater, there are no facts, circumstances or conditions or proposed changes in Environmental Laws that would reasonably be expected to form the basis for any Action or liability against or affecting Bowater or any of its Subsidiaries relating to or arising under Environmental Laws or that would interfere with or increase the cost of complying with all applicable Environmental Laws in the future.

SECTION 4.12 Labor Relations and Other Employment Matters .

(a) As of the date of this Agreement, (1) none of the employees of Bowater or any of its Subsidiaries are represented by any union with respect to their employment by Bowater or such Subsidiary, (2) there is no pending demand for recognition or certification to Bowater or any of its Subsidiaries by any labor organization or group of employees of Bowater or any of its Subsidiaries and (3) to the Knowledge of Bowater, there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or threatened in writing to be brought or filed with any labor relations board or any tribunal or authority in any applicable jurisdiction with respect to Bowater or any of its Subsidiaries.

(b) Except as would not, individually or in the aggregate, reasonably be expected to have a Bowater Material Adverse Effect, (1) no work stoppage, slowdown, lockout, labor strike, material arbitrations or other labor disputes against Bowater or any of its Subsidiaries are pending or, to the Knowledge of Bowater, threatened, (2) no unfair labor practice charges, grievances or complaints are pending or, to the Knowledge of Bowater, threatened against Bowater or any of its Subsidiaries, (3) neither Bowater nor any of its Subsidiaries is delinquent in payments to any of its employees for any wages, salaries, commissions, bonuses, vacation pay or other direct compensation for any services performed for it or amounts required to be reimbursed to such employees, and (4) Bowater and its Subsidiaries are in compliance with all applicable Law, agreements, contracts, policies, plans and programs relating to employment, employment practices, compensation, benefits, hours, terms and conditions of employment, pay equity rules, and the termination of employment, including any obligations pursuant to the Worker Adjustment and Retraining Notification Act of 1988.

SECTION 4.13 Pension and Benefits Compliance .

(a) Section 4.13(a) of the Bowater Disclosure Schedule contains a complete and accurate list, as of the date of this Agreement, of each material “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974 (“ ERISA ”), including multiemployer plans within the meaning of Section 3(37) of ERISA and multiemployer plans within the meaning of applicable Canadian provincial pension and benefits Laws) and all employment, employee loan, collective bargaining, bonus, pension, supplemental pension, savings, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock appreciation, restricted stock, stock option, “phantom” stock, retirement, thrift savings, stock bonus, life insurance, medical, hospital, dental care, vision care, short-term and long-term disability, salary continuation, paid time off, fringe benefit, vacation, severance, retention, change in control, and all other material employee benefit plans, programs, policies, practices, whether funded or unfunded, registered or unregistered, qualified or non-qualified, insured or self-insured, or Contracts maintained, contributed to or required to be maintained or contributed to by Bowater or any of its Subsidiaries or any other person or entity

that, together with Bowater, is treated as a single employer under Section 414(b), (c), (m) or (o) of the Code (each, a “ Commonly Controlled Bowater Entity ”) (exclusive of any such plan, program, policy or Contract mandated by and maintained solely pursuant to applicable Law), in each case providing benefits to any Bowater Personnel (collectively “ Bowater Benefit Plans ”). Neither Bowater nor any Subsidiary or Commonly Controlled Bowater Entity has any Contract, whether formal or informal, to create any additional material benefit plan, program, policy or arrangement of the nature described above or to amend any existing Bowater Benefit Plan. Each Bowater Benefit Plan that is an “employee pension benefit plan” (as defined in Section 3(2) of ERISA) or a Canadian registered or unregistered pension plan is sometimes referred to herein as a “ Bowater Pension Plan ” and each Bowater Benefit Plan that is an “employee welfare benefit plan” (as defined in Section 3(1) of ERISA) or a Canadian group insurance, group benefit or employee benefit plan is sometimes referred to herein as a “ Bowater Welfare Plan ”. Terms defined in this Section 4.13(a) by reference to the meaning given to such term in a provision of ERISA refer to all plans, programs, policies or Contracts that fall within such meaning, regardless of whether the plan, program, policy or Contract in question is itself subject to ERISA.

(b) Bowater has provided to ACI current, complete and accurate copies of (1) each Bowater Benefit Plan (or, with respect to any unwritten Bowater Benefit Plans, accurate descriptions thereof), (2) with respect to each Bowater Benefit Plan, for the two most recent years (A) annual reports on Form 5500 or other annual information return required to be filed with the Internal Revenue Service (the “ IRS ”) or any other Governmental Authority (if any such report was required) and all schedules and attachments thereto, (B) all other material reports, returns and similar documents filed or required to be filed with any Governmental Authority and all schedules and attachments thereto, (C) audited financial statements (if any such statements exist or were required) and all schedules and attachments thereto, and (D) actuarial valuation reports (if any such reports exist or were required) and all schedules and attachments thereto; provided that if no actuarial valuation report was required to be performed during such period, Bowater shall provide the most recently completed actuarial valuation report, (3) the most recent summary plan description or employee booklet for each Bowater Benefit Plan for which such summary plan description or employee booklet is required or exists as of the date of this Agreement, (4) each trust Contract and insurance or group annuity Contract relating to any Bowater Benefit Plan, and (5) with respect to each Bowater Benefit Plan, the most recent favorable IRS determination letter or letter from a Canadian Governmental Authority confirming registration or continued registration, to the extent applicable.

(c) Except as has not had and would not reasonably be expected to have a Bowater Material Adverse Effect, (1) each Bowater Benefit Plan has been established, maintained and administered in accordance with its terms and all applicable Law and Orders, and (2) Bowater, its Subsidiaries and all Bowater Benefit Plans are in compliance with the applicable provisions of ERISA, the Code and all other Laws to Bowater Benefit Plans and the terms of all collective bargaining Contracts.

(d) Except as has not had and would not reasonably be expected to have a Bowater Material Adverse Effect, each of the Bowater Benefit Plans subject to Code Section 409A has been administered in good faith compliance with the applicable requirements of Code Section 409A, IRS Notice 2005-1, IRS Notice 2006-79 and the proposed regulations

issued thereunder. Each Bowater Stock Option was granted with an exercise price per share equal to or greater than the per share fair market value (as such term is used in Code Section 409A and the proposed regulations and other Department of Treasury interpretive guidance issued thereunder) of the Bowater Common Stock underlying such Bowater Stock Option on the grant date thereof. Except as has not had and would not reasonably be expected to have a Bowater Material Adverse Effect, there are no Taxes due or accrued because of Code Section 409A and the proposed regulations and other Department of Treasury interpretive guidance issued thereunder.

(e) All the Bowater Pension Plans intended to be qualified within the meaning of Section 401(a) of the Code have received favorable determination letters from the IRS, to the effect that such Bowater Pension Plans are so qualified and exempt from federal income Taxes under Sections 401(a) and 501(a), respectively, of the Code, no such determination letter has been revoked (nor, to the Knowledge of Bowater, has revocation been threatened) and no event has occurred since the date of the most recent determination letter relating to any such Bowater Pension Plan that would reasonably be expected to adversely affect the qualification of such Bowater Pension Plan or materially increase the costs relating thereto or require security under Section 307 of ERISA. Bowater has provided to ACI a complete and accurate list of all amendments to any Bowater Pension Plan as to which a favorable determination letter has not yet been received or, in the case of a Canadian Bowater Pension Plan, if any, for which registration has not been confirmed. All the Bowater Pension Plans intended or required to be qualified under applicable non U.S. Laws are so qualified and no such registration in Canada, if applicable, has been revoked, or to the Knowledge of Bowater, has revocation been threatened.

(f) Neither Bowater nor any Commonly Controlled Bowater Entity has, during the six-year period ending on the date hereof, maintained, contributed to or been required to contribute to any Bowater Pension Plan that is subject to Title IV of ERISA or Section 412 of the Code or any corresponding or similar provisions of any other non-U.S. Law relating to plan termination, or any “multiemployer plan” as defined in Section 3(37) or 4001(a)(3) of ERISA or any “multi-employer plan” within the meaning of applicable Canadian provincial pension and benefits Laws. Except as has not had and would not reasonably be expected to have a Bowater Material Adverse Effect, neither Bowater nor any Commonly Controlled Bowater Entity has any unsatisfied liability under Title IV of ERISA or any corresponding or similar provisions of any other non-U.S. Law. To the Knowledge of Bowater, no condition exists that presents a material risk to Bowater or any Commonly Controlled Bowater Entity of incurring a material liability under Title IV of ERISA or any corresponding or similar provisions of any other non-U.S. Law. The Pension Benefit Guaranty Corporation has not instituted proceedings under Section 4042 of ERISA to terminate any Bowater Benefit Plan and, to the Knowledge of Bowater, no condition exists that presents a material risk that such proceedings will be instituted. No event has occurred, and to the Knowledge of Bowater no condition, exists, that would be reasonably expected to subject Bowater, any Subsidiary of Bowater or any Commonly Controlled Bowater Entity or any Bowater Benefit Plan, to any Tax, fine, Lien, penalty or other liability imposed by ERISA, the Code or other applicable Law with respect to any Bowater Benefit Plan subject to Title IV of ERISA. All contributions under the Bowater Pension Plans that are required to have been made as of the date hereof in accordance with the terms of the Bowater Pension Plans and applicable Law and Orders have been timely made or, if not yet due, have been reflected in the Bowater Balance Sheet in accordance with GAAP.

(g) Except as has not had and would not reasonably be expected to have a Bowater Material Adverse Effect, (1) all reports, returns and similar documents with respect to all Bowater Benefit Plans required to be filed with any Governmental Authority or distributed to any Bowater Benefit Plan participant have been duly and timely filed or distributed, (2) none of Bowater or any of its Subsidiaries has received notice of and, to the Knowledge of Bowater, there are no Actions by any Governmental Authority with respect to, termination, wind-up, partial termination, or partial wind-up proceedings or other claims (except claims for benefits payable in the normal operation of Bowater Benefit Plans), suits or proceedings against or involving any Bowater Benefit Plan or asserting any rights or claims to benefits under any Bowater Benefit Plan that are pending or threatened that could reasonably be expected to give rise to any liability, (3) to the Knowledge of Bowater, there are not any facts that could give rise to any liability in the event of any such Action and (4) no written or oral communication has been received from the Pension Benefit Guaranty Corporation in respect of any Bowater Benefit Plan subject to Title IV of ERISA, or from any other Governmental Authority in respect of any Bowater Benefit Plan, in connection with the transactions contemplated herein.

(h) Except as has not had and would not reasonably be expected to have a Bowater Material Adverse Effect, (1) all contributions, premiums and benefit payments under or in connection with Bowater Benefit Plans that are required to have been made as of the date hereof in accordance with the terms of Bowater Benefit Plans and applicable Law and Orders have been timely made or, if not yet due, have been reflected in the Bowater Balance Sheet in accordance with GAAP, (2) no Bowater Pension Plan subject to ERISA has an “accumulated funding deficiency” (as such term is defined in Section 302 of ERISA or Section 412 of the Code), whether or not waived, (3) all Bowater Benefit Plans that are required to be funded are fully funded on both a going-concern and a solvency or termination basis in accordance with applicable Law, Orders, past practice and generally accepted accounting principles in the applicable jurisdiction and, with respect to all other Bowater Benefit Plans, adequate reserves therefor have been established on the accounting statements of Bowater or the applicable Subsidiary to the extent so required; and (4) no liability or obligation of Bowater or its Subsidiaries exists with respect to any Bowater Benefit Plans that has not been accrued in the consolidated financial statements of Bowater included in the Bowater Public Documents.

(i) With respect to each Bowater Benefit Plan, except as has not had and would not reasonably be expected to have a Bowater Material Adverse Effect, (1) there has not occurred any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) in which Bowater or any of its Subsidiaries or any of their respective employees, or, to the Knowledge of Bowater, any trustee, administrator or other fiduciary of such Bowater Benefit Plan, or any agent of the foregoing, has engaged that could reasonably be expected to subject Bowater or any of its Subsidiaries or any of their respective employees, or any such trustee, administrator or other fiduciary, to the Tax or penalty on prohibited transactions imposed by Section 4975 of the Code or the sanctions imposed under Title I of ERISA and (2) neither Bowater, any of its Subsidiaries or any of their respective employees nor, to the Knowledge of Bowater, any trustee, administrator or other fiduciary of any Bowater Benefit Plan nor any agent of any of the foregoing, has engaged in any transaction or acted in a manner, or failed to act in a manner, that could reasonably be expected to subject Bowater or any of its Subsidiaries or any of their respective employees or, to the Knowledge of Bowater, any such trustee, administrator or other fiduciary, to any liability for breach of fiduciary duty under

ERISA or any other applicable Law with respect to Bowater Benefit Plans. There have been no withdrawals or improper use or transfer of funds or assets of any Bowater Benefit Plan.

(j) Subject to any restrictions in applicable collective bargaining agreements, each Bowater Welfare Plan may be amended or terminated (including with respect to benefits provided to retirees and other former employees) without liability to Bowater or any of its Subsidiaries at any time after the Effective Time, which liability would reasonably be expected to have a Bowater Material Adverse Effect. Each of Bowater and its Subsidiaries complies with the applicable requirements of Section 4980B(f) of the Code, Sections 601-609 of ERISA or any corresponding or similar provisions of any state, local or non-U.S. Law with respect to each Bowater Benefit Plan that is a group health plan, as such term is defined in Section 5000(b)(1) of the Code or such state or non-U.S. Law, except for such non-compliance as has not had and would not reasonably be expected to have a Bowater Material Adverse Effect. Neither Bowater nor any of its Subsidiaries has any material obligations for health or life insurance benefits to retired or former employees or their respective beneficiaries or dependents under any Bowater Benefit Plan (other than for continuation coverage required under Section 4980B(f) of the Code).

(k) None of the execution and delivery of this Agreement or the consummation of the Arrangement or any other transaction contemplated by this Agreement (alone or in conjunction with any other event, including as a result of any termination of employment prior to, on or following the Effective Time) will (1) entitle any Bowater Personnel to notice, indemnity in lieu of notice, severance or termination pay, (2) accelerate the time of payment or vesting, or trigger any payment or funding (through a grantor trust or otherwise) of, compensation or benefits under, increase the amount payable or trigger any other material obligation pursuant to, any Bowater Benefit Plan, (3) result in any breach or violation of, or a default under, any Bowater Benefit Plan or (4) result in payments under any Bowater Benefit Plan that would not be deductible under Section 280G of the Code, or under any equivalent provisions of the Canadian Tax Act or (5) create or increase any liability under any Bowater Benefit Plan that is a multiemployer plan within the meaning of Section 3(37) of ERISA or a multi-employer plan within the meaning of applicable Canadian provincial pension and benefits Laws.

(l) Neither Bowater nor any of its Subsidiaries has any liability or obligations, including under or on account of a Bowater Benefit Plan, arising out of the hiring of persons to provide services to Bowater or any of its Subsidiaries and treating such persons as consultants or independent contractors and not as employees of Bowater or any of its Subsidiaries, except for such liabilities or obligations that individually or in the aggregate would not reasonably be expected to have a Bowater Material Adverse Effect.

(m) There is no Contract, plan or arrangement covering any person in the U.S. that, individually or in the aggregate, could give rise to the payment of any amount that would not be deductible by Bowater or any of its Subsidiaries by reason of Section 162(m) of the Code or any equivalent provisions of the Canadian Tax Act. No material deduction by Bowater or any of its Subsidiaries in respect of any “applicable employee remuneration” (within the meaning of Section 162(m) of the Code) has been disallowed or is subject to disallowance by reason of Section 162(m) of the Code or any equivalent provisions of the Canadian Tax Act.

(n) None of the Bowater Personnel is entitled to receive any additional payment from Bowater or any of its Subsidiaries or ACI by reason of the excise Tax required by Section 4999(a) of the Code being imposed on such person.

(o) None of the Canadian Bowater Pension Plans is the result of a merger or consolidation of two or more predecessor pension plans, and no application to approve any such merger or consolidation of a Canadian Bowater Pension Plan has been made to any Canadian Governmental Authority and is presently outstanding.

SECTION 4.14 Taxes .

(a) All material Tax Returns required to be filed by or with respect to Bowater or any of its Subsidiaries have been properly prepared and timely filed, and all such Tax Returns (including information provided therewith or with respect thereto) are correct and complete in all material respects.

(b) Bowater and its Subsidiaries have fully and timely paid all material Taxes owed by them (whether or not shown on any Tax Return) and have made adequate provision for any Taxes that are not yet due and payable for all taxable periods, or portions thereof, ending on or before the date of this Agreement.

(c) Bowater and its Subsidiaries have made available to ACI correct and complete copies of all material Tax Returns, examination reports and statements of deficiencies for taxable periods, or transactions consummated, for the 2004 and 2005 taxation years.

(d) There are no outstanding agreements extending or waiving the statutory period of limitations applicable to any claim for, or the period for the collection, assessment or reassessment of, Taxes due from Bowater or any of its Subsidiaries for any taxable period and no request for any such waiver or extension is currently pending.

(e) No audit or other proceeding by any Governmental Authority is pending or, to the Knowledge of Bowater, threatened with respect to any Taxes due from or with respect to Bowater or any of its Subsidiaries. No Governmental Authority has given written notice of its intention to assert any deficiency or claim for additional Taxes against Bowater or any of its Subsidiaries. No claim in writing has been made against Bowater or any of its Subsidiaries by any Governmental Authority in a jurisdiction where Bowater and its Subsidiaries do not file Tax Returns that Bowater or such Subsidiary is or may be subject to taxation by that jurisdiction. All deficiencies for Taxes asserted or assessed in writing against Bowater or any of its Subsidiaries have been fully and timely paid, settled or properly reflected in the most recent financial statements contained in Bowater’s periodic reports to the SEC.

(f) There are no Liens for Taxes upon any of the assets of Bowater or any of its Subsidiaries, except for statutory Liens for current Taxes not yet due.

(g) Neither Bowater nor any of its Subsidiaries is a party to any Contract relating to the sharing, allocation or indemnification of Taxes (collectively, “ Tax Sharing Agreements ”) or has any liability for Taxes of any person (other than members of the affiliated group, within the meaning of Section 1504(a) of the Code, filing consolidated federal income tax

returns of which Bowater is the common parent) under Treasury Regulation § 1.1502-6, Treasury Regulation § 1.1502-78 or any similar state, local or foreign Laws, as a transferee or successor, or otherwise.

(h) Bowater and its Subsidiaries have each withheld (or will withhold) from their respective employees, independent contractors, creditors, stockholders and third parties, and timely paid to the appropriate Governmental Authority, proper and accurate amounts in all material respects for all periods ending on or before the Closing Date in compliance with all Tax withholding and remitting provisions of applicable Law. Bowater and its Subsidiaries have each complied in all material respects with all Tax information reporting provisions under applicable Law.

(i) Neither Bowater nor any of its Subsidiaries has constituted a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of shares qualifying for tax-free treatment under Section 355 of the Code (i) in the two years prior to the date of this Agreement or (ii) in a distribution that could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with the transactions contemplated by this Agreement.

(j) Any adjustment of Taxes of Bowater or any of its Subsidiaries made by any Governmental Authority, which adjustment is required to be reported to the appropriate state, local, or foreign taxing authorities, has been so reported.

(k) Neither Bowater nor any of its Subsidiaries has executed or entered into a closing agreement under Section 7121 of the Code or any similar provision of state, local or foreign Laws, and neither Bowater nor any of its Subsidiaries is subject to any private letter ruling of the IRS or comparable ruling of any other Governmental Authority.

(l) Neither Bowater nor any of its Subsidiaries has entered into any transaction that constitutes (i) a “reportable transaction” within the meaning of Treasury Regulation § 1.6011-4(b), (ii) a “confidential tax shelter” within the meaning of Treasury Regulation § 301.6111-2(a)(2) or (iii) a “potentially abusive tax shelter” within the meaning of Treasury Regulation § 301.6112-1(b).

(m) The net operating loss carryforwards of Bowater and its Subsidiaries (the “ NOLs ”) as set forth in Section 4.14(m) of the Bowater Disclosure Schedule are not subject to any limitation under Section 111 of the Canadian Tax Act or under Section 382 or 384 of the Code or otherwise. There are no Actions pending or, to the Knowledge of Bowater, threatened against, with respect to or in limitation of the NOLs, including any limitations under Section 111 of the Canadian Tax Act or under Sections 382 or 384 of the Code (other than limitations incurred in connection with transactions contemplated by this Agreement).

(n) Bowater and each of its Subsidiaries have disclosed on their Tax Returns each position taken on such a Tax Return that could give rise to a substantial understatement of Tax within the meaning of Section 6662 of the Code or any similar provision of applicable Law, and is in possession of supporting documentation as may be required under any such provision.

SECTION 4.15 Title to Properties .

(a) Bowater and each of its Subsidiaries has good, valid and marketable fee simple title to, or valid leasehold or sublease interests or other comparable contract rights, as applicable, in or relating to all real property owned, leased or subleased by Bowater or any of its Subsidiaries (the “ Bowater Real Property ”) and all other tangible assets necessary for the conduct of its business as currently conducted, except as have been disposed of in the ordinary course of business, free and clear of all Liens, except for defects in title, recorded easements, restrictive covenants and other encumbrances of record that individually or in the aggregate have not had and would not reasonably be expected to have a Bowater Material Adverse Effect. Bowater and each of its Subsidiaries has complied with the terms of all leases and subleases with respect to Bowater Real Property leased or subleased by Bowater or any of its Subsidiaries (the “Bowater Leases” ), and all Bowater Leases are in full force and effect, enforceable in accordance with their terms against Bowater or a Subsidiary of Bowater that is a party thereto and, to the Knowledge of Bowater, the counterparties thereto, except for such failure to comply or be in full force and effect that individually or in the aggregate has not had and would not reasonably be expected to have a Bowater Material Adverse Effect. Neither Bowater nor any of its Subsidiaries has received or provided any written notice of any event or occurrence that has resulted or could result (with or without the giving of notice, the lapse of time or both) in a default with respect to any Lease, which defaults individually or in the aggregate have had or would reasonably be expected to have a Bowater Material Adverse Effect.

(b) All buildings, structures, fixtures, building systems and equipment included in the Bowater Real Property (the “ Bowater Structures ”) are in reasonably good condition and repair in all material respects and sufficient for the operation of the business of Bowater, subject to reasonable wear and tear and subject to replacements and upgrades of fixed assets, except for such failures that individually or in the aggregate has not had and would not reasonably be expected to have a Bowater Material Adverse Effect.

(c) Neither Bowater nor any of its Subsidiaries is a party to or obligated under any option, right of first refusal or other contractual right to sell, dispose of or lease any of the Bowater Real Property or any portion thereof or interest therein, in each case that is material to Bowater and its Subsidiaries, taken as a whole, to any person (other than pursuant to this Agreement).

(d) The present use of the land and Bowater Structures on the Bowater Real Property are in conformity with all applicable Law, including all applicable zoning Laws, and with all registered deeds, restrictions of record or other agreements affecting such Bowater Real Property, except for such failures to be in conformity that individually or in the aggregate have not had and would not reasonably be expected to have a Bowater Material Adverse Effect.

SECTION 4.16 Intellectual Property .

(a) Except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Bowater Material Adverse Effect: (1) Bowater and its Subsidiaries own, license or have the right to use all Intellectual Property used in the operation of their businesses as currently conducted (the “ Bowater Intellectual Property ”), free and clear of

all Liens; (2) no Actions or Orders are pending or, to the Knowledge of Bowater, threatened (including cease and desist letters or requests for a license) against Bowater or its Subsidiaries with regard to the ownership, use, validity or enforceability of any Intellectual Property; (3) the operation of Bowater and its Subsidiaries’ businesses as currently conducted does not infringe, misappropriate or violate (“ Infringe ”) the Intellectual Property of any other person and no other person is infringing Bowater’s or any of its Subsidiaries’ Intellectual Property; (4) all registrations and applications for patents, trademarks, copyrights and domain names owned or controlled by Bowater or any of its Subsidiaries are subsisting and unexpired, have not been abandoned or cancelled and, to the Knowledge of Bowater, are valid and enforceable; and (5) Bowater and its Subsidiaries take all reasonable actions to protect their Intellectual Property (including trade secrets and confidential information), and require all persons who create or contribute to material proprietary Intellectual Property to assign all of their rights therein to Bowater. Upon the consummation of the transactions contemplated herein, Bowater shall own and have the right to use all Bowater Intellectual Property on the same terms and conditions as Bowater and its Subsidiaries enjoyed prior to such transactions.

(b) “ Intellectual Property ” shall mean all patents, inventions, technology, discoveries, processes, formulae and know-how, copyrights and copyrightable works (including software, databases, applications, code, systems, networks, website content, documentation and related items), trademarks, service marks, trade names, logos, domain names, corporate names, trade dress and other source indicators, and the goodwill of the business appurtenant thereto, trade secrets, customer data and other confidential or proprietary information.

SECTION 4.17 State Takeover Laws; Bowater Certificate Provisions; Rights Agreements . None of Section 203 of the Delaware General Corporation Law, any similar state anti-takeover statute or regulation, or any takeover-related provision in the Bowater Certificate or Bowater Bylaws would (i) prohibit or restrict the ability of any Bowater Entity to perform its obligations under this Agreement or to consummate the transactions contemplated hereby, or (ii) have the effect of invalidating or voiding this Agreement or any provision hereof. Bowater has not entered into, and the Board of Directors of Bowater has not adopted or authorized the adoption of, any stockholder rights plan or similar agreement.

SECTION 4.18 Brokers and Other Advisors . No broker, investment banker, financial advisor or other person (other than Goldman, Sachs & Co., UBS Investment Bank and The Levin Group, L.P.) is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Bowater.

SECTION 4.19 Opinion of Financial Advisors . The Board of Directors of Bowater has received the opinions of each of Goldman, Sachs & Co. and UBS Investment Bank, dated as of the date of this Agreement, to the effect that, as of such date, the Bowater Exchange Ratio is fair, from a financial point of view, to the holders of Bowater Common Stock and to the holders of Exchangeable Shares.

SECTION 4.20 Insurance . All insurance policies maintained by Bowater or any of its Subsidiaries are in full force and effect, except as individually or in the aggregate has not had and would not reasonably be expected to have a Bowater Material Adverse Effect, and

provide insurance in such amounts and against such risks as the management of Bowater reasonably has determined to be prudent in accordance with industry practices or as is required by Law. Neither Bowater nor any of its Subsidiaries is in breach or default, and neither Bowater nor any of its Subsidiaries has taken any action or failed to take any action which, with notice or lapse of time or both, would constitute such a breach or default, or permit a termination or modification of any of the insurance policies of Bowater or its Subsidiaries, except in each case for such breaches, defaults, terminations or modifications that individually or in the aggregate have not had and would not reasonably be expected to have a Bowater Material Adverse Effect.

SECTION 4.21 Vote Required . The only votes of the holders of any class or series of Bowater’s capital stock or other securities of Bowater necessary to approve this Agreement and the transactions contemplated hereby are the affirmative vote in favor of the approval and adoption of this Agreement and the Merger of the holders of a majority of the voting power of Bowater Common Stock and of Bowater Special Preferred Stock, voting as a single class (such approvals, collectively, the “ Bowater Stockholder Approval ”).

SECTION 4.22 CallCo and ExchangeCo Status .

(a) Other than in connection with the Arrangement or the transactions contemplated by this Agreement, Bowater, directly or indirectly, has no plan or intention to: (i) cause the liquidation of ExchangeCo or CallCo (for U.S. federal income tax purposes or otherwise), (ii) cause the sale, distribution or other disposition of the stock of ExchangeCo or CallCo by the owner thereof (other than a transfer to one or more wholly-owned Subsidiaries of Bowater), or (iii) cause ExchangeCo to issue any shares of voting stock of ExchangeCo (other than to one or more wholly-owned Subsidiaries of Bowater).

(b) At the Effective Time, except as contemplated by the Arrangement, Bowater or one or more direct or indirect wholly-owned Subsidiaries of Bowater will own all of the outstanding capital stock of ExchangeCo other than the Exchangeable Shares currently held by public holders and the Exchangeable Shares to be issued in the Arrangement or in connection with the Arrangement, and ExchangeCo will be a “taxable Canadian corporation” within the meaning of the Canadian Tax Act.

(c) Except for the Exchangeable Share Support Agreement and the Voting and Exchange Trust Agreement and the transactions contemplated hereby and in the Plan of Arrangement, CallCo has not and will not have incurred, directly or indirectly, any obligations or liabilities or engaged in any business or activities or entered into any agreements or arrangements with any person. At no time prior to the Effective Time will CallCo own any material assets.

SECTION 4.23 Exchangeable Shares . The Exchangeable Shares to be issued in connection with the Arrangement will be duly and validly issued by ExchangeCo and fully paid and non-assessable. The rights, privileges, restrictions and conditions attaching to the Exchangeable Shares shall be substantially as set out in Appendix I of the Plan of Arrangement.

SECTION 4.24 No Other Representations or Warranties . Except for the representations and warranties contained in this Agreement, neither Bowater nor any other person (i) makes any representation or warranty express or implied, including any implied

representation or warranty, as to condition, merchantability, suitability or fitness for a particular purpose of any of the assets used in the business of or held by Bowater or any of its Subsidiaries or (ii) makes any representation or warranty, express or implied, as to the accuracy or completeness of any information regarding Bowater or any of its Subsidiaries or the business conducted by Bowater or any of its Subsidiaries, in each case except as expressly set forth in this Agreement or as and to the extent required by this Agreement to be set forth in the Bowater Disclosure Schedule.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF ACI

Except as set forth in the disclosure schedule delivered by ACI to Bowater prior to the execution of this Agreement (the “ ACI Disclosure Schedule ”) (with specific reference to the particular Section or subsection of this Agreement to which the information set forth in such disclosure schedule relates (and such items or matters disclosed in other sections of the ACI Disclosure Schedule to the extent the relevance of such items or matters to the referenced Section or subsection of this Agreement is reasonably apparent on the face of such disclosure)) (it being understood and agreed by the parties that individual sections in this ARTICLE V do not contain any references to such ACI Disclosure Schedule), ACI represents and warrants to Bowater as follows:

SECTION 5.01 Organization, Standing and Corporate Power . ACI and each of its Subsidiaries has been duly amalgamated or organized, as applicable, and is validly existing and in good standing (with respect to jurisdictions for which that concept is applicable) under the Laws of the jurisdiction of its amalgamation, incorporation or formation, as the case may be, and has all requisite corporate or similar power and authority to own, lease or otherwise hold and operate its properties and other assets and to carry on its activities as currently conducted, except where the failure to be so qualified individually or in the aggregate has not had and would not reasonably be expected to have an ACI Material Adverse Effect. ACI and each of its Subsidiaries is duly qualified or licensed to do business and is in good standing (with respect to jurisdictions for which that concept is applicable) in each jurisdiction in which the nature of its activities or the ownership, leasing or operation of its properties makes such qualification, licensing or good standing necessary, other than in such jurisdictions where the failure to be so qualified, licensed or in good standing individually or in the aggregate has not had and would not reasonably be expected to have an ACI Material Adverse Effect. ACI has made available to Bowater, prior to the date of this Agreement, complete and accurate copies of the articles of amalgamation of ACI, as currently in effect (the “ ACI Articles ”) and the bylaws of ACI , as currently in effect (the “ ACI Bylaws ”).

SECTION 5.02 Subsidiaries . Section 5.02 of the ACI Disclosure Schedule lists, as of the date hereof, each material Subsidiary of ACI. All of the outstanding capital stock of, or other equity interests in, each material Subsidiary of ACI, is directly or indirectly owned by ACI. All the issued and outstanding shares of capital stock of, or other equity interests in, each such material Subsidiary owned by ACI have been validly issued and are fully paid and non-assessable and are owned directly or indirectly by ACI free and clear of all Liens, and free of any restriction on the right to vote, sell or otherwise dispose of such capital stock or other

equity interests (other than restrictions imposed by Securities Laws). Except for the Subsidiaries of ACI, ACI does not own, directly or indirectly, as of the date hereof, any capital stock of, or other voting securities or equity interests in, any material corporation, partnership, joint venture, association or other entity. There are no options, warrants, conversion privileges or other rights, agreements, arrangements or commitments obligating any material Subsidiary of ACI to issue or sell any shares of any material Subsidiary of ACI or securities or obligations of any kind convertible into or exchangeable for any shares of any material Subsidiary of ACI.

SECTION 5.03 Capital Structure . As of the date hereof, the authorized capital of ACI consists of an unlimited number common shares, no par value, of ACI (“ ACI Common Shares ”) and an unlimited number of Class A preferred shares, no par value, of ACI (“ ACI Preferred Shares ”). At the close of business on December 31, 2006, (i) 440,174,994 ACI Common Shares were issued and outstanding, (ii) no shares of the ACI Preferred Shares were issued and outstanding and (iii) 14,457,537 ACI Common Shares were subject to outstanding ACI Stock Options or ACI’s obligation to issue ACI Common Shares granted under the employee and director stock plans of ACI (the “ ACI Stock Plans ”) and other employment arrangements. Section 5.03 of the ACI Disclosure Schedule sets forth a complete and accurate list, as of December 31, 2006, of all outstanding ACI Stock Options, stock appreciation rights with respect to ACI Common Shares (“ ACI SARs ”) and ACI Share-Based Awards, granted under ACI Stock Plans or otherwise, the number of ACI Common Shares subject thereto, the grant dates, expiration dates, exercise or base prices (if applicable) and vesting schedules thereof and the names of the holders thereof. All outstanding ACI Stock Options, ACI SARs and ACI Share-Based Awards are evidenced by stock option agreements, restricted stock agreements or other award agreements in each case in the forms set forth in Section 5.03 of the ACI Disclosure Schedule, and no stock option agreement, restricted stock agreement or other award agreement contains terms that are inconsistent with such forms. Except as set forth above in this Section 5.03, as of December 31, 2006 there were not issued, reserved for issuance or outstanding (1) any capital shares or other voting securities of ACI, (2) any securities of ACI convertible into or exchangeable or exercisable for capital shares or voting securities of ACI or (3) any warrants, calls, options or other rights to acquire from ACI, or any obligation of ACI to issue, any capital shares, voting securities or securities convertible into or exchangeable or exercisable for capital shares or voting securities of ACI. No bonds, debentures, notes or other indebtedness of ACI having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which the stockholders of ACI may vote are issued or outstanding.

SECTION 5.04 Authority; Noncontravention .

(a) ACI has all requisite corporate power and authority to execute and deliver this Agreement and, subject to receipt of the ACI Shareholder Approval, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by ACI and the consummation by ACI of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action on the part of ACI and no other corporate proceedings on the part of ACI are necessary to authorize this Agreement, to consummate the transactions contemplated by this Agreement (other than the obtaining of the ACI Shareholder Approval). This Agreement has been duly executed and delivered by ACI and, assuming the due authorization, execution and delivery by each of the other parties hereto, constitutes a legal, valid and binding obligation of ACI, enforceable against such person in accordance with its terms,

subject to bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or similar Laws affecting the rights of creditors generally and the availability of equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law).

(b) At a meeting duly called and held, ACI’s Board of Directors has unanimously: (1) determined that this Agreement and the transactions contemplated hereby (including the Merger and the Arrangement) are advisable and fair to and in the best interests of ACI and the holders of the ACI Common Shares; (2) authorized and approved this Agreement and the transactions contemplated hereby (including the Merger and the Arrangement); and (3) resolved to recommend approval and adoption of the Arrangement by its shareholders at the ACI Meeting.

(c) The execution and delivery of this Agreement by ACI do not, and the consummation by ACI of the Arrangement and the other transactions contemplated by this Agreement and compliance by ACI with the provisions of this Agreement will not, conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of, or result in, termination, modification, cancellation or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any Lien in or upon any of the properties or other assets of ACI or any of its Subsidiaries under, (x) the ACI Articles or the ACI Bylaws or the comparable organizational documents of any of its Subsidiaries, (y) any Contract to which ACI or any of its Subsidiaries is a party or any of their respective properties or other assets is subject or (z) subject to the obtaining of the ACI Shareholder Approval and obtaining consents or approvals of any Governmental Authority or making the governmental filings and other matters referred to in Section 5.04(d), any (1) Law applicable to ACI or any of its Subsidiaries or any of their respective properties or other assets or (2) Order applicable to ACI or any of its Subsidiaries or their respective properties or other assets, other than, in the case of clauses (y) and (z), any such conflicts, violations, breaches, defaults, rights of termination, modification, cancellation or acceleration, losses or Liens that individually or in the aggregate have not had and would not reasonably be expected to have an ACI Material Adverse Effect.

(d) No consent, approval, order, receipt or authorization of, action by or in respect of, or registration, declaration or filing with, any Governmental Authority is required by or with respect to ACI or any of its Subsidiaries in connection with the execution and delivery of this Agreement by ACI or the consummation of the Arrangement or the other transactions contemplated by this Agreement, except for (1) (A) the filing of a premerger notification and report form by ACI under the HSR Act and the expiration or termination of the waiting period required thereunder, (B) Competition Act Approval and ICA Approval, and (C) the receipt, termination or expiration, as applicable, of approvals or waiting periods required under any other applicable antitrust Law, (2) applicable requirements of the 1933 Act, the 1934 Act, and state securities and “blue sky” Laws, as may be required in connection with this Agreement and the transactions contemplated by this Agreement, (3) the filing of the Articles of Arrangement with the Director, (4) applicable requirements under the Canadian Securities Laws and of the Canadian Securities Regulatory Authorities, (5) any filings with and approvals of the NYSE, (6) any filings with and approvals of the TSX, (7) any applicable requirements under forestry legislation in jurisdictions in which ACI or any of its Subsidiaries operate and the Permits issued or granted under such legislation, and (8) such other consents, approvals, orders, authorizations,

actions, registrations, declarations and filings the failure of which to be obtained or made individually or in the aggregate has not had and would not reasonably be expected to have an ACI Material Adverse Effect.

(e) There is no anti-takeover statute, regulation or Law, or any takeover-related provision in the ACI Articles or ACI Bylaws that would (i) prohibit or restrict the ability of any ACI Entity to perform its obligations under this Agreement or to consummate the transactions contemplated hereby, or (ii) have the effect of invalidating or voiding this Agreement or any provision hereof. ACI has not entered into, and the Board of Directors of ACI has not adopted or authorized the adoption of, any stockholder rights plan or similar agreement.

SECTION 5.05 ACI Public Documents .

(a) ACI has timely filed all reports, schedules, forms, statements and other documents with SEC and the Canadian Securities Regulatory Authorities required to be filed by ACI since January 1, 2004 (such documents, the “ ACI Public Documents ”). Each of the ACI Public Documents, as amended prior to the date of this Agreement, complied as to form in all material respects with, to the extent in effect at the time of filing, the requirements of the 1933 Act, the 1934 Act and applicable Canadian Securities Laws applicable to such ACI Public Documents, and none of the ACI Public Documents when filed or, if amended prior to the date hereof, as of the date of such amendment, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Each of the financial statements (including the related notes) of ACI included in the ACI Public Documents (or incorporated therein by reference) complied at the time it was filed as to form in all material respects with the applicable accounting requirements and the published rules and regulations of the SEC and applicable Canadian Securities Laws with respect thereto in effect at the time of such filing, had been prepared in accordance with generally accepted accounting principles in Canada (“ Canadian GAAP ”) (except, in the case of unaudited statements, as permitted by the rules and regulations of the SEC and applicable Canadian Securities Laws) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly presented in all material respects the consolidated financial position of ACI and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal recurring year-end audit adjustments). Neither ACI nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar Contract or arrangement (including any Contract or arrangement relating to any transaction or relationship between or among ACI and any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited purpose entity or person, on the other hand, or any “off-balance sheet arrangement” (as defined in Item 303(a) of Regulation S-K of the SEC)), where the result, purpose or intended effect of such Contract or arrangement is to avoid disclosure of any material transaction involving, or material liabilities of, ACI or any of its Subsidiaries in the ACI’s or such Subsidiary’s published financial statements or other ACI Public Documents. None of the Subsidiaries of ACI are, or have at any time since January 1, 2004 been, subject to the reporting requirements of Section 13(a) or 15(d) of the 1934 Act.

(b) Each of the principal executive officer of ACI and the principal financial officer of ACI (or each former principal executive officer of ACI and each former principal financial officer of ACI, as applicable) has made all certifications required by Rule 13a-14 or 15d-14 under the 1934 Act and Sections 302 and 906 of the Sarbanes-Oxley Act with respect to the ACI Public Documents, and the statements contained in each such certification, at the time of filing or submission of such certification, were true and accurate. For purposes of this Agreement, “principal executive officer” and “principal financial officer” shall have the meanings given to such terms in the Sarbanes-Oxley Act. Neither ACI nor any of its Subsidiaries has outstanding, or has arranged any outstanding, “extensions of credit” to directors or executive officers in violation of Section 402 of the Sarbanes-Oxley Act. As of the date hereof, ACI has no reason to believe that its outside auditors and its principal executive officer and principal financial officer will not be able to give, without qualification, the certificates and attestations required pursuant to the Sarbanes-Oxley Act when next due.

(c) ACI has, to the extent required by applicable Law, (1) designed disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the 1934 Act) to ensure that material information relating to ACI, including its consolidated subsidiaries, is made known to its principal executive officer and principal financial officer; (2) designed internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the 1934 Act) to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Canadian GAAP; (3) evaluated the effectiveness of the ACI’s disclosure controls and procedures and, to the extent required by applicable Law, presented in any applicable ACI Public Document that is a report on Form 40-F or Form 6-K or any amendment thereto its conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by such report or amendment based on such evaluation; and (4) to the extent required by applicable Law, disclosed in such report or amendment any change in ACI’s internal control over financial reporting that occurred during the period covered by such report or amendment that has materially affected, or is reasonably likely to materially affect, ACI’s internal control over financial reporting.

(d) ACI has, to the extent required by applicable Law, disclosed, based on the most recent evaluation of internal control over financial reporting, to ACI’s auditors and the audit committee of ACI’s Board of Directors (1) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect ACI’s ability to record, process, summarize and report financial information, and (2) any fraud, whether or not material, that involves management or other employees who have a significant role in the ACI’s internal control over financial reporting.

(e) Since January 1, 2001, (i) neither ACI nor any of its Subsidiaries, nor, to the Knowledge of ACI, any director, officer, employee, auditor, accountant or representative of ACI or any of its Subsidiaries has received or otherwise had or obtained Knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of ACI or any of its Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that ACI or any of its Subsidiaries has engaged in questionable accounting or auditing practices, and (ii) no attorney representing ACI or any of its Subsidiaries,

whether or not employed by ACI or any of its Subsidiaries, has reported evidence of a material violation of Securities Laws, breach of fiduciary duty or similar violation by ACI or any of its Subsidiaries or their respective officers, directors, employees or agents to the Board of Directors of ACI or any committee thereof or to any director or officer of ACI.

SECTION 5.06 Information Supplied . None of the information supplied or to be supplied by or on behalf of ACI specifically for inclusion or incorporation by reference in (i) the Form S-4, any Alternative Form or the Form S-3 will, at the time the Form S-4, such Alternative Form or the Form S-3, as applicable, is filed with the SEC and at the time it becomes effective under the 1933 Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading or (ii) the Joint Proxy Statement will, at the date it is first mailed to the shareholders of ACI and at the time of the ACI Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation or warranty is made by ACI with respect to statements made or incorporated by reference therein based on information supplied by or on behalf of Bowater or any of its Subsidiaries specifically for inclusion or incorporation by reference in the Form S-4, any Alternative Form or the Form S-3 or the Joint Proxy Statement.

SECTION 5.07 Undisclosed Liabilities . There are no liabilities or obligations of ACI or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances that could reasonably be expected to result in such a liability or obligation, other than (a) liabilities or obligations disclosed and provided for in the ACI Balance Sheet or disclosed in the notes thereto, (b) liabilities or obligations incurred in the ordinary course of business consistent with past practices since the ACI Balance Sheet Date, (c) liabilities or obligations incurred directly pursuant to this Agreement or (d) other liabilities which individually or in the aggregate have not had and would not reasonably be expected to have an ACI Material Adverse Effect.

SECTION 5.08 Absence of Certain Changes or Events . Since the ACI Balance Sheet Date, there has not been any ACI Material Adverse Effect. Except as disclosed in the the ACI Public Documents filed prior to the date of this Agreement (such ACI Public Documents, the “ Filed ACI Public Documents ”) (other than in the Cautionary Disclosures) and for liabilities incurred in connection with this Agreement or, with respect to liabilities incurred after the date hereof, as expressly permitted pursuant to Section 6.02, since the ACI Balance Sheet Date (i) ACI and its Subsidiaries have conducted their respective businesses only in the ordinary course consistent with past practice, and (ii) there has not been any action taken or committed to be taken by ACI or any of its Subsidiaries which, if taken following entry by ACI into this Agreement, would have required the consent of Bowater pursuant to Section 6.02 (excluding Section 6.02(i)).

SECTION 5.09 Litigation . There are no Actions, including Actions under or relating to any Environmental Law, pending or, to the Knowledge of ACI, threatened against ACI or any of its Subsidiaries or any of their respective assets, rights or properties or any of the

executive officers or directors of ACI, except, in each case, for those that individually or in the aggregate have not had and would not reasonably be expected to have, an ACI Material Adverse Effect or for those disclosed in the Filed ACI Public Documents. Neither ACI nor any of its Subsidiaries nor any of their respective properties or assets is or are subject to any Order, settlement or award, except for those that, individually or in the aggregate, have not had, and would not reasonably be expected to have, an ACI Material Adverse Effect or for those disclosed in Item 4 (or other item number corresponding to “Legal Proceedings”) of the Filed ACI Public Documents or in the notes to the most recent audited financial statements and most recent financial statements included in the Filed ACI Public Documents. To the Knowledge of ACI, there are no formal or informal inquiries, inspections or investigations by any Governmental Authority or internal investigations, in each case regarding accounting or disclosure practices of ACI or any of its Subsidiaries, compliance by ACI or any of its Subsidiaries with any Law or any malfeasance by any executive officer of ACI or any of its Subsidiaries, except for those that individually or in the aggregate have not had and would not reasonably be expected to have an ACI Material Adverse Effect.

SECTION 5.10 ACI Material Contracts .

(a) For purposes of this Agreement, “ ACI Material Contract ” shall mean:

(i) any employment, severance, consulting retention, indemnification, change-in-control, deferred compensation or other Contract with any ACI Personnel which will require the payment of amounts by ACI or any of its Subsidiaries, as applicable, after the date hereof in excess of $250,000 per annum;

(ii) any Contract containing covenants of ACI or any of its Subsidiaries not to (or otherwise restrict or limit the ability of ACI or any of its Subsidiaries to) compete in any line of business or geographic area;

(iii) any contract that contains a “most favored nation” provision binding ACI or any of its Subsidiaries to provide a third party pricing or other terms at least as favorable as those received by other third parties who have contracted with ACI or any of its Subsidiaries;

(v) any Contract pursuant to which ACI or any of its Subsidiaries has entered into a material partnership or joint venture with any other person (other than ACI or any of its Subsidiaries);

(vi) any indenture, mortgage or similar agreement, loan, guarantee or credit Contract under which ACI or any of its Subsidiaries has outstanding indebtedness for borrowed money or any outstanding note, bond, indenture or other evidence of indebtedness for borrowed money or otherwise or any guaranteed indebtedness for money borrowed by others, in each case, for or guaranteeing an amount in excess of $5,000,000;

(vii) other than as disclosed pursuant to clause (vi) above, any pledges, mortgages, security agreements, sale/leaseback arrangements and equipment or other capitalized leases (other than leases for copy machines, postage machines, fax machines and computer equipment) entered into by ACI or any of its Subsidiaries, in each case, relating to a current outstanding or pledged amount in excess of $5,000,000;

(viii) any Contract under which ACI or any of its Subsidiaries is (1) a lessee or sublessee of real property, (2) a lessee or sublessee of, or holds or uses, any machinery, equipment, vehicle or other tangible personal property owned by a third person, (3) a lessor or sublessor of real property, or (4) a lessor or sublessor of any tangible personal property owned by ACI or any of its Subsidiaries, in each case which requires annual payments in excess of $5,000,000;

(ix) any Contract (other than purchase or sale orders in the ordinary course of business that are terminable or cancelable without penalty on 90 days’ notice or less) under which ACI or any of its Subsidiaries is a purchaser or supplier of goods and services which, pursuant to the terms thereof, requires payments by ACI or any of its Subsidiaries in excess of $10,000,000 per annum and has a term of longer than 12 months;

(x) any Contract which requires payments by ACI or any Subsidiary of ACI in excess of $1,000,000 per annum containing “change of control” or similar provisions; and

(xi) any Contract entered into on or after January 1, 2001 relating to the acquisition or disposition of any business (whether by merger, sale of stock or assets or otherwise), in an amount in excess of $25,000,000.

(b) Each such ACI Material Contract is valid and in full force and effect and enforceable against ACI or its applicable Subsidiary and to the Knowledge of ACI the counterparty to such ACI Material Contract in accordance with its respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other Laws relating to or affecting the rights and remedies of creditors generally and to general principles of equity (regardless of whether considered in a proceeding in equity or at law), except to the extent that (A) they have previously expired in accordance with their terms or (B) the failure to be in full force and effect or be enforceable, individually or in the aggregate, has not had and would not reasonably be expected to have an ACI Material Adverse Effect. Neither ACI nor any of its Subsidiaries, nor, to the Knowledge of ACI, any counterparty to any ACI Material Contract, has violated or is alleged to have violated any provision of, or committed or failed to perform any act which, with or without notice, lapse of time or both, would constitute a default under the provisions of any ACI Material Contract, except in each case for those violations and defaults which, individually or in the aggregate, has not had and would not reasonably be expected to have an ACI Material Adverse Effect.

SECTION 5.11 Compliance with Laws; Environmental Matters . Except for those matters that individually or in the aggregate have not had and would not reasonably be expected to have an ACI Material Adverse Effect and except as disclosed in the Filed ACI Public Documents (other than the Cautionary Disclosures):

(a) each of ACI and its Subsidiaries is and has been since January 1, 2002, in compliance with all Laws and Orders applicable to it, its properties or other assets or its business or operations,

(b) ACI and each of its Subsidiaries has in effect all Permits, including Permits under Environmental Laws and including any Permits and licenses required in connection with timber supply and forest management, necessary for it to own, lease or operate its properties and other assets and to carry on its business and operations as currently conducted, and there has occurred no default under, or violation of, any such Permit;

(c) during the period of ownership or operation by ACI or any of its Subsidiaries of any of its currently or formerly owned, leased or operated properties or facilities, there have been no Releases of Hazardous Materials in, on, under, from or affecting any properties or facilities which could reasonably be expected to require remediation under any Environmental Law or require any expenditure by ACI or any of its Subsidiaries thereunder;

(d) prior to and after, as applicable, the period of ownership or operation by ACI or any of its Subsidiaries of any of its currently or formerly owned, leased or operated properties or facilities, to the Knowledge of ACI, there were no Releases of Hazardous Materials in, on, under, from or affecting any properties or facilities which could reasonably be expected to require remediation under any Environmental Law or require any expenditure by ACI or any of its Subsidiaries thereunder;

(e) none of ACI or its Subsidiaries has received any notice or demand alleging that it may be liable for any Release of Hazardous Materials at any other location which could reasonably be expected to require remediation under Environmental Law or require any expenditure by ACI or any of its Subsidiaries thereunder;

(f) neither ACI nor any of its Subsidiaries is subject to any indemnity obligation or other Contract with any person relating to obligations or liabilities under Environmental Laws; and

(g) to the Knowledge of ACI, there are no facts, circumstances or conditions or proposed changes in Environmental Laws that would reasonably be expected to form the basis for any Action or liability against or affecting ACI or any of its Subsidiaries relating to or arising under Environmental Laws or that would interfere with or increase the cost of complying with all applicable Environmental Laws in the future.

SECTION 5.12 Labor Relations and Other Employment Matters .

(a) As of the date of this Agreement, (1) none of the employees of ACI or any of its Subsidiaries are represented by any union with respect to their employment by ACI or such Subsidiary, (2) there is no pending demand for recognition or certification to ACI or any of its Subsidiaries by any labor organization or group of employees of ACI or any of its Subsidiaries and (3) to the Knowledge of ACI, there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or threatened in writing to be brought or filed with any labor relations board or any tribunal or authority in any applicable jurisdiction with respect to ACI or any of its Subsidiaries.

(b) Except as would not, individually or in the aggregate, reasonably be expected to have an ACI Material Adverse Effect, (1) no work stoppage, slowdown, lockout, labor strike, material arbitrations or other labor disputes against ACI or any of its Subsidiaries are pending or, to the Knowledge of ACI, threatened, (2) no unfair labor practice charges, grievances or complaints are pending or, to the Knowledge of ACI, threatened against ACI or any of its Subsidiaries, (3) neither ACI nor any of its Subsidiaries is delinquent in payments to any of its employees for any wages, salaries, commissions, bonuses, vacation pay or other direct compensation for any services performed for it or amounts required to be reimbursed to such employees, and (4) ACI and its Subsidiaries are in compliance with all applicable Law, agreements, contracts, policies, plans and programs relating to employment, employment practices, compensation, benefits, hours, terms and conditions of employment and the termination of employment, pay equity rules, including any obligations pursuant to the Worker Adjustment and Retraining Notification Act of 1988.

SECTION 5.13 Pension and Benefits Compliance .

(a) Section 5.13(a) of the ACI Disclosure Schedule contains a complete and accurate list, as of the date of this Agreement, of each material “employee benefit plan” (within the meaning of Section 3(3) of ERISA, including multiemployer plans within the meaning of Section 3(37) of ERISA and multiemployer plans within the meaning of applicable Canadian provincial pension and benefits Laws) and all employment, employee loan, collective bargaining, bonus, pension, supplemental pension, savings, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock appreciation, restricted stock, stock option, “phantom” stock, retirement, thrift savings, stock bonus, life insurance, medical, hospital, dental care, vision care, short-term and long-term disability, salary continuation, paid time off, fringe benefit, vacation, severance, retention, change in control, and all other material employee benefit plans, programs, policies, practices, whether funded or unfunded, registered or unregistered, qualified or non-qualified, insured or self-insured, or Contracts maintained, contributed to or required to be maintained or contributed to by ACI or any of its Subsidiaries or any other person or entity that, together with ACI, is treated as a single employer under Section 414(b), (c), (m) or (o) of the Code (each, a “ Commonly Controlled ACI Entity ”) (exclusive of any such plan, program, policy or Contract mandated by and maintained solely pursuant to applicable Law), in each case providing benefits to any ACI Personnel (collectively, “ ACI Benefit Plans ”). Neither ACI nor any Subsidiary or Commonly Controlled ACI Entity has any Contract, whether formal or informal, to create any additional material benefit plan, program, policy or arrangement of the nature described above or to amend any existing ACI Benefit Plan. Each ACI Benefit Plan that is an “employee pension benefit plan” (as defined in Section 3(2) of ERISA) or a Canadian registered or unregistered pension plan is sometimes referred to herein as an “ ACI Pension Plan ” and each ACI Benefit Plan that is an “employee welfare benefit plan” (as defined in Section 3(1) of ERISA) or a Canadian group insurance, group benefit or employee benefit plan is sometimes referred to herein as an “ ACI Welfare Plan ”. Terms defined in this Section 5.13(a) by reference to the meaning given to such term in a provision of ERISA refer to all plans, programs, policies or Contracts that fall within such meaning, regardless of whether the plan, program, policy or Contract in question is itself subject to ERISA.

(b) ACI has provided to Bowater current, complete and accurate copies of (1) each ACI Benefit Plan (or, with respect to any unwritten ACI Benefit Plans, accurate descriptions thereof), (2) with respect to each ACI Benefit Plan, for the two most recent years (A) annual reports on Form 5500 or other annual information return required to be filed with the IRS or any other Governmental Authority (if any such report was required) and all schedules and attachments thereto, (B) all other material reports, returns and similar documents filed or required to be filed with any Governmental Authority and all schedules and attachments thereto, (C) audited financial statements (if any such statements exist or were required) and all schedules and attachments thereto, and (D) actuarial valuation reports (if any such reports exist or were required) and all schedules and attachments thereto; provided that if no actuarial valuation report was required to be performed during such period, ACI shall provide the most recently completed actuarial valuation report, (3) the most recent summary plan description or employee booklet for each ACI Benefit Plan for which such summary plan description or employee booklet is required or exists as of the date of this Agreement, (4) each trust Contract and insurance or group annuity Contract relating to any ACI Benefit Plan, and (5) with respect to each ACI Benefit Plan, the most recent favorable IRS determination letter or letter from a Canadian Governmental Authority confirming registration or continued registration, to the extent applicable.

(c) Except as has not had and would not reasonably be expected to have an ACI Material Adverse Effect, (1) each ACI Benefit Plan has been established, maintained and administered in accordance with its terms and all applicable Law and Orders, and (2) ACI, its Subsidiaries and all ACI Benefit Plans are in compliance with the applicable provisions of ERISA, the Code and all other Laws applicable to ACI Benefit Plans and the terms of all collective bargaining Contracts.

(d) Except as has not had and would not reasonably be expected to have an ACI Material Adverse Effect, each of the ACI Benefit Plans subject to Code Section 409A has been administered in good faith compliance with the applicable requirements of Code Section 409A, IRS Notice 2005-1, IRS Notice 2006-79 and the proposed regulations issued thereunder. Each ACI Stock Option was granted with an exercise price per share equal to or greater than the per share fair market value (as such term is used in Code Section 409A and the proposed regulations and other Department of Treasury interpretive guidance issued thereunder) of ACI Common Shares underlying such ACI Stock Option on the grant date thereof. Except as has not had and would not reasonably be expected to have an ACI Material Adverse Effect, there are no Taxes due or accrued because of Code Section 409A and the proposed regulations and other Department of Treasury interpretive guidance issued thereunder.

(e) All ACI Pension Plans intended to be qualified within the meaning of Section 401(a) of the Code have received favorable determination letters from the IRS, to the effect that such ACI Pension Plans are so qualified and exempt from federal income Taxes under Sections 401(a) and 501(a), respectively, of the Code, no such determination letter has been revoked (nor, to the Knowledge of ACI, has revocation been threatened) and no event has occurred since the date of the most recent determination letter relating to any such ACI Pension Plan that would reasonably be expected to adversely affect the qualification of such ACI Pension Plan or materially increase the costs relating thereto or require security under Section 307 of ERISA. ACI has provided to Bowater a complete and accurate list of all amendments to any ACI Pension Plan as to which a favorable determination letter has not yet been received or, in the

case of a Canadian ACI Pension Plan, for which registration has not been confirmed. All the ACI Pension Plans intended or required to be qualified under applicable non-U.S. Laws are so qualified and no such registration in Canada has been revoked or, to the Knowledge of ACI, has revocation been threatened.

(f) Neither ACI nor any Commonly Controlled ACI Entity has, during the six-year period ending on the date hereof, maintained, contributed to or been required to contribute to any ACI Pension Plan that is subject to Title IV of ERISA or Section 412 of the Code or any corresponding or similar provisions of any other non-U.S. Law relating to plan termination, or any “multiemployer plan” as defined in Section 3(37) or 4001(a)(3) of ERISA or any “multi-employer plan” within the meaning of applicable Canadian provincial pension and benefits Laws. Except as has not had and would not reasonably be expected to have an ACI Material Adverse Effect, neither ACI nor any Commonly Controlled ACI Entity has any unsatisfied liability under Title IV of ERISA or any corresponding or similar provisions of any other non-U.S. Law. To the Knowledge of ACI, no condition exists that presents a material risk to ACI or any Commonly Controlled ACI Entity of incurring a material liability under Title IV of ERISA or any corresponding or similar provisions of any other non-U.S. Law. The Pension Benefit Guaranty Corporation has not instituted proceedings under Section 4042 of ERISA to terminate any ACI Benefit Plan and, to the Knowledge of ACI, no condition exists that presents a material risk that such proceedings will be instituted. No event has occurred, and to the Knowledge of ACI no condition exists, that would be reasonably expected to subject ACI, any Subsidiary or Commonly Controlled ACI Entity or any ACI Benefit Plan, to any Tax, fine, Lien, penalty or other liability imposed by ERISA, the Code or other applicable Law with respect to any ACI Benefit Plan subject to Title IV of ERISA. All contributions under the ACI Pension Plans that are required to have been made as of the date hereof in accordance with the terms of the ACI Pension Plans and applicable Law and Orders have been timely made or, if not yet due, have been reflected in the ACI consolidated financial statements as at December 31, 2005 in accordance with Canadian GAAP.

(g) Except as has not had and would not reasonably be expected to have an ACI Material Adverse Effect, (1) all reports, returns and similar documents with respect to all ACI Benefit Plans required to be filed with any Governmental Authority or distributed to any ACI Benefit Plan participant have been duly and timely filed or distributed, (2) none of ACI or any of its Subsidiaries has received notice of and, to the Knowledge of ACI, there are no Actions by any Governmental Authority with respect to, termination, wind-up, partial termination or partial wind-up proceedings or other claims (except claims for benefits payable in the normal operation of the ACI Benefit Plans), suits or proceedings against or involving any ACI Benefit Plan or asserting any rights or claims to benefits under any ACI Benefit Plan that are pending or threatened that could reasonably be expected to give rise to any material liability, (3) to the Knowledge of ACI, there are not any facts that could give rise to any liability in the event of any such Action and (4) no written or oral communication has been received from the Pension Benefit Guaranty Corporation in respect of any ACI Benefit Plan subject to Title IV of ERISA, or from any other Governmental Authority in respect of any ACI Benefit Plan, in connection with the transactions contemplated herein.

(h) Except as has not had and would not reasonably be expected to have an ACI Material Adverse Effect, (1) all contributions, premiums and benefit payments under or in

connection with the ACI Benefit Plans that are required to have been made as of the date hereof in accordance with the terms of the ACI Benefit Plans and applicable Law and Orders have been timely made or, if not yet due, have been reflected in the ACI consolidated financial statements as at December 31, 2005 in accordance with Canadian GAAP, (2) no ACI Pension Plan subject to ERISA has an “accumulated funding deficiency” (as such term is defined in Section 302 of ERISA or Section 412 of the Code), whether or not waived, (3) all ACI Benefit Plans that are required to be funded are fully funded on both a going-concern and a solvency or termination basis in accordance with applicable Law, Orders, past practice and generally accepted accounting principles in the applicable jurisdiction and, with respect to all other ACI Benefit Plans, adequate reserves therefor have been established on the accounting statements of ACI or the applicable Subsidiary to the extent so required; and (4) no liability or obligation of ACI or its Subsidiaries exists with respect to any ACI Benefit Plans that has not been disclosed in the consolidated financial statements of ACI included in the ACI Public Documents in accordance with Canadian GAAP.

(i) With respect to each ACI Benefit Plan, except as has not had and would not reasonably be expected to have an ACI Material Adverse Effect, (1) there has not occurred any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) in which ACI or any of its Subsidiaries or any of their respective employees, or, to the Knowledge of ACI, any trustee, administrator or other fiduciary of such ACI Benefit Plan, or any agent of the foregoing, has engaged that could reasonably be expected to subject ACI or any of its Subsidiaries or any of their respective employees, or any such trustee, administrator or other fiduciary, to the Tax or penalty on prohibited transactions imposed by Section 4975 of the Code or the sanctions imposed under Title I of ERISA and (2) neither ACI, any of its Subsidiaries or any of their respective employees nor, to the Knowledge of ACI, any trustee, administrator or other fiduciary of any ACI Benefit Plan nor any agent of any of the foregoing, has engaged in any transaction or acted in a manner, or failed to act in a manner, that could reasonably be expected to subject ACI or any of its Subsidiaries or any of their respective employees or, to the Knowledge of ACI, any such trustee, administrator or other fiduciary, to any liability for breach of fiduciary duty under ERISA or any other applicable Law with respect to ACI Benefit Plans. There have been no withdrawals or improper use or transfer of funds or assets of any ACI Benefit Plan.

(j) Subject to any restrictions in applicable collective bargaining agreements, each ACI Welfare Plan may be amended or terminated (including with respect to benefits provided to retirees and other former employees) without liability to ACI or any of its Subsidiaries at any time after the Effective Time, which liability would reasonably be expected to have an ACI Material Adverse Effect. Each of ACI and its Subsidiaries complies with the applicable requirements of Section 4980B(f) of the Code, Sections 601-609 of ERISA or any corresponding or similar provisions of any state, local or non-U.S. Law with respect to each ACI Benefit Plan that is a group health plan, as such term is defined in Section 5000(b)(1) of the Code or such state or non-U.S. Law, except for such non-compliance as has not had and would not reasonably be expected to have an ACI Material Adverse Effect. Neither ACI nor any of its Subsidiaries has any material obligations for health or life insurance benefits to retired or former employees or their respective beneficiaries or dependents under any ACI Benefit Plan (other than for continuation coverage required under Section 4980B(f) of the Code).

(k) None of the execution and delivery of this Agreement or the consummation of the Arrangement or any other transaction contemplated by this Agreement (alone or in conjunction with any other event, including as a result of any termination of employment prior to, on or following the Effective Time) will (1) entitle any ACI Personnel to notice, indemnity in lieu of notice, severance or termination pay, (2) accelerate the time of payment or vesting, or trigger any payment or funding (through a grantor trust or otherwise) of, compensation or benefits under, increase the amount payable or trigger any other material obligation pursuant to, any ACI Benefit Plan, (3) result in any breach or violation of, or a default under, any ACI Benefit Plan or (4) result in payments under any ACI Benefit Plan that would not be deductible under Section 280G of the Code or under any equivalent provisions of the Canadian Tax Act or (5) create or increase any liability under any ACI Benefit Plan that is a multiemployer plan within the meaning of Section 3(37) of ERISA or a multi-employer plan within the meaning of applicable Canadian provincial pension and benefits Laws.

(l) Neither ACI nor any of its Subsidiaries has any liability or obligations, including under or on account of an ACI Benefit Plan, arising out of the hiring of persons to provide services to ACI or any of its Subsidiaries and treating such persons as consultants or independent contractors and not as employees of ACI or any of its Subsidiaries, except for such liabilities or obligations that individually or in the aggregate would not reasonably be expected to have an ACI Material Adverse Effect.

(m) There is no Contract, plan or arrangement covering any person in the U.S. that, individually or in the aggregate, could give rise to the payment of any amount that would not be deductible by ACI or any of its Subsidiaries by reason of Section 162(m) of the Code. No material deduction by ACI or any of its Subsidiaries in respect of any “applicable employee remuneration” (within the meaning of Section 162(m) of the Code) has been disallowed or is subject to disallowance by reason of Section 162(m) of the Code or is subject to disallowance under any equivalent provisions of the Canadian Tax Act.

(n) None of the ACI Personnel is entitled to receive any additional payment from ACI or any of its Subsidiaries or Bowater by reason of the excise Tax required by Section 4999(a) of the Code being imposed on such person.

(o) None of the Canadian ACI Pension Plans is the result of a merger or consolidation of two or more predecessor pension plans, and no application to approve any such merger or consolidation of a Canadian ACI Pension Plan has been made to any Canadian Governmental Authority and is presently outstanding.

SECTION 5.14 Taxes .

(a) All material Tax Returns required to be filed by or with respect to ACI or any of its Subsidiaries have been properly prepared and timely filed, and all such Tax Returns (including information provided therewith or with respect thereto) are correct and complete in all material respects.

(b) ACI and its Subsidiaries have fully and timely paid all material Taxes owed by them (whether or not shown on any Tax Return) and have made adequate provision for

any Taxes that are not yet due and payable for all taxable periods, or portions thereof, ending on or before the date of this Agreement.

(c) ACI and its Subsidiaries have made available to Bowater correct and complete copies of all material Tax Returns, examination reports and statements of deficiencies for taxable periods, or transactions consummated, for the 2004 and 2005 taxation years.

(d) There are no outstanding agreements extending or waiving the statutory period of limitations applicable to any claim for, or the period for the collection, assessment or reassessment of, Taxes due from ACI or any of its Subsidiaries for any taxable period and no request for any such waiver or extension is currently pending.

(e) No audit or other proceeding by any Governmental Authority is pending or, to the Knowledge of ACI, threatened with respect to any Taxes due from or with respect to ACI or any of its Subsidiaries. No Governmental Authority has given written notice of its intention to assert any deficiency or claim for additional Taxes against ACI or any of its Subsidiaries. No claim in writing has been made against ACI or any of its Subsidiaries by any Governmental Authority in a jurisdiction where ACI and its Subsidiaries do not file Tax Returns that ACI or such Subsidiary is or may be subject to taxation by that jurisdiction. All deficiencies for Taxes asserted or assessed in writing against ACI or any of its Subsidiaries have been fully and timely paid, settled or properly reflected in the most recent financial statements contained in ACI’s periodic reports to the SEC and applicable Canadian Securities Regulatory Authorities.

(f) There are no Liens for Taxes upon any of the assets of ACI or any of its Subsidiaries, except for statutory Liens for current Taxes not yet due.

(g) Neither ACI nor any of its Subsidiaries is a party to any Tax Sharing Agreement or has any liability for Taxes of any person (other than members of the affiliated group, within the meaning of Section 1504(a) of the Code, filing consolidated federal income tax returns of which ACI is the common parent) under Treasury Regulation § 1.1502-6, Treasury Regulation § 1.1502-78 or any similar state, local or foreign Laws, as a transferee or successor, or otherwise.

(h) ACI and its Subsidiaries have each withheld (or will withhold) from their respective employees, independent contractors, creditors, stockholders and third parties, and timely paid to the appropriate Governmental Authority, proper and accurate amounts in all material respects for all periods ending on or before the Closing Date in compliance with all Tax withholding and remitting provisions of applicable Law. ACI and its Subsidiaries have each complied in all material respects with all Tax information reporting provisions under applicable Law.

(i) Neither ACI nor any of its Subsidiaries has constituted a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of shares qualifying for tax-free treatment under Section 355 of the Code (i) in the two years prior to the date of this Agreement or (ii) in a distribution that could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of

Section 355(e) of the Code) in conjunction with the transactions contemplated by this Agreement.

(j) Any adjustment of Taxes of ACI or any of its Subsidiaries made by any Governmental Authority, which adjustment is required to be reported to the appropriate state, local, or foreign taxing authorities, has been so reported.

(k) Neither ACI nor any of its Subsidiaries has executed or entered into a closing agreement under Section 7121 of the Code or any similar provision of state, local or foreign Laws, and neither ACI nor any of its Subsidiaries is subject to any private letter ruling of the IRS or comparable ruling of any other Governmental Authority.

(l) Neither ACI nor any of its Subsidiaries has entered into any transaction that constitutes (i) a “reportable transaction” within the meaning of Treasury Regulation § 1.6011-4(b), (ii) a “confidential tax shelter” within the meaning of Treasury Regulation § 301.6111-2(a)(2) or (iii) a “potentially abusive tax shelter” within the meaning of Treasury Regulation § 301.6112-1(b).

(m) The NOLs of ACI and its Subsidiaries as set forth in Section 5.14(m) of the ACI Disclosure Schedule are not subject to any limitation under Section 111 of the Canadian Tax Act or under Section 382 or 384 of the Code or otherwise. There are no Actions pending or, to the Knowledge of ACI, threatened against, with respect to or in limitation of the NOLs, including any limitations under Section 111 of the Canadian Tax Act or under Sections 382 or 384 of the Code (other than limitations incurred in connection with transactions contemplated by this Agreement).

(n) ACI and each of its Subsidiaries have disclosed on their Tax Returns each position taken on such a Tax Return that could give rise to a substantial understatement of Tax within the meaning of Section 6662 of the Code or any similar provision of applicable Law, and is in possession of supporting documentation as may be required under any such provision.

SECTION 5.15 Title to Properties .

(a) ACI and each of its Subsidiaries has good, valid and marketable fee simple title to, or valid leasehold or sublease interests or other comparable contract rights, as applicable, in or relating to all real property owned, leased or subleased by ACI or any of its Subsidiaries (the “ ACI Real Property ”) and all other tangible assets necessary for the conduct of its business as currently conducted, except as have been disposed of in the ordinary course of business, free and clear of all Liens, except for defects in title, recorded easements, restrictive covenants and other encumbrances of record that individually or in the aggregate have not had and would not reasonably be expected to have an ACI Material Adverse Effect. ACI and each of its Subsidiaries has complied with the terms of all leases and subleases with respect to ACI Real Property leased or subleased by ACI or any of its Subsidiaries (the “ ACI Leases ”), and all ACI Leases are in full force and effect, enforceable in accordance with their terms against ACI or a Subsidiary of ACI that is a party thereto and, to the Knowledge of ACI, the counterparties thereto, except for such failure to comply or be in full force and effect that individually or in the aggregate has not had and would not reasonably be expected to have an ACI Material Adverse

Effect. Neither ACI nor any of its Subsidiaries has received or provided any written notice of any event or occurrence that has resulted or could result (with or without the giving of notice, the lapse of time or both) in a default with respect to any Lease, which defaults individually or in the aggregate have had or would reasonably be expected to have an ACI Material Adverse Effect.

(b) All buildings, structures, fixtures, building systems and equipment included in the ACI Real Property (the “ ACI Structures ”) are in reasonably good condition and repair in all material respects and sufficient for the operation of the business of ACI, subject to reasonable wear and tear and subject to replacements and upgrades of fixed assets, except for such failures that individually or in the aggregate has not had and would not reasonably be expected to have an ACI Material Adverse Effect.

(c) Neither ACI nor any of its Subsidiaries is a party to or obligated under any option, right of first refusal or other contractual right to sell, dispose of or lease any of the ACI Real Property or any portion thereof or interest therein, in each case that is material to ACI and its Subsidiaries, taken as a whole, to any person (other than pursuant to this Agreement).

(d) The present use of the land and ACI Structures on the ACI Real Property are in conformity with all applicable Law, including all applicable zoning Laws, and with all registered deeds, restrictions of record or other agreements affecting such ACI Real Property, except for such failures to be in conformity that individually or in the aggregate have not had and would not reasonably be expected to have an ACI Material Adverse Effect.

SECTION 5.16 Intellectual Property . Except as has not had and would not reasonably be expected to have, individually or in the aggregate, an ACI Material Adverse Effect: (1) ACI and its Subsidiaries own, license or have the right to use all Intellectual Property used in the operation of their businesses as currently conducted (the “ ACI Intellectual Property ”), free and clear of all Liens; (2) no Actions or Orders are pending or, to the Knowledge of ACI, threatened (including cease and desist letters or requests for a license) against ACI or its Subsidiaries with regard to the ownership, use, validity or enforceability of any Intellectual Property; (3) the operation of ACI and its Subsidiaries’ businesses as currently conducted does not Infringe the Intellectual Property of any other person and no other person is infringing ACI’s or any of its Subsidiaries’ Intellectual Property; (4) all registrations and applications for patents, trademarks, copyrights and domain names owned or controlled by ACI or any of its Subsidiaries are subsisting and unexpired, have not been abandoned or cancelled and, to the Knowledge of ACI, are valid and enforceable; and (5) ACI and its Subsidiaries take all reasonable actions to protect their Intellectual Property (including trade secrets and confidential information), and require all persons who create or contribute to material proprietary Intellectual Property to assign all of their rights therein to ACI. Upon the consummation of the transactions contemplated herein, the ACI shall own or have the right to use all ACI Intellectual Property one the same terms and conditions as the ACI and its Subsidiaries enjoyed prior to such transactions.

SECTION 5.17 Brokers and Other Advisors . No broker, investment banker, financial advisor or other person (other than Credit Suisse Securities (USA) LLC and CIBC World Markets Inc.) is entitled to any broker’s, finder’s, financial advisor’s or other similar fee

or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of ACI.

SECTION 5.18 Opinion of Financial Advisors . The Board of Directors of ACI has received the opinions of each of Credit Suisse Securities (USA) LLC and CIBC World Markets Inc., dated as of the date of this Agreement, to the effect that, as of such date, the ACI Exchange Ratio is fair, from a financial point of view, to the holders of ACI Common Shares.

SECTION 5.19 Insurance . All insurance policies maintained by ACI or any of its Subsidiaries are in full force and effect, except as individually or in the aggregate has not had and would not reasonably be expected to have an ACI Material Adverse Effect, and provide insurance in such amounts and against such risks as the management of ACI reasonably has determined to be prudent in accordance with industry practices or as is required by Law. Neither ACI nor any of its Subsidiaries is in breach or default, and neither ACI nor any of its Subsidiaries has taken any action or failed to take any action which, with notice or lapse of time or both, would constitute such a breach or default, or permit a termination or modification of any of the insurance policies of ACI or its Subsidiaries, except in each case for such breaches, defaults, terminations or modifications that individually or in the aggregate have not had and would not reasonably be expected to have an ACI Material Adverse Effect.

SECTION 5.20 Vote Required . The only votes of the holders of any class or series of the ACI Common Shares or other securities of ACI necessary to approve this Agreement and the Arrangement and the transactions contemplated hereby and thereby are, subject to any requirement of the Interim Order, the ACI Shareholder Approval.

SECTION 5.21 No Other Representations or Warranties . Except for the representations and warranties contained in this Agreement, neither ACI nor any other person (i) makes any representation or warranty express or implied, including any implied representation or warranty, as to condition, merchantability, suitability or fitness for a particular purpose of any of the assets used in the business of or held by ACI or any of its Subsidiaries or (ii) makes any representation or warranty, express or implied, as to the accuracy or completeness of any information regarding ACI or any of its Subsidiaries or the business conducted by ACI or any of its Subsidiaries, in each case except as expressly set forth in this Agreement or as and to the extent required by this Agreement to be set forth in the ACI Disclosure Schedule.

ARTICLE VI

COVENANTS RELATING TO THE BUSINESS

SECTION 6.01 Conduct of Business by Bowater . During the period from the date of this Agreement to the Effective Time, except as set forth in Section 6.01 of the Bowater Disclosure Schedule or as consented to in writing in advance by ACI or as otherwise expressly permitted or required by this Agreement, Bowater shall, and shall cause each of its Subsidiaries to, carry on its business in the ordinary course consistent with past practice and, to the extent consistent therewith, use commercially reasonable efforts to preserve intact its current business organizations, keep available the services of its current officers, employees and consultants and preserve its relationships with customers, suppliers, licensors, licensees, distributors and others

having business dealings with it. In addition to and without limiting the generality of the foregoing, during the period from the date of this Agreement to the Effective Time, except as otherwise set forth in Section 6.01 of the Bowater Disclosure Schedule or as otherwise expressly permitted or required pursuant to this Agreement, Bowater shall not, and shall not permit any of its Subsidiaries to, without ACI’s prior written consent (which consent may not be unreasonably withheld or delayed):

(a) (x) declare, set aside or pay any dividends on, or make any other distributions (whether in cash, stock or property) in respect of, any of its capital stock, other than dividends or distributions by a direct or indirect wholly owned Subsidiary of Bowater to its stockholders or regular, quarterly dividends on Bowater Common Stock of $0.20 per share, which regularly quarterly dividend shall be paid consistent with past practices, unless otherwise required by the fiduciary duties of the Board of Directors of Bowater or by applicable Law, (y) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or (z) purchase, redeem or otherwise acquire any shares of its capital stock or any other equity securities or convertible debt securities thereof or any rights, warrants or options to acquire any such shares or other securities, except for purchases, redemptions or other acquisitions of capital stock or other equity or convertible debt securities (1) required by the terms of the Bowater Stock Plans, the Bowater Stock Options, the Bowater SARs or the Bowater Stock-Based Awards, in each case as in effect on the date hereof or (2) required by the terms of any plans, arrangements or Contracts existing on the date hereof between Bowater or any of its Subsidiaries and any director or employee of Bowater or any of its Subsidiaries listed on Section 6.01(a) of the Bowater Disclosure Schedule or (3) required by the rights, privileges, restrictions and conditions attaching to the Exchangeable Shares;

(b) issue, deliver, sell, grant, pledge or otherwise encumber or subject to any Lien any shares of its capital stock, any other voting securities or any securities convertible into or exercisable for, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities, or any “phantom” stock, “phantom” stock rights, stock appreciation rights or stock based performance units (other than (x) the granting of Bowater Stock Options, Bowater SARs or Bowater Stock-Based Awards, each in the ordinary course of business consistent with past practices or (y) the issuance of shares of the Bowater Common Stock upon the (1) exercise of the Bowater Stock Options, the Bowater SARs or settlement of the Bowater Stock-Based Awards, in each case outstanding on the date hereof and in accordance with their terms on the date hereof and other than permitted by clause (j) below or (2) exchange of any exchangeable shares previously issued by any of its Subsidiaries listed on Section 6.01(a) of the Bowater Disclosure Schedule);

(c) amend the Bowater Certificate or the Bowater Bylaws or other charter or organizational documents of any of Bowater’s material Subsidiaries, except for such amendments to the charter or organizational documents of a Bowater material Subsidiary necessary or advisable to effect transactions or events otherwise permitted by the terms of this Section 6.01;

person or (y) any assets, rights or properties except for (1) capital expenditures, which shall be subject to the limitations of clause (g) below, (2) assets in the ordinary course of business consistent with past practice and (3) other acquisitions, investments or capital contributions not exceeding $25,000,000 in the aggregate;

(e) sell, pledge, dispose of, transfer, abandon, lease (as lessor), sublease (as sublessor), license, or otherwise encumber or subject to any Lien any material properties, rights or assets, of Bowater or any of its Subsidiaries, except (1) sales, pledges, dispositions, transfers, leases, licenses or encumbrances required to be effected prior to the Effective Time pursuant to existing Contracts, or non-material leases or licenses in the ordinary course of business consistent with past practice, and (2) sales, pledges, dispositions, transfers, leases, licenses or encumbrances of (A) assets or properties of Bowater or any of its Subsidiaries having a value not to exceed in the aggregate $50,000,000 in any six-month period, or (B) assets or properties, including inventory or finished goods, in the ordinary course of business consistent with past practice;

(f) (x) incur, assume, guarantee or endorse, or otherwise become responsible for, indebtedness for borrowed money, issue or sell any debt securities or calls, options, warrants or other rights to acquire any debt securities of Bowater or any of its Subsidiaries, enter into any “keep well” or other Contract to maintain any financial condition of another person or enter into any arrangement having the economic effect of any of the foregoing (other than borrowings under existing credit facilities of Bowater or its Subsidiaries, or renewals thereof, or refinancing of existing indebtedness for borrowed money) or (y) make any loans or advances to any person, other than to Bowater or any direct or indirect wholly owned Subsidiary of Bowater, which would result in the aggregate principal amount of all loans and advances of Bowater and its Subsidiaries, other than to Bowater or any direct or indirect wholly owned Subsidiary of Bowater, exceeding $25,000,000 in any six-month period;

(g) make any new capital expenditure or expenditures exceeding the amounts set forth in Section 6.01(g) of the Bowater Disclosure Schedule;

(h) except as required by Law or any judgment by a court of competent jurisdiction, (x) pay, discharge, settle or satisfy any claims, liabilities, obligations or litigation (whether absolute, accrued, asserted or unasserted, contingent or otherwise) material to Bowater and its Subsidiaries, taken as a whole, other than the payment, discharge, settlement or satisfaction in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities disclosed, reflected or reserved against in the Bowater Balance Sheet (or the notes thereto) or incurred since the Bowater Balance Sheet Date in the ordinary course of business consistent with past practice, or (y) waive or assign any claims or rights material to Bowater and its Subsidiaries, taken as a whole;

(i) (x) enter into, materially modify, terminate, cancel or fail to renew any Contract that is or would be a Bowater Material Contract, or waive, release or assign any material rights or claims thereunder or (y) enter into, modify, amend or terminate any Contract or waive, release or assign any material rights or claims thereunder, which, in the case of each of clauses (x) and (y), if so entered into, modified, amended, terminated, waived, released or assigned would reasonably be expected to (1) have a Bowater Material Adverse Effect, or (2)

impair in any material respect the ability of Bowater and its Subsidiaries to conduct their business as currently conducted;

(j) except (u) as provided in clause (b) above, (v) as required by applicable Law, (w) as required by to comply with any Bowater Benefit Plan or other Contract entered into prior to the date hereof (to the extent complete and accurate copies of which have been heretofore delivered to ACI), (x) as may be required to avoid adverse treatment under Section 409A of the Code, (y) with respect to the Bowater Personnel other than the Bowater Key Personnel, in the ordinary course of business consistent with past practice or (z) in conjunction with new hires, promotions or other changes in job status consistent with past practices, (1) adopt, enter into, terminate or amend (other than in connection with negotiations of collective bargaining agreements with labor unions in the ordinary course of business consistent with past practice) (A) any Bowater Benefit Plan or (B) any Contract, plan or policy (other than a Bowater Benefit Plan) involving Bowater or any of its Subsidiaries and the Bowater Personnel, except in the ordinary course of business with respect to employees of Bowater or its Subsidiaries who are not the Bowater Key Personnel, (2) grant any severance or termination pay or increase the compensation of any Bowater Personnel, (3) remove any existing restrictions in any Bowater Benefit Plans or awards made thereunder, (4) take any action to fund or in any other way secure the payment of compensation or benefits under any Bowater Benefit Plan, (5) take any action to accelerate the vesting or payment of any compensation or benefit under any Bowater Benefit Plan or awards made thereunder or (6) materially change any actuarial or other assumption used to calculate funding obligations with respect to any Bowater Pension Plan or change the manner in which contributions to any Bowater Pension Plan are made or the basis on which such contributions are determined;

(k) except as required by GAAP and as advised by Bowater’s regular independent public accountant, revalue any material assets or liabilities of Bowater or any of its Subsidiaries or make any change in accounting methods, principles or practices; or

(l) authorize any of, or commit, resolve, propose or agree to take any of, the actions specified in clauses (a) through (k) inclusive of this Section 6.01.

SECTION 6.02 Conduct of Business by ACI . During the period from the date of this Agreement to the Effective Time, except as set forth in Section 6.02 of the ACI Disclosure Schedule or as consented to in writing in advance by Bowater or as otherwise expressly permitted or required by this Agreement, ACI shall, and shall cause each of its Subsidiaries to, carry on its business in the ordinary course consistent with past practice and, to the extent consistent therewith, use commercially reasonable efforts to preserve intact its current business organizations, keep available the services of its current officers, employees and consultants and preserve its relationships with customers, suppliers, licensors, licensees, distributors and others having business dealings with it. In addition to and without limiting the generality of the foregoing, during the period from the date of this Agreement to the Effective Time, except as otherwise set forth in Section 6.02 of the ACI Disclosure Schedule or as otherwise expressly permitted or required pursuant to this Agreement, ACI shall not, and shall not permit any of its Subsidiaries to, without Bowater’s prior written consent (which consent may not be unreasonably withheld or delayed):

(a) (x) declare, set aside or pay any dividends on, or make any other distributions (whether in cash, stock or property) in respect of, any of its capital shares, other than dividends or distributions by a direct or indirect wholly owned Subsidiary of ACI to its shareholders, (y) split, combine or reclassify any of its capital shares or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for its capital shares or (z) purchase, redeem or otherwise acquire any of its capital shares or any other equity securities or convertible debt securities thereof or any rights, warrants or options to acquire any such capital shares or other equity or convertible debt securities, except for purchases, redemptions or other acquisitions of or other securities (1) required by the terms of the ACI Stock Plans, the ACI Stock Options, the ACI SARs or the ACI Share-Based Awards, in each case as in effect on the date hereof or (2) required by the terms of any plans, arrangements or Contracts existing on the date hereof between ACI or any of its Subsidiaries and any director or employee of ACI or any of its Subsidiaries listed on Section 6.02(a) of the ACI Disclosure Schedule;

(b) issue, deliver, sell, grant, pledge or otherwise encumber or subject to any Lien any of its capital shares, any other voting securities or any securities convertible into or exercisable for, or any rights, warrants or options to acquire, any such limited shares, voting securities or convertible securities, or any “phantom” stock, “phantom” stock rights, stock appreciation rights or stock based performance units (other than (x) the granting of ACI Stock Options, ACI SARs or ACI Share-Based Awards, each in the ordinary course of business consistent with past practices or (y) the issuance of ACI Common Shares upon the exercise of ACI Stock Options, ACI SARs or settlement of the ACI Share-Based Awards, in each case outstanding on the date hereof and in accordance with their terms on the date hereof and other than permitted by clause (j) below);

(c) amend the ACI Articles or the ACI Bylaws or other charter or organizational documents of any of ACI’s material Subsidiaries, except for such amendments to the charter or organizational documents of an ACI material Subsidiary necessary or advisable to effect transactions or events otherwise permitted by the terms of this Section 6.02;

(d) directly or indirectly acquire (x) by merging or consolidating with, by purchasing a substantial portion of the assets of, by making an investment in or capital contribution to, or by any other manner, any person or division, business or equity interest of any person or (y) any assets, rights or properties except for (1) capital expenditures, which shall be subject to the limitations of clause (g) below, (2) assets in the ordinary course of business consistent with past practice and (3) other acquisitions, investments or capital contributions not exceeding $25,000,000 in the aggregate;

(e) sell, pledge, dispose of, transfer, abandon, lease (as lessor), sublease (as sublessor), license, or otherwise encumber or subject to any Lien any material properties, rights or assets, of ACI or any of its Subsidiaries, except (1) sales, pledges, dispositions, transfers, leases, licenses or encumbrances required to be effected prior to the Effective Time pursuant to existing Contracts, or non-material leases or licenses in the ordinary course of business consistent with past practice, and (2) sales, pledges, dispositions, transfers, leases, licenses or encumbrances of (A) assets or properties of ACI or any of its Subsidiaries having a value not to exceed in the aggregate $50,000,000 in any six-month period, or (B) assets or properties,

including inventory or finished goods, in the ordinary course of business consistent with past practice;

(f) (x) incur, assume, guarantee or endorse, or otherwise become responsible for, indebtedness for borrowed money, issue or sell any debt securities or calls, options, warrants or other rights to acquire any debt securities of ACI or any of its Subsidiaries, enter into any “keep well” or other Contract to maintain any financial condition of another person or enter into any arrangement having the economic effect of any of the foregoing (other than borrowings under existing credit facilities of ACI or its Subsidiaries, or renewals thereof, or refinancing of existing indebtedness for borrowed money) or (y) make any loans or advances to any person, other than to ACI or any direct or indirect wholly owned Subsidiary of ACI, which would result in the aggregate principal amount of all loans and advances of ACI and its Subsidiaries, other than to ACI or any direct or indirect wholly owned Subsidiary of ACI, exceeding $25,000,000 in any six-month period;

(g) make any new capital expenditure or expenditures exceeding the amounts set forth in Section 6.02(g) of the ACI Disclosure Schedule;

(h) except as required by Law or any judgment by a court of competent jurisdiction, (x) pay, discharge, settle or satisfy any claims, liabilities, obligations or litigation (whether absolute, accrued, asserted or unasserted, contingent or otherwise) material to ACI and its Subsidiaries, taken as a whole, other than the payment, discharge, settlement or satisfaction in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities disclosed, reflected or reserved against in the ACI Balance Sheet (or the notes thereto) or incurred since the ACI Balance Sheet Date in the ordinary course of business consistent with past practice, or (y) waive or assign any claims or rights material to ACI and its Subsidiaries, taken as a whole;

(i) (x) enter into, materially modify, terminate, cancel or fail to renew any Contract that is or would be an ACI Material Contract, or waive, release or assign any material rights or claims thereunder or (y) enter into, modify, amend or terminate any Contract or waive, release or assign any material rights or claims thereunder, which, in the case of each of clauses (x) and (y), if so entered into, modified, amended, terminated, waived, released or assigned would reasonably be expected to (1) have an ACI Material Adverse Effect, or (2) impair in any material respect the ability of ACI and its Subsidiaries to conduct their business as currently conducted;

(j) except (u) as provided in clause (b) above, (v) as required by applicable Law, (w) as required to comply with any ACI Benefit Plan or other Contract entered into prior to the date hereof (to the extent complete and accurate copies of which have been heretofore delivered to Bowater), (x) as may be required to avoid adverse treatment under Section 409A of the Code, (y) with respect to ACI Personnel other than ACI Key Personnel, in the ordinary course of business consistent with past practice or (z) in conjunction with new hires, promotions or other changes in job status consistent with past practices, (1) adopt, enter into, terminate or amend (other than in connection with negotiations of collective bargaining agreements with labor unions in the ordinary course of business consistent with past practice) (A) any ACI Benefit Plan or (B) any Contract, plan or policy (other than an ACI Benefit Plan) involving ACI or any of its

Subsidiaries and ACI Personnel, except in the ordinary course of business with respect to employees of ACI or its Subsidiaries who are not ACI Key Personnel, (2) grant any severance or termination pay or increase the compensation of any ACI Personnel, (3) remove any existing restrictions in any ACI Benefit Plans or awards made thereunder, (4) take any action to fund or in any other way secure the payment of compensation or benefits under any ACI Benefit Plan, (5) take any action to accelerate the vesting or payment of any compensation or benefit under any ACI Benefit Plan or awards made thereunder or (6) materially change any actuarial or other assumption used to calculate funding obligations with respect to any ACI Pension Plan or change the manner in which contributions to any ACI Pension Plan are made or the basis on which such contributions are determined;

(k) except as required by Canadian GAAP and as advised by ACI’s auditors, revalue any material assets or liabilities of ACI or any of its Subsidiaries or make any change in accounting methods, principles or practices; or

(l) authorize any of, or commit, resolve, propose or agree to take any of, the actions specified in clauses (a) through (k) inclusive of this Section 6.02.

SECTION 6.03 Other Actions . Except as permitted by Section 6.02, ACI and Bowater shall not, and shall not permit any of their respective Subsidiaries or Parent or its Subsidiaries to, take any action that could reasonably be expected to result in any of the conditions to the Arrangement set forth in ARTICLE VIII not being satisfied.

SECTION 6.04 Notice of Changes . Bowater and ACI shall promptly advise the other party orally and in writing if (i) any representation or warranty made by it contained in this Agreement becomes untrue or inaccurate in a manner that would or would be reasonably likely to result in the failure of the condition set forth in Section 8.02(a) or Section 8.03(a) or (ii) it fails to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement; provided , however , that no such notification shall affect the representations, warranties, covenants or agreements of the parties (or remedies with respect thereto) or the conditions to the obligations of the parties under this Agreement.

SECTION 6.05 No Solicitation .

(a) Each of ACI and Bowater agrees that it shall not, and it shall not permit any of its Subsidiaries or any of the officers or directors of it or its Subsidiaries to, and that it shall direct and cause its and its Subsidiaries’ employees, agents and representatives (including any investment banker, attorney or accountant retained by it or any of its Subsidiaries) not to, directly or indirectly, initiate, solicit or otherwise knowingly encourage or facilitate any inquiries or the making by any third party (other than the other party hereto and/or its Subsidiaries and their respective representatives) (a “ Third Party ”) of any proposal or offer with respect to a purchase, merger, reorganization, share exchange, consolidation, amalgamation, arrangement, business combination, liquidation, dissolution, recapitalization or similar transaction involving 20% or more of the consolidated assets of ACI or Bowater (including by means of a transaction with respect to securities of such party or its Subsidiaries) or 20% or more of the outstanding shares of any class of equity securities of ACI or Bowater (any such proposal or offer being

hereinafter referred to as an “ Acquisition Proposal ”, it being understood that none of the transactions contemplated by this Agreement or set forth in Section 6.01 of the Bowater Disclosure Schedule or Section 6.02 of the ACI Disclosure Schedule, as applicable, shall be deemed to constitute an Acquisition Proposal). Each of ACI and Bowater further agrees that neither it nor any of its Subsidiaries nor any of the officers and directors of it or its Subsidiaries shall, and that it shall direct and cause its and its Subsidiaries’ employees, agents and representatives (including any investment banker, attorney or accountant retained by it or any of its Subsidiaries) not to, directly or indirectly, except as permitted by Section 6.05(b) (i) engage in any negotiations or discussions with, or provide any confidential information or data to, any Third Party relating to an Acquisition Proposal, or otherwise knowingly encourage or facilitate any effort or attempt to make or implement an Acquisition Proposal, (ii) approve or recommend, or propose publicly to approve or recommend, any Acquisition Proposal, (iii) waive, amend or otherwise modify any confidentiality, standstill or similar obligation of any Third Party or (iv) execute or enter into, or publicly propose to accept or enter into an agreement with respect to an Acquisition Proposal, including a letter of intent, agreement in principle, option agreement, merger agreement, acquisition agreement or other agreement (whether binding or not) in furtherance of an Acquisition Proposal (other than a confidentiality agreement to the extent permitted by Section 6.05(b)).

(b) Notwithstanding the provisions of Section 6.05(a), nothing contained in this Agreement shall prevent ACI or Bowater, or their respective Boards of Directors, from (A) complying with Rule 14d-9 or Rule 14e-2 promulgated under the 1934 Act with regard to an Acquisition Proposal and, in the case of ACI and its Board of Directors, from complying with Section 99 of the Securities Act (Ontario) and similar provisions of the Securities Laws of each of the other provinces and territories of Canada (it being understood that any such communication constituting a Change in Recommendation shall be made in compliance with Section 2.08 and this Section 6.05) or from calling and holding a meeting of the holders of ACI Common Shares requisitioned by such shareholders pursuant to Section 143 of the CBCA; (B) providing information in response to a request therefor by a Third Party who has made an unsolicited bona fide written Acquisition Proposal if the Board of Directors of ACI or Bowater, as the case may be, receives from the Third Party so requesting such information an executed confidentiality agreement on terms no less favorable in the aggregate to the disclosing party than those contained in the Confidentiality Agreements (but which need not have a standstill agreement) and so long as any information provided to such Third Party that has not previously been provided to ACI or Bowater is concurrently provided to ACI and/or Bowater; (C) effecting a Change in Recommendation in respect of an Acquisition Proposal; (D) engaging in any negotiations or discussions (including solicitation of a revised Acquisition Proposal) with any Third Party who has made an unsolicited bona fide written Acquisition Proposal or (E) (i) in the case of ACI, concurrently with the termination of this Agreement by ACI in accordance and compliance with Section 9.01(j) and following payment by ACI of the Termination Fee and the Expenses of Bowater to Bowater pursuant to Section 9.03(b)(iv), entering into an agreement with respect to an Acquisition Proposal or any agreement referred to in clause (iv) of the second sentence of Section 6.05(a) with respect to an Acquisition Proposal or (ii) in the case of Bowater, concurrently with the termination of this Agreement by Bowater in accordance and compliance with Section 9.01(k) and following payment by Bowater of the Termination Fee and the Expenses of ACI to ACI pursuant to Section 9.03(c)(iv), entering into any agreement with respect to any Acquisition Proposal or any agreement referred to in clause (iv) of the second

sentence of Section 6.05(a) with respect to an Acquisition Proposal; provided , however , that neither ACI nor Bowater shall take any of the foregoing actions unless:

(i) in each such case referred to in clause (B) or (D), (1) the ACI Shareholder Approval or the Bowater Stockholder Approval, as applicable, has not yet been obtained, (2) the Board of Directors of ACI or Bowater, as the case may be, determines in good faith after consultation with outside legal counsel that failure to take the foregoing action would be inconsistent with its fiduciary duties under applicable Law (including the duty of care), and (3) the Board of Directors of ACI or Bowater, as the case may be, determines in good faith (after consultation with its financial advisor and outside legal counsel) that such Acquisition Proposal constitutes, or is reasonably likely to result in, a Superior Proposal; and

(ii) in each case referred to in clause (C) or (E) above, prior to ACI or Bowater, as the case may be, effecting a Change in Recommendation with respect to an Acquisition Proposal or a termination of this Agreement pursuant to Section 9.01(j) or Section 9.01(k), as applicable, (1) the ACI Shareholder Approval or the Bowater Stockholder Approval, as applicable, shall not have been obtained, (2) such party shall be in compliance with the provisions of this Section 6.05, (3) the Board of Directors of such party shall have determined in good faith, after consultation with its financial advisor and outside legal counsel, that such Acquisition Proposal constitutes a Superior Proposal after giving effect to all of the adjustments which may be offered by the other party pursuant to clause (5) below, (4) such party shall have notified the other party in writing, at least five Business Days in advance of such Change in Recommendation or termination (it being understood that any change in financial terms or other material terms of the relevant Acquisition Proposal shall extend such period by an additional three Business Days from the date of receipt of the revised Acquisition Proposal containing such changed financial terms) that it is considering taking such action, specifying the material terms and conditions of such Superior Proposal and the identity of the person making such Superior Proposal and delivering the documents and information required to be delivered pursuant to Section 6.05(c), and (5) during such five Business Day period (as extended, if applicable), such party shall have negotiated, and shall have made its financial and legal advisors available to negotiate, with the other party should the other party elect to propose adjustments in the terms and conditions of this Agreement such that, after giving effect thereto, such Acquisition Proposal no longer constitutes a Superior Proposal. As used herein, “ Superior Proposal ” means a bona fide written Acquisition Proposal with respect to a party that the Board of Directors of such party concludes in good faith, after consultation with financial advisors and outside legal counsel, is (i) more favorable, from a financial point of view, to the stockholders or shareholders, as the case may be, of the party receiving the proposal and (ii) fully financed or reasonably capable of being fully financed and otherwise reasonably capable of being completed on a timely basis; provided that for purposes of this definition, “ Acquisition Proposal ” shall have the mea

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